TLDR In this episode of BidCast, Jason speaks with Tristan, co-founder of Zeta and Bullet, about their journey in the DeFi space, the challenges of building on Solana, and their plans for the future. They discuss the technical expertise of their engineering team, the importance of user experience, and their go-to-market strategy for Bullet. Tristan shares insights on market making, user acquisition, and the significance of community engagement in their tokenomics. The conversation highlights the potential for Bullet to compete with centralized exchanges and the importance of building a sustainable trading platform. CHAPTERS / TIMELINE * 00:00 Opening * 00:51 Introduction to BidCast and Zeta * 01:53 The Journey of Zeta and Bullet * 04:31 Engineering Expertise Behind Bullet * 06:10 Challenges of Building on Solana * 07:52 Technical Innovations in Bullet * 12:01 User Experience and Onboarding Improvements * 13:34 Future of Solana and Bullet's Role * 14:53 Bridging and Interoperability Challenges * 16:31 Market Making and Liquidity Strategies * 19:12 Go-to-Market Strategy for Bullet * 25:36 User Acquisition and Retention Strategies * 31:29 Volume Expectations and Market Positioning * 35:31 Market Dynamics and Trading Volume Insights * 36:21 Incentives and Organic Growth Strategies * 39:16 Revenue Projections and Tokenomics * 44:28 Security Concerns and Risk Management * 47:26 Learning from Past Mistakes in Crypto * 50:50 Product Development and Listing Strategies * 54:04 Token Migration and Community Engagement * 01:02:02 Financial Position and Future Plans TRANSCRIPT << Jason Kam (00:52) >>: Okay, welcome to another episode of BidCast. I'm your host Jason Kam, aka @MapleLeafCap . Today is June 18th, 2025, 10 a.m. Hong Kong time. BidCast is being livestreamed to BidClub members. Questions are from the members and my own. This is not financial advice. Today I'm speaking with Tristan, co-founder of Zeta and soon to be Bullet. Tristan, welcome.   << Tristan (01:15) >>: Yeah, great to be on here, Jason. Really, really appreciate it.   << Jason Kam (01:18) >>: Yeah, nice shirt. A lot of people don't know this, but you can buy the Bull Exchange token now through $ZEX Zeta token. It's kind of an interesting best kept secret until it became public with Ansem and Monk a couple days ago.  I think it's on people's mind, pretty straightforward. question,  how long have you been working on Bullet And maybe just walk me through the journey of the past four years when you built Zeta, Option, Dex, and then this.   How did it evolve and how have you been working on Bullet itself?   << Tristan (01:53) >>: Yeah, good question. guess the truthful answer is pretty much four years at this point, we've been basically full time building in DeFi. We started off in the very early days of 2021 trying to build a derivatives exchange. We started off building essentially options and that was the inception of data markets. And then we essentially kind of pivoted more around the time that FTX melted down into perpetuals trading, just finding a lot more PMF on the...   perpetual side as well as just it's a it's a much more simple product to build. And so we were one of the very early Solana projects, there was nothing there back in the day, back in 2021. And I was fortunate enough to meet and it totally was very impressed with his vision and what was possible on the chain. And so we kind of pioneered that fully on chain order book, you know, off the back of Serum, which is essentially one of those kind of core primitives back in the day, more for spot trading, we decided let's extend that for options trading and then perps trading.   And so we had a good amount of success, especially last year when Solana really started taking off. We scaled to over 100,000 users, roughly 150,000, I think. And we did $15 billion of notional kind of purpose volume traded through the platform. So that really gave us a lot of clarity on how to build a good exchange. And I would say more recently, probably about a year ago, we decided to kind of kick things off with Bullet specifically, which was kind of a...   a more focused bet on specific infrastructure for perps trading. We essentially had run into a few kind of technical and scaling issues with fully on chain order books built on Solana. We can dive into the specifics later. And so we made this slightly more ballsy pivot into doing our own kind of roll up execution layer for Solana. And that's what ended up being bullet.  And now we're like getting, we're on test net and getting a bit closer to main net so we can kind of shame on.   << Jason Kam (03:40) >>: Yeah, I guess this is a pretty straightforward question. For those who don't know, maybe tell me a bit more about the engineering team's background. At least to me, a Perp DEX is anybody can kind of build it, but to make it good, it requires a lot of technical chops. Like Jeff at HyperLiquid prides himself with being HRT and really deep from Wall Street. What qualifies you guys to build this, technically speaking?   << Tristan (04:08) >>: Yeah, that's a really good question. I respect the hyperliquid guys a lot. I've met Jeff before and chatted to him and I think he has very deep knowledge of the space. And I think it's great that they worked on the trading side through Chameleon for a couple of years and that gets you really intimately familiar with how exchanges work, at least from kind of like a user perspective and then flipping to be the other side in the exchange builder. I think there's a lot of good context there.   I guess fairly similarly for us, like a lot of our team had been in crypto for a number of years. I'd been in crypto since 2017, kind of like on and off, you know, a bunch of my other kind of friends, kind of started from just a bunch of us, you know, from university, essentially all knew each other for quite some time. My background is more in technology and those kinds of systems, but thankfully my co-founders and a bunch of the early team were all from HFT trading. And that's why I was kind of friends with them. I was always dabbling and   crypto and HFT stuff for a bit. And so we have a pretty strong bench, I would say, of talent there, both on the HFT and crypto native side. For example, most of our backend engineering team comes from top firms like Optiva, IMC, if you're familiar with a bunch of these kind of traditional firms, they're basically some of the top tier electronic market making firms, similar to Hudson River Trading, I guess.   And in terms of crypto native talent, for example, my co founder actually used to be one of the first market makers on Kyber network back in I think it was 2017 or 2018 when like DEXs were really starting to take off. We also hired people more recently, for example, on the growth side hired the guy who used to lead product growth at Bybit and who's kind of seen a lot of their kind of growth systems work really well. And so yeah, I think we have a good mix of talent there. And like you said, building an exchange is a highly technical   complex system  and to that effect we've been building over the last couple of years. We've never had any exploits. We've run an exchange in like a pretty good fashion I would say. We take a slightly more kind of conservative approach trying to do things the right way and trying to play that survival and that kind of like long-term game.   << Jason Kam (06:10) >>: Yeah, that's good background.  And why build the CLOB not on a SOL L1 and opt for a roll-up on top? How is it different than other things like Soon and Sonic, I guess?   << Tristan (06:27) >>: Good question. That's pretty loaded questions. A lot of stuff in there. could probably talk for a very long time, but I'll try and give you the long and the short of it. Essentially, I would say about a year ago or even longer than that  in the bear market, we were just kind of hitting some scalability issues, but those issues essentially got exacerbated when things started to pick up in terms of adoption. And I kind of chatted to Anatoly and some of the engineering team on some of the issues that we were doing scaling kind of.   fully on chain order books. And I think now they're obviously in race mode trying to get all this stuff fixed, but we didn't have the liberty of time. We had to kind of take things into our own hands essentially as an application.  And so some of to kind of rattle off some of the issues Solana still has discrete 400 millisecond block times. If you compare this to Binance, which is basically the primary market for price discovery, that's happening at about five to 10 milliseconds. So you're basically two orders of magnitude off  in terms of those trade execution latencies.   And so you see a lot of the flows that are happening on chain, especially on the purpose markets, which move very quickly. It's a lot of centralized decentralized art. You can imagine one venue is updating very quickly, you know, over 10 X the rate of the other one. And you're just kind of like someone like winter meters, just sitting there and always doing this arbitrage essentially.  And so on chain can never really compete in terms of being the primary venue for price discovery. And that's why with Bullet, we really wanted to like our main focus pretty much in our main unique value proposition is like, let's bring those latencies down as much as possible.   So in production in testnet right now, we're seeing a kind of end to end trade execution times of 3.5 milliseconds essentially. And that's because we run it in pure RAS. There's no virtual machine overhead. It's like very performant. And we also adopt this continuous streaming model. So we don't have discrete blocks basically as soon as your transaction is submitted, you get a pre confirmation essentially right away. And this makes it feel a lot more like a centralized exchange while still being kind of transparent and verifiable. So that's one thing on slow block times.   Next one was congestion essentially. When you're on a general purpose L1 and you're competing with PumpFun and you're competing with all these NFT platforms, you have this noisy neighbor problem essentially. And so it was really hard running  a proper exchange where people need to cancel their orders, liquidations need to go off. And if you can't get your transaction through in the same slot essentially, or even in the next couple of slots, that degrades the trading experience a lot. And as a platform, that's actually quite risky.   If you can't get off liquidations in a timely manner, you could actually go bankrupt as a platform because you are offering leverage essentially. These things need to be very guaranteed.  And yeah, we were just thinking like, why isn't NFT going to bring down our exchange? This kind of doesn't make a lot of sense to me.  Then there was some more kind of like trading related stuff that is basically like the kind of big topic right now of discussion in the Solana space. So all around adverse selection. So for the traders in the crowd, there's a big problem where you have   << Jason Kam (09:00) >>: Hmm.   << Tristan (09:15) >>: toxic flow and essentially if you're providing maker liquidity, people are coming there with informed knowledge or some kind of signal and being able to basically trade against you, make a bunch of money. And so right now, basically the meta is on Solana, it is fundamentally like pretty negative EV to market make across the CLOBs as well as across like a bunch of other kinds of systems there. And those MM's just kind of bleed P &L. The reason is, and if I was to explain this in simple terms,   Imagine we have the $SOL perp essentially, it's quoted bid price 99 ask price like 101 is your market. And yes, your kind of midpoint is essentially $100 for $SOL Suddenly, Binance for some reason, who knows Trump tweets something crazy or Elon Musk does something, the price basically just like jumps to 110 on Binance. Suddenly, you have this ask that's still in the book at 101.   and you have this race essentially the maker is trying to go and cancel their order because that 101 is now very stale and you have a take a boat racing in there and saying hey if I lift this 101 ask I'm actually going to capture $9 of profit essentially and so it's negative EV in that the MM has to bid up the gas fees as much as possible to like win in that GTO auction and get in there first and cancel or they kind of risk losing and having their quote picked off and losing a bunch of money like P &L on the exchange so   in either way you're having to pay up a bunch of money, whether it's through the priority fees or whether it's through the loss of P &L. And so with Binance, they have this first come first serve model, which is a bit different to Solana, which is more auction based. Whoever has the fastest execution  environment will basically wipe the floor with everyone else. And that's kind of what you're seeing with more of these HFT guys. Like they really dominate because they have really good execution in front. And so Hyperliquid took a really interesting approach. They added essentially this opinionated cancel prioritization.   It means that when you build the block essentially, your cancels or any kind of cancels for makers in there basically get executed by default first. And so that means that you essentially have what is in effect like a last look or a free option to cancel. And it kind of removes this  adverse selection because the maker can essentially get out of the way  as much as possible. This is nice in that they can tighten up spreads to like one basis point with a bunch of size and they can be pretty confident that they're just not going to get sniped all the time.   And so this brings down the barrier, I guess, to market making. Even if you're a random dude running a Python script, you can provide a lot of maker liquidity and not get completely destroyed by like one of these HFT companies. And so I kind of democratize a bit. So we've been playing around with that as well. We have a POC for that, this kind of like speed bump feature, which we'll also be adding because we really care about getting day one, like very good maker liquidity.  And then because I'm going a bit over here, we have a few other kind of features which are really nice.   << Jason Kam (11:59) >>: No, it's fine.   << Tristan (12:01) >>: Gas less onboarding is really good. can kind of sponsor gas. We think it's really important when you come into crypto, you don't have to buy like random token and generally like onboarding is a bit janky. We also work with privy to kind of abstract a lot of that wallet experience doing something more kind of similar to session keys. So you'll log in there. You don't need to buy a random gas token to start trading. Essentially, you'll just bring your USDC or whatever it might be as your trading collateral.  You'll establish a session key and then you can essentially just click trade.   long short do whatever you like to do. This is kind of a pain point with our old platform and pretty much every Solana trading experience on the L1 is you have to sign every transaction the centralized exchange guys come in there and they're like what is this it's like flow clunky  annoying  yeah that's pretty much like all that we were trying to solve is like build something that is going to compete one-to-one with the centralized exchange  but have self-custody properties have verifiability all these other things.   << Jason Kam (12:56) >>: Do you feel like Anatolia and the Solana team can build in these kind of features within the mainnet? Especially priority cancel and those kind of things.   << Tristan (13:04) >>: It's a good question. mean, it's an active area of research. They have some nice blogs on it essentially, and I've talked to them in depth about it. I understand their solution.  But I think there is like, even if they do manage to pull it off, it's undoubtedly going to be quite a long journey for them.  To give you the long and the short of it, they need to ship a bunch of like very core protocol upgrades. One of them being async execution, which I think is basically in development right now. That's kind of the prerequisite to multiple concurrent leaders.   << Jason Kam (13:21) >>: Hmm.   << Tristan (13:34) >>: This is like a pretty complex change. I think the spec for it is pretty difficult to get your head around. I'm still kind of getting to grips with it.  It's a big change. I don't think anyone's nailed it in any other crypto network. And to be honest, if any blockchain engineering team is to do it, I think the Solana team is the best. But I realistic timelines, the optimists in the crowd say it's going to take a year. Probably the more realists or pessimists say it's going to take two years to ship. And the reason that's important is they want to add some kind of a transaction metadata.   It means that you can label your transaction on the Solana L1 as a cancel, for example, and then the leader will kind of be able to reorder them themselves. The problem is censorship. If there's a single leader right now on Solana, it could just ignore it and just say, no, I'm not going to do that. So if you have multiple leaders, you would actually broadcast it to say three of those leaders. You would have hopefully an honest majority that could kind of agree.  But yeah, you still don't get the latency guarantees that we get.   because all those three leaders have to communicate with each other. There's a bunch of kind of consensus and agreements going on there. Whereas with a roll up, you just have kind of a single sequence that you get very fast acknowledgements, not just inclusion, but also execution. We think that's definitely the best for trading.   << Jason Kam (14:44) >>: And then bridging and experience if I'm a Solana user today, the bridge is how fast? Once mainnet.   << Tristan (14:52) >>: The bridge will be very fast. We just finished our integration with hyperlane. It's basically going to be the finality of Solana, which is 32 slots. And if you do that by 400 milliseconds, it's like 12 seconds essentially. That's in the worst case. That's if you fully wait for finalized. We think there's some clever stuff you can do similar to what people do on L1 apps, which is they use a lower confirmation level. For example, confirmed essentially is once everyone kind of votes on blocks.  And so we think we can basically issue a bridge confirmation within   probably around a second essentially, but then we'll have to do some smart UX stuff, which is like, we don't actually let people trade until the 12 second like full functionality has elapsed, but you will see the funds within your kind of balance at that time. And I think that makes it basically feel exactly like it otherwise would using an L1 kind of program.   << Jason Kam (15:39) >>: But I guess the dollars that I have on your roll up is not going to be composable with all the protocols that exist on Solana mainnet today.   << Tristan (15:48) >>: That's a good question. Yeah, we're still figuring out the interoperability and composability parts of that. Like, yes, fundamentally, you have to bridge and we will have kind of separate funds there. The nice thing is if you use Solana for DA, you can get some kind of asynchronous composability benefits. And I'm actually talking to guys like the VP of Solana Foundation,  yeah, Solana Foundation for like a bunch of the engineering stuff.   to figure out ways that we can kind of try and compose with Spot Liquidity on Jupiter and some of these other platforms. Definitely like a tricky problem, but I think there's some ideas that we have, some designs that we think would be cool.   << Jason Kam (16:21) >>: Yeah, I guess the lack of immediate day one composability, I suppose it shouldn't be an issue because people are not on the to like do DeFi stuff or Ponzi stuff. It's just here to trade. Am I?   << Tristan (16:31) >>: That's correct.   think people largely agree that perhaps exchanges don't need to be composable.  think even a bunch of people on Solana kind of agree with that as well. And you've kind of seen this in practice. look at all the big exchange, look at Binance is obviously the biggest example. I don't think they need to vertically, or sorry, like integrate with a bunch of other stuff. They just vertically integrate. just own everything. Hyperliquid as well. You know, they've kind of like built a bit of their own ecosystem. They don't really need to compose with existing Ethereum primitives.   DYDX, all these other ones, think, kind of just like own the whole thing themselves and it works out well for them.   << Jason Kam (17:05) >>: Yeah, I suppose the beauty and the bull case people do talk about and eventually will become a reality would be that the Hyper-EVM itself would be able to yank liquidity away from the perp decks and utilize that liquidity for all sort of crazy things. So the whole thing is like hyper-composable.  I suppose it's... it on the road map? Is it easy to do for you to sort of allow for similar capabilities?   << Tristan (17:30) >>: Yeah, yeah, really good question. So we have like a not too dissimilar setup on our end, which is essentially we have our kind of like core exchange primitives, which is going to be the perps, spot and lending markets, which are kind of all need to gel together and need to be very high performance. This all runs like I said, in a pure Rust runtime. We don't do virtualization. We don't have a VM essentially, because we want really high performance and kind of highest potential, you know, gas limits and not to deal with other constraints.   But then we're going to ship, it'll be after mainnet, but hopefully sometime this year, essentially like a SVM module,  know, similar to how Hyperliquid has Hyper-EVM. And then the nice thing is you can essentially have these pre-compiles, which let you talk between the kind of core base layer primitives, as well as that kind of programmable smart contract environment. I think that's very doable. A lot of people have been building these SVM layer two roll-ups like  Soon and Sonic and these kind of ones.   We're a bit different in that we're not purely an SVM chain. Actually, our focus is just being on this application specific high performance roll up. We're not building like a SVM L2 on Binance Smart Chain, which is kind of what Soon are doing. We're very focused on the trading use case, getting those kind of that purpose exchange extremely good. And then if someone wants to build something composable in there, whether that be a vault or whether someone wants to build an Ethena type product that does this like  basis trade arbitrage and build a stable coin off that, that will all be.   possible to do on the kind of SVM side.   << Jason Kam (19:00) >>: that you will build.   << Tristan (19:02) >>: Yes, yes, we will have at least like the foundation for that. Whether we want to do that in-house or work with external teams, ideally it would be good to kind of like build that out and work with other builders on that.   << Jason Kam (19:03) >>: Mm.   I   see. mean, it's a lot on your plate. I could see why you were kind of deprioritizing, because the perp dex is like the most important thing, first and foremost. Testnet now.   << Tristan (19:20) >>: Yeah, I think my worry   is like focus. Like that's saying I see is kind of the problem with a lot of crypto teams is they're not focused. They try and bite off more than they can chew. It's like death by a thousand cuts. They try and do 20 different products under the one hood. And there's kind of like a lack of focus there for us. It's just like, get the main thing out, make it really good, start kind of gradually expanding. Don't take on too much. Like I said, we're only a team of 15 people essentially. there's only so much we can do. And I would rather deliver one really good product than five mediocre products.   << Jason Kam (19:29) >>: Yeah.   Yeah. How soon can you get to mainnet? Like when should we expect the first transaction on the Perp dex?   << Tristan (19:56) >>: Yeah, good question. I would say with high, high confidence Q3, probably early Q3, we're quite close. We just completed our main net audit a couple of weeks ago. All the fixes have been merged and that's looking really good. The main things that we need to get done are just finish off the hyperlane bridge, which is almost done. Iron out any kind of   other random bugs or kind of rough edges and do a few more performance optimizations. But I think largely it's looking pretty good. We're like 95 % done in terms of the feature work. So I'm pretty confident we can get out there quite quickly.   << Jason Kam (20:29) >>: And then day one, when it comes to mainnet, I mean, it's nice that you have like Amber and Wintermute and Jump previously supporting you on Venture Round.  How deep are you in the discussion with them in providing liquidity day one and what's their feedback so far?   << Tristan (20:46) >>: Yeah, good question. So it's very important for us to get good day one liquidity. If you understand the exchange business, essentially, the thing you need to solve for at least in the early days is the supply side. No one's going to come trade on your platform if you've got, you know, 1 % spreads and no liquidity. So you need to kind of solve that first. So we've been in pretty advanced discussions with a bunch of the guys on our cap table as well as other kind of market makers.   in that kind of environment. work with basically the three top on-chain MM's on Solana, as well as a bunch of the top guys on Binance already, and some of the top ones on Hyperliquid. ⁓ And so, some of them on our cap table have already been trading on ZETA on our previous platform, have done the integration. So we're in pretty advanced talks with them, just kind of getting a bunch of back and forth essentially on exchange feedback, API specs, and stuff like that. ⁓ These guys been pretty instrumental, to be honest, in how we design Bullet.   For example, I'll give a shout out to Tim, who's the head of  DeFi at Wintermute, who's given me a lot of really good feedback on what could have been improved with our previous product and how we want to change things going forward. So that's been really good. And I think those conversations have been very productive. And especially over the last week, I think we've seen a lot of renewed interest from people wanting to come on chain and trade on such a platform.  Outside of the market makers as well, we have a bunch of people who more run.   funds and are able to deploy into DeFi strategies. So we've been chatting to them about essentially we will have a similar kind of LP vault, which will help around like market making, know, funding arbitrage strategies, things like that. So we see people kind of looking for yield and deploying into those strategies. So trying to get some TVL in there, I think in the early days also very important.  Yeah, that's, that's pretty much the status. I would say those conversations.   << Jason Kam (22:32) >>: Was there feedback like it was unusable at Zeta before and  we moved to hype that was great and yours is way better than what Zeta was before but it's still kind of laggy? What's that like I'm trying to dig a little deeper. Are they like, my God, this is fantastic. We're going to deploy the same level of capital and attention we have to hyperliquid here or are they like still picking favorites here and there?   << Tristan (22:56) >>: That's a good question. think speaking to the old platform, yeah, definitely they had some gripes with it and they had gripes with all the Solana platforms essentially. One, just like a lot of the API interfaces, like very non-standard for traders essentially. You're using essentially like this JSON RPC layer, talking to RPCs and having to run your own RPCs, trying to get transactions included in blocks was like kind of a dark art at the time, still.   to be honest is they were also paying up so much for fees, like just really bleeding a lot of priority fees, like I mentioned, just to be able to replace their quotes.  And fundamentally, like they just complained about they were struggling to be profitable essentially on chain. And so it kind of led to a route where you have to subsidize it heavily essentially for them to make money. And that's not really sustainable in the long term. So we took a lot of that back to the drawing board. And fundamentally, the thing that we want to solve with the new platform is we want market makers to be   profitable because then they provide really good liquidity which means that normal traders can come in they can trade with really good prices essentially and the more that they kind of trading with the market makers the more the market makers can actually run their business model and kind of profit off the spreads which means they're willing to kind of quote even more competitively it's kind of like a dynamic that you essentially see on Robinhood with Citadel and stuff like that they want to be facing this retail flow and it helps them get price improvement ⁓   And so with the new exchange, we're still in the process of integration, but so far it's way more snappy. They get acknowledgments back way faster. We're trying to basically mirror a bunch of our API spec around Binance because that just like lowers the kind of, lowers the barrier, I guess, for integration. You don't have to deal with it extremely custom set up. It's kind of stuff that you're familiar with essentially. And getting those multiple millisecond confirmations makes it feel much better. People can kind of react very quickly to the market. So, so far, I think the feedback has been pretty good.   And we're good at taking on feedback. We're always like happy to iterate. The nice thing is now that we have a bit more discretion over our infrastructure stack and like owning that a bit more, we can really fully customize anything and build the best possible solution.   << Jason Kam (24:56) >>:  got it well ⁓ I Mean, I think market making is one is one thing having all the features you talked about and API access You know helps you get liquidity. I suppose the biggest challenge for any perp decks historically Supposedly it was UI UX issues. It was like a clunky experience, but now it's getting to the point where getting non-toxic retail or actually aggressive directional flow is been that's you know issue for a lot of these nascent startups and   I guess the biggest question then becomes how do you actually plan to get the flow from actual users? What's your GTM go-to-market plan?   << Tristan (25:36) >>: Good question and that's a really like insightful observation there because the thing that makes purpose exchanges go around is solving that demand side essentially having those retail people coming in there the thing that you want to avoid fundamentally is bring on too many market makers the whole you have market makers on both the maker side and then you have a bunch of these HFT takers and then it's just very PvP right like jump is trading gets winter mute against like the next guy no one's really making any money   and it's just kind of very kind of toxic environment. And this is sort of what you're seeing on a bunch of the other  perp dexes on Ethereum right now. And it's part of the reason why think Hyperliquid ate everyone's lunch there.  They managed to capture retail flow with a good product. Obviously, I think the airdrop helped with that as well. And it just kind of got this like sticky kind of network effect there, which is really good. And the MMS like really love quoting on there because they're like, I'm facing like normal people and it's much more fun. So   << Jason Kam (26:30) >>: Yep.   << Tristan (26:32) >>: That's a really important thing for us to solve for. I'm pretty confident we can solve on the maker side. So getting the demand side is really important. So what does our GTM look like to bring on real users?  I think a large part of it is just having a very Solana native go to market is important. It's a big reason why we just didn't decide. I didn't want to go and build a Cosmos chain or build on stocknet or something like that because I just don't think there's a lot of interest and you're not tapping into like a base of users that is particularly interesting.   But Solana I think has like the largest MAU of any chain. There's just like a lot of people using DeFi products, trading on chain, doing meme coin stuff, whatever it might be. And the good thing for us is we have been a pedigree in Solana. We've been around for four years. I know who most of the big on chain traders and trading groups are. You know, for example, like I talked with guys like, you know, for example, like a Joe McCann who runs a fund. He's like very actively trading, doing stuff like that. He's really wanted essentially like a Solana native purchase exchange that's competitive.   So working with those guys will get a lot of volume into the exchange. Targeting some of those bigger trading groups I think also important. Thinking about what regions we want to get into. There are some communities that we're pretty well aligned with. For example, the Bonk guys. I'm very close to the founder. He's actually an angel investor and we've talked about some kind of trading campaigns that we can do together. They have hundreds of thousands of holders, if not more, which is really great.  Something I like as well is just being the venue for Solana Native Assets.   pump fun coins coming off the bonding curve. That's great, you know, up until maybe a hundred mil market cap. But then above that, you're kind of listing on the tier one centralized exchanges. What if we could bring that back on chain? What if we could really prioritize some of these really promising new Solana teams and give them a good CLOB venue to essentially launch on? I think that would be really good. That's on the Solana native GTM, which I think we have good edge because we have a background there. There's other just like exchange playbook stuff that's pretty standard.   Referrals very important all the centralized exchanges do this well We previously ran a referral program on Zeta and we had over 30,000 users kind of come in through that  As well as like 3.5 billion dollars worth of volume, which I think is like pretty good We've done that before it's just like works very well Trading competitions very nice way to kind of bring in a bunch of new users Like I said, we hired this guy from from Bybit who essentially like was pretty instrumental in running a lot of their trading comps Which I think saw massive ROI and then there's a bunch of integrations   that are important that can kind of  funnel in a bunch of volume and open interest to us. So one is trading terminals, I think are a great entry point for a lot of professional traders.  We've been talking to a bunch of the bigger ones, for example, the Teal Street guys, we're like pretty close to, they have quite a lot of users. ⁓ We've been talking to aggregators like Ranger, I think you mentioned before, have been very eager to kind of integrate us and send a bunch of flow our way. And this is a really great way to just get these sticky.   Programmatic or professional traders who are going to have this repeat trading volume, which is important for us And then yeah using this kind of broker system essentially they refer us volume people do these kind of trading bots grid trading arbitrage funding rate strategies That's like really good for us There's the vault stuff which I talked about which I think it's just like a nice way for people to get involved There's white labeled front ends, which is pretty cool as well. This is something we're exploring we have   One thing cooking with like an existing Solana team that I think is quite solid.  They basically want to dumb down perhaps essentially for this kind of more on chain meme coin type audience. That's one click to essentially long and short a bunch of stuff. They're their own leaderboards, copy trading. And I think seeing the success that platforms like Axiom had, which kind of integrate both pump fun and hyper liquid. I think there's definitely some strong PMF there. And then using this kind of   brokerage system or kind of build a code system, I think is a nice way to give kickbacks and help those front ends kind of integrate and make a sustainable business model.  And then the last one I would say is mobile, I think is something that's been underwhelming or kind of underexposed on the trading side.  We have the chops on our team to build a mobile native app. We have some guys on our team who pretty good with React Native. I think seeing the success of Robinhood essentially on the option side.   << Jason Kam (30:21) >>: you   << Tristan (30:45) >>: with a mobile first trading experience. That's been really good to see and I think it's underappreciated in crypto. Even looking at Hyperliquid, they have a PWA. It's not super responsive. I don't think it cuts it super well. So I think there's good market there. And if you're following Solana,  they're doing the Seeker phone essentially, which is their own kind of Solana phone. They're gonna be launching their own token, their own incentives on that. And like I said, we're working with that gamified perhaps front-end team who are gonna be launching a kind of a native app.   on the Seeker Phone Day 1.   << Jason Kam (31:17) >>: I guess that's a good overview and coverage. Do you have a target in mind of what kind of volume you want to do in the first week, the first month, first couple months and so on?   << Tristan (31:29) >>: Yeah, it's a good question. I mean, the more the better, obviously.  I think volume is a decent metric. We're also looking at like kind of monthly active users. think open interest is also like an important one to get up. last year, like I think we were routinely doing one to 200 mil  of volume a day, essentially, ⁓ which was like pretty solid. So I'm very confident we can get back to that with just like a few people integrated. I see Jupiter doing essentially   500 million to a billion dollars  a day  kind of fluctuates a bunch. I think that's like kind of the longer term goal is if we can build something that's a best in class exchange on Solana,  I don't see why more of that kind of volume would essentially migrate to us and we could kind of assimilate a lot of that that perps trading volume. So that's kind of my goal, I think within the first six months to essentially just try and leapfrog our way to to kind of number one on the Solana side. And then I think once we're at that kind of   500 mil level will probably be number two or three Hopefully on the perps leaderboard and then we can kind of continue to push from there   << Jason Kam (32:30) >>: So basically half a billion to a billion  daily volume.  Do you expect most of it to come from the central exchanges? Do you expect it come from share gain versus Jupiter  or Hyperliquid? Where do you expect it to come from?   << Tristan (32:46) >>: Yeah, I think given that our GTM is very Solana focused, we don't want to go too broad and try and go after a centralized exchange trading audience. That's like the longer term goal, I think. But in the short term, you know, those guys probably don't have a wallet, you got to get them to jump through some hoops, they got to like send it, like some friction in the process. So we'd rather just work with guys who are on chain native who already basically have a wallet, who've already traded on Solana, who already kind of know their way around it. And I think seeing the volume that   platforms like Jupiter are doing, I think that audience exists. And I think to be honest, it's not necessarily like a cannibalistic thing of like, we all have to fight for the same volume. kind of see it as hyper liquid was doing maybe 500 mil of volume  a day, like a year ago, but that's actually grown 10 X essentially, because I think the product is so much better. They've actually grown that category. And I think if you look at the emerging trend,  kind of on that side, Dex volume market share versus centralized exchange has actually been an increase in pie. And so I think the kind of   The kind of small-minded mindset is to look at like, we're all competing for the same 5,000 people, the same flow. When in reality, think Hyperliquid has 30,000 daily active users and Binance overall has 260 million users. I don't know how much that is in daily actives, but I would imagine they probably have tens of millions. So I think that pie is much bigger, much greater, and we just kind of want to grow that and grow into that as much as possible.   << Jason Kam (34:10) >>:  And I guess the Solana guys are... It would really sound like then it would be the whales, trading groups and  the funds that are very Solana aligned that will be taking their trading volume, let's say from Hyperliquid today to you, assuming it's a perps product in day one.   << Tristan (34:35) >>: Yeah, I think there would definitely be some crossover and we're definitely trying to target more of that professional audience because we found that flow is just more sticky. Like people come in and trade every day. Whereas if you just cater to a bunch of random airdrop farmers, right? Like they trade a bit, they get liquidated and then they kind of churn out and you know, they do like, you know, a couple of thousand dollars worth of volume and like that doesn't really like help our bottom line or help our product grow. But the guys that we've had the most productive conversations with like we just found you really only need like   50 people to be honest in a telegram group all talking together who can give product feedback who are going to kind of like stick by the product. And that's kind of what we built I guess through this like bear market period is kind of this is like core following. And those guys come in and trade every day their day trading, they kind of repeat volume, repeat customers essentially. And I would say those that kind of top end that kind of yeah top end of the market is essentially probably driving I don't know what the number is, but it's definitely Pareto distributed you know.   20 % of people are probably doing 80 % of the volume. It's probably even more skewed than that, to be honest.   << Jason Kam (35:37) >>: Have you gotten further indication already from some of the Solana whales that will be like just moving over to basically told you like yeah We're gonna do it or is it more like oh like this in yeah, okay   << Tristan (35:45) >>: Yeah,   don't know if I can share it. But yeah, I literally talked to one of the biggest fund managers on Solana. He said if this platform was live, I would trade like, like at least nine figures, if not like 10 figures on this platform, monthly tomorrow. So I was like, that's that's great. I'm glad to hear that. Because he is basically he's basically migrated from  one of the existing perps dexes on Solana to hyper liquid. And he's just like forced to trade that but he kind of doesn't want to.   << Jason Kam (36:00) >>: Okay. Okay, great.   I see. Interesting. Okay, very good.  How much token do you want to give out as a part of this process?   << Tristan (36:14) >>: Yep.    That's a really good question. I think the most important thing is for us to get essentially organic traction as much as possible. I think if you rely too much on subsidies, you get kind of this points market fit, which is dangerous. You you kind of like fake the PMF somewhat. So our kind of important yardstick is like how much can we get people like genuinely trading on this thing, try and build up the PMF, try and keep repeat customers. And then I see incentives is essentially kind of like gasoline on that fire.    So that's saying I really want to make sure that we have done before any kind of incentives really hit off in a big way. Once we start ramping that up, yeah, we're likely to have something like a points program or some other incentives. This was super effective last time that we did it. I think it's just like a really great growth tool. But our lesson learned there is I think focus on real long term uses as opposed to kind of trying to   I wouldn't say cater, like, you know, all these airdrop farmers come in, they're very short term, they don't really care about the product long term, they're just trying to farm a quick buck. And I think, you know, basically, like not prioritizing those guys, prioritizing the kind of early community people who actually trade and care about the product is definitely the kind of main tweak that we'd make there. So I can't share like concrete numbers on how much we would potentially give away. But our goal is definitely, we have we didn't give away too much on the previous token, we still have a bunch that we can kind of earmark from our   incentive budget and treasury which is good so I think we have a pretty healthy amount and I think our big learning there is it's important to have an early wealth effect for users so building that loyalty and kind of rewarding people for being early and for using the product and helping us scale is definitely something that we saw work very well on the kind of hype drop  they have this like massive maxi community and I think we would we would want to build a similar community essentially   << Jason Kam (38:03) >>: Yeah.   Yeah, and just so we have a sense, like it's a 20 % float today of Zex, how much did you give away for AirDrops?   << Tristan (38:15) >>: It was 10 % for the previous airdrop   << Jason Kam (38:18) >>: Okay, and how much are you playing with now that you could potentially give away?   << Tristan (38:22) >>: I mean, I don't want to commit to numbers, I think we could definitely... Yeah, I think we have... I forget the exact number, but in terms of what we have for... What do call it? For treasury and stuff like that, I don't remember the exact number off top of my head, but it was something like we have at least 30%. I have to do the math, essentially. Yeah. Yeah.   << Jason Kam (38:25) >>: No, just overall.   Got it. Okay. And   if you were to do it, it won't be like in one go, everything gone. It'll be like, let's truncate it over seasons and so on and so forth.   << Tristan (38:52) >>: Yeah, potentially, we're still kind of deciding that essentially, but whatever I think drives the most long term growth will be the direction that we go down.   << Jason Kam (38:54) >>: Hmm.   Got it. Understood.  So the goal would be like, you know, maybe like, if you hit all your benchmarks, the goal within the team internally, it would be by year end, by this point next year, a year from now, like 10 % of hyperliquid, basically, if you can get there.   << Tristan (39:16) >>: Yeah,   pretty much. think that's that's what we're shooting for. I mean, if you look at the volumes right now, like I said, Jupiter is the number one on Solana.  That's basically 10 % of hyper liquid, which is doing about $5 billion today. So I think that's that's like an achievable target. That's kind like my base case in my mind is where I want to get to in the the short to medium term.   << Jason Kam (39:36) >>: And with that volume, I'm guessing you'll have a HLP, so like a ZLP kind of, and then you have a bunch of other different type of fees. What would that overall, if you hit that target, what would that translate to in terms of revenue to maybe Zeta token holders?   << Tristan (39:52) >>: Yeah, good question. In terms of like the vaults, we're mostly just going to pass that yield and essentially that P &L directly back to users. So that's not necessarily, at least in the early days, not like a big revenue source for us. We want to democratize that and give that back to community. I think it's nice not having to purely depend on external market makers. And that's why HLP was really good as retail can come in, they can provide liquidity on these things. There was actually like very good gains to have in the early days.  But in terms of obviously we run an exchange.   there is a take rate and kind of trading fees that go through that. yeah, having value accrual to the token was actually our number one most requested feature on the previous token. And so if we do turn on a fee switch, we would want to be pretty aggressive with it. I will kind of caveat saying these are all hypotheticals. This is kind of like how we are thinking essentially. So there's like not financial advice or anything, but like if you were to do some of the numbers, crunch the numbers.   The guidance would be essentially if we were doing 500 mil daily volume and let's say we take a take rate of about three basis points. think that's kind of market standard. If you look at some of the other exchanges, Hyperliquid, think they're kind of take a fee is anywhere from two to 4.5 basis points. And on the maker side, it's a little bit lower, like averaging out, say three basis points. That would essentially give us a daily revenue of $150,000. And if you annualize that, that's essentially 55 million.   basically taking their  proportion that goes back into their assistance fund buybacks, they do 97%, essentially, which is pretty aggressive. I think we would also want to be pretty aggressive with that. We do want to beef up the insurance fund a bit, but we also want to give a bunch back  to users in the form of buybacks, potentially.  Let's say we take that number, 97%. That translates to $53 million of annual buybacks.  Our current circulating supplier, like we mentioned, is about 187%.   million tokens out of the one billion like total supply and if you take the hype market cap to revenue essentially multiple you can find this on Artemis and a few other places it's roughly 15x so the implied market cap I guess if we were to multiply that through would be 821 million and I guess the  current market cap where the token sits is about 35 so I think in that kind of case you're seeing a pretty good multiple   I also ran the numbers essentially on the bear and what I consider the bull case. Bear case I say would be 100 mil of daily volume. That was like half of what we were doing or kind of roughly similar to like half of what we were doing last year. And we had a much bigger take rate as well last year. I think it was about six basis points on average probably. And I'm modeling in 100 mil at three essentially. Even with that, I would say you run the numbers once again, the same kind of math.   I would imply a market cap of 164 mills. So it's about a 5x. And then the bull case, if you were to plug in a billion dollars daily volume, which is basically 2x jup or jup on a good day, which is assuming that we can kind of exceed expectations on the Solana side, that would pit it at a 1.6 billion market cap, which is a 45x. And then I did the ultra bull case, which is like, what if we can compete one to one with hyper liquid or just kind of seeing how the numbers match up.   << Jason Kam (43:11) >>: Yeah, the math got silly.   << Tristan (43:11) >>: And that actually   comes out, yeah, yeah. I mean, it actually kind of comes out to exactly what Hypo Liquid is doing in production, which is they're doing, my numbers came out to 820 mil in annualized revenue. The actual annualized revenue is 890 based  on Artemis And then it implies essentially a market cap of 12 billion and their actual market cap is 13. So the numbers actually came out pretty close.   << Jason Kam (43:34) >>: Yeah, I suppose. mean, the numbers, the numbers certainly make sense. And like the three bits is pretty standard. I suppose I suppose the biggest barrier like in your mind when you're plotting this and you're launching the platform, you know, like what  keeps you up because, you know, the math makes sense. The token is going to do very well if you hit that number. But what do you think would be the biggest barrier between like what you have now?   and maybe $500 million a day of volume. Is it, my god, we could run into bugs? Is it, ⁓ we have a pretty feature complete decent product, but it's still a little clunky that I didn't get it to place I want? Is it, people are already pretty happy on hyperliquid? They probably don't want to switch over. In your mind, what would stop you from getting that target?   << Tristan (44:28) >>: I guess the biggest existential threat or the thing that keeps me up at night as any exchange operator is like, you know, warrior potentially like an exploit or a hack. Like that's definitely the scariest thing. And we've spent a lot of time, obviously we just did a security audit. It's been a lot of time like auditing our contracts, checking all the kind of different attack vectors and even kind of like financial exploits that could happen.  For context, we've never been exploited over four years of  operation, touch wood, even though like   pretty much, I think every single perps platform, except for Jupiter, has been exploited on Solana. think Drift kind of famously lost 20 plus million dollars a couple of years ago with their kind of lunar markets and that kind of all imploding mango with the Abraham Eisenberg thing. They basically allowed for withdrawal of unrealized P &L as well as they allowed margining in their kind of native token, which is extremely low liquidity and able to be manipulated. And so we've made, I think, a lot more   wouldn't say smarter, but more conservative design decisions in terms of what collateral we kind of enable on the platform, what kind of assets we list, how we kind of tweak a bunch of these parameters. I think we're playing kind of playing the longer term game where we need to be around for a number of years. We can't just like go hard and fast and take all these crazy risks and blow up like we're trying to play a longer term game. So that definitely keeps me up at night, but we have a really smart engineering team. We've really gone hard essentially on like...   monitoring DevOps reliability. So we have like observability dashboards and everything. We're kind of like 24 seven monitoring a bunch of stuff. Everyone's on call. If something goes wrong, I get working up at 3am in the middle of the night to go fix it. So we try and really be on the the ball with stuff. In my mind, I feel like if we execute on the product, and it's really good. And there's this kind of like captive tan of Solana who are kind of excited to use the product and from the conversations I've been having and from obviously all the traction that we've been getting in the last couple of weeks.   I think there is some pretty strong PMF there. So I feel like if we just kind of keep leaning into that with a really good product experience and we do all the right things and just kind of trim down our roadmap and deliver something that is like achievable, get there to market. I do feel like I'm quite confident that we will kind of get out there and start raising that volume.   << Jason Kam (46:41) >>: Yeah, the way I see it, I guess it's the way of the Solana native guys, it's their way of getting their huge potential airdrop from rerunning the Hyper Liquid Playbook on a hopefully similar product. I suppose because you have built a similar Perpdex before on Solana. There are many attempts by other players also historically. Those never seem to take off beyond...   people farming the points, they never were sustainable like the way Hyper liquid was. Like, I guess you're confident today on you can potentially achieve that volume sustainably because the product historically just weren't that good because is that how you would think about it? this time it will be very different  there been new learnings along the way? Yeah.   << Tristan (47:26) >>: Yeah, yeah, that's right.   No, I think I think you hit the nail on the head. I think  much as I maybe hate to say this, I think the bar is relatively low in crypto. And if Jeff kind of proved anything, they just locked in, put their heads down and executed out executed like pretty much the rest of the market. That's pretty obvious. I think if you just crypto tends to be more short term horizon, I think. And if you can survive past I think that first like six months to a year of operation is pretty critical, right?   Like it's easy to raise money, it's easy to get a bunch of hype. know, there's always like testnet products right now that are like, we're the greatest, you know, and that stuff doesn't matter, you know, until you actually launch the product and you have users. Like, yeah, you get all the Twitter metrics and the engagement,  but you're almost overfitting to the wrong kind of metrics that you really need to be out there showing real growth potential. And I think that's why crypto has such a focus  for the worst, I think on infrastructure.   It's because infrastructure doesn't have to show real growth metrics, right? If you were like a real web 2 app, you have to show that you're growing. Otherwise, like no one will find you and your product will die essentially. For some reason, people get around it in crypto and last for a couple of years in this kind of zombie state. And it's a big reason why I think people are scared to do apps in crypto, right? Because it's goddamn hard to do because you actually have to grow, you actually have to have real product market fit. Very few products you can kind of point to and say that they actually have this. And so from our perspective, yeah, that's always been the focus for us is   I'm not a marketing genius per se, but I think we can do the product growth really well, which is I want to get to a position where the product essentially sells itself. We still just kind of happen on exchanges like FTX back in the day. We actually had a guy back in the day who joined us from FTX and he said, my job was the easiest in the world doing BD for FTX because literally I didn't have to like push it on anyone. The product was so good, people would just use it immediately because it was the best thing on the market. And that's kind of where I want to get to. And then my other point is we've learned a lot over the last four years.   << Jason Kam (49:18) >>: Hmm.   << Tristan (49:21) >>: And not to talk ourselves up too much, but like we made a lot of mistakes. We've learned from them We've done basically through this trading product perps exchange for four years. We've also launched a token before You know, there's like lots of things that you can mess up that you can learn from we've kind of already made a bunch of those mistakes So I feel much more confident kind of going into into the next leg of the journey that we kind of know a lot more there there's like a lot of Bespoke like first-hand experience and then I see a bunch of these new kind of club teams perp teams coming up. They're very hot, know, you got   whatever building on some cool new chain with some cool new founders and they just raised a big round from whoever it might be.  But yeah, they're going to run into a lot of the same problems. I see people trying to build fully on chain order books like we were trying to do a couple of years or let's do it on Monad or something like that. And I'm like, I don't see how this changes the equation. There's some like fundamental issues here. And like talking to them, I'm like, it just feels like they're like us like two, three years ago, they're going to run into the same challenges. So that's why I feel a bit more confident. We're kind of like a bit more veteran and the team has kind of been through.   a whole cycle of multiple cycles at this point. We've kind of done it before. It's not our first radio.   << Jason Kam (50:26) >>:  And then, I guess just a bit more on the product itself, like listing and delisting of perps. Do you plan to be any different? And do you have a roadmap for stocks? I think Hype is trying to do that. And then they also have HyperUnit that is for spot deposits. Maybe on those three things, how do you think about those three aspects?   << Tristan (50:50) >>: Yeah, listing super important. I think this is actually I didn't touch on that in the go to market, but that is extremely critical. We saw I think it was a big reason why hyper liquid got a lot of attention in the early days. They did pre market stuff similar to the to the Aevo guys. I think that's just even though it didn't do a lot of volume. It's a great kind of top of funnel acquisition strategy, bring new people into the platform who kind of want to get into these new markets. And funnily enough, you actually saw innovation leading on the dex is right.   then Bybit started copying it, then Gate started doing pre-market stuff.  So was good, they were kind of on the bleeding edge there. And so for us, that was a bit harder to do on our previous product, because getting the kind of Oracle feeds, putting that all on chain, setting up a market, probably would take us a day roughly, like turn around. It was a bit of a painful process with a few moving parts.  But with the new model that we have, the Oracle setup, we're working with the Pyth guys on that.   They have a new Oracle essentially which they can spin up a lot faster. So we're hoping, or like my internal SLAs, we want to get these new listings out in a couple of hours. If we're taking too long, we've kind of failed there. I think that's really important.  I think your other question was essentially on bridging hyperunit stuff, if I'm not mistaken.   << Jason Kam (52:02) >>: Yeah,    the spot trading on hyperliquid itself through hyperunit. Yeah, the custody. Yeah.   << Tristan (52:06) >>: Yep. Yep.   So yeah, we will have spot trading as well. That's pretty much mostly built, but just kind of like putting the finding final touches on it.  We think that's pretty important. And it's also a fundamental component of our kind of unified trading account.  We kind of took some notes from essentially  how Bybit had done there is we think they have a really good system and this allows for   kind of collateralizing your positions, not just in USDC like Hyperliquid does, but in Bitcoin, ETH, Solana, Jito, Sol, whatever it might be. This is like a really nice feature that people have.  This kind of unlocks the whole lending side as well as the spot trading side. So it's kind of this nice trifecta of products there. And like I said, getting the bridging experience really good is super important to us. So we're focusing on making that very fast and painless. On top of that,   Yeah, I think a big draw for HyperUnit is this like native Bitcoin angle. I think there's like a lot of TVL there. Actually, I'll kind of one of our kind of like,  BD guys, actually really been pushing this on me is like, we need native Bitcoin. And I've been talking a bunch to the Zeus network guys who have ZBTC on Solana. I'm very good friends with with the CTO there. He basically, it re implemented the Bitcoin virtual machine in like Solana smart contracts in the SVM, which is just like   crazy smart stuff, but yeah, he said basically he looked at hyper units modeling. He's like, yeah, threshold signature scheme. can do something. Basically our product is pretty much comparable with them on the Solana side, which is good.   << Jason Kam (53:35) >>:  Interesting. Okay. Well, good luck on the launch, I guess.  then if you do get the buy-in and the shifting of volume and people kind of get the sense of the token incentive, like it should just kind of work, assuming the product itself stands up.  And then onto the product.  Zeta would do a one-to-one mapping and migration of the $ZEX token to the $BULLET token. Can you walk me through how you think about that?   << Tristan (54:04) >>: Yeah, sounds good. Yeah, I mean, we had already launched a token. I guess now that we've done this rebrand, we have a much more grand vision in terms of what we're building with the whole network extension for Solana and really trying to take on bigger market share.  We thought it was important, I guess, to reflect that and essentially the token, it's going to have much more refreshed utility, which is going to be much stronger. So using that in the actual.   Proven network potentially is the gas token, giving trading fee rebates essentially is like a very standard exchange feature. Some of the kind of a revenue  kind of all value accrual mechanisms, which will go through essentially like a fee switch decision. All those we think is much better.  And yet we didn't want to launch a second token because I think it's a lot to manage. I think it's also like probably not best faith. So we decided to simulate to how it.   taking the product and moving it all over into the bullet stuff. We're gonna do the same for the token essentially. We already have a bunch of people, we have almost 35,000 holders, so that's really nice. We initially with the token had a year cliff essentially, so we didn't want any investors or team or anyone else unlocking before then. We wanted a full year to get it out to community, get as much distribution, as many holders. We had about 15,000 stakers as well, which is pretty nice, those people that have locked up essentially for.   for a couple of years. it's kind of gotten out there in the community. I think especially we've had a lot more kind of a buy interest recently, which is great. And so I think that's kind of a nice base and anyone I think who wanted to not support the project and like exit during that kind of bear market period or over the last year had the opportunity to. I think we have quite a strong holder base now. And so we're gonna be doing a one-to-one token conversion. We think that this is probably the most fair thing to do.   for the people that have been supporting us since the early days. It's that will happen essentially around the time that we do the TGE for the new token. We'll just have some essentially like conversion portal. People can go in there and they'll have a period of time essentially post TGE to be able to convert their tokens into the new token.   << Jason Kam (56:13) >>: This happens after mainnet   << Tristan (56:15) >>: Yes, yes, that's correct. So yeah, like very fundamentally, and this is an important  point to mention as well. A lot of people have been bringing up the point that like, investors, it's like we're coming up on a year investors must be unlocking, there's going to be this like supply shock or like overhead. We actually did something which is we basically reached out to all our investors and like obviously chatted with our team.   We negotiated with all of them. We want to basically push out vesting until TGE. We don't want to have any of this supply overhang before the token comes out. And fundamentally, like you said, I want the mainnet to come out. I want it to be successful. I want to get traction on that. And we don't basically deserve any tokens until we can kind hit those milestones. So that's why we've decided to push all the vesting out until the new token comes out.   << Jason Kam (56:59) >>: immediately or maybe there's still a time lag between the TGE itself and sort of maybe like a month, three months or so after they can start clipping.   << Tristan (57:06) >>: Yeah,   potentially there might be a little bit. Yeah, we're still kind of deciding on the exact details, but we will do the thing that I think maximizes the benefit for community essentially. We want to get people in on the ground floor. We don't want to have any kind of like negative externalities.   << Jason Kam (57:19) >>: Yeah.   Is there more tokens granted like when let's say if if land to AAVE a there's like this additional 20 30 % portion for additional like is there anything like that or no?   << Tristan (57:33) >>: No, it's just one for one at the moment. Yeah, we're just keeping it simple.   << Jason Kam (57:37) >>: Do you expect all of the flow to convert over or do you think some is already lost? Maybe like 80 % conversion rate.   << Tristan (57:44) >>: It's a good question. Yeah, I'd probably go with something similar to that. To be honest, we had a claims mechanism for our original airdrop after the whole point system and I think 80 to 90 % roughly was claimed. there was a bit that people either forgot about or I don't know what kind of happened there. guess people churned out of crypto as well, to be honest, through the bull and the bear cycle. So I imagine probably a similar kind of conversion rate will happen there, but very hard to say.   << Jason Kam (57:48) >>: Yeah.   Yeah, and then it would seem like you're strongly intending to  copy or not copy stuck the wrong word, like learn from what really work well with hyperliquid with especially the fee induced buy and burn. And looking at your FDV of two, three hundred million today with like a thirty, forty million dollars circulating. If you your target, a 50 to 100 million cash flow every year.   fully dedicated towards burn will have a huge impact, obviously.  I guess, how should we think about the decision being made about the buy and burn of most of that cash flow?   << Tristan (58:50) >>: What's your question specifically?   << Jason Kam (58:52) >>: Like, are you going to decide it? It's going to be like  a pretention of voting by the community. But like, it's really just investors like us voting say yes. And then like the burn starts because I think Jeff just decided like the AF just kind of started buying and burning. Well, not not burning, but like they're just buying but locking it up. I suppose nothing stops you from doing the exact same thing without any sort of token holder approval.   << Tristan (59:14) >>: Yeah, I mean, we want to try and   avoid any like it's not it's not a like, we don't want to make like kind of these centralized decisions. And we also want to basically do stuff that's in the benefit of the protocol and work with community. So that would definitely be something that goes down to a vote. I think we want to model out the numbers as well. And there's like a good bunch of people who've been early supporters who I think have like good quantitative understanding and expertise who have kind of modeled out a bunch of this kind of stuff. So we definitely want to get their input essentially on what numbers make sense, you know, how aggressively we should pursue this and   the right parameters. But I think there's a ton of interest. I don't imagine there will be pushback from the community on this. think most people will be generally on board. I think you've seen similar things like Jup, think also announced their kind of buyback thing a couple of months ago. I think overwhelmingly positive kind of feedback and push from the community to have such a mechanism. This is true.   << Jason Kam (00:02) >>: Yeah, but that's not 97 % see here that Tristan   I was strongly advocate for like almost all of it And I think it will be a huge impact. Yeah   << Tristan (00:10) >>: that's internally.   Yeah, I don't want to commit to an exact number. But yeah, our goal off the bat is to  recycle or reinvest as much as possible into the community and into the growth of the exchange. We think this is very important. Like we need to be doing this off the bat and for probably the next couple of years to really grow. Because I think the market share in the pie is going to get really big. And I think, ⁓ yeah, it's just not conducive or we're not in a rush to like   take profits or stuff like that. We really want to give that back to community and having that flywheel and starting that flywheel, something that Hyperliquid did very well. They're basically giving back almost 100%. They never raised any VC funds. All these kinds of things make a lot of sense and that's how you win community sentiment to be honest. And I think if you're looking at some of our other competitors on Solana then they're not doing that. They're kind of probably taking a bunch of profits themselves centrally. They're relying on...   Grants, essentially, they're raising huge rounds from VCs, so we definitely want to take the more community-oriented approach.   << Jason Kam (01:01:10) >>: Got it. And  when should we expect something like that to be public for everybody to vote on or sort of at least observe?   << Tristan (01:01:18) >>: Good question. I mean, it would definitely need to be, I would like to have it pre TGE. So I imagine the next couple of months, it's something that I'm like now thinking a lot about.  Definitely by like end of the year, I would like to accelerate that. And it's such like a important catalyst. I want to start that conversation early, get people excited, get a bunch of input as early as possible.   << Jason Kam (01:01:25) >>: wow, okay.   Yeah, I know we're running out of time. Maybe just like one or two last questions.  You've raised about 13.5 million historically through two rounds of fundraising.  Do you have an equity entity or will kind of all future value accrual go to the token and how much of that treasury is left?  I guess you have to fund yourself through your own token portion, you know, just kind of walk me through all of that.   << Tristan (01:02:02) >>: Yeah, sounds good. We've only done  kind of token sales and raises and everything's around the token. We kind of don't have that equity structure, essentially.  In terms of, yeah, our raise, I think it was around $13 to $14 million, like you mentioned. That's put us in a pretty good position. We raised 21, 22, essentially,  in kind of that bull market phase of Solana that kind of carried us through. We did a smaller, essentially, like...   friends and family or like angel raise essentially like Anatoly, bunch of other people  last year, which was kind of nice to just get a bunch of the Solana builders in.  But generally we're in a very strong financial position. Yeah, yeah, yeah, that's right. There was like a much smaller round though, it was just kind of like an angel thing.  But yeah, we're in a pretty strong financial position. We have over two years of runway, we're pretty comfy, we're like relatively lean teams and we don't have like massive kind of  operating expenses, which is pretty nice.   << Jason Kam (01:02:37) >>: last year.   << Tristan (01:02:58) >>: And yeah, we're kind of not going out there and necessarily doing any private deals, I would say at the moment, we think we're well capitalized, we have mainnet around the corner, there's a lot of really exciting releases for us.  So we want community to kind of get in the ground floor. We've seen a lot of people just essentially going out there and, kind of investing in secondary markets. And that's been working pretty well. And I think people have been pretty happy with that. We're always trying to improve the kind of on chain liquidity as well. Like literally last week, we tripled our on chain liquidity.   just working with market makers and kind of getting more capital in there because I think that's a really good way to go.  And if hyperliquid is any kind of example of that, it's really nice that it drove a bunch of people on chain to their exchange  to buy it as well. And I think looking ahead essentially like who are the comparables or things you could benchmark it to, I guess you've probably mentioned that there's like other kind of SVM L2's that kind of sitting at the, you know, 4-500 mil kind of FDV range. I think guys like   Sonic if you're looking at the perps vertical essentially this guy's like drift also at like four or five hundred mil essentially so I think market is already starting to rerate and price some of that stuff in I think there's still a bunch more breathing room potential and then obviously hyper liquid is on an absolute tear right now it kind of 40 to 45 so I think people can kind of do the moon math a bit and kind of look into that but yeah of course not financial advice but yeah we're not in a rush right now to raise I think   We have time on our hands. Essentially, our focus right now is getting Maynette out as soon as possible. And then if we need to really aggressively scale the team,  it's something that we can prioritize a bit further down the road.   << Jason Kam (01:04:30) >>:  Tristan, thank you for your time. Good luck on the execution.   << Tristan (01:04:36) >>: I appreciate it. Thanks for having me on.   << Jason Kam (01:04:38) >>: Thank you.

TLDR In this episode of BidCast, Jason Kam speaks with Richard and Erbil, co-founders of Huma Protocol, about their innovative approach to decentralized finance (DeFi) and payment solutions. They discuss the importance of Total Active Liquidity (TAL) for capital efficiency, the role of PayFi in enabling faster transaction settlements, and their revenue generation strategies. The conversation also covers scaling plans, liability composition, and the significance of partnerships in driving growth. The founders emphasize their commitment to risk management and the potential for future growth in the DeFi space, particularly as regulatory clarity improves. They conclude with insights into tokenomics and the value capture for stakeholders. CHAPTERS / TIMELINE * 00:00 Opening * 01:12 Introduction to Huma Protocol and Its Founders  * 02:00 Understanding Total Value Locked (TVL) and Capital Efficiency   * 05:20 Exploring Payment Financing and Transaction Volume   * 08:21 Revenue Generation and Interest Margins   * 12:16 Scaling Strategies and Growth Projections   * 16:04 Liability Composition and Risk Management   * 19:09 Current Business Volume and Future Opportunities   * 22:09 Self-Sufficiency and Future Growth Plans   * 26:02 Partnerships and Market Positioning   * 31:21 Business Development Landscape and Acceleration Factors   * 35:48 Strategic Partnerships and Collaborations   * 38:12 Credit Card Settlement Innovations   * 50:18 Future of Payment Systems and Adoption   * 54:12 Integrating Existing Players into the Ecosystem   * 01:01:18 Long-term Vision and Market Disruption  TRANSCRIPT << Jason Kam (00:38) >>: Okay, I think we're live. Well, good afternoon. Welcome to an episode of BidCast. I'm your host, Jason Kam, AKA @MapleLeafCap . Today is June 12th, 2025, 12.30 p.m. Hong Kong time. BidCast is being live streamed to BidClub members. Questions are from the members and my own. This is not financial advice. Today I'm speaking with Richard and Erbil, the co-founders of Huma Protocol. Guys, welcome.   << Richard Liu (01:05) >>: Great to be here. Thank you Jason for having us.   << Jason Kam (01:09) >>: Yeah, it's the first time I did two co-founders at once, so this will be a fun one. We have the...   << Richard Liu (01:16) >>: Actually,   it's the first time for me as well. I have recorded a bunch of podcasts, but this is first time, Team Up with Erbil   << Jason Kam (01:24) >>: That's fun. It'll be really good. ⁓ So we see your metrics out there in your Dune dashboard, in the public domain. That is about 90 to 100 million of TVL. We know that you have lent out about $2.4, $2.5 billion of lending volume and recruit all of it without any default. Can you just bridge for us on how you think about turning that...   sort of TVL base into volume into ultimately sort of the cash flow and revenue for Huma Can you kind of just bridge that for me?   << Richard Liu (01:58) >>: Yeah, sure. But ⁓ Jason, before we jump into that, can we have the opportunity to share our philosophy about TVL? We have some reaction to that term. OK, so we actually created a total vanity leaderboard. But TVL serves this purpose in DeFi 1.0, because that's a way where people lock their capital in certain protocols to show their confidence.   << Jason Kam (02:09) >>: Sure, please.   << Richard Liu (02:26) >>: But ever since then, honestly, it has become a burden. And many projects are forced to chase for TVL. And they get a lot of capital they cannot use. And they actually  cannot use. And they don't become a burden for them. And in our case, we always believe in capital efficiency. And when we build Huma Protocol, we always think about sustainability.   When you think about sustainability, you think about long-term and also short-term, you think about capital efficiency. And that's why we only want to lose the capital that we think we can use. So that's why we call it total active liquidity, TAL, if you look at our dashboard carefully. So there is one little difference, but that's a critical difference. So at this moment, we have about $100 million total active liquidity. Most of them we deploy into something we call the PayFi   Payment financing, we use this capital to enable all kinds of payment transaction settlement. Normally it takes three or four days. We use this stablecoin-based settlement solution, make it go a lot faster. And majority of the capital is put in there. We probably have about 70 % to 80 % of capital deployed into all kinds of use cases. Then we also have another 20 to 30%.   we deploy into high quality, low risk, DeFi opportunities such as Aave and Kamino. This is mainly to meet our LP's redemption needs because PayFi assets usually take about three months in locking the capital. But if we got to have enough cushion for people to finish redemption. So Erbil, you want to add more on the, how do we change the transaction volume?   << Erbil | Huma (04:15) >>: Yeah, turn the   total active liquidity into productive use, which you saw as $2.4 billion in origination and about that much in payback. So total about close to $5 billion in total pay-fi volume. So if you want to break it down further, we have two big use cases. One is the settlement liquidity for cross border payments. And the other one is settlement liquidity for stablecoin back cards. So those are the two use cases. The settlement liquidity for cross border payments   is our bigger use case. the use case is here is the origination use case here is that ⁓ we actually call this transactional credit and it gets paid back in about two to six days. What happens is think about an example cross border payment institution as Western Union. I collect as Western Union, $10 million today from people who want to remit that to Mexico. And I need to settle that $10 million with my distribution partners in Mexico. What I do,   If I'm a PayFi platform partner, I tap into the liquid assets, stable coin assets to actually settle immediately with my distribution partners in Mexico. And it takes me about a few days to turn around that, you know, money I've collected and on rampage to pay back that USDC liquidity back. Right. And then I can reason repeat this as many times. And what happens  in reality, we actually turn around this, you know, a hundred million dollars of active liquidity for about   4.4 times every month, which is about 50 times a year per origination. And then there's 50 times a year for the paybacks. for every million dollars actually of liquidity creates about a hundred million dollars you know in volume, right? On both ends, origination and payback on the ecosystem. That's why you see close to $5 billion of  total volume. And  we're projecting end of year being around $10 billion or so. And then how do we turn to...   << Jason Kam (06:11) >>: ⁓   << Erbil | Huma (06:12) >>: yield and revenue, right? Use AST. Maybe Richard, you want to take that one?   << Jason Kam (06:14) >>: Yes, please.   << Richard Liu (06:17) >>: Yes, so from your perspective, you think about this one. We charge business borrowers, they're more like different fintech companies and financial institutions. We charge them somewhere between 12.5 % to 15%. And so you use that one, you think annualized. And so you don't do the transaction level. Of course, each transaction level, when the capital deployed, they're probably charged on a on a BIP's purpose.   << Jason Kam (06:36) >>: annualized.   << Richard Liu (06:47) >>: BIPs, basis for our customers. And in our case, but we charge them annualized from APR perspective. with 100, and then some of the capital, as I said, we deploy into the DeFi side, then the yield is lower, like 8 or 9%. But then you look at about 12%. With 100 million dollars, right now we're looking at 12 million dollars annualized revenue. And from a yield perspective,   So that's how much our income side. Now what's the cost? So LPs can participate in our process in two modes. One is called a classic mode, where we pay 10.5 % at this moment plus some token rewards. And also you have a maxi mode, where the LPs choose not to take any stable yield. And they only get rewarded by feather and the token.   So at this moment, 40 % of people choose to be classic mode, 60 % in the max mode. That means 10.5 times 40 % are actually borrowing cost is 4.2%. This leave us about 7 % net interest margin. And that's put us in a very, very good situation.   << Jason Kam (08:08) >>: Got it. So that's about a 5.5 % spread, which is like you make like five to six million dollars of...   << Richard Liu (08:15) >>: No,   7%. Right, 12 minus 4 something. 7%.   << Jason Kam (08:20) >>: I'll watch it.   Got it. Wow. Okay. So that's like seven million. Okay.   << Richard Liu (08:24) >>: Yeah, that's   Yeah, so basically you think about 100 million every year. Your net interest margin would be around $7 million. And then, of course, from here, you can continue to scale the size from 100 million to 500 million. And of course, once you scale, more and more people will move down to the classic mode. Your cost may be higher, but your margin no longer becomes 7, probably actually it's 5.   So that's still very, very healthy domain of thoughts to be in.   << Erbil | Huma (08:59) >>: Yeah,   that's the spread you're talking about. That's interest spread between what you're gaining versus what your cost of borrowing is.   << Jason Kam (09:10) >>: I see. Sorry, and just so I understand this, like 100 million of TAL, of which right now you are keeping 20, let's call it 25 million of it just in DeFi, 75 of it in just like the business that you run, you turn this 4.4 times a month, so a velocity of 50 times a year, you know, that...   << Richard Liu (09:17) >>: Mm-hmm. Yep.   Yeah.   << Jason Kam (09:36) >>: 75 to 80 million becomes about 5 billion of transactional like lending which will get back So that's how you get to the 10 billion number, right? And then and then all of this blends to maybe 12.5 to 15 percent annualized Okay, okay   << Richard Liu (09:52) >>: Analyzed. Yeah, but when you do   the analyst you use a capital did capital do the calculation use 100 million to do the calculation instead of your few billion dollars transaction volume. Yeah.   << Jason Kam (10:02) >>: Yeah,   that's right. OK, so that's how you get to maybe 12.5 to 15 million of annualized revenue. And the DeFi yield is lower of like 8, 9. So the actual business, you probably charge five bips a day or something. That's actually 15 to 20 % type of fee that you can charge on the vendors you work with.   << Richard Liu (10:25) >>: That's right. For example, our underlying, the biggest departure is ARF. ARF, they charge 5 to 10 bibs a day. Yeah, typically 6 to  10.   << Jason Kam (10:28) >>: well.   Hmm.   Okay, wow. Okay, that's a good business.   Got it. And on your liability side, because 40 % of that $100 million is like maxi, so they're not getting any yield. 60%, OK. Oh, wow. So you're really paying interest costs on $40 million of that $100 million. And that 40 % is like 10.5%. So it's like four, call it four and a half. OK.   << Erbil | Huma (10:48) >>: 60%.   << Richard Liu (10:48) >>: As this one 60, 60%. 60%.   Yeah,   4.2, yeah. Same percent. Same.   << Jason Kam (11:09) >>: Yeah, so you have a net interest margin. You have a net interest margin of   seven to eight percent on that hundred million.   << Richard Liu (11:16) >>: Yeah, yeah, right now it's we feel it's a good business.   << Jason Kam (11:22) >>: Yeah. How do you, when you think about your path of scaling it from 100 million TAL today to let's say 500 million over time,  what's a timeline of that scaling? How fast can you get there and how do you get there? Is it still the permissionless, you know, everybody aping or is it from other means?   << Erbil | Huma (11:40) >>: there are multiple different ways this is gonna scale. So I think the most important thing to talk about is, what we're focusing on is not to just scale this to $2 billion or $5 billion of active liquidity right away because...   we have strong principles that we are protecting, which is sustainable growth of assets with low risk exposure and sustainable yields with very high utilization of the capital coming in. So those are the main principles of how we grow. And on the ARF side, which is kind of like our regular entity through which we serve the trade fine and the payment institutions, we are dealing with mostly tier ones and tier twos, which takes a bit of time to onboard because these are   large institutions, need to prepare them from digital operations perspective, you need to get regulatory clearance and then deploy them and not necessarily deploy them at where their demand is, you deploy them from the basis and then you monitor their work and then their whole operations to make sure everything is working very smoothly and then you scale them over time. So with that, we can easily grow that business to 3X, 5X,   even maybe 10X by the end of next year. So that's kind of like the span we're looking at. There's a lot of alpha here in terms of the planning because if we decide to actually...   create a more balanced yield opportunity. Right now, our yields are more shifted towards like LPs and we provide one of the best yields on chain. You can actually scale even faster, right? So with the macro interest rates going down, actually we can scale a bit faster because we have this spread opportunity in between. And on the second side, on the card partnership side, even though it's right now a relatively smaller portion of our total volume, we have some very large pilots   going on with some of the biggest players in that world that drives trillions of dollars of volume. And it can quickly scale us to hundreds of millions of dollars in active liquidity once those pilots mature to a point where we become the de facto platform, the onboard stablecoin based cards or the onboard, the settlement partners on the acquirer side, merchant acquirer side to settle in stablecoins, right? So that's like, you know,   one of those pilots maturing and getting to a scale where we think is probably gonna happen around early next year is easily a few hundred million dollars of active liquidity and a lot of volume that comes with that. And then the last, I think, opportunity is some of these also big PayFi assets that are established with more than $10 billion in arm are looking to actually partner with us and come onto our platform.   to get DeFi distribution and other  benefits by being on our platform. And they obviously can add up a good chunk of asset volume. So  again, like what we have can scale easily, 5x, 10x by end of next year, but  these new opportunities, both the pilot and the established partners like that can add up like order of magnitude more volume to the whole platform.   << Jason Kam (14:59) >>: Mm.   << Richard Liu (14:59) >>: So   what Erbil covered is more on the asset side, more on the demand side than on the supply side. So the liquidity side. To be honest, whenever Huma says we have new cap, and people are chasing, usually within a day, the cap is filled. So this supply is very, very strong on the defi side. But meanwhile, we also have large ⁓ financial, large   trade five players give us permission. You we need to do 100 million, those type of neighborhood for, you know, deals. And I think we have a few of them lined up. And right now at this moment, we focus on just still consuming with the DeFi capital.  In the next few months, we're going to gradually open door for TradFi to come in.   << Jason Kam (15:50) >>: Interesting. There are a few questions and some of these growth initiatives I do want to hit on because they are quite important. Just on a liability side first, when you look at maybe two, three years, assuming that demand side gets you there, what do you think the composition of the liability would look like on that 500 million? Is it mostly crypto native capital or is it like TradFi taking most of it, kind of like Cantor with Maple? What do you think that 500 million will look like in terms of composition?   << Richard Liu (16:19) >>: I would say that really depends on the risk profile for the demand side. so far, we took very conservative approach. We only take tier one and tier two type of players. Our risk is very low. But since we are a smaller brand, we are a new brand, the market does not treat us  as a super, super safe asset.   So the market is still treating us as revenue, a risky. Once you reach to 300 million range and people see you have not enough tracking record, then they are going to see that part become, oh, this is actually pretty safe assets. And then from there, you're most likely, your stable yield is no longer at 10.5%. You get more close to the normal market, 8 or 9%. Then in that case, you can actually get the capital from all kinds of sources.   I can imagine if you talk about 500, at that moment, most likely half-half.   << Jason Kam (17:22) >>: I see. OK. So it's kind of like Defi natives gets you to 250, 300, and then right at that happens, it's going to turn on and Cantor and, you know, OK, makes sense.   << Richard Liu (17:30) >>: Yeah, yeah, exactly.   Then after 500 most likely they TradFi will play bigger role.   << Jason Kam (17:37) >>: Got it. And then this is all hopefully happening by the end of next year.   << Richard Liu (17:42) >>: Yeah, target 500 minutes. Next year   << Erbil | Huma (17:44) >>: target is a little bit at the end of next year.   << Jason Kam (17:46) >>: And   of the $4 $5 billion of lending you're doing today,  how much of that is this kind of cross-border transaction versus credit cards like today currently?   << Erbil | Huma (17:58) >>: It's about 90 % is cross border payments. It's our biggest volume because that's where we focused on. And that's why we also merged with ARF last year. was our of like killer app and fastest growing use case on our platform. And then Card is where we are looking to rapidly grow because it requires a bigger build out to really plug into this big networks.   << Jason Kam (18:02) >>: Mm.   << Erbil | Huma (18:24) >>: So right now we have RAIN that's being powered by us and we're looking to grow that, but obviously the opportunity on the network integration side is much bigger. So we think that by end of next year, the composition might be maybe, you know, 40 % cross border, 40 % card settlements on the acquire and the issuer side and   << Jason Kam (18:33) >>: Mm-hmm.   << Erbil | Huma (18:49) >>: probably 20 % or maybe even more depending on some of these big players plugging in on other PayFi assets.   << Jason Kam (18:57) >>: Got it. And sorry, and you did say that to get to 500 million, you said that you can 3 to 5X your existing business that is cross border? Okay.   << Erbil | Huma (19:06) >>: easily that's like by end   of next year, we can even probably 10X depending on picking certain partners. Right now we're lucky because a lot of our partners coming from trying Ripple first and then not liking it very much and then onboarding with us and then sticking with us. And I think that's creating a world of math, you know, and also some of our partnerships, you know, with Circle and others opening up doors with the new regulatory frameworks, you know, being pushed around the world.   << Jason Kam (19:18) >>: Yeah.   << Erbil | Huma (19:32) >>: I'm making TradFi and these payment institutions more comfortable plugging into our system.   << Jason Kam (19:38) >>: Yeah, I definitely want to touch on all of that before we get to these business side of the topics. I want to narrow some numbers down before we get there. So seven million of net profit basically flowing to the entire Huma. I guess what's your burn today with the labor and sort of the cost base? And how do you how do you get from that seven to eight million dollars of profit to, let's say, a protocol treasury or like kind of accrual to the token?   << Richard Liu (20:04) >>: Yeah, yeah, yeah.   So I think that I want to add one clarification to your point about the entire Huma. This is only Huma protocol portion. Huma protocol portion captures at 7 million. ARF still has their own margin captured. That's separate because that's more on the equity side. So on the token side, everything's captured on the Huma side. That's 7 million dollars. On the Huma side, honestly, right now, our burn, you're excluding all the one-time listing fees,   Well, around 250-ish, but with the foundation built out more, we expect that will go higher, probably burn rate about 300k a month. So you can imagine, you will end up to be basically 300 as burn and 300 as more like adding to the reserve to the foundation. Half of them goes to the foundation reserve.   << Jason Kam (20:57) >>: So basically, ⁓ you won't need to sell any tokens. You don't need to raise capital anymore. You kind of are fully self-sufficient at the moment.   << Richard Liu (21:06) >>: From that perspective, yes, unless we see major opportunities. Today we have one killer app of ARF, and we're also launching with the third parties. But tomorrow, if you see another major killer app that we think makes sense for us to build, in addition to the platform, then most likely that part, then we are looking for more capital. But with our current growth plan, we will be self-sufficient.   << Jason Kam (21:33) >>: Okay, We can talk about the token value capture and in sort of if you hit your target. Back to the business out of things I guess you have 3 venues of growth: One of each is the existing business you can maybe even 10x again because of the demand that you see The second part is this new credit card   And a third part is, I guess, working with more partners doing potentially similar things, but tapping into your infrastructure, your technology, your source of capital, and so on and so forth. Is there anything else that sort of really, really excites you besides these three things that you want to cover first?  Or we can kind of take through this one by one.   << Richard Liu (22:09) >>:  That's right.   I would say platform. The platform has built to be very, very powerful. Initially, we saw that it's more like the on-chain lending platform, especially with all kinds of structural finance building for fintech. And we believe we have the most powerful capability. But turned out after Huma 2.0 built out, we found we have a new powerful platform that is basically the PST token distribution with all the different integrations.   So what happens when user deposit capital into Huma and they get a token, LP token called a PST, Pay-Fi Strategy Token. Then that strategy token is integrated with Jupiter, Camino, Rated X, Underless, Meteor, and Orca. So all of those are tied together. So that means this token itself has intrinsic yield and that one is plugged into the entire Solana ecosystem.   That means Solana ecosystem see additional yield. That ecosystem become much more interesting. This is a flywheel already. We make that flywheel bigger. So everybody's welcome us. We become major player. So now this is more like we become the DAI of Solana. DAI bring a lot of energy into the EVM ecosystem. Solana is looking for something that can connect the real world yield with the Solana DeFi ecosystem. I think we are well positioned.   with that infrastructure, then that basically come with a lot of distribution power. Now a lot of PayFi assets, even some RWA assets wants to work with us. Right away we're saying, hey, we're going to focus on PayFi and we need this stuff. But our capability will position us to be very powerful player.   << Jason Kam (24:07) >>: Yeah, do you plan to expand PST to  Ethereum anytime soon?   << Erbil | Huma (24:13) >>: Good question.   << Jason Kam (24:14) >>: I mean, like, AAVE   and whatnot. It's quite interesting, because the SUSD PT of Pendle became this thing on AAVE, and they're just looping this thing. Yeah.   << Erbil | Huma (24:22) >>: Totally. Totally. I think, yeah, it's   just a no-brainer, right? Right now, we're just building the whole thing, the whole ecosystem and all the plugins into the DeFi ecosystem. So sophisticated LPs can leverage their positions, can have a very liquid play. And that's why we built a lot of our partnerships on the Solana side and built the framework. It's very easy for us because we already partnered with Layer 0.   on the Huma token to make it on the chain. It's ready for us to turn on, know, PST being available everywhere. And we have a lot of demand coming from, you know, other ecosystems for that. And we'll do it at the right time. But right now we're just focused on making sure we are a de facto, you know, assets  on the LP asset on Solana side and, you know, become the DAI of Solana. And we also see a lot of net new stablecoin inflows just because of us, right, into the ecosystem.   We want to make sure that's like reestablished and then go just replicate it at scale.   << Jason Kam (25:25) >>: It's a really cool initiative because when it's looped appropriately with adequate YT incentives with Huma on top,  would seem to me at least the TVL from the DeFi native side shouldn't be a problem for a long time. I remember a while back we talked about 10.5 % not being that exciting, but now if you can loop this with PST with additional yield on top with Huma, it's become...   << Richard Liu (25:46) >>: -   Yeah.   << Jason Kam (25:55) >>: But basically, I would expect any time you open a cap is when you have a lot of demand on your business side, so you need more capital. And right when you open it up, you should be able to fill in no problem. in a sense, after a TGE, you should be at a phase where you should just be able to grow rapidly. Capital should not be a constraint for you.   << Richard Liu (26:09) >>: Mm-hmm.   Yeah, indeed, that's the case. And I was laughing, you said, both Erbil and  when you said 10.5 is not as interesting. Go to ask people who invest in Huma pool. They will tell you a totally different story. Yeah.   << Jason Kam (26:28) >>: Yeah,   well, the DeFi well is dry, so 10.5 is actually pretty good.   << Erbil | Huma (26:33) >>: Yeah, actually   people  have, some of them actually have made their  sophisticated strategies more public on Twitter and they generate way more than 10.5 % using those strategies that you suggested and way more than that. Right? So we even have a TradeFi investor who is creating an SPV just because they figured that there's opportunity. And they're actually one of our big, you know, token investors as well.   << Richard Liu (26:45) >>: Waymo   << Erbil | Huma (27:02) >>: They want to combine those soft-skill strategies and some of the sticking strategies on the Huma side to create an SP that is like a fluid-liquid, 40-lp base. And, you know, they think they can actually quickly fill that up and bring, you know, bring that onto the protocol. I think this is, to your point, proves that at least on that end, we don't have a constraint. The main thing is, you know, get the best assets developed, you know, make sure the risk exposure is very low and make sure the yield is very sustainable.   << Jason Kam (27:18) >>: Mm.   At what point, you don't have to say this if you don't want to, but at what point will ⁓ Pandel and you have an official poll on Solana or Ethereum?   << Richard Liu (27:42) >>: No, I actually already work with a kind of similar product called a Ritex. It's already in life. So basically all the popular DeFi play on Solana were already in different forms.   << Jason Kam (27:47) >>: Yeah. Okay, yeah.   Okay.   Okay. It's just a more pendle-specific question, but I'm aware of the that it's life. Okay.   << Erbil | Huma (28:00) >>: And the handle wants   to do it on Solana as well. we're happy to, once they are ready to deploy on Solana and do this on Solana, we're happy to do it. It's just before Pendle exists, there's rate X, which is a, know, equivalent on Solana side. And all those strategies are basically already deployed on rate X.   << Jason Kam (28:13) >>: Of course.   Of course, of course. ⁓ And the last bit on the numbers.  I should imagine all of the revenue and cash flow ⁓ and eventually after cost-profit generating on the Huma side,  there's no equity or token split here. It's just occurring to token holders over time.   << Richard Liu (28:36) >>: That's correct. That's correct. Yeah. Huma side    only ends up with a lab and then with a foundation. So either way, it all be captured on the token side.   << Jason Kam (28:47) >>: Got it, very good. And then, so let's talk about the business side. I think, you know, 3 to 5x or even 10xing your existing book of business that is 90-95 % of your $4 to $5 billion of lending. I guess it's a two-part question. Kind of walk me through how you ramp that so quickly over the next 12 to 18 months, because that's a pretty significant growth. And then secondly, has the listing of Circle helped you?   in getting sort of that number there faster.   << Erbil | Huma (29:19) >>: Yeah, very good question. So there are actually two different ways this grows, right? As we said, we focused on working with tier one and tier two for two reasons. One, obviously, this exposure is much lower when you work with them, but two, they have a lot of internal capacity to grow. They also don't want to put all of their eggs in one basket. They don't want to push all of the treasure operations into this stablecoin-based settlements. They also like to start relatively low exposure and then...   growth from there on. just within the, you know, the client base that we have at the SER, there is actually a lot of room for growth. And, you know, some of the growth is just going to come from planned growth that we enable on a monthly or quarterly basis for them. Right. So that's kind of like what we know ⁓ happens with the existing client base. And then we also know that  there are different ways to, you know, balance the current yield.   you know, with the macro changes and that will enable a few other, you know, very big players to just like turn on the lights and start basically pushing more of their volume. And we know those players can easily double or triple right by end of next year, the existing volume as well. So combined together, you know, that's, that's where we're confident that we will see two to five X easily by end of next, next year on the existing business, but maybe even the alpha is, know,   up to 10X or so on the existing business.   << Richard Liu (30:47) >>: Mm-hmm.   << Jason Kam (30:48) >>: Why haven't the big players turned on yet today? Some of these logos that you're signing.   << Richard Liu (30:52) >>: No,   << Erbil | Huma (30:53) >>: And the.   << Richard Liu (30:53) >>: actually we do. Go ahead, Erbil   << Erbil | Huma (30:56) >>: Yeah, there are basically ones who already did that, right? So we have some of the biggest players that you mentioned circle when they wanna onboard the big player, they usually push us to help onboard them. Same thing happened with Solana Foundation when they were onboard a big player on Solana Pay or on the institutional side, they pushed them to us to help them get onboarded because we can really help them adopt these technologies without themselves having too much expertise in-house. That's kind of like already happening.   And then there are ones where they're either waiting for regulatory clearance and in different parts of the world, stable coins is still not like 100 % enabled from regulatory perspective. And it's a matter of time. know this is gonna happen in the next year or so in different parts of the world. then you're gonna actually see them going live. And some of them are just basically waiting to just like...   negotiate and figure out like where they can replace, you know, some of their existing treasury operations and treasury capital  with basically the liquid that we're bringing in, right? So that's like why some of the cycles take actually longer, but we know once we enable them, it's very sticky.   << Jason Kam (32:11) >>:  Do you work with any partners in? Yeah, go ahead.   << Richard Liu (32:12) >>: But   Jason, just to add, right now on our table, we already have three actual very meaningful brands. There's only one of them that allowed us to disclose the name. That's LuLu And even when Circle launched their payment network, they were one of the launch partners as well. And there are two other ones also very significant. But we cannot disclose their name yet.   And some of them we are ready, we're gonna see scaling starting from next year.   << Jason Kam (32:45) >>: Yeah. I guess the signing on of these logos,  the conversations with them and ramping volume, has there been any given time in the past couple months or quarters has this sped up? Because we noticed the Circle IPO, we saw this tryback with Brex, and now Privy. And there's a lot of moves. Do you feel like it accelerated? You couldn't get them to sign on a quarter ago, now you can.   Can you guys kind of walk me through the BD landscape today?   << Erbil | Huma (33:15) >>: Yeah, maybe I can talk about the Lulu case since Richard mentioned that, because I think it's an important glimpse into the future. It's one of the largest payment players in UAE. And a couple of things happened at the same time, which is, one, UAE created probably the most progressive  legislation around stable coins, Circle officially launched  in UAE with USDC, with Lulu being one of their biggest partners.   And just that relationship from beginning to end and the scale, it's very, very quickly scaled on our platform, very, very quickly. So I think it gives you a glimpse of like when an institution is ready and bought into the stable coin based feature enabled by Circles infrastructure, but also enabled by the regulators to actually double down on this vision, we see things ramp up very quickly. And then obviously there are regions where onboarding might take six months.   right, because it takes longer for them to get ready, you know, have the conversations with the regulators and get the clearance. Those we believe, again, once the clarity is there from the legislative perspective, will accelerate quite a bit because, you know, they're bought in from a BD perspective. As long as, you know, you have the right structure that you're plugging in and they kind of, you know, solution to actually help their treasure operations not take too much overhead.   They're born in from a BD perspective.   << Jason Kam (34:45) >>: Aside from Circle and Solana, could be working with you and helping you to moat? I would imagine, and it's what excited us initially too, is that you guys actually go to Silicon Valley very often, you guys have extremely deep connections with the fintech ecosystem there. It would seem very clear to me that maybe other crypto-native firms like Ring Up Stripe, Ring Up Revolut, they wouldn't answer the calls, but when you call them, they would answer and they would work with you.   Do you expect a lot of these kind of partnerships going forward with these companies and wrapping up your business?   << Erbil | Huma (35:19) >>: Richard, do you wanna take this one?   << Richard Liu (35:20) >>: Sure.   To your question, besides for the big players, besides Circle and  Solana, we also partner very closely with Stellar. And especially the actual bunch of our early customers were introduced by them. It's in their network. They are very well-plugged for cross-border payments players.   << Jason Kam (35:39) >>: Mm.   For those who don't know, tell   us who they are.   << Richard Liu (35:47) >>: Erbil helped me with the pronunciation. I have trouble pronouncing their company name.   << Erbil | Huma (35:53) >>: You mean Stellar Development Foundation? Yeah, so SDF, Stellar Development Foundation is basically, you you can think of XLM as their thing. They are one of the earliest payment-focused networks that has a very interesting advantage, which is what they call Anchor Network. So you can go from stable coins to fiat off-ramp by just basically making a transaction on chain. And they're one of the, you know, biggest partners of Moneygram.   << Richard Liu (35:56) >>: Yeah, yeah,   << Erbil | Huma (36:21) >>: And they have a of Remittance players who basically operate on the Stellar networks ⁓ if they want to utilize, you know, stablecoin and PayPal just announced they're actually pushing PYUSD to also operate on the Stellar network as well. they're, know, ⁓ very much payments, cross-border payments focused network and ⁓ they onboard a lot of partners, you know, through us  on to the network as well. And then there are a few of those, you know, Silicon Valley based    players that I don't think we are able to disclose the names right now because of all the  NDAs, but one of them is probably one of the largest  payment networks out there  and once we prove these pilots I think  they will be a major channel partner because we'll be plugging right into their network.   << Jason Kam (37:15) >>: Okay, that's all I need to hear. That's very good. And then, off the 3.5x ramp on your existing business, would you say it's mostly from your existing client base ramping up? Or would you say it already bakes in some big players turning on? Or another way to ask this is, if some of these players are turning on, that's the sort 10x bull case you talked about.   << Erbil | Huma (37:36) >>: That's the 10x block as I'm talking about. Yeah.   Yeah, what we have in the pipeline right now that you're onboarding plus the capacity existing, you know, packages can grow is three to five x.   << Jason Kam (37:48) >>: wow.   wow. Okay, very good. If it happens, it already gets you to that 500 million TAL target. This is completely excluding credit card. Okay. So tell me about credit card. guess maybe walk me through just how big could that business look like and what are you exactly doing in that business and kind of walk us through that.   << Richard Liu (38:00) >>: That's all.   << Erbil | Huma (38:14) >>: Richard, do you want to... Okay, ⁓ I can take that. So there are two different sides of the credit card settlement business. One is the issuer side, which is basically whoever is backing the card that you're paying with. And then there's the acquirer side, which is whoever is ⁓ orchestrating the payments to the mergers that you're making payments to. So there's two sides of the  network. And what we are doing is basically we're doing a pilot for this and we're doing a pilot for this.   << Richard Liu (38:14) >>: Go ahead, please. ⁓   << Erbil | Huma (38:44) >>: on the issuer side, we started working with, know, Rain, which is one of the early stablecoin backed card issuers. They serve stablecoin treasuries to issue cards, corporate cards usually. And these are all backed by stablecoins locked in a vault. And as they, you know, people use the stablecoin backed cards, someone needs to provide liquidity to settle on the Visa network that they use.   Right? And banks don't do that because bank don't care about, you know, stable coins locked in vaults. They have no clue how to necessarily, you know, provide facilities for that. But because this whole thing is on chain, we can create a fully closed loop, no counterparty system where, you know, all of those vaults are basically controlled from a payment, you know, access perspective and the liquidation perspective while we provide liquidity that's backing those, you know, stable coin vault assets.   to settle in the network and then we get paid back as soon as those vaults are liquidated or the partner makes the payment back to the network. So that's kind of like the issuer side, we're enabling the stablecoin backed cards to settle with the network that they're operating on. On the acquirer side, the equation is slightly different, which is acquirers today, especially merchants themselves who plug into acquired networks, they face a couple of challenges, especially in merchant markets.   the time to get your money once somebody actually swipes the card can take easily at least a few days, if not a week or maybe sometimes multiple weeks. And this is terrible for merchants because they actually are disengaged from accepting credit cards if they have a low margin business and high cashflow needs, they need to pay for supply, inventory, workforce, and it's pretty hard for them to actually make it work when their cashflow is locked in into the network.   So we're working with a few different merchant networks to pile something where when you actually swipe the POS, once you get the pre-auth from the issuer side that the person actually has the credit and can actually settle, we can just ⁓ front run this transaction, right? The pink can come back to the Huma network and say, okay, I don't settle this much in USDC with this merchant network. And the merchant can see that as a balance in their account without even knowing.   that they're getting paid in stable coins. the networks can actually charge the merchant for direct access and immediate access to that capital. And that can actually create a very strong economy, which again, almost zero risk that you're taking because you're not taking the issuer's credit risk. You're just basically fronting the settlement by creating this float and charging the merchants who want to access that capital immediately for that. So that's the merchant side of enablement.   We believe there is actually a strong business to build on both sides.   << Jason Kam (41:43) >>: Which side is bigger, you think? I guess it's not a fair question.   << Erbil | Huma (41:47) >>: Hard to say, I think   eventually the merchant side is much bigger, I believe, because regardless the stable coin back cards is going to be a portion of the overall card ecosystem. But more and more merchants will want to settle immediately access immediately. And we can do it again without exposing the merchant to a stable coin itself, as long as we provide the flexibility.    for the merchant network itself or the merchant bank itself,  either directly adapting them to stable coin or even using some of our fiat capabilities that we're building right now to directly actually off ramp into fiat onto the network.   << Jason Kam (42:31) >>: And it's the Visa network or the MasterCard network that ultimately pays you that receivables you acquired from the acquired merchant basically.   << Erbil | Huma (42:39) >>: Yeah, we can get paid by   the merchant or the Visa Master Card Network, either way.   << Jason Kam (42:43) >>: And that's interesting because it does seem like that one could be bigger. I guess, how do I ask this question? ⁓ I'm not an expert in credit card at all, but at least my understanding is credit cards get declined all the time. I might not be able to pay, they get stolen. Do you feel like that's a risky business when you're taking payment financing for something like this?   << Richard Liu (43:01) >>: Yeah.   Yeah, yeah.   Just very, very clear about this one. We are not financing the credit card itself. We are financing the credit card transaction itself. The credit card issuer, they are financing the credit card. They take all the credit risk. We only do the transaction they're supposed to pay. But because of the banking system just so slow, the credit card ecosystem moving multiple days.   We just find a way to help you to settle earlier. But that money you're paying out will come to me. So that's the way. We are not taking any of those type of credit and risk.   << Jason Kam (43:38) >>:  And...   Okay, that's exactly what I want to get to. Is the economics of this business similar to that of your existing cross-border transaction business?   << Richard Liu (43:54) >>: So I think early experiment people are paying us very well. But when you add the scale, when large brand wants to put their logo on it, this is what we intense. We are not there yet. But earlier.   << Erbil | Huma (44:08) >>: Yeah, we believe to be so, but we   cannot say because there's no comparable business today in the world, you know, to really say it is right there, but we believe to be so.   << Richard Liu (44:13) >>: Yeah. But   early experiment, the economics worked well for us.   << Jason Kam (44:21) >>: But it's like a better business in terms of economics.  The maturity does turn out a little bit. It's not like for sure two to six days. It's potentially weeks. But you get compensated for it.   << Richard Liu (44:31) >>: Yeah, So I think   it's a benefit. Both of them actually talk about it just one to six days. It's a very short duration. All those things we do is a short duration payment transaction financing. There's nothing to do. I know there are a lot of things, especially your audience, probably some of them in Asia, think about, OK, you guys take a P2P. Those are critical risks. No, we are totally different. We are only doing payment transaction.   The payment transaction is going. It's just travel too slow. And we have a faster track for them to reach to the final destination and get that one done. But the money will ultimately come into us. So that's the one. And what was your question back again?   << Jason Kam (45:16) >>: Yeah, I guess just the economics there is,  in the cross-border transactions case, usually, and in most cases, it's two to six days, there's no long tail months to get the money. But here, there's potentially times where...   << Richard Liu (45:19) >>: You   Yeah, yeah.   I think it's a bird that still they create her system and network is just be this. You don't want to go that long because we don't.   << Erbil | Huma (45:41) >>: As long as go directly   to Metzberg directly, the delay is not going to too much, right? The delay comes from multiple hops, you know, people need to go through to actually get to the merchant account itself. Yeah.   << Jason Kam (45:53) >>: I see what you mean.   << Richard Liu (45:55) >>:  So because   << Jason Kam (45:55) >>: I see what you mean.   << Richard Liu (45:57) >>: we don't deal with any real consumer credit card itself, we just deal with this transaction flow itself. Another piece I want to say, besides the economics factor, the other one is from LP, token holder, or whatever our product side. People can feel, man, this one is much easier for me to understand than the cross-border payments one. I think   that would give us quite some premium. That product from either from the LP's expectation on their yield, because they perceive this will be lower risk than the cross-border payments. Although in our view, the risk is probably comparable, but they view this will be because they can easily relate to it. They will much easier to give more appreciation to our product.   << Jason Kam (46:45) >>: I would imagine the existing payment networks would love you for that. Is there any competition doing something similar today?   << Richard Liu (46:56) >>: Well, I think this  is a driving force to disruption. But you think about today, obviously Jack has made his name on Twitter in the last few days, Airwallex He said, know, stablecoin is not going to help. But I would say, yeah, sure. You ask a Kodak CEO, would say, yeah, we don't need a cell phone to take pictures, right?   << Jason Kam (47:07) >>: Yeah.   ⁓ that's rough.   << Richard Liu (47:23) >>: It's rough, but I just never see this way and I appreciate him. I appreciate him go to on a big stage to see it and I'm sure he will learn. I'm sure he will learn. I predict within a year he will change his mind. If he does not change his mind, his company will go down in a few years. That's my prediction. Although they're much bigger than us, but if he does not embrace, he will go down.   << Jason Kam (47:42) >>: Yeah.   You know, this clip, Richard is gonna get cropped and we're gonna try to make it viral. It's quite funny.   << Erbil | Huma (47:53) >>: I was going to   say, you don't see Dr. Payfi as passionate about a topic. I know internally, this tweet went up, obviously, we're laughing at it ⁓ from our perspective, because we see the waves of adoption coming in and how crazy that is. And we see big institutions telling us about their 50-year-old problems that hasn't been solved in the traditional Web2 or fintech world. And Richard was very eager to just go ahead.   << Jason Kam (47:56) >>: Yeah, yeah, yeah.   Yeah.   << Erbil | Huma (48:23) >>: provide an opinion and a perspective on this because I mean clearly we have enough strong reason that to be   << Jason Kam (48:30) >>: Yeah, seems   like compared to the cross-border transaction business, are potentially alternatives where there are lot of factoring firms potentially helping them as well. This is potentially no alternative. It's kind of a new field. Maybe, and we all know that credit card transaction globally is a very big business in terms of trillions of transactional throughput. Okay, good, exactly. So on that note, like,   << Erbil | Huma (48:52) >>: 16 to 20 trillion dollars.   << Jason Kam (48:59) >>: How soon, I think you mentioned timeline, like what's the blocker, how soon can you spin this up? then kind of, know, tell us a bit more versus like the 100 million you have today and like, what kind of a scope of this revenue generating TVL opportunities this could become?   << Erbil | Huma (49:15) >>: Yeah. ⁓   << Richard Liu (49:15) >>: Well, let   me first give a philosophical comment about what you just asked. Usually people overestimate what they can achieve in a short term. They underestimate what they can achieve in a longer term. So I can predict in 10 years, majority of those will be T plus zero, no matter it's cross border or credit card. So in 10 years, I can see a lot of business will be converted.   to be enabled by stablecoin or other infrastructure from blockchain and the settlement much faster than it is today. In terms of next one year, I think it will take some time for people to get used to it and to really to grow that business. That's why our overall forecast for next year is just modest, 5X from here today. But most likely we will be able to do better than that. But that's our forecast.   << Erbil | Huma (50:11) >>: And it's modest in the Web3 sense, you know, because obviously it's massive for...   << Jason Kam (50:20) >>: And the biggest blocker is just it's so new, you're building fresh technology for it and therefore everybody's, you know, let's just make sure it pilots well. Is that the blocker?   << Erbil | Huma (50:29) >>: Yeah, I guess.   << Richard Liu (50:29) >>: I think cross border we are   we're at a skinny cross border is nearly at a skinny cross border. You already have major players adopted in our customer base and it's just a fast to figure out. You know how do we as a robot mission is some of the any new customer wants to come on board. They have to go to set up all the banking relationship. They have to get their regulation, clear clarity. Those time it takes time as we go through different regions. For example.   We have several customers in Hong Kong. Where you are, have several customers have been go through that approval process for month, for month. And that's just the energy. But as we get through it one region, most likely you're going to see more and more customers from that one region. I think that will help us to grow faster.   << Erbil | Huma (51:20) >>: Yeah, like I'll give you an example, Jason. I was in Korea last week. I spent about 10 days and when I was there, the presidential election was going on and both candidates went on public talk about how they're going to energize the economy by adopting digital assets, adopting stable coin legislations and follow genius act and really push that forward because they are concerned about...   economy is slowing down and they want to make the economy go faster. And Korea is already a big digital payment adapter and innovator, and they just want to push it to the next level. And when I was just living, the election happened and then one of the candidates won. And that candidate literally a week later, just pushed the bill that they had prepared into public, right? it was like a discussion stage, which is like super rapid.   << Jason Kam (52:14) >>: Mm.   << Erbil | Huma (52:17) >>: you know, adoption on the legislation side. And I talked to the people who are actually working on the policy side on this legislation. And they told me that out of the top five payment players and finance, know, financial players, at least four of them are looking for, you know, global partners to, you know, quickly, you know, adopt these solutions and, plug in to, to provide this, you know, as a benefit to their, you know, users and also to open up more to the outside because   Korea financial system is pretty much a closed looped ecosystem. They see it as basically a way to grow their businesses by opening up the borders using the borderless economy in some ways and digital economy. And we're hearing similar things on the Japan side through our partners who have again helped circle launch in Japan. And we plan to do  ecosystem launch event and get into some of those businesses.   these things to Richard's point, it's hard to predict like where they would be like a year from now on, but it's easy to see, you know, where things are going, you know, five, six years probably, you know, from now on. that's why we're short term expectations, but we're very bullish on, you know, anytime horizon longer than one year.   << Jason Kam (53:29) >>: Yeah.   Yeah. And this is a good segue on the third big initiative. We talked about cross-border ramping, existing client base and new logos. talked about credit cards as a new initiative for you that will be probably really big in a couple of years. The third part is existing other players in this field working with you, tapping into your TVL. Walk me through how that works.   << Erbil | Huma (53:59) >>: Maybe it's a bit early to talk about the full picture, but ⁓ maybe give you an example of how this could work.  There are actually people who have built assets  with some on-chain exposure. The problem is  those assets have zero distribution today. And it's just like a lot of...   things locked and not really, you know, very productive and not very discoverable. And it's not really, you know, built the right way into the DeFi, right? Like we spend a lot of time thinking about PST and PST, how it plugs into, you know, different strategies on chain, the communal, you know, the loops and the rate eggs and the pen. We thought about all of these, you know, that creates this ecosystem around the yield paying LP token, you know, very deeply. we built a   successful example and they're now looking at this and saying, okay, how do I plug into this? How do I bring my assets? How do I actually make it work? And how do I become part of this ecosystem? So we're thinking about this as like, how do we take those existing big PayFi asset players and plug them into the whole framework? And again, it's still a bit early to give names or talk about the specifics, but...   Like one of them is more than $10 billion in size in terms of like assets they can bring on, right? So it's up to us in terms of like, where we can take it, how much of it we can bring into this framework or maybe how much more we can grow it if we plug it in the right way.   << Jason Kam (55:42) >>: Interesting. When will we find out more about this, you think?   << Erbil | Huma (55:47) >>: I'm hoping in about maybe three to six months. We're in kind of like active explorations right now in terms of the right model, know, financial model, business model, distribution models.   << Jason Kam (56:00) >>: Got it.   Got it. That's very cool. So looking through these initiatives, I suppose if you hit your target, the liability base would shift because you do have to, your NIM margin will probably compress. I'm guessing it goes from 7 % to, I don't know, 4 5%. Let's just, 5%. OK, OK, good. then, so that would be 25 million of net interest income minus your costs might go up a little bit, doesn't matter. So you're going to be playing with   << Richard Liu (56:01) >>: Mm-hmm.   Five, five, yeah, that's my prediction, five.   << Jason Kam (56:30) >>: If everything goes well, but not crazy, 20 million of net profit to potentially Huma token holders next year.  Like we discussed before, you're still anchoring for growth, so that 20 million will likely be in treasury redeployed for growth.  But over time, can you tell us more about, as you generate more cash flow, what would that mean for Huma stakeholders?   << Richard Liu (56:53) >>: I think a very straightforward one. Two options. One is that you grow. The other one is that you buy back your tokens. That's just a straightforward. We already, of course, we already have. We already have actually pretty good. We published another  angle is from the staking side. We published our staking proposal and the community near decade. Then people staking him a token. You not only get the staking award, but more importantly.   << Jason Kam (57:03) >>: Got it. Okay, so.   << Richard Liu (57:23) >>: your LP participation get a big boost. And people already did some modeling about those type of HEMA token, staking how much yield they can generate. It's actually pretty attractive. I cannot give a specific number, but it's very, very good. So if for any of the audience, you can do both token and LP, check it out. It's actually can be a very interesting angle. But to your question, most of those ones, once we have enough money in their foundation, besides the   gross under deserve, of course, naturally we're going to spend on buying back tokens.   << Jason Kam (57:58) >>: Yeah, and then going forward, think this is like, it might soon be relevant because you could be scaling very quickly as some of these businesses get there. Like, is there a point in your mind, whether it's TAL, whether it's kind of Lend Volume, is there a point you feel like 500 million, a billion, five billion, that the risk profile of your lending would change meaningfully so that you no longer feel comfortable committing to like 0 % default?   or sort of that one to six day sort of, you know, maturity period. Is there a time where you scale, is there a point where you scale where you stop, like the risk profile of your lending pool changes meaningfully?   << Erbil | Huma (58:38) >>: Yeah, I think it's a good question. Go ahead, Richard.   << Richard Liu (58:39) >>: I would have   I would say that's actually attenuously enforceable future. Our principle is still going to be keep very tight and we are going to we're not going to add the cost for risk or security for growth. I'll say we will continue to put a very heavy focus on your risk one because we risk management because there are so many demanded there. We can still just be very selective and because the reason for that one for purely trade fair people they understand.   If you have 1 % project risk default, if you give me 2 or 3 % extra yield, I buy it. That's building risk taking. That's people buy it. But in crypto world, people don't have that mindset yet. So at this moment, if we introduce some, there is some default people, although the default volume may be small, but people will overreact to it. And people will not react in rational way. So that's why.   From day one, we have been very careful about the prioritizing risk and the security from that side.   << Erbil | Huma (59:46) >>: And you can imagine like some of that capital coming back is going into different types of like buffer reserves, right? So we do have an institutional side, for example, something called a long-loss reserve, right? So there's some of the actually money coming in is going into creating that kind of buffer for absorbing, you know, what might be a potential, you know, default in the future. So you're going to build more of those, I think buffer zones and buffer, you know, layers.   << Jason Kam (59:46) >>: Got it.   << Erbil | Huma (00:12) >>: into the whole thing.  to Richard's point, our goal is to keep the exposure as low as possible. And we are known as a team from our previous company expertise to actually have managed this really, really well. We are known as the gold standard, what we have built in the previous FinTech where we all work together.  We built a very, very scalable business. They scale to more than half a billion dollars in revenues.  And with one of the lowest...   risk default rates in the whole industry. you know, that has been kind of like our focus area and expertise area. And we're going to continue to keep it as a priority.   << Jason Kam (01:00:53) >>: That's helpful. We cover a lot of the business. We're running long time as well, asked for an hour. Is there any other things that really excite you or anything that we haven't covered yet you want to sort of cover in the last bit?   << Erbil | Huma (01:01:07) >>: We covered a lot of things.   << Jason Kam (01:01:08) >>: Yeah, we'll have lot of things.   << Richard Liu (01:01:09) >>: Yeah,   we actually covered all the angles, but if you of course we talk about a lot of business then I think most of the ones when you take up protocol to a new level. Most likely is the platform play. After day one we always said that Huma as a platform and then we are part of all kinds of killer apps. I think that platform building in shape actually in a faster way.   Especially what we already talked about, I want to underscore it. And the distribution, PST distribution with all the Solana DeFi ecosystem plugged into everything, that gave us the level of success we got in two months has far exceeded my expectation. I think the impact of that one will be very, very big.   << Jason Kam (01:02:02) >>: It's like a  that actually does BD. We'll see.   << Erbil | Huma (01:02:03) >>: And I think.   Chris.   << Richard Liu (01:02:08) >>: Yeah. Yeah.   << Erbil | Huma (01:02:11) >>: Yeah, and I think on the other macro, let's say, is to me the growth of the PayFi ecosystem, the growth of this new category of asset that I believe is gonna continue to bring net new inflows on stablecoins and create a very productive use case for them.  I think that is...   going to defy people's belief that stable coins is only for maybe trading. I think we believe this moment is so much bigger than just like what we are enabling.   having got that flag from Solana Foundation because you know, Solana Foundation created the term PayFi to define this category that they really believe in and they built Solana Pay and built a lot of different relationships and they're really pushing very hard. And they give this flag to us and said, you you guys are really at the forefront of this  and you have the right team and expertise and the platform and the capabilities to really like help create adoption.   And as much as we focus on, know, humans growth, we also focus on the growth of the ecosystem and helping anybody who wants to, you know,  adapt, you know.   anything related to PayFi. And we have a lot of old partners, for example, they have millions of users, they have billions in assets in custody, self custody or otherwise, they all want to enable some kind of payment solutions. And we want to also see our role in that play to help them really quickly find the right solutions, find the right partners, compose the right capabilities  and just build rapidly to create more and more opportunities for people to just adopt.   what we believe is the main use case of Bitcoin and blockchain.   << Jason Kam (01:03:59) >>:  Last question, guess. After Circle IPO, did you call Jeremy? Do you know what he's going to do with that billion dollars? Is he going to jam into you, your relationship? It's foster. I figure I might ask.   << Erbil | Huma (01:04:14) >>: Yeah, so Jeremy and I go way back and actually quick maybe fun story so Circle's CTO Lee Fan is a very close friend of Richard and Li Fan calls Richard one day and says, you    Richard, we're looking to hire a chief product officer for Circle. This is like way before, before we start to Huma Do you have a recommendation, know,  because Richard worked in Silicon Valley and worked with amazing, you know, product leaders and Richard says, you know, I have this friend and partner and colleague I worked with at Ernan, you know, Erbil and you should talk to him.   << Richard Liu (01:04:55) >>: I ranked him number two PM in the world. Number one is a Sundar Pichai. And I really appreciate Sundar as a product manager, but Erbil as well. So that's why I named him third.   << Erbil | Huma (01:05:07) >>: Yeah, so Google CEO is hard to compete with, you know, was kind enough   to put me on number two. And, know, I got a very serious conversation with Jeremy. sat at his home, you know, long hours and many conversations with people in circle, I even started advising some of the, you know, team members already. And I really loved like what they were doing. And he really sold me on this like stable coin, like story and what he wanted to do. He had a very clear vision.   And I was sold. I was actually ready to, you know,  jump on board and then like literally as I'm like making this decision and just like make you my, you know, mental model to start it, it gets started on, ⁓ you know, leading that effort with, you know, with Jeremie at circle, Richard calls me and says, Erbil, you make a decision? I'm like almost there. I'm thinking about actually joining and it's like, let me make it hard for you or harder for you.   << Jason Kam (01:05:59) >>: Yeah. Yeah. Yeah. Yeah.   << Erbil | Huma (01:06:04) >>: I think we   can do something together that's going to be even more disruptive. Right. And that's, how we started Huma. And obviously, you know, we talked to Jeremy and the whole team leadership team very often.   << Jason Kam (01:06:07) >>: Hmm.   << Erbil | Huma (01:06:15) >>: We congratulate them during the day of IPO and they're very appreciative, obviously, because we have one of the largest use cases on Circle, real world use cases on Circle, right, on USDC. And they were bullish about, you know, how we're going to enable this new network they have built, which is the, payment network that they really want to like bring it to everywhere in the world. And we are a very critical partner for them because we are the enabler for, you know, either party that's plugging into the network on both ends. So they really want us to like plug in and grow with them.   going forward. So we are lucky to have partners like that and because it makes...   << Jason Kam (01:06:52) >>: And they're going to step up their existence to you.   OK, with more money for sure. Great. Good story, by the way. We would have sized up in the private check if you told us that story in the very earlier days. But I don't have anything else. Yeah, go ahead.   << Erbil | Huma (01:07:03) >>: Thanks for watching.   << Richard Liu (01:07:06) >>: I   confirm that story is true.   << Jason Kam (01:07:12) >>: That's funny.   << Erbil | Huma (01:07:12) >>: Thank you.   << Jason Kam (01:07:15) >>: don't think the members have any questions, but  Richard Erbil, thank you so much for your time. This is great.   << Erbil | Huma (01:07:22) >>: Now thank you, Jason.   << Richard Liu (01:07:23) >>: Thank you.   As usual, every time talking to you is just such a joy.   << Jason Kam (01:07:28) >>: Thank you.

TLDR In this episode of BidCast, Jason Kam interviews Mike Horton, the co-founder of GEODNET, discussing the innovative technology behind their low-cost base stations, the competitive landscape in the geospatial market, and the implications of tokenomics on network growth. They explore the impact of GEODNET on agriculture and drone industries, marketing strategies, and future projections for revenue growth, particularly in the robotics sector. The conversation highlights the importance of decentralization in technology and the challenges posed by international competition, particularly from Chinese firms. CHAPTERS / TIMELINE * 00:00 Opening * 00:44 Introduction to Geodnet and Its Technology * 03:45 Understanding the Cost Differences in Base Stations * 06:43 Market Competition and Hardware Evolution * 09:34 Tokenomics and Network Coverage * 11:19 Marketing Strategies and Community Engagement * 13:14 Empowering Small Businesses with Geodnet * 16:40 Manufacturing Challenges and Decentralization * 18:46 Revenue Growth and Customer Base * 23:48 Future Projections and Backlogs * 27:45 Understanding Customer Dynamics and Tokenomics * 31:40 Exploring New Use Cases and Revenue Opportunities * 35:23 The Role of Robotics in Future Growth * 40:35 The Impact of Robotics on Market Dynamics * 45:16 Innovations in Indoor Positioning and Satellite Technology * 50:44 Competing in the Global Robotics Market * 57:33 Financial Sustainability and Future Outlook TRANSCRIPT << Jason Kam (00:44) >>: Yeah. All right, guys. Welcome to another episode of BidCast. I'm your host, Jason Kam, aka, @MapleLeafCap Today is May 28th, 2025, 9 p.m. Hong Kong time. BidCast is being live streamed to BidClub members. Questions are from the members and my own. Today I'm speaking with Mike, the founder of GEODNET Mike, welcome.   << Mike Horton (01:04) >>: Hey Jason, good to be here.   << Jason Kam (01:06) >>: Yeah, it's really early there in the West Coast. I really appreciate it. Let's dive right into it. I guess you know, this is the question that came up to my mind when I first started doing DD on a name. What is really the difference between a $25,000 base station that your competitors install versus the $700 one that your users install? Like, is there any difference at all?   << Mike Horton (01:33) >>: From a performance point of view and technical capability, there's no difference and in fact in many cases our station will be better because it's tracking more satellites and more signals. From  why the cost is lower,  one is we're not trying to make money off of base stations and that certainly is a core part of the business of some of the competitive  networks. And then the second piece is we're using the most modern integrated circuit technology.   So as you know, integrated circuit technology sort of follows these different process nodes and the silicon that's inside of our base station is on like an eight nanometer node. And so it's therefore it's lower cost and lower power. If you compare that to sort of a traditional  base station, that may not even be an integrated circuit at all. It may be an FPGA with a bunch of discrete RF components that drive the bomb cost up well beyond the price of a GEODNET mining station.   So essentially we're just using much more modern technology than those base stations. And that modern technology is born kind of out of the opportunity for GEODNET, which is that this modern technology is now in things like the latest Apple phone and the Android phones. These higher  capability GNSS chips have made their way into mobile devices, into cars, and the networks that support them just haven't caught up.   because the network you have to refresh physical things on the ground. It's actually much harder than, you know, replacing the watch on your wrist to go install a base station in a remote location and get it back connected to internet. And so that's where the magic of Deepin has come in order to not only refresh and create a better network with all the modern signals, but also a much bigger network now standing at about three times the size of the nearest competitor and do that in a short period of time. That's really the magic of Web3 and tokenomics and   crypto rails and all this stuff.   << Jason Kam (03:30) >>: And it costs almost nothing to run. The electricity cost is nil.   << Mike Horton (03:32) >>: Yeah,   it's a couple watts, two, three watts of power.   << Jason Kam (03:36) >>: Why are they pricing it like it was back in the 90s or 2000s versus kind of dropping the cost dramatically and upgrade to tech to kind of be more purposeful to you?   << Mike Horton (03:45) >>: Yeah, I mean, think that,   well, when you have a huge company to feed and you have an existing business and reputation, these things, you can't change these things overnight or you,  you know, you essentially go bankrupt or you destroy your business, right? mean, those businesses have been built over 20 years. have incredible reputations that they, that, you know, price is an important part of how people think about things. And a lot of the customers of those businesses are   You know governments and cities and people they have contracts and they've done You know most favored nation pricing agreements and all kinds of you know contractual and business reasons You just can't go in and mess with that not to mention just the fact that if if you drop your revenue line By a factor of 10, you know or more in some cases Your business it just doesn't work the same way anymore. So those are reasons. I think a good analogy would be   << Jason Kam (04:40) >>: Hmm.   << Mike Horton (04:43) >>: Sort of the, think about where Nokia was when the iPhone first dropped. That's kind of where we're at. You know, I'm sure Nokia at the time the iPhone drops said, hmm, interesting. This could be a problem, but let's, you know, wait and see. yeah, we wait and saw and things changed.   << Jason Kam (05:02) >>: And are there any sort of other   competitors that you kind of see in the market because they do go to a lot of trade shows from China that sort of build similar tech with similar price points even cheaper?   << Mike Horton (05:13) >>: On the hardware side, think the price will continue to come down. So a base stations is a network effect thing. you really what's powerful about GEODNET is just getting this network established and running and so on. But on the device side, I mean, prices are continuing to come down. New devices are coming out. mean, consumer robotic lawnmower, you know, for seven, $800 with the house is when you look at that and compared to our base station, our base station looks expensive because it has   In a sense, even more equipment in it to do the job. So I think the hardware costs are coming down. That's enabling a lot of  new types of physical AI devices. That's what I always say is like now the sensors are really ready. mean, before, why hadn't all these robotics and drones kind of been able to go mass market? A lot of it had to do with the sensing technology, be it GNSS, the chips like what's in our base station weren't there.   The LiDAR sensors, the cameras weren't there to really enable it. The understanding that the compute engines that to process all this data weren't there. And now, now those things are. And so these things can have their moment. And it really is very analogous back to the sort of the iPhone analogy back before the iPhone. You know, people tried to build those types of devices over and over again, and they couldn't quite get it to work because the compute memory screens.   all the elements, batteries, weren't quite there to pull off something that can meet the sort of overall zeitigest of the consumer. You would come out with a device like a Compaq IPAQ. I had those, they were based on Intel. Intel at that time had a good arm silicon, crazy, they sold that off. But they had it and they had this device, the IPAQ, it was pretty close, but it was a little heavy.   was a little clunky and it had this sort of junky version of Microsoft Windows on there. It wasn't a very great experience. You had to use a stylus. So, you know, just that small change to getting the form factor right and getting the component cost down, making it thinner, that sort of enabled it. I think that's where we're at. You know, the sensors are there. A lot of these devices are still a little bit clunky. You look at the videos of the humanoids, you see them, they're still...   pretty clunky, but we're getting really, really close to make that transition to very mass market devices.   << Jason Kam (07:42) >>: So with   the happening that you're doing with the geotoken emission, would seem like the hardware cost will also keep going down. the ROI, assuming price remaining the same, it can actually still make a lot of sense. Is that the right way to think about it?   << Mike Horton (07:57) >>: That's a way to think about it if there were hexes to fill. But our tokenomics are set up on really an incentive around a one high quality device per hex.  a lot of regions that are of interest where most of the revenue generating potential for the network is, the vast majority of hexes are in fact already filled with a high performing miner.   that has earned its NFT, which means it kind of has locked the hacks and has obtained the governance rights associated with the NFT. So another way to think about it is really the GEODNET network is almost complete. Our tokenomics don't really encourage people to deploy additional devices in places that already have  complete coverage.   << Jason Kam (08:37) >>:  And for those hexes...   And to the extent, if we were to go into a hex and there's a lot of miners deployed,  do these devices get saturated  based on significant usage and therefore requiring more miners to be deployed into those areas? is there like, there's no limit? Okay.   << Mike Horton (09:05) >>: No, no, no, no, no,   you're a geographic coverage problem.  so we're trying to cover geography. We're trying to cover geography that will, you know, be a benefit to our customers and that will let them generate revenue and therefore us generate revenue. And you only need one miner per hex to satisfy. could put all,  1.4 billion people from India in one hex. If you could squeeze them all in my ones that one station could, could cover.   every mobile device. So there is no saturation. It's very different than  wireless networking.   << Jason Kam (09:34) >>: wow, okay.   Yeah, brap entrant. Interesting.   That's interesting. And then to the point of distribution,  of the 17k devices that you sold, did you spend any marketing on those, selling those devices? Or like social marketing, or is it kind of happening organically? Okay.   << Mike Horton (09:55) >>: Most of the markets are sure. I mean,   my goodness. Yeah, I would say so. You know, we're not, you know, running TV ads or things like that. Not in a traditional Web 2 sense, but and certainly our investors feel like we don't do enough Web 3 crypto native, blah, blah, blah. I hear that every day. But from my point of view, from a Web 2 guys point of view, we've put in a tremendous amount of effort to build up   << Jason Kam (10:16) >>: Yeah.   << Mike Horton (10:25) >>: you know, community channels, be it discord, telegram, be it attending,  web 3 events being doing podcasts, what have you to help people understand the value proposition of GEODNET, why it's an interesting project to mine, why it's an interesting project to follow. Definitely. Absolutely.   << Jason Kam (10:45) >>: It's mostly those DePin investors who bought the device and set them up.   << Mike Horton (10:51) >>: Yeah, absolutely. There's probably a good 80 % are individual  deep end enthusiasts who've purchased devices and set one or two up. We did a poll on Twitter recently, or on X I should say recently of how many devices you have. And I think like two was the most common answer. So maybe you get one and you get one for your friends. So it's a very diverse network. There are a few people who've deployed more.   but they're in the minority. And then there's also some Web 2 entities that use GEODNET, including a number of the dealers of Ag products now  and  drone products. So in Ag and in drone, we've had a number of dealers now, more than a handful, who've also deployed quite a lot of devices in support of their business operations. And that's pretty neat because you have a person who's running a drone services business or selling equipment to farmers for precision agriculture.   and they are able to make money selling our service. They're able to make money selling their equipment and then they're able to make money actually deploying stations and mining. So it's been really great for them because it's helped them grow their business quickly.  And they've been able to leverage the full power of the GEODNET value proposition. So those guys are super loyal enthusiasts and have kind of been brought into the web three. Like a lot of them we've gone through. see   On our YouTube channel, we post videos on how to set up a wallet, how to swap, how to use quick swap, type of stuff, how to use raydium. We do that for the specific reason to support those guys. And,  you know, they love GEODNET. They just love it because it gives them now a footing to compete with the quote big guys. know, so if they traditionally, you know, someone, a smaller  service provider  of equipment and Ag might be competing with the John Deere dealer.   And they wouldn't necessarily have access to the John Deere network. They wouldn't have access to those resources. Now with GEODNET, they do. And it's been super effective competitively. They've been able to really grow like crazy. And at the same time, these big companies, they are very extractive. That's  a sort of standard thing, I think, in American business culture is that as these companies make it into the Fortune 100 or whatever, they just become more more extractive. So there's a lot of frustration.   in these fields, but geospatial stuff, like you have to have infrastructure to play the game. And that's very, very difficult for a small business to build infrastructure and GEODNET and the web 3 tokenomics around it really solve that in an incredibly elegant way. And I just think that that  is going to continue to pull pretty hardcore web 2 people into the space. And we expand plan to expand how we've done, how we had this success with guys and drones.   And in agriculture, we're going to expand it into other areas, into a more broad robotics play to just bring in all kinds of robot developers who have challenges of  the development cost, of servicing, of traceability of their equipment, how it's working in the field. And Web3 and the GEODNET platform can help solve all of that. So we're going to have more and more platforms like that come up.   << Jason Kam (14:03) >>: Yeah.   I definitely want to get to robotics in a second, just on this topic, the last one I want to ask is just roughly ballpark. If we put a GEOD Token aside, how much cash dollars have you spent to actually make people aware of the 17k device that you have deployed? How much cash dollars did you spend to get those out the door? And then maybe for the next 17k, do you expect to spend more or less marketing dollars?   << Mike Horton (14:30) >>: boy, I don't know if I have a good number off the top of my head. I guess I wouldn't think, yeah, maybe a million or two. Yeah. One to 2 million.  a lot of sweat actually. Yeah. A lot of the team, ⁓ you know, responding to discord posts, I would say has been the, the, you know, the thing. And, and, and it's not a huge team. So probably not in dollar terms, probably not.   << Jason Kam (14:35) >>: Yeah, so is it like a couple million? Is it like a couple hundred K?   Okay, and it's a lot of sweat equity, guess, then. You just like...   << Mike Horton (14:59) >>: a huge number and sweat equity terms and emotional effort and 24 by 7 customer support on Christmas Day. Yeah, a lot.   << Jason Kam (15:07) >>: got it   Yeah.   And those devices that you sold, the hardware, you sell them at breakeven, gross margin-wise?   << Mike Horton (15:18) >>: Yeah, so we don't sell the, GEODNET Network doesn't sell the devices. The GEODNET Network has partnered with a company, HiFix, who developed, who I'm involved in, in transparency, but who developed a device. They then turned around and gave it to a manufacturer who's been building it and then supplying it to a number of distributors. there about 10, 11 distributors of the device. And it's a certified device. So every device has  a crypto chip in it with this  private key that creates a...   cryptographic signature of the data so we can tell that the devices are authentic and those you know gets sold through a distribution channel and that helps a lot because countries have different languages, you  know border policies, different certification, RF certifications and we've gone through that now in all different kinds of places whether it's Anatel in Brazil or this and that you know it's just on and on and on ⁓ and I think that that type of decentralization   is very critical and we're going to do more of that. We're going to enable more of that in robotics as well. think this type of geospatial and physical AI infrastructure, people are going to see more and more that's super important for every  country if it wants to be able to maintain sort of its real sovereignty and peace, needs to have a capability to build, develop, maintain, service physical AI machines.   << Jason Kam (16:40) >>: And only the device manufactured by that manufacturer can farm $GEOD And you will not be turning that on to any other devices that's sold by anybody else.   << Mike Horton (16:49) >>: No, no plans to do that. think that one potential exception, well, a couple of exceptions. I we've been starting to have these devices manufactured in multiple geographic locations. So we added and initially everything was built in China last year due to trade disputes between China and India became quite problematic. So we started in India and this year we've been working to get it going in the United States. It's taken a little longer than I had hoped. It's not.   not trivial today to build things in the United States, but we're working on it. And I think the lights at the end of the tunnel, then we'll start to be able to crank out production in the United States at a reasonable cost. But it's been a pretty massive effort actually to figure out how to even make a relatively simple device like the, like the miner  and get that built effectively. So I think the US has got a ways to go to catch back up manufacturing.   << Jason Kam (17:44) >>: But if you get a huge order tomorrow, you don't expect this trade war to put an issue on lead time and everything else.   << Mike Horton (17:50) >>: Well, I mean, it just depends on what's tweeted tomorrow. I mean, no, I wouldn't go that far. work, we work through it. We have capacity in India. We're building it in the US but I think to say that, to say something broad like that is I think not, not reasonable. The trade war is very unpredictable and that's why we're making the investment. it was just looking at it from an ROI point of view, I think we would   we wouldn't put all the effort into diversifying the thing. But I think this trade war, we don't know where it's going and  you don't know where trade war ends and other things start. We don't know. So it's, I think, really important that supply chains and decentralization occur. Again, especially on things like robotics and physical AI, decentralization is, I think, paramount to national sovereignty and security.   << Jason Kam (18:44) >>: Moving on to the revenue side, guess last I checked us. Yeah. Yeah.   << Mike Horton (18:47) >>: ⁓ can't make a quick analogy on that, Jason, just so the audience really understands what I mean, because   maybe it's not being clear enough. You know, in the Ukraine today, that decentralization is down to the household level. So people are making what Ukraine is doing to support the four million drones per year that are being used in that conflict. They are having individual homes and a deepened style build drones.   So kits of parts go out to homes and people assemble the drones in their homes so they don't have a centralized place of production to be targeted.   << Jason Kam (19:24) >>: You can do that too. I mean, it's actually not that hard to build a drone if you have all the components in place. Yeah, yeah, yeah. You can just drop a bomb beneath it. Yeah. And it's kind of scary.   << Mike Horton (19:27) >>: It's really easy, isn't it? It's super easy, yes. Indeed. Yeah, it's super easy.   That's the way I feel you. And that's why it's really important it's decentralized because that's only the tip of the iceberg. What's going on there is a small microcosm of what could come. It's serious technology.   << Jason Kam (19:44) >>: Yeah.   Yeah.   This is a good segue actually, for the drones. guess you probably work with a drone company today, but of the $3.5 million to $4 million of ARR, can you break that down for us? How many logos, how many customers, what's their churn like, and everything in  here?   << Mike Horton (20:09) >>: Yeah, so we have about 10   big customers now that constitute a lot of that. And then we have about 30 plus more smaller customers that are probably in the 20 % range of revenue. So about 80 % is divided among 10 bigger customers. And those are all people who have pretty established businesses and high precision GNSS products and services. The smaller customers, I think,   are all folks who are kind of coming in, a lot of it through the drones and robotics side that are trying to build up new businesses around these types of devices and services. And so I'm pretty optimistic on a lot of that. First of all, we have,  I think, really big impact on both those types of customers. on the bigger customers, I think we've been really enabling for them to launch new capabilities and new services.   for them and they really depend on GEODNET and the smaller customers I think were kind of creating almost helping them create their business together. So I think that, you know, if you're trying to do, you know, a startup to sell robotic lawnmowers, mean, GEODNET's a game changer for you because you can reduce your bomb, you can make it much easier to deploy the product, you can make it much closer to that iPhone experience you're not telling. You know, in that space today, if you go...   On Amazon, you look at this things, you're either burying a boundary wire, which in the United States for our yards here is just not a practical thing to really do, or you're trying to up a base station. And in a lot of places, setting up a base station isn't really super practical. that leads to a really high return rate and a bunch of problems. And that's been a big limiter for the market. And we solve that problem completely.   << Jason Kam (21:54) >>: Yeah, that's   ⁓ Would you say historically the Grove have been signing up new logos or was it because existing customers just paying you more dollars?   << Mike Horton (22:14) >>: I'd say, you know, it takes a good year from when we sign up a new customer to when we get significant revenue. So most of the growth you see at any given time is from customers we signed up ⁓ with a while ago. And for bigger customers, there's another period on top of that for them to just get comfortable before they even sign up. we have a lot of customers. Yeah, it's been years.   << Jason Kam (22:28) >>: Yeah.   Wow. So it's like a two year sell cycle for large customers.   << Mike Horton (22:41) >>: For large customers can be a good two years. And even then you're still at the early phase of the revenue growth. it's web 2 takes time. It takes time. There's safety considerations. There's  geographic, there's regulatory, there's just integration. There's them training their own sales cycle. There's changing the way products operate to take advantage of having a network available as opposed to telling people to go out and set up a base station.   Yeah, it takes time, it takes education. But I think the good thing is we have a lot of things that are being using GEODNET right now. In fact, we went through a long list of them yesterday that are still in sort of trial phases right now, deep in trial phases, have been on trial for a long time. So those are all things that can come off and start to monetize. And we're  kind of going to see some of that over the second half of the year and into the beginning of next year.   << Jason Kam (23:23) >>: Yes.   << Mike Horton (23:39) >>: that are already, we know they're using it all the time. We see that the performance is good. So those give us confidence in revenue growth.   << Jason Kam (23:48) >>: Yeah, so that's an important question because the 4 million annualized ARR is as of now, but it doesn't take into account of signed contracts and potential backlogs. Roughly speaking, how big is that backlog versus your formula ARR?   << Mike Horton (24:00) >>: I mean, I think what we feel comfortable saying is that we do see a good path to to 10 million in ARR in the near term.  think beyond that.   << Jason Kam (24:09) >>: Neutromous and   like, like your end.   << Mike Horton (24:12) >>:  you know, it, we don't control the rate at which some of these things happen, right? We're, we're, we build a platform, people build on top of that. They roll things out. So we, I can't, I don't, don't certainly don't want to publicly be stating an exact timeframe for that We, push as hard as we can. We do the things that we,  can to support people, but we're a taker a lot of times on kind of how quickly these things actually end up, you know, turning into revenue.   because we're not out there. The foundation itself doesn't directly sell subscriptions. It relies on a network of OEMs and resellers to sell subscriptions and it takes the time it takes ⁓ for these guys.   << Jason Kam (24:55) >>: And almost more than doubling of that, that's new customers, mostly new customers.   << Mike Horton (25:01) >>: Well, certainly the near term stuff that we see is all things that we already are working on and that have already tested the network. things I'm not even, I don't even really sort of think about,  at least in the near term, you know, so they're saying what's going to happen over the next 12 months.  As I sort of mentioned, even the smaller customers, you, I mean, they may turn on, but the revenue won't be that big initially.   << Jason Kam (25:12) >>: Yeah.   << Mike Horton (25:28) >>: So everything that we sort of see in the next 12 months, we are working on today. We have people are using the network today. That's not what, so we're not, if we're talking about, we just did the drone show last week. There's some new things that came up. really interesting. That is stuff that will start to impact, you know, later in 2026. It's certainly not going to impact ⁓ the rest of this year.   << Jason Kam (25:35) >>: Mm.   Yeah. I  was going to say something.   And then I guess the 80 % of it goes to the burn, the 20 % goes to the foundation. That 20 % is used to spend on salaries and marketing and all these things that you need to do to keep the lights on.   << Mike Horton (26:11) >>: Yeah, and AWS. that's something that, know, our AWS is a major expense for us because all of this data is streamed real time. And we also store it all. So this is something in the future we could look to decentralize to enable full decentralization. And that's something that might make sense. But yeah, so when you're connected to GEODNET, you need to have the data goes from   << Jason Kam (26:13) >>: Okay, yeah   Yeah.   << Mike Horton (26:39) >>: from some station somewhere through the cloud. In the cloud, gets processed, quality checks get done. ⁓ It may get moved to different datums in a sense. there's some processing that goes on. And then it goes from the AWS down to the device. ⁓ And that time from when the data is first observed by the satellites to when it arrives to the drone, let's say,   << Jason Kam (27:01) >>: you   << Mike Horton (27:08) >>: could be less than one second, ideally. It can go up to like five, but ideally it is less than one second and our key customers really want to see it less than one second  all the time. So that's actually pretty demanding latency requirement. And so we end up running in caster servers, the technical term of art is called a caster server. So we run caster servers in every single AWS availability zone. So that second layer of processing is a decentralized network in and of itself.   to relay data from stations to users.   << Jason Kam (27:44) >>: Has there been any turn of your customer base historically? Nice. 10 million is a really magical number because if I do my math correctly, after a NIC's happening, your annualized inflation of a token at the current prices come out to just about 10 million dollars. So you will be at a point where  the ARR dollars that you generate to the burn roughly equals to the emission that you pay to the miners.   << Mike Horton (27:47) >>: None so far.   Mm-hmm.   << Jason Kam (28:14) >>: It's a complex equation, then beyond it, the beauty to this, in my opinion, is that the ARR is completely  orthogonal to how you inflate your tokens. It's completely in your hands on how you drive the ARR. And there are, I think, a lot of venues how you can grow that in terms of signing up new customers for existing use cases and increasing the take rate meaningfully in providing more services.   And then there are some crazy new cases about robotics, about drones, about everything else that we kind of haven't talked about. I guess  I want to go into that. the first question in that area is, am I right about my math, right, of what I just laid out?   << Mike Horton (28:54) >>: Yeah, you are. I don't even   really look at it as inflation exactly because the way I look at it is we started off with a billion tokens and that is kind of the max supply. yeah, I mean, you could look at it as inflation is, but there's not really that the token itself is deflationary. mean, we're already down below a billion. it's not like the total. I always look at things in terms of thinking about   the business in terms of FDV, in terms of all tokens being liquid, because that's where we're going to be at some end state. So in that respect, I think it's more appropriate to look at sort of are the rewards being distributed in a way to create an end state that we want. And the end state that we want, to a larger degree, we've achieved. We have the world's largest network. have coverage covering a huge percentage of the population of the world. And we've used...   less than half the mining tokens to get that initial network bill. And so, and we're on our third half at the end of June, as you said, so the amount of emissions is going to come way down in order to support that network. We're not necessarily, I mean, there a few places we want to add more coverage and we're working on that with kind of specific programs. We have a super hex program to get coverage. So we're working on, there's some locations in Japan we desperately need to fill.   We could definitely have been working on Brazil and we've gone really, it's really gone well in Brazil recently. So we now have a very nice network in Brazil. I'd hazard to say, I don't know if we're the best yet, but I think we're probably there.  We've done that in India now. We're definitely the biggest and best network in India. So there's not too many places left that we're really  gung-ho to immediately create a dense network on.   at filling in the US is a very big country, but, not a lot. So you look at that and you say, look, we've, we've created the end state that we want. And when we created that initial token allocation, you think of it kind of like a, how much do I need for these different tasks? Well, the way I look at it is we've, we've built what we need with less than half the tokens that we sort of planned. And of course there's a sustaining part of it for sure, but   A lot of these things, initial point of airdrops or whatever you want to incentive mechanisms is that bootstrapping function. The bootstrapping is done. That's the key thing to sort of highlight. The bootstrapping of GEODNET is done and we're working towards now a state where you're really looking at the network as this utility to build additional functionality. And that ties back into our robotics roadmap.   got this global precision layer, we've got this base thing that can give any device an absolute accuracy to a centimeter. Now let's help people build things on top of that.   << Jason Kam (31:50) >>: Yeah,  in particular to that revenue point then, I laid out kind of three, I know there are like different small areas I want to go into later, but like on a high level, new customers on existing use cases, existing customers taking up the take rate on new services you provide them, and then extremely new use cases that is not even in your numbers yet or in your kind of previous use case. Which of those three excite you the most? can you quantify it for me?   << Mike Horton (32:12) >>: All right.   Well, I'm a technology guy, so I'm always the most   excited about the new use cases doing the newest things.  I think from a blocking and tackling point of view, the existing market that's been there for a long time for high precision geospatial GEODNET's doing super well in that space. And I think it's, there's no end in sight to where we can go with that. We have some very exciting things coming.    that we'll be showing at the ESRI user conference. So ESRI is a big kind of mapping organization that runs community of people in what GIS is called, Geospatial Information Services, a very professional organization around a lot of like public utilities, water and wastewater, energy,  you that you need high precision mapping services. So we've gotten better and better tied into that community. And I think there's a lot upside there.  And then   This Ag thing, mean, lot of good things coming on Ag We have a wonderful  relationship with USDA that has really been excited because 1.8 million farmers in the US don't do precision Ag or something like this. mean, the exact number,  we did a webinar recently with the USDA and a couple of our customers and we went through some of the numbers, but because the technology has been so expensive, it's really...   All this automation and farming has really benefited the big farmers. can think of people sort of like in Iowa, South Dakota, those states where you have really large farms, but smaller farm operations haven't been able to afford it. And GEODNET changes all that. And that has a benefit to those farmers, especially in bad years, because it reduces their input costs and labor costs. But they have to be able to get over that upfront cost of getting the equipment and services and paying for it. So I think there's a lot of potential in farming. I think there's a lot of potential in construction and survey.   And those are the kind of classical use cases that the technology does. So no end in sight to what we can do on the very traditional business case for RTK.   << Jason Kam (34:29) >>: Yeah,   I suppose Mike when you build a budget for this year and next year and as you look at the sort of ARR and order backlog trajectory, I mean, it certainly is true that you and the team sort of lay out different venues of growth. And I guess from the looks of it, when I listen to you, the path from 4 million to 10 million, it seems like it's a hodgepodge of different efforts. Like there's no single biggest driver that would take you there. It's kind of everything else working together. Is that correct? Okay.   << Mike Horton (34:54) >>: Yeah, that's right. At this   point in time, is no customer that's super dominant. That could change. One of these things could accelerate  faster than others. But at the moment, no, and I don't foresee it.  Just because, like I said, the web 2 things take time. And so you're kind of working through growth curves with each one of these customers and adoption.  So yeah, I would agree with that statement.   << Jason Kam (35:23) >>: Yeah, I mean, I've heard you publicly talked about  the sort of, you know, the GPS device in the car and I heard you talk about wing bit. heard you talk about the Android position app. Are those big drivers for you going from four to ten or are they outside of   << Mike Horton (35:37) >>: No, they're outside that. Yeah, those are all outside. Those are all things. I mean, those, we definitely have our share of things that were,  I don't know, we're trying out that never have been done before because going back to the first point that you made in this conversation about, how is this expense and the change in expense and the cost of this type of equipment.  So that's very beneficial. The reduction in cost of equipment is very   << Jason Kam (35:40) >>: Okay, can you quantify? Yeah.   << Mike Horton (36:07) >>: beneficial to the accessibility like getting the small farmer to be able to compete with the big farmer and have the same tools and techniques, right? That's kind of what that does in that market. But at the same time, having access to globally referenceable centimeter accurate position, which is what we provide, globally referenceable, absolutely accurate centimeter position, that's a crazy capability. That's like being able to, you know, as a human, if you want to put it in human terms, it's like being able to remember.   you know, where everything is in your life down to the center of your accuracy and be able to translate that to your wife or to your friend and then them having that same knowledge instantly. Like I can share that knowledge with anyone instantly by having this reference map. So it's a crazy kind of capability that you can do different things and we've toyed around a lot with different augmented reality ideas.   So we have a demo, showed it in that talk on the Solana mobile where we show a piece of augmented reality content. And the case of the demo was like a GEODNET coin. And we put that coin in front of the door of one of our offices in Asia. So that coin is sitting there in front of the door of the office. And you look at it with a phone that has GEODNET and the coin shows up in front of the door, just like it's supposed to. You turn GEODNET off and you look at that coin with   GPS and the coin is like where's the coin it's actually it was off maybe 20 meters to the left on the wrong heading as well so I think that what do you do with that well I don't think anyone really knows yet to be honest with you but we think it's pretty cool capability I mean it should be very useful whether it's for meeting your uber or for finding you know more specific locations I mean the or geocaching ⁓ but maybe it's a gaming thing or maybe   I don't really know, but it's something that you cannot do today that we enable and we're like, well, let's try to stimulate some activity around that. I think tying into the Solana Seeker phone is going to be a really kind cool way to test it because you're going to have a lot of people, people who are buying the Seeker, I think are a self-selecting group that are like really  edging into new stuff and want to try new things. So we'll see where that goes. But  yeah, there's a lot of that.   Those things are not really in our revenue, short-term revenue horizon. We don't know how big they'll be. We don't know when they'll...   << Jason Kam (38:35) >>: Are they more   experiments or are they more like actual real business efforts? It's like this is cool.   << Mike Horton (38:40) >>: Some are   experiments. I mean, I think augmented reality and reality is an experiment and we've kind of interviewed a lot of different people in that marketplace. And we do think the experiment is probably the right category because a lot of things haven't really taken off yet in that space. I think when you look at drones and robots, I would say that's less of an experiment and it's more about, you know, it's just still pretty early. Like humanoids aren't really, I mean, they're monetizing for a lot of really cool demos, but   Actually, like in our business,  talk about, like, I like the dogs because dogs are generating revenue. Like we have customers like Drone Deploy and their name says drones, but in reality they're doing sort of mapping services using a combination of photogrammetry  and, you know, back-end cloud processing to extract data out of imagery. They do a lot of, they have customers who collect data all the time on the robotic dogs. So the dogs are...   a little bit more actual revenue-generating machines today than humanoids, but all that, I think that's a category that I wouldn't categorize as experimental. It's more a question of timing as to when that explodes. I am totally, 100 % convinced that we are all gonna be interacting with a lot of robots on a daily basis within five years.   << Jason Kam (40:01) >>: Yeah,   I do want to touch on that because that feels more real than not because with billions of dollars Silicon Valley is pouring into it.  Let's say standing by your end or maybe next year you can't commit to it. But I'm going to say for you, let's say you're standing there and you're looking at 10 million ARR, all of which coming from new customers, existing customers, drones, your existing use cases. And then you look at robotics. How soon and how big would that be for you?   And are you already talking to the largest robotic companies in the world, either in China or US, about this effort?   << Mike Horton (40:34) >>: We're definitely talking to some really good names and I think, I mean, if this stuff goes consumer and that's my bet, so I'm focused a lot on consumer applications, I think it can be ginormous. i mean, Yuan runs around talking about it'll be the biggest product of all time. That probably is not an exaggeration that this market will be the biggest market of all time. ⁓ I just think that   It replaces physical work. mean, that's the thing. mean,  you know, depending on what stats you believe, like 70 % of the GDP is physical work. And, and, and also the ROI on these things is fantastic. There's a, mean, there's a real ROI on robotics. It's not, I don't know. There was, it was there an ROI on getting your iPhone. I guess there was, cause you could send messages faster and you could, you know, you entertain yourself more cheaply or something. I don't know, but.   At end of the day, the function was still the function you had before and there wasn't an ROI. There is an ROI with robotics. There's a real like monetary ROI when these things work where you end up, you know, they pay back quickly. And then when they work with each other and share data with each other, you get a network effect between them. And so I think that that will have another benefit to it that you also don't really see with.   sort of traditional smart devices. So yeah, I think it could be very, very, very big. And a lot of the stuff that has been sci-fi or has been sort of quote military technology or whatever, as it comes into consumer hands is it's gonna revolutionize the way we live.   << Jason Kam (42:15) >>: Do you feel like those potential customers feel that your technology is vetted and of matured enough to be part of that spec in day one in commercial production?   << Mike Horton (42:26) >>: Yeah, I think all these things are pushing on Obtanium, so they're always looking for new edges. Where we are working on our roadmap most strongly to intersect those devices in a more concrete way is to crack some of the indoor problem and some of the GPS denied problems. So if you think about where GEODNET works really well today, it's outdoors. And when you go indoors or when you go into an environment that's quasi indoors, like...   you know, super deep urban canyon downtown, the signals get all messed up and are too weak to really effectively use. So we're tackling that in two different directions. The first direction is incorporating vision and LiDAR sensing into our stack. We made an investment into a protocol called Rover, which we couldn't be more excited about, which is doing HD mapping. So they have a deep end device that combines a LiDAR and a camera with GEODNET and allows you to build.   HD mapping data for simulation training and actually just having a reference map for autonomous vehicles to use. And that technology stack we're working to bring into our positioning stack. So turning it around the other way, I have HD data available. I've either trained on it or I have a reference map. How do I do localization with the combination of RTK and LiDAR and camera so that I can get now high accuracy anywhere. So that's one major direction to solve sort of help.   build absolute positioning capability indoors. And the other, which is equally exciting, is that our ground stations starting in June will start to be updated for tracking low-earth orbit satellites. so low-earth orbit satellites are much closer to the Earth than the traditional positioning satellites. So traditional positioning satellites include the US GPS, the Russian GLONASS, European Galileo, and the Chinese BEDO satellites. And those are 12,000 miles from Earth. Low-earth orbit satellites are like    you know, three to four hundred miles from Earth, so about, you know, thirty to forty times closer. The signal that then hits the ground is about a hundred times stronger. So those signals, so the same frequency band, same physics, but now a hundred times stronger means they can penetrate into indoors. And so you start to see that a lot of the problems that GNSS faces indoors may be solved with these low-earth orbit satellites.   We're really, really excited. excited. have a contract with one of the foremost companies launching these things that is really, you know, well set up, I think to yes. Well, this out of the launching the low Earth orbit. So you need specialized, you know, the people think, oh, Starlink Starlink is a communication satellites different than a positioning satellite positioning satellite works a little bit differently. Although there've been research efforts to look at how to reuse the.   << Jason Kam (44:57) >>: Satellites. Satellites or robotics? Okay. Okay. Okay.   << Mike Horton (45:16) >>: the communication satellites for positioning, but fundamentally normally when you do positioning, like the way GPS works, it's kind of a different type. But there are groups,  one here in the Bay Area that we have a contract with that is going along and they're already using GEODNET data today, is launching 300  low-earth orbit satellites. And those will, I think, really help bring the absolute global position layer ⁓ to be easily utilized with GEODNET in the indoor environment.   << Jason Kam (45:46) >>: How much of your current  mind space or R&D dollars are going towards these new robotic efforts versus  signing up more clients for existing ad efforts, for example, or uping the tick rate of existing customers?   << Mike Horton (45:59) >>: Well, in terms of R&D dollars, almost 100%, in terms of  what is going on in terms of  BD, it's much more of a mix. So  I think in BD, still have a, we're trying to hire some more BD people as we speak, so we have some.   << Jason Kam (46:20) >>: Sorry,   but for you personally, your mind is like mostly robotics. Okay, wow. And robotics now, sorry to cut you off, robotics now is how much of your ARR?   << Mike Horton (46:23) >>: My mind? Yeah, mostly robotics and drones. Yeah. I mean, think that   It's not maybe I would have to give you. mean, there's also some things that are hard to decide whether you would call it. What do you call  auto steering in cars and in precision act? Right. Like a das functionality. Is that robotics or is that autonomy or not? I mean, it's a kind of a blurry line. So I would say anywhere from if you want to take a very strict definition, 10 percent.  And if you took a looser definition, maybe 30 percent, something like that.   << Jason Kam (47:01) >>: Yeah,  it's early, I think that's the optionality that would step Function ARR and it just makes this narrative or this target, the network that you built extremely attractive  to potential investors, I feel like.   << Mike Horton (47:03) >>: That's early. So early.   And maybe   if you include drones, it's even higher. I I think of drones as aerial robotics. think most people also would agree with that characterization. So, and drones is quite a space for us.   << Jason Kam (47:32) >>: Yeah, from what you from all of what you know about today in terms of the progress of your potential customers all across different sectors and your target short-term target of 10 million ARR. Let's if we push forward maybe a couple more years,  what would be a ARR number that would make you happy? Do you think?   << Mike Horton (47:51) >>: I mean a billion. mean, yeah, no, I'm not joking. mean, I don't think I'll be particularly happy until the vast majority of robots in the world are built, you know, have, have, or we're working with the GEODNET platform. Yeah.   << Jason Kam (47:53) >>: That would be very nice.   And the path from 10 million to a billion, most of it will be robotics.   << Mike Horton (48:14) >>: Absolutely.   << Jason Kam (48:16) >>: Okay, so you're betting the firm on it effectively. This will. What is the point, if you can give us a timeline on what is the point where most people will go, holy shit, this is entering commercial production, you think?   << Mike Horton (48:18) >>: Yeah, absolutely.   ⁓ that's so hard to say. You know, the easiest way to think about it is  probably that iPhone type of moment where,  or maybe it's actually the Android moment where people realize, hey, now the second guy's come in and this is obvious that everyone's doing that. For me personally, I started to really see it when I started to better understand what...   our customers were doing with drones and the level of automation and capability that drones have, I started to really see,  in many ways, the revolution around drones is much more  significant than maybe people realize. And so that gave me the clue. And then the second thing that gave me sort of the reality check that this was really very, very inevitable  is the progress of self-driving cars.   So self-driving cars have gone through the valley of death and come out onto the other side now. And there was a period, I think, when many in the valley here were starting to doubt. I mean I started working on self-driving car stuff, God, back in like 2015, 20, I mean, that was a while ago. That's a decade ago, right? And then there was a hype cycle around that, of, you know, like all these hype cycles where everyone thought it was gonna be 2021, you know, everyone would have a self-driving car. And it took longer, it just took longer.   You see us, on the other side now. mean, in San Francisco and in LA, they are all over the place. Waymo is doing a remarkable job of, I think, building trust in their product. So that's a hard, hard problem. I don't know that people understand how hard a problem that is to get to where that is and all the compute and learning and regulatory things that go together to pull that off.   It's a big thing, technology has been able to overcome that. And I think it's going to start getting much easier. So for me, are little, but those are early signs.  But I think we're right there on the cusp of this stuff, just really mass market.   << Jason Kam (50:40) >>: Mmm.   So maybe this year or next year, your existing contracts will be really buying into this from all the things that you've talked about gets you to 10, 20, 30, 40. And then when robotic hits, this is when it goes S curve.   << Mike Horton (50:53) >>: I think   definitely the robotics is the thing that will take it exponentially, particularly consumer robotics. I think that's the most powerful thing.   << Jason Kam (51:03) >>: This ties to another question. know we're running low on time. I plan to keep a very strict schedule for you. I've heard, because I'm Chinese, I've heard a lot about the advance of robotics in China. know, Unitree, Da Jiang all of these guys are well-funded and quite sharp. It would be shocking to me that there's no competitor like yours coming from this side of the world. Have you come across any? Do you feel like you are competing with them? Do you deal with any Chinese customers? Like I said, yeah, yeah.   << Mike Horton (51:31) >>: We,   yeah, so certainly we have a strong knowledge of the China market and definitely today and small robots,  they're all made in China, right? And Da Jiang so for folks on the call, Da Jiang is DJI and DJI is a superpower company. I don't think people fully appreciate or understand in the United States.   << Jason Kam (51:33) >>: Haha.   << Mike Horton (52:01) >>: just how incredibly competent and powerful and technologically complete Da Jiang is.  They make their own system on a chip, which is what we see as created the competitive advantage for their products. That's why we are pushing so aggressively to develop specific system on a chip that can reduce the cost power weight of these robotic solutions. Localization is a   big computational driver, all the math that's done to do the positioning is really intense. So they've done that. They made that investment there, know, many for drone. mean, if you look at that thing, sub 250 gram completely automatable by API  has just an amazing set of capabilities. So yeah, I think in terms of the  the current market situation,   Yeah, the US has got a hole to fill. we think that deep end and the deep end movement can help fill that hole quickly on its own. If that doesn't happen, that China will continue to sustain a remarkable advantage and be in a position of  very strong power. So it is imperative that deep end succeeds. It's imperative that these things start to move faster.   The US doesn't do centralized planning, right? We know that. Everything, you go to the DMV, know centralized solutions don't work in the US. I don't know they work very well in Western Europe either. What works really well is great competitive market dynamics and sort of decentralized solutions, if you will. And so I think that super important, super, super important, but yeah, today in the robotics field, China's way ahead, no doubt.   << Jason Kam (53:49) >>: So another way to read this, very helpful by the way, another way to read that is that you're not in that market. They have their own RTK geonet like solution that they're using.   << Mike Horton (53:58) >>: Well, we are in that market in the sense that those types of equipment can connect to our network when they're exported to Europe and into the US. So DJI today is a very popular piece of equipment in the US. of lots of the mean we publish videos on how to connect GEODNET to DJI drones and those those videos are really popular because lots of people use those drones.   Now there is a potential ban of those starting at the end of the year which creates another market opportunity. That ban is on the books and law that FCC will no longer approve new DJI drones starting at the end of the year and that will have a major impact on the drone market in the US. When you look at Europe, mean Europe, the Chinese cars are becoming extremely popular there. So those cars all need to have   ADAS functionality, that means they need to have RTK, that means they need to have potentially been trained with HDMAP data products. So those are definitely opportunities that are lawful, that are super easy to support because they're growing.   << Jason Kam (55:03) >>: that you don't plan to operate in mainland.   << Mike Horton (55:05) >>: We can't operate in mainland. They have geospatial restrictions. So you can't set up a geonet station in mainland China. That's why you don't see any on the map   << Jason Kam (55:13) >>: Yeah, makes sense. I know we're really low on time. Just last question for me. I mean, you're talking about potentially competing against these Chinese players. These guys have potentially billions of dollars of R&D budget. You have a budget of, I don't know, for multiple fund raises, $10 million, maybe more. I don't know. Do you plan to do more fund raises? And what are the terms like historically? Yeah, yeah,   << Mike Horton (55:32) >>: I don't know why we're competing against the Chinese players. We're not competing against them. that I   think the US is competing against them. We would like to stimulate an ecosystem so that drones and robots can be built in the United States competitively. If you try to build a DJI Mini 4 drone in the United States today, there is no way to do that. It cannot be done. There's not an ecosystem of parts.   There is not a system on a chip that can do that. there is none and that's just reality. There's no way to build that functionality in the US today. We want to fix that problem and we want to be part of that solution, but we're not going to go out and build DJI Mini 4s. That's not our goal. It's our goal is to leverage our network to  build a system on a chip architecture that can enable people to make those here.   so that the US has a sovereign capability to build small drones and millions of units like DJI does. That we're very, very interested in. But DJI will remain a friend and a customer of ours because they sell drones all over the world. They need RTK and we have an RTK network. And I think in terms of building out geospatial infrastructure, the Asian manufacturers, they don't want to be building out that infrastructure. That just sort of from a commercial...   I'm a commercial company making farming equipment in mainland China. I don't want to be building an RTK network overseas. That just amplifies all the fear and paranoia people have around that. They want to be able to just connect. And we have that connectivity so that type of equipment can connect and be used. And that helps them sell equipment. It helps the farmer  be able to... The guy in Turkey who's got a farm and wants to use an FJ...   know, tractor steering kit that lets them get connected and run. So that's a win-win. It's not competitive at all.   << Jason Kam (57:25) >>: Yeah, and just last question for our audience. What's your monthly burn currently and do you fund it through internal VC raised capital and ARR?   << Mike Horton (57:32) >>: Yeah, currently, exactly. So about 200 to 300 K a month.   << Jason Kam (57:38) >>: Got it. And you don't have to sell tokens basically to find yourself because of the ARR plus of it.   << Mike Horton (57:41) >>: Not, no,   I mean, you know, I think we're definitely want to ramp that revenue so that 20 % can, you know, cover all the foundation needs. The foundation is pretty, pretty thin, right? But I go back also to that AWS comment, that is a big expense for us. So it's something that, that, you know, there are a couple of options for something like that. One is ⁓ to get the 20 % to be big enough to cover that. Another would be to, to, you know, leverage the decentralization to take care of the...   further decentralizing the network. ⁓ But we do have data storage and data processing costs are a big expense for the GEODNET Foundation. Running a 17,000 station network that delivers real-time data  all over the globe, it's pretty intense and the latencies have to be low and we use a lot of AWS resources to run the network.   << Jason Kam (58:34) >>: Very helpful call. Thank you so much, Mike, for the time today.   << Mike Horton (58:38) >>: You bet,   Jason. Glad to do it.   << Jason Kam (58:41) >>: Yeah.

TLDR In this episode of BidCast, Jason Kam interviews Sid Powell, co-founder of Maple Finance, discussing the company's evolution from under-collateralized to over-collateralized lending. Sid shares insights on the current lending landscape, the importance of institutional partnerships, and the future growth targets for Maple Finance. The conversation delves into the dynamics of the lending market, the significance of TVL, and the innovative products being developed to cater to both retail and institutional clients. Sid emphasizes the cyclical nature of lending and the strategies Maple is implementing to navigate these cycles while aiming for substantial growth in the coming years. CHAPTERS / TIMELINE * 00:00 Opening * 00:45 Introduction to Maple Finance and TVL Growth * 03:45 Transition to Over-Collateralized Lending * 06:46 Understanding Loan Economics and Revenue Generation * 09:42 Syrup USDC and Syrup USDT: New DeFi Products * 12:42 Client Base and Borrowing Trends * 15:47 Market Dynamics and Future Growth Strategies * 18:49 Navigating the Credit Cycle in Crypto Lending * 21:41 Future Projections and Product Development * 27:31 Understanding Market Risk and Collateral Management * 28:43 Scaling Bitcoin Staking and Revenue Projections * 31:19 Funding Strategies and Revenue Distribution * 33:11 Future Growth and Institutional Partnerships * 36:17 Navigating Competition and Market Dynamics * 40:01 Exploring Bitcoin Treasury Lending Opportunities * 41:09 Building a Sustainable Liability Base * 46:47 Strategic Focus on Lending and Asset Management TRANSCRIPT << Jason Kam (00:45) >>: Anyways, welcome to another episode of BidCast. I'm your host Jason Kam, aka MapleLeafCap Today is May 27th, 2025, 8 p.m. Hong Kong time. BidCast is being livestreamed at BidClub members. Questions are from the members and my own. Today I'm speaking with  Sid Powell. There are two of you, Sid, founder of Maple Finance. Sid, welcome.   << Sid | Maple (01:10) >>: Thanks for having me on Jason, great to be here.   << Jason Kam (01:12) >>: Yeah, great to be here. I've known you for a long time, actually. ⁓ And there are ⁓ quite a bit of up and downs, and now you are definitely on the up. Maybe to start, why don't you just tell us, like, what brought you from almost no TVL to above $2 billion TVL today? Like, what happened?   << Sid | Maple (01:33) >>: It's a good question and yeah, we've known each other a while. think we first caught up back in late 2021 in Lisbon.   But in the time since then, we got down to almost no TVL at around April, May, 2023. We're sitting below 20 mil. And now we're back almost at 2 billion. And I think the big change that we made was we switched to over-collateralized lending. prior to that, we've been doing under-collateralized lending to market makers.   you can only sell something that the market wants to buy and the buy side of the market for that type of product completely fell away. And so we focused on what was within our core skill set and we felt underwriting and credit was still within our core skill set. And we looked around and saw that nobody was doing any lending of any kind. The most contrarian bet you could have made in the middle of 2023 was to say that lending was going to come back. And so we leaned into that.   We were able to then launch that product and get the first few borrowers on. And then it's just been a grind since then. So really from August 2023 until now, we've just been focused on growing the over collateralized lending business. And we now lend to pretty much all the major institutions in the space. And we have a number of high net worths, hedge funds, corporate treasuries, and indeed DeFi protocols who are putting money through our platform to get a yield.   because the thesis on lending and credit on chain has really bounced back since that time. So I'd say the core things were focusing on what we could do differently, where there was a gap in the market. And we actually tried T-Bills for a little while in 2023, but we found that it was so competitive. There were 15 entrants in the space. It was a race to the bottom. Your product was getting commoditized. And it's just, I continue to think it's kind of a horrible business to be in for anyone who's doing that. They make no revenue. They're   It's just a race to the bottom on phase.   << Jason Kam (03:38) >>: I think there was a gap that's left in the market on over collateralized standing after Celsius and Genesis and all those guys are dead and ⁓ were you the only one sort of left to fill that gap and you know, yeah   << Sid | Maple (03:45) >>: 100%. Yeah.   No, mean the market of whores are vacuumed. And so ⁓ if you look at who was around doing lending at the time and who survived, it was  us, Ledn ⁓ Two Prime, and then  new entrants. There were people who were doing some lending but not that much. Like, Galaxy and Coinbase were not massive lenders at the time, and they've since grown to be   probably number two and number three position on the CeFi leaderboard today. Tether was doing lending before, but they wouldn't have been the largest or even maybe a top four or five at the time in 2022. And they've since emerged to become kind of the giant of the lending space today. But if you look, I would say that the space is still structurally under supplied. 2022 total loans outstanding would have been something like $55 billion if you   If you add up Celsius, $26 billion, Genesis, $18 billion, BlockFi, about $12 billion at its height, and then you have others aside from that, so Babel, $5 billion, and a few others, you get to that kind of like $55 bill mark. Today, I'd say the C-Fi loans outstanding are still less than $15 billion. So we're off by almost a factor of four from where we were in 2022. So I think it is still under-supplied. And the largest player today, Tether, is still   you know, around 10 billion or less. So it's still smaller than the three largest who were around in 2022. So I continue to believe that there's a massive runway ahead of growth for the over-collateralized lending space.   << Jason Kam (05:34) >>: And sorry and just to break it down for me a little bit like two billion dollars of TVL How does that translate to you know how much loan is outstanding versus capital as just parked there and not being lent out?   << Sid | Maple (05:46) >>: You ⁓ can see on our June dashboard, but roughly TVL outstanding equals loans plus collateral plus the other product we have, which is the BTC yield product, which sits at about $180 billion today. And so the actual loans ⁓ or the deposit book is around   six hundred and twenty mil the loans outstanding is probably around five hundred mil we're currently sitting today on around a hundred mil in cash and so our our goal as a business is to get the cash deployed and to you know and and to try and you know add collateral value on top of the loan book so that the collateral is our protection but the loans are what is earning us money so we don't really want to be sitting on cash we want to be trying to deploy as much as possible at   the best interest rate that we can.   << Jason Kam (06:41) >>: and the fees you generate is only on that 500 million dollar loans.   << Sid | Maple (06:46) >>: ⁓ We generate fees on the BTC yield product as well. So we are generating ⁓ a spread on the 180 mil in BTC. But it's a different kind of spread, because that's not lending. That's staking strategy. But ⁓ on the loan book, yes, we're generating the fees on the 500 mil. And then on the remaining cash, we generally have that deployed in money market-like instruments. So we use SuperState. We use ⁓   Maker, we have bots that will add other DeFi strategies if we think that they are interesting. But predominantly, it's just in money market funds. And so where we really make the money is when we deploy into loans. And the rough economics for us are around 150 to 200 basis points on the loan board.   << Jason Kam (07:39) >>: So 150 bips, 200 bips on a $500 million and on a $500 million of cash slash treasury, how much does it take right there?   << Sid | Maple (07:49) >>: ⁓ on terms of like dollar dollar revenue today or you mean the take right on the treasuries   << Jason Kam (07:53) >>: like ⁓   the tick rate on the treasury.   << Sid | Maple (07:57) >>: Well, it actually gets blended into the returns on the loan book. it's effectively dilutive to the yield that we're earning on the loans, but it blends together and we take the 150 to 200 basis points on the whole thing.   << Jason Kam (08:15) >>: that's a good business. So you're taking on the billing. It's basically a billion dollar loan book, kind of. And you're taking 15 to 20 million dollars a year annualized currently.   << Sid | Maple (08:25) >>: We are taking around $10 million annualized, and it's growing. the economics are coming on that $620 million of cash. And then we have some economics on the $180 million of Bitcoin. But we don't make extra economics on the collateral. Really what we take is denominated on the loan book. And so today we're about $10 million in terms of annualized revenue.   << Jason Kam (08:47) >>: Got it. And then the hunt. Yeah, good.   God, okay. On a, well, I guess a two billion TVL is kind of double counting because it includes the collateral. So when you think about...   << Sid | Maple (09:02) >>: Yeah, it includes the collateral. So we count it as assets under management. mean, if you look at the general practices in counting TVL, if they look at Aave, they count collateral.  And so  we manage the collateral. And that's why we count it in TVL and AUM. But it's not monetized. Really, what's monetized is the loan.   << Jason Kam (09:27) >>: Yeah, so the fee generating assets is like ⁓ $1.2 billion, just about. Okay.   << Sid | Maple (09:30) >>: Yes.   << Jason Kam (09:34) >>: got it. And what's syrup usdc and syrup usdt?   << Sid | Maple (09:42) >>: Good question. So if you look at where we were in early 2024, so we had the Insta product. It was all permissioned. So you had to be an accredited investor, high net worth, family office, hedge fund, to come and use the pools. And then we looked around and we saw that we were missing out on a lot of the DeFi distribution. So Syrup USDC and Syrup USDT were our DeFi native product. So we created   these as a way for DeFi users to access the same institutional yield under the hood. So it's set up as an offshore structure. Americans can't access it, but retail offshore can use it, and DeFi protocols can use it.  the additional things that we built in to make the product useful are secondary liquidity. So there's a Uniswap pool and DEXs. So you can instantly redeem. So you don't have to wait for loans to be repaid. You can just go on   Uniswap and swap back to dollars if you want to exit the position. And then that then enabled  it to be used as collateral on borrowing protocols. So we've got it on Morpho. We're in conversations with Euler. But we have actually over 90 mil of it deposited as collateral on Morpho. And that was possible because we had the secondary liquidity. So it could be liquidated if it needed to be. And then  we've also been    integrated with Pendle so people had an opportunity to hedge or fix their interest rate which was very popular early on when we had the points program and then also we've had it  added as one of the backing assets for Spark so ⁓ the Spark and Sky ecosystem uses it as some of the deployment for its stablecoins as well to generate the yield that  it's trying to make.   across the DeFi space.   << Jason Kam (11:41) >>: And so it's offshore non   KYC depositor into your vault that can be deployed into both treasury as well as loans.   << Sid | Maple (11:45) >>: Yes.   Yeah, yeah. And so the interesting thing, I mean, the token is yield-bearing, so we treat it,  we call it like a liquid-yield dollar,  but it's kind of like a high-yield savings product in a way. And from here, what we're trying to do is take it cross-chain. So we announced last week that we're going to be working with Chainlink to get it across to Solana, but we want to now take it into other ecosystems and other chains so that they can have   a high yield savings product ⁓ without fragmenting the liquidity. So if we had to deploy all the contracts on different chains, it starts to fragment all of our   << Jason Kam (12:24) >>: And   Yes, and so sorry and it's deposited and done and you're starting yield. There's no staking like sUSD Got it That's cool   << Sid | Maple (12:33) >>: That's right. You don't have to stake it. Yeah.   Yeah, so it's not trying to be a stable coin. It's trying to be more ⁓ of a conventional savings product or a fixed income product.   << Jason Kam (12:42) >>: Got it. That makes   sense. And your typical clients, the $500 million loan books out there and you have some outstanding loans, who's sort of your clients growing the fastest? Who is the biggest borrowers? And where do you think their demand is coming from? Because it blends to a pretty high rate. Is it the same market makers that borrow historically? Who are they?   << Sid | Maple (13:06) >>: Funny enough, we actually have no market makers anymore, because market makers won't post collateral. So if you look at their business, their business is being able to transform BTC into dollars and vice versa at the lowest slippage possible. So it's almost never worthwhile for them to post collateral to us to borrow. They would just turn the BTC into dollars if they really wanted dollars. So we don't do business with many market makers. Instead, what we have is primes.   So primes borrow from us. have long balance sheets that are generally long, know, Bitcoin or Solana or something else. And they borrow from us to give margin to their clients and use that in trading and settlements. We also have ⁓ on-chain hedge funds. So they might have yield strategies, and they want to lever up a yield strategy on-chain. So we had some borrow against Pendle PT tokens. And then you have family offices. So you might have somebody who's an OG.   << Jason Kam (13:46) >>: Hmm.   << Sid | Maple (14:03) >>: They've accumulated a lot of wealth in crypto, but they don't want to sell it for tax reasons. Or they just want to remain long on the market, but they might want to purchase real estate or some other consumptive spending. And so they borrow from us as well. then the other ones that have been interesting and kind of grown for us more over the last 12 months are we're looking at retail lenders. So we would be a wholesale lender to a retail lender. So they might take $50 to $100 million from us.   and then parcel out into $100,000 loans. And we don't want to be in the business of retail lending. It's a totally different operating model. But we're happy to be a wholesale lender to parties like that. We think it's conservative, and we get paid a good yield. And then the other one is centralized exchanges. So some of them now use us to fund their margin books as well. So we've grown to the scale where we can now offer $100 million facilities to people.   And that's helping us to scale up business, but also introduces other fee streams that we can take, like structuring fees and fees that are kind of like quasi-investment banking fees for putting together these facilities.   << Jason Kam (15:14) >>: Is there any is there any party that grows the fastest or is there?   << Sid | Maple (15:21) >>: I'd say ⁓ it kind of varies. ⁓ the ones that have been growing, or the segment that I think has the potential to grow the fastest at the moment is probably the retail lenders. ⁓ The segment that has historically, know, grows the fastest in response to market upswings is probably the primes. They have very elastic demand, so as soon as Bitcoin starts to rip, borrowing demand goes through the roof from them. And then this   Family offices and high net worths are very sticky, so it's good to have them on your book. They're ⁓ not seeking to return their loans if Bitcoin drops to 105k. And they're generally just good long-term, reliable borrowers. But I'd say the segment we want to grow the most in over the next 12 months, the centralized exchanges and the retail lenders. ⁓   << Jason Kam (16:14) >>: Sorry, when you say retail lenders, who are they exactly? are they lenders to crypto retail or?   << Sid | Maple (16:19) >>: So think these are names like,   yeah, they're lenders to both crypto retail and I guess normie retail if they happen to own Bitcoin. But think of these as names like Arch, Ledn, there's a couple of others. these people, their client base is doing smaller loans. And they take Bitcoin from them. And then we would do larger loans to these types of players against Bitcoin. So we'd lend $50 million. They break it up into $100,000 chunks or $200,000 chunks.   and lend that out. Same as in conventional home loan lending. A bank will do a $300 million line of credit to a smaller home loan lender and they then parcel it out into $500,000 in charge.   << Jason Kam (17:02) >>: And the primes are like Falcon X and Galaxy and Hidden Road those guys.   << Sid | Maple (17:06) >>: You've got Falcon X, Galaxy, Hidden Road and an LTP are kind of the four main primes in Crypto.   << Jason Kam (17:13) >>: Got it. OK, makes sense. Do you feel like there's room for tick rate to go up, or do you feel like it's pretty stable, or any competition if we're going to?   << Sid | Maple (17:19) >>: I think it's kind of stable   at the moment. think you can see take rate going up in a bull market, because everybody becomes less price sensitive. I think ⁓ over the long term, take rate probably comes down slightly, because you would expect that competition kind of competes in a way a little bit, or adds pressure to it. And also, I think if you can be the low cost provider in a space, that's generally kind of a competitive mode. You don't want to get caught as a   << Jason Kam (17:28) >>: Sure.   << Sid | Maple (17:47) >>: you know as like Grayscale did with the Bitcoin Trust where their take rate was much higher than the others and you know and then so customers switched away. I think you want to try and compete yourself away and get to the scale where you can be the low cost provider.   << Jason Kam (18:03) >>: How sticky is this business? it's certainly, in my mind, feels highly cyclical depending on crypto cycles. In your mind, do you prepare yourself mentally for the ups and downs going forward? Do you feel like it's kind of straight line up going forward?   << Sid | Maple (18:19) >>: I think I'd be naive if I said it was a straight line up going forwards. This is now our second cycle of operating in the space. And I kind of first got into crypto after the 2018 cycle, but wasn't really operating in the space. And so I think I'm acutely aware that lending is always a cyclical business, right? They call it the credit cycle for a reason. And you're naive if you think that you can escape the credit cycle. And so I think you have to prepare yourself.   << Jason Kam (18:20) >>: Ha   << Sid | Maple (18:49) >>: for, you always have to have kind of an eye on the market and you have to have a read as to when conditions are getting too frothy. And that's when you want to tighten up your lending criteria and adopt a more conservative or defensive posture in lending. And I think one of the mistakes that the peers who are no longer with us made in 2022 was, I guess they weren't defensive enough ⁓ in how they positioned their loan book back then.   I've also seen this as well coming from banking. I was a securitization banker and so we used to do case studies on lending companies that went bust. Typically it's because they ignored the cycle and try and grow in a straight line ⁓ kind of throughout. What we would do from here is we are keeping an eye on whether conditions in crypto credit get too frothy and then we will go more defensive. So more conservative collateral, lower LTVs, ⁓ more borrower diversification.   And I think that's just the best way to position yourself.   << Jason Kam (19:52) >>: Hmm. ⁓   << Sid | Maple (19:54) >>: The signs of frothiness would be if you start to see loan rates drop too much. Remember in 2022 there was so much VC money and retail money coming into the space that by the end they were lending out Bitcoin at 10 basis points. So the actual interest rates got kind of below what a proper risk adjusted return should have been. And then ⁓ most of the lenders went towards heavy ⁓   heavy concentration of under-collateralized lending. And so some of the things I keep an eye on today are things like Wildcat. How much under-collateralized lending is there in the space? And I think at the moment, leverage is actually relatively low, and there's not a lot of under-collateralized lending. So I don't think that we're at a frothy point in the credit cycle.   << Jason Kam (20:42) >>: Hmm and I guess I forgot where I read it but you know, I read a figure somewhere about four billion dollars TVL by your end ⁓ I guess do you have a target for yourself by Okay, okay, how do get there?   << Sid | Maple (20:54) >>: That's the goal. That's the goal. That's our target. Yeah.   So from here, if you look at our three main product lines, so we have Maple and Stowe, which is the one where you have to be permissioned and accredited. We have Syrup USDC, Syrup USDT, so the permissionless one. And then we have the BTC yield product. So roughly off the $4 billion, ⁓ we're looking at getting to $1 to $1.5 billion of the BTC yield product.   from, call it a touch under 200 million today. And a lot of that is going to be driven by the release of LST BTC. So you're to have a DeFi yield-bearing version of Bitcoin that can be used as collateral. ⁓ And it'll be cross-chain.   So I think that'll the big catalyst there on the BTC product. On Syrup USDC, that's already over a billion. So, I think the goal will be to get that to probably one and a half to two billions. And so the path there will be more of these DeFi partnership. So, extending the relationship with Spark, Sky, Morpho, Euler and then getting in cross-chain. And so our next big focus will be Solana and we're very excited about getting in that ecosystem.   And we think there's a big opportunity for yield products. I'd say a lot of Solana today has been ⁓ trading, and it has very good representation on the trading side of things. ⁓ But I think the yield ecosystem is kind of still growing there and has a lot of runway to go. So, Syrup will be greater DeFi partnerships and ⁓ getting it cross-chain. And then also, we're actually working on getting it integrated with a lot of the exchange wallets. So we did a program with Binance last week. We got 30 mil in within a day.   And we're going to be expanding more of those partnerships. And then on the insto side, the path is going to be ⁓ expanding, so getting wholesale facilities in from some of these larger balance sheets ⁓ and ⁓ traditional players. So what we'd like to do is take out a wholesale facility of 100 or 200 mil ourselves and start to introduce this product, which I think is   Which I think is very applicable to TradFi investors. BTC-backed lending is like a money market fund that pays 3 % over what money markets pay. It's over collateralized at a 70 % LTV. The BTC is often held in qualified custody. And it's very short duration. So I think of this as like a very good cash management product for TradFi. And if we can get wholesale facilities and then start to   introduce this product to trad-fi investors, whether they be insurance companies, fixed income investors, ⁓ or macro funds, I think that's definitely an area we would like to grow.   << Jason Kam (23:49) >>: Do you expect I guess the tick rate on the 1.5 billion of BTC staking that's is that also 150 bips 200 bips and take rate?   << Sid | Maple (24:01) >>: No, you can't charge that much on it. ⁓ The reason being is that the BTC product yields about 5 to 6 % or on a normalized basis, it's to yield somewhere between 4 and 6%. So I think you've got scope to charge 10%. So we have, ⁓ call it like 10 % of the gross yield as management fees. ⁓ We have some hedges in place on ⁓ the price of the underlying asset.   which we use for dual staking, which is the core token. Sometimes that yields a bit of P &L. And then we have, we obviously have a vested interest in the growth of the core networks. We receive some incentives that way as well. Because we're their primary partner for distributing the staking strategy. But no, unfortunately you can't charge 150 basis points on a 5 % product.   << Jason Kam (24:50) >>: Yeah.   And where does the yield come from for the LST BTC?   << Sid | Maple (24:58) >>: It's a good question. So Core is a proof of stake L1 built on top of Bitcoin. So you stake roughly what you do to participate in staking. You take a dollar of BTC, and then you take 10 to 15 cents of $Core tokens, and you dual stake them. And you receive roughly, call it between 4 and 6%, or 4 and 7%, something like that. Call it the mid-single-digit range.   in staking rewards in $core tokens, which we hedge back to BTC. So for one of our clients, what it looks like is you loaned us BTC and you got a yield back, which is denominated in BTC. You didn't have to ⁓ run smart contracts yourself and you didn't face slashing risk, unlike some of the other BTC L1 and L2s that you see today. So think that's why it's appeal to people. They keep their Bitcoin in custody. They're not selling it.   So it's not a taxable event. ⁓ And then they don't face a risk of slashing. And they don't really care about getting back ⁓ yield in other tokens or points. And I think that's been a problem with some of the other programs. They really just want the yield back in BTC. And so the role that we play is we aggregate, we manage the staking infrastructure, and we manage the hedging ⁓ so that they just get their yield back in BTC. The other function we play is we source the core.   which you need for dual staking. If they had to do this themselves, they'd have to go and buy $CORE. What we do is because we have lending pools, we're able to borrow dollars against the BTC that we have. And then we can convert that into $core tokens, apply hedging to protect the downside position, and then sell things back into BTC.   << Jason Kam (26:43) >>: interesting. How much is it too short to Hedge Core?   << Sid | Maple (26:48) >>: ⁓ It ⁓ kind of varies. you have to... The way that you think of it is the hedging cost comes out of the yield that we earn on the core tokens or on the staking position. it's enough to... It's low enough that it can be self-financed by the staking yield. But what we do is we use ⁓ different options, ⁓ OTC counterparties, to hedge the core positions.   << Jason Kam (27:13) >>: Okay, got it. And the ratio   between the core needed and the BTC needed to get the yield is how much?   << Sid | Maple (27:20) >>: 10 to 15%. And so if you think about it, that's kind of the extent of your principal risk. Because the worst case scenario is that core would drop to zero instantly, let's say, and then our options counterparties would default. In that case, the maximum loss would be that 10 to 15%, which was the amount that we had to borrow in order to purchase the core tokens. So that's why we use diversified options hedging counterparties.   << Jason Kam (27:31) >>: Yeah.   << Sid | Maple (27:49) >>: and that's why we have the hedges in place as well. we're not riding naked ⁓ market risk on the court.   << Jason Kam (27:53) >>: Got it.   And then the borrow of the USD is on the same collateral that your clients provided you in BTC.   << Sid | Maple (28:01) >>: Correct. Because we have the lending pools and we manage a lending business, we're able to consider the BTC that's staked in the program as collateral, which it is. And then 10 to 15 % LTV is super low in the scheme of things. Ordinary lending would be 70%, right? So it's highly, highly, highly unlikely to ever be margin called. But we are the ones running.   << Jason Kam (28:04) >>: It's cool. I see.   Yeah. Yeah. Yeah.   interesting.   << Sid | Maple (28:30) >>: that position and kind of managing the collateral. So we can give it credit as collateral, whereas if you were to use an external financier, you wouldn't be able to get credit for the BTC as collateral because you're staking it.   << Jason Kam (28:41) >>: Yeah, makes sense. that's about five. Yes. And I guess you're confident it scales to one to 1.5 billion by year end because there is that much demand you have already lined up.   << Sid | Maple (28:43) >>: So it's a synergistic business for us.   It's definitely a stretch target, but what we're seeing is that this product has a lot of pent-up demand because there are no good Bitcoin staking products. And we have a number of pipeline conversations that are quite large. So think like thousand Bitcoin or more. So if a few of those tickets start to come together and convert to deals, you actually climb your TVL of that product quite quickly.   << Jason Kam (29:08) >>: Hmm.   << Sid | Maple (29:28) >>: But also I look at the proxies, right? And so the nearest most successful Bitcoin staking program to date was, of course, Babylon. And at its peak, they had around 6 billion staked. So I don't ⁓ view 1 and half billion as an otherworldly type target, given that we've seen one that's previously gotten to 6 billion. And then we know that we have a number of pipeline conversations that are for 1,000 Bitcoin or more.   << Jason Kam (29:58) >>: ⁓ And this, guess the tick rate is 10%, so around 50 Bips. And on your target, that's about $5 to $7 million of fees to Maple.   << Sid | Maple (30:08) >>: Yes.   << Jason Kam (30:10) >>: Got it. then assuming you get the other, I guess that's 1.5, let's say, and then the other 2.5 to 3, a lot of it will be collateral. So about $1.5 billion loan book. then that to you, I guess would be maybe $15 million of annualized fees if you hit your target on that loan book.   << Sid | Maple (30:36) >>: on the just the you mean just the Bitcoin product or the loan book as well   << Jason Kam (30:40) >>: No,   So the Bitcoin product is 5 to 7, right? And that's 1 to 1.5 billion of TVL. And then of the remaining 2.5 to 3 billion of TVL that is of your target, ⁓ a big part of it is collateral. So I'm guessing it's like 1.5   << Sid | Maple (30:44) >>: Yeah.   Yes, you'd say that's   roughly a $1.5 billion loan book. And then if you're making $150 to $200 bips, it's anywhere from $25 to $30 million of additional revenue. I think we want to allow for some kind of compression. But I think the goal would be for us to get, let's say, north of $25 million in revenue by the end of the year. Overall.   << Jason Kam (31:19) >>: overall.   Yeah. And then how do you fund yourself currently? Do you have to sell tokens or that 25 to 30 kind of, how does that flow to your equity and your token?   << Sid | Maple (31:31) >>: So we don't actually have equity. So we just have the token. ⁓ And I think that gives us a less complicated capital structure. So if you look at other teams in the past that had both, there was always a question of does the revenue flow to the equity or does it flow to the token holders? DYDX is probably good example. ⁓ So ours, there's just the token. And so   ⁓ Currently we have 6 million in cash in ⁓ stable coins and that's come from past token sales as well as revenues generated by the platform. now, as of April, we were cash flow positive. So if you look, really the gross expenses of the business are somewhere around the 7-bill mark. They might increase a little bit as we add some people, but we're not looking to blow out.   the team size and add a ton of FTEs. I think we've been through cycles before, and so we want to stay relatively lean. And so at this point, ⁓ we're funded from the past token sales plus internally generated revenues. And going forward, ⁓ now that we're cash flow positive, I think we're just intending to be funded through the gross profits of the business.   << Jason Kam (32:46) >>: And you just pass a resolution to utilize 20 % of your revenue towards to burn, is that correct?   << Sid | Maple (32:51) >>: Yeah, think,   yeah, so I mean, as you're growing a business, there's always this question, right, of do we reinvest the cash flows of the business in profitable growth, assuming that we can achieve a higher return on invested capital than people who holding a token or who could participate in buybacks? And so I think here we've chosen a blended approach. So we want to pay 20%. We want to use 20 % of the revenues as buyback.   And so we do treasury buyback, and then we distribute those bought back tokens to people who are staking syrup. And so that's part of the yield if you're staking syrup today, which I think is around 2.7 to 3%. And then the other portion of revenues can be used for growth of the protocol. So what that would look like if you're in the debt business like us, or ⁓ debt slash asset management, what that would look like is   ⁓ taking surplus capital, might use it for first loss capital in a new facility. Like let's say a large bank gives us a facility but wants first loss capital from us. ⁓ Or in reinvesting it in the pools or developing new products. I think we think that there's a lot ⁓ more room to grow still and so it's not worth paying out a high proportion as buybacks.   But we want to pay out something because think fee switches are very rare these days and it's rare to have protocols that are actually earning ⁓ in the economic return.   << Jason Kam (34:25) >>: Yeah, so target for year-end may be $20 million plus in overall revenue. $5 million of it goes towards the buyback and not burned, but redistributed to syrup-stakers. Yeah. Yeah.   << Sid | Maple (34:36) >>: to syrup stakers. Because I think the burn is inefficient. I think when you buy   back in burn, I don't think the market appropriately says, well, 10 % of the supply is now gone, so what should happen to the rest? So I think it's better for stakers to just get the token, and it then incentivizes more staking.   << Jason Kam (34:56) >>: I guess so. And then the 20 million minus 8 million of annualized cost, that's about a 12 million dollar cash build ⁓ towards your 6 million dollar cash pile. So maybe by this time next year, if everything goes well, you should have like a 15 to 20 million dollar cash pile sitting there.   << Sid | Maple (35:12) >>: That would be nice, yes.   << Jason Kam (35:13) >>: That would be nice. Yeah, that would   be nice. Interesting. Okay, I got the math. I guess, so we kind of talked about the BTC ⁓ effort with Core. We talked about the incremental growth effort to extend and grow your loan book. Is there anything else that excites you, you know, going to the future? Like what excites you the most aside from these two things that we talked about?   << Sid | Maple (35:37) >>: That's ⁓ I mean that's plenty of excitement for me, but I think ⁓ I look I I think   the size of our business is kind of bounded by the size of stablecoins. And so I look at the introduction of new stablecoins, like the stablecoin bill, the expansion of existing stablecoins, and that kind of increases Maple's total addressable market. So that's one of things I pay the most attention to. And then I also look at Wall Street and I see traditional players starting to enter the space. know, Cantor announced that they were going to do a $2 billion loan program.   And I think they're just the beginning. There are going to be more coming in. And when we look at institutions today and when we talk to players like Coinbase, what we're hearing is that institutions are mostly focused on just buying Bitcoin. But the way that we've tried to position our business at Maple is ⁓ to cater to the two next things that they think about. So once they buy Bitcoin, they then start to think about how can I get a yield on the Bitcoin? Or then,   they think about how can they either borrow against their Bitcoin or lend against other people's Bitcoin. And so I think Bitcoin structured products is something that I'm very bullish on and I think we're still kind of in the early innings of. And you've kind of seen proxies for it with some of the capital markets activity that Saylor has done, as well as some of these other ⁓ new Bitcoin treasury public offerings, whether it's   Nakamoto or the Cantor 21 1 or Metaplanet. And so I think I'm very bullish on that trend going forward and I find that pretty exciting.   << Jason Kam (37:23) >>: What would that mean for your business?   << Sid | Maple (37:28) >>: Well, you I would you know Saylor a couple of years ago ⁓ prior to the Silicon Valley and Silvergate bank collapses had a 200 million dollar line of credit against Bitcoin with Silvergate and I see an opportunity for Maple to be doing some of that lending to some of these Bitcoin treasuries over collateralized so fairly conservative but we would be a partner that would allow them to buy the dips on Bitcoin without having to go through a costly   capital markets issuance process. So think about it, I could provide a line of credit of 200 million to them for them to buy Bitcoin opportunistically whenever they like using their existing Bitcoin stack as collateral and then every now and then they can just do a capital markets issuance whether it's convertible debt or pref equity or equity and pay that down and then grow again. And so I think we could be, you know, it could be a very synergistic partnership with some of these Bitcoin treasury strategies. And so   Good for us, we get to grow our loans outstanding. ⁓ We have a high profile partnership and good for them because they have a more flexible facility than a convertible bond issuance.   << Jason Kam (38:38) >>: Do they currently work with any banks that offer that kind of loan or none of the banks are willing to do so?   << Sid | Maple (38:44) >>: None of the banks offer that. so that's the other thing I look at is how likely and how soon are we going to have competition from the banks. And I think regulation and capital requirements are going to keep them out of the market a while longer. ⁓ And so I think for us from a competitive perspective, we want to try and get bigger sooner so that we can hit economies of scale and ultimately lower our cost of funding and start to tap capital markets.   But I look at the banks and I think if they were to do lending against Bitcoin, the capital requirements are going to be so punitive on them that it's never going to be a profitable business line for them. So they may not actually ever enter.   << Jason Kam (39:26) >>: Sorry, holding Bitcoin on their asset side as collateral. just can't.   << Sid | Maple (39:32) >>: So if you're a bank, have   Basel capital requirements. And they determine how much of your equity you need to hold against loan positions that you have outstanding. And the lowest requirements that you have are for rated public companies and ⁓ what are called high quality liquid assets. But think of these as like senior R &BS type positions or just resi mortgages. ⁓ The worst positions that you can have are lending to unrated companies.   and types of personal lending like this. I think Bitcoin is going to get the worst capital treatment for some time. And so they're effectively going to have to hold $0.001 of equity against it instead of $0.05 to $0.10 of equity against it. And it means that the return on equity for them is much lower on lending against Bitcoin. And that means that they'll probably just be kept away from that line of business for quite a while.   << Jason Kam (40:17) >>: Terrible.   Got it. But I guess for you, when you lend to, let's say, MicroSailor, he's going to drive a pretty tough bargain. I guess because they don't have alternatives at the moment, you can still get the same rate that you charge. But is that true? And then secondly, how far along are you with these Bitcoin vehicles?   << Sid | Maple (40:44) >>: We're in early stage conversations around these types of facilities. Remember that a lot of these didn't exist, you know, four months ago. So it's a relatively new phenomenon since the Trump admin came in. I can't have seen a lot of people, I couldn't see a lot of people wanting to launch, you know, Bitcoin treasury vehicles under the Biden admin. So it's a relatively new phenomenon. So, but you are correct that these type of players will try and look for like low cost of capital, but   If you look at their cost of capital today, issuing equities are expensive. Even issuing pref equities are expensive. A lot of the reason that Saylor got away so many convertible bonds is because he underpriced them. He priced them at a lower implied volatility than they had, and that's why the hedge funds snapped them up. So think without us being under...   a reasonable return for ourselves, can be a good partner that is still relatively cheaper than other forms of capital that they have today.   << Jason Kam (41:46) >>: How and how fast do you think you can you can deliver and is that in your four billion dollar guidance? Yeah   << Sid | Maple (41:50) >>: Well, I'm sitting on 100   million cash today, so I think I can deliver it pretty quickly. ⁓ think the main thing, yeah, yeah, if they said yes, I think it's going to depend on the parties on the other side of the table.   << Jason Kam (41:54) >>: if they say yes.   Interesting. And I guess it will be more of a floating facility than them actually levering up requiring the US dollar to pay back because they're going to just yanking into buying Bitcoin. And ideally, on the other side, there's   << Sid | Maple (42:13) >>: They will,   yeah, you look at these businesses, they want to be permanently long Bitcoin. so what I mentioned at the start is we're effectively going to be a of bridge facility that they tap when they want to make opportunistic purchases. And I would see them paying us back through capital markets issuances. So we're effectively always going to get refired back to zero. And they're going to tap a convertible bond issuance or a prefect equity issuance or something else.   And they're going to do that once they're in the money on their Bitcoin purchases, or once they've hit a size where it makes sense to go to capital markets. Whereas I think what we allow them to do is to go and buy 10 or 20 or 50 mil in Bitcoin at a time. Now that's not going to be material for a sailor who's got thousands and thousands of Bitcoin. I think it was at 55,000 or something last time I checked.   But for somebody who's got 200 to 500 mill of Bitcoin, that's where we can slot in and be a good partner with a $100 to $200 million facility.   << Jason Kam (43:21) >>: Got it. And that's not in your TVL guidance of four billion.   << Sid | Maple (43:26) >>: Well, that had helped me get to the four billion.   << Jason Kam (43:28) >>: Yeah, got it. Makes sense. Interesting. The last thing is that the maple syrup migration is complete by now. ⁓ I guess as for now, how much syrup do you and the team owns? I think that the previous concern I always had is you guys don't own enough. ⁓   << Sid | Maple (43:47) >>: Well, I would say relative to most teams that now have 95 % or 92.5 % of their token and circulating supply, we probably actually own quite a healthy amount. I think most of those teams by that stage probably own, the team altogether probably owns less than 10%, whereas I would say the Maple team now, so founders, core team members, probably owns closer to 25 % to 30 % of the   protocol, which I'd say is higher than almost any team that has 90 % of their token outstanding. I think most people are selling down. ⁓ I can say I've never sold any tokens so far. ⁓ And the migration's complete. We ended up with around, ⁓ call it 8 % of the token remaining ⁓ that was not migrated. And so the plan is for that to go to the Treasury. And that would be used to support liquidity.   because it's now on more exchanges, so it does require a bit more inventory there, ⁓ as well as rewards for syrup stakers and other kind of strategic initiatives for growth, whether it be a points program or incentives on other chains or something like that. But it's all going to be owned by the treasury and used for the growth of the protocol.   << Jason Kam (45:07) >>: Got it. That makes sense. And the last question I have ⁓ is, are you guys planning to build any businesses beyond the current lending business that you have? Is there anything on the roadmap?   << Sid | Maple (45:19) >>: So I think we just announced our rebrand last week. And how we've positioned ourselves is more as an asset manager. So whenever I look at the TradFi world, the comparison that I make for Maple is Apollo or Aries. They are ⁓ the world's largest alternative lenders, but they are also asset managers. So they have an asset management business, but with a credit and fixed income focus. And that's kind of how I think of Maple today. So we have the lending and the credit part of the business, which is   Maple, Syrup USDC. And then we have the yield side of the yield asset management side of business, which is the BTC yield product. I don't see us going into venture, trading, that type of thing. I think if you do too many things, you kind of lose your focus and your priorities. And so I think our strategy in our Northstar at the moment is we want to be the biggest lender. And so we're focused on kind of climbing that ranking. I would say we're kind of the fifth.   fifth or sixth at the moment. And so with Tether, Galaxy, and Coinbase ⁓ being the top three. And so think we want to kind of climb that ladder, but really focus on lending and fixed income asset management as our core business so that we don't suffer from distractions and we don't go into something where we don't have a core competency or an edge over our competitors.   So I you shouldn't expect us to be launching tokenized equities anytime soon.   << Jason Kam (46:47) >>: to some extent.   Yeah, I suppose the competitors difference is they have a bit of more of a sticky deposit base or maybe they even fund it through prop where if there's a cyclical downturn, they don't expect the lending capacity to go away. They'll just be tighter. Whereby for you, like, am I correct to say that most of the TVL is actually leased? Like these people would just yank in the downturn. So do you feel like there's a better way to build this liability base that you currently utilize?   << Sid | Maple (47:19) >>: I think that's the question of every financier, right? Up until 2023, you would have said that banks have a relatively sticky deposit base, and then the universe would come and throw you Silicon Valley Bank or Silvergate or First Republic. So I think Apollo has a very nice sticky deposit base because they also have the Athene business, which provides them effectively insurance premium capital for life insurance policies, which are very long dated.   So I think there's always a question of how do you lengthen your liability side so that you can withstand business shocks. And we're no different to other parties. If you look, what we're looking at doing at the moment, Jason, is getting in place some of these wholesale facilities that would be a year or more where it's $100 million ticket plus for a year. So that would give us a relatively sticky liability side of the business that would be able to ride out the business cycle.   short-term shocks. So we want to move away from our  deposits.   << Jason Kam (48:18) >>: And what are these kind of wholesale facilities?   Are they kind of like JPMorgan Chase type of facilities or are they kind of like Galaxy type? Are they crypto native or are outside of crypto?   << Sid | Maple (48:31) >>: It's a mix at the moment. So we have one who's outside crypto, and then we have two that we're talking to who are inside crypto. And then we also are looking at some of these facilities actually from the DeFi space. And that's where I'd say ⁓ we have a really good differentiator from some of those other CeFi providers. As far as I know, we're the only one able to tap DeFi capital at scale, whether it comes from talking to these stablecoin issuers or some of these other yield and money market protocols.   And so ⁓ we're now, as well as foundations, but we're now approaching these parties seeking to lock up more stable long-term capital. But if you look, know, Ledn, Two Prime, Galaxy, Coinbase, these guys are not, like they have no ability to tap DeFi capital. It's all, you know, either other wholesale facilities or their deposit base. So I think that actually gives me some, ⁓ greater degree of diversification in Maple's liability side.   << Jason Kam (49:28) >>: Would you do uncollateralized lending again?   << Sid | Maple (49:31) >>: I think internally there's still little bit of PTSD over it and so there's definitely reluctance to do it on our side. And there's also a sense that it takes a lot more labor to do an undercollateralized underwrite and then a lot more labor to continue to monitor it than it does the overcollateralized stuff. And we see that there's a really long, steep runway in just continuing to do the collateralized business and focusing on Bitcoin, ETH, Sol, XRP as kind of like   good large cap collateral. So I think you shouldn't expect to see us get back into under collateralized lending any time soon. Instead what we would focus on is just maximizing the scale of our existing business and focusing on that side of things. I think we will continue to observe the under collateralized lending market for signs that it's picking back up or signs that the crypto credit space is getting frothy again. we don't have any great desire to get   to jump back into it right now.   << Jason Kam (50:32) >>: Got it. That makes sense. Well, let's see if the members have any questions. This is going three seconds.   I don't think so. Is there anything we haven't covered yet that you really want to say?   << Sid | Maple (50:47) >>: No, think this has been pretty good. ⁓ We will have an announcement coming out later this morning about a partnership between ⁓ us and Cantor, which we're really excited about. So stay tuned for that. But I think that will mark this turning point where you're starting to see the bridging of TradFi and DeFi. And so we're really excited to be a part of that. But for us, that's part of what we're talking about is how do we scale our business?   we're going to have to get more institutional capital in. I can see that other people in this space are thinking the same thing, right? Ethena partnering with Securitize to ⁓ tokenize and wrap  the USDe basis product and try and sell that to traditional investors. I think everybody recognizes that the pie within crypto hasn't grown over the last couple of years. So we're going to have to bring traditional money and institutions in.   if we really want to scale out businesses.   << Jason Kam (51:48) >>: It would seem like it's just a better... like if you can just tap into the institutional desk and all of a sudden the hedge funds can lend through a prime broker to you, like a click, and that... but I guess it'll take a while but Cantor could start.   << Sid | Maple (52:04) >>: Yeah, it will take a while. These things, it's like an S-curve. They're really slow at the start and then you hit an inflection point, it moves really quickly, and then it kind of tapers off again. But I still think we're in that very early part of the curve at this stage.   << Jason Kam (52:16) >>: Very exciting.   ⁓ Good luck with Cantor It's a good start and maybe there will be more to come. But Seth, thank you so much for your time.   << Sid | Maple (52:22) >>: Awesome.   All right. Thanks for having me, Jason.   << Jason Kam (52:26) >>: Thank you.

TLDR In this episode of BidCast, Jason Kam talks with Sterling, the token lead of Shuffle. They discuss the evolution of crypto casinos, the competitive landscape, and how Shuffle differentiates itself from major players like Stake and Rollbit. Sterling explains the metrics of revenue generation, including NGR and GGR, and delves into Shuffle's innovative lottery mechanism designed to reward token holders. The conversation also covers the challenges of growth in the crypto casino market, the importance of VIP users, and the strategic shift from a buyback and burn model to a lottery-based payout system. In this conversation, Sterling discusses the growth strategies and innovative marketing approaches for Rubett's in the competitive landscape of crypto casinos. He emphasizes the untapped potential of lotteries in the crypto space and outlines plans for an on-chain lottery product that aims to democratize access and enhance user experience. The discussion also covers revenue models, challenges in the lottery market, and the future vision for the Shuffle token, including strategic decisions regarding blockchain integration and exchange relationships. CHAPTERS / TIMELINE * 00:00 Opening * 01:38 Introduction to Shuffle and Crypto Casinos * 02:57 Differentiating Shuffle from Competitors * 05:09 Understanding Revenue Metrics in Crypto Casinos * 09:11 The Lottery Mechanism and Value Capture * 14:35 The Shift from Buyback to Lottery Payouts * 16:10 Breakdown of Revenue Allocation * 21:42 Growth Strategies and Market Positioning * 30:30 Growth Strategies in Crypto Casinos * 32:57 Innovative Marketing Approaches * 34:18 The Future of Lotteries in Crypto * 36:29 On-Chain Lottery Concepts * 39:16 User Experience and Accessibility * 40:49 Revenue Models and Market Potential * 43:53 Challenges and Opportunities in the Lottery Space * 46:22 Vision for Shuffle Token’s Future * 51:15 Navigating Exchange Relationships * 56:53 Strategic Chain Decisions * 60:28 Final Thoughts and Future Directions TRANSCRIPT <Jason Kam (01:39)>   OK, GM, we are live. Welcome to another episode of BidCast. I'm your host, Jason Kam, AKA at Maple Leaf Cap. Today is May 22, 2025, 7 PM Hong Kong time. BidCast is being livestreamed to BitClub members. Questions are from the members and my own. Today I'm speaking with Sterling, the token lead of Shuffle. Sterling, welcome.  <Sterling (02:00)>   Alright, thanks Jason, thanks for the intro.  <Jason Kam (02:03)>   Yeah, I mean, I remember my first foray into crypto was aping US casino coins, the Ponzi's back. It's fucking nuts. I didn't know you were doing that as well back in the days.  <Sterling (02:11)>   Yeah.  Yeah, 2019 was wild times because the only on-chain apps you could really play were basic casinos. was like, use casinos and from ages ago you had stuff like Bust a Bit and all these other Bitcoin casinos. So if you wanted to do anything on-chain, it was always a coin flip or dice or something with on-chain, truthfully, fairness, right?  <Jason Kam (02:30)>   Yes.  I remember dice. It's fucking, oh my God, like I made so much money in PA. But fast forward today, Shuffle is doing quite well. Here's the first question for you. I mean, internally, externally, when you talk to people, you probably get this question a lot. What is the difference between Shuffle and Rollbit and Stake? How do you differentiate yourself versus them?  <Sterling (02:57)>   Okay, this is a fun question because there's a lot of parables between traditional crypto companies. So the way I kind of think about it is that stake is kind of like your Coinbase. They are growing to the top funnel of users. They're basically going out there and marketing to people that have never heard of Crypto Casino as they're going out there and talking to users that would typically never touch crypto and only use crypto basically to like...  for payments and whatnot. like Stake's kind of like Coinbase. Like they're always kind of growing the pot. The product's really good on Stake. Like the way I kind of think about it, if I play a game on Stake or the user experience on Stake, it's like closing like a German car door. Like basically, you know, it's like high quality and the product's really great. Like it has that funk sound to it. I know it's a bit esoteric, but that's like the way I think about it. It's like Stake's product is really great. And from like a perspective of a crypto product, they're like Coinbase. Rollbit is an interesting one too.  you because Rollbit bit was really early on a lot of stuff but  they've kind of changed directions and they've kind of always been from a different type of background, so to speak. So the way I think about Rollbit is Rollbit's kind of like your Bittrex 2017 era kind of exchange. like the exchange that basically was really early to things got some of the product right, but didn't really follow through with like that next wave of user. And then the way I kind of compare Shuffle is like Shuffle's like FTX was before everything blew up. Like they were the first kind of to do things  the right way, the first to kind of think about it from like...  <Sterling (04:31)>   crypto first principles type role. And like the real first thing that I like, would say is like crypto native, like all the founders, like all the original kind of people at Shuffle basically like are all crypto kids all around the same age have all like kind of used these products where if you think about Bittrex back in the day, it was much more of just an exchange business. It was much more of like older school mentality. And that's where kind of where it sits right now. And Shuffle kind of sits as that like kind of bleeding edge of like crypto  to casino tech, crypto casino onboarding when it comes to like air drops and stuff like that. Like we've been quite the trailblazer on that front.  <Jason Kam (05:09)>   And just so I have a sense when it comes to like revenue or when it comes to NGR, like betting volume, how do these three, do you think of them as competitors and how do you compare in terms of metrics?  <Sterling (05:18)>   So, Stake is definitely a competitor, but Stake is almost so ginormously big. Like, when I say Coinbase, I mean in the product sense, and I mean like growing the pie sense, but from like industry kind of...  hyper this like from industry domination point of view, they're more like Binance. So they have like 80 to 90 % or sorry, not 80 to 90%, 70 to 80 % of all crypto casino betting volume goes through stake. So that level of dominance is like pretty unheard of even in say crypto, Like Binance, don't, I'm not sure what Binance's derivatives volume like mixes right now, but it's pretty dominant. Stake is like as dominant as it gets when it comes to that. So stake would do, I think the latest number was like they did 5 billion in revenue.  that's NGR or NGR meaning net gaming revenue or GGR which is gross gaming revenue. I don't know which number that is but it's five billion in that area. With Rollbit all their revenues are public on their dashboard but I don't know specifically what their GGR or NGR is because it just has revenue. just again it's like not a number we can kind of compare apples to apples to. And then on shuffle side like our NGR is like based off like our last couple weeks of  What is it? Last couple of weeks of what we've given to lottery, it's about 102 to 105 million in NGR. So this is getting tactical right away, but there's like two different, there's two definitions there. Like GGR is gross gaming revenue. So that's like your top line, top line revenue. That's like the, the, basically there's nothing getting taken away from that. NGR is like everything after bonuses, commissions, stuff you have to pay to kind of users. So when you play on like a crypto casino, it's a bit different than like trading on exchange.  or whatnot, you're basically getting bonuses via cash back and stuff like that as you wager and as you play. So basically with NGR, you take away that commission, take away those bonuses, and that's what you end up with.  <Jason Kam (07:14)>   It's usually like half of TGR.  <Sterling (07:16)>   I don't know the full mix, it really depends though. It depends on how we do bonuses that week, depends on how we do bonuses that month, it depends on the user too. Like if the user mix is different a week, one week from another, it can vary quite a bit. So it's hard to really pin down.  <Jason Kam (07:30)>   Got it. Got it. And sorry, and you say $120 to $150 million annualized.  <Sterling (07:37)>   So I said 102 to 105, like that's like roughly where it is, but yeah, that's just based off our last couple of NGR ads to the lottery. But we've been growing that pretty, yeah, anyways.  <Jason Kam (07:47)>   Got it. Annualize. So it's like 1.50 of the size of stake if you're both counting and NGR OK. Got it. That makes sense.  <Sterling (07:52)>   Yeah. Yeah. Yeah. I, but again, like with stake it's tough because you don't actually know what their NGR is. You just have a revenue number and that's probably GGR if I had to guess.  <Jason Kam (08:02)>   Got it. And then on your website, shuffle.com, and then tokenomics lottery history, we also see that on a weekly basis, there is a NGR contribution of 250 to 350k. What is that compared to the revenue number of about 100 million that you just gave me?  <Sterling (08:19)>   So that revenue number I just gave you is based off our lottery. So that's like, that's our NGR. That's the thing we pay out. So like, even if you just extrapolate what we give out to the lottery, that's what our number is. Like our GGR would be like quite a bit higher than that because, you know, shuffle as a business, we have to give up bonuses. That's kind of like how the industry works. So that's just based off the NGR number, the stuff that actually goes straight back to the token holders. Yeah.  <Jason Kam (08:40)>   Got it. And that's all of your revenue going back to lottery, or is it part of it?  <Sterling (08:47)>   It's all the 15%. Like the 15 % we dedicate to, sorry, the lottery.  <Jason Kam (08:54)>   OK, so walk me through this. So there's the betting volume, and then there's your GGR and NGR. And after you get the NGR, which is like 200, 300K a week or 100 million a year, the mechanism of your lottery mechanism for value capture is interesting. So walk me through how that works.  <Sterling (09:11)>   So basically the way it works is we have the GGR, have NGR, which is like the net gaming revenue. We take 15 % of that NGR and we basically give it, yeah, 15 % of that NGR and we give it right back to the lottery. So the way the lottery works right now, if I'm just talking to a crypto investor audience, this is the easiest way to put it. Basically there's a jackpot and nine tiers of lottery prizes. Those are basically determined by a power  <Jason Kam (09:20)>   One five.  <Sterling (09:40)>   So you have five balls, one power ball. Essentially what we have is everything, how I basically count yields is that everything from like say second division to ninth division, stuff that's easier to win, is basically like a yield that a token holder can basically get. And then the jackpot is essentially like a call option. And so each week you basically get 15 % of this $100 million businesses like revenues directly to tokens. And then on top of that, there's a call option that's built in that you possibly hit for  the jackpot with our lottery. That's really from like a token, whole this point of view, like from users on our platform, we don't pitch it like that. We don't talk about it like that. The way we look at it is more of like, this is a product for retention. This is a product to get people like, you know, more familiar with staking. This is a product, like a product to like get people kind of familiar with what shuffle token does. So to a crypto investor, it's like, it's like a yield product plus a call option to like people on our platform, which are not crypto people at all. They're just gamblers really.  <Sterling (10:40)>   It's a lottery.  <Jason Kam (10:43)>   did you guys decide on this effectively lottery-based or pseudo-dividend type of payout of value capturing for your token versus actually buying back?  <Sterling (10:53)>   super funny because like it's such a tough question to kind of answer. If I could take myself all the way back because we started out a lot like Rollbit did where it's like we have a buy back and burn, know, we buy back tokens each week depending on what our NGR is, we can use that NGR to purchase tokens on the open market. And it just didn't really work for us. Like we were spending millions of dollars of bankroll just basically purchasing tokens and having tokens get absolutely dumped by the market. This is obviously during our  our first airdrop. So we had quite a few tokens like ready to be sold into, I guess. But the way we kind of thought about it is like, okay, lotteries are a product that haven't really been perfected, so to speak, or even tried really well for crypto casinos in general. It's like this one area that...  crypto casinos for whatever reason just couldn't get right. There's lotteries on roll bit, is like, it's not that fun to play. There's lotteries on BC game, which are like not really like lotteries in any sense. They just feel like, like horrible products. Um, so we're like, how can we use the token to kind of like enter a new kind of vertical in our own field? So right now Shuffle's kind of split between, uh, you know, sports casino and lottery and like a lot of other casinos just don't have the third category. So the way we're kind of looking  out it is we start with a buy back and burn which is like great if you  I have a bunch of bankroll. It's great if you're a little bit of an older product, like an older casino to some extent. But we're still kind of young where bankroll is like not as big as say something like stake. So we kind of got to try new methods to kind of give value feedback to token as well as grow like our own user base. Cause at the end of the day, like if I keep paying out, say it's like token holders or whatnot, doesn't actually grow the product a ton just because there's this idea that...  <Sterling (12:42)>   People think that like crypto casinos and like crypto exchanges have like the same user base. Like it's the same users you're competing for. But in reality, a crypto casino is like completely different business than crypto users. Like Jason, you are not my customer. Just being completely honest. Lots of guys. Yeah. Right. Like ants, a lot of guys on BidCast are listening are not my customer either. Like my customer is using crypto to deposit, you know, 200,000 USDT on Tron. So they can play blackjack ads. And then when they're done gambling,  they want to be able to withdraw that. It's a bit different than like a token holder's perspective where it's like most of the products you use, you can kind of tell like how good it is or like basically like you can basically feel the yield or you can feel the product. With us, like our main focus is on gamblers and getting people to keep playing on the casino. So we want to basically reward those people, right? So playing a lottery product makes a lot more sense.  <Jason Kam (13:36)>   I see. So to the extent that it's basically finding another way to monetize or reward your user base. And if it's a buyback and burn, then it's just rewarding your non-user base.  <Sterling (13:52)>   I think the thing is, is like you do buy back and burn, like it's great for like token price in the short term, at least when you have a bigger bank roll. When we were doing buy back and burn, our bank roll was nowhere near what it is like now. Like we just have a lot more kind of ammo to play with.  With Buyback and Burn, yeah, it's just a bit tricky. With lottery, I'm directly rewarding people on the platform that are playing these games, people that add to that revenue and whatnot. So if I send it out to, say, a Buyback or whatnot, I'm actually not rewarding my user base as much and not rewarding my true fans. So it's very tricky as a product to wrap your head around, because for us, I'm selling to one person and then I also have to sell it to another that it's not intended for, if that makes sense. Yeah.  <Jason Kam (14:24)>   Fair enough.  <Jason Kam (14:35)>   That's a good answer. When Kharitosh, and you talked to the lawyers about this mechanism design, did it scare you about maybe like security and capturing value for the dividend?  <Sterling (14:47)>   I think the thing is we never call it dividend. Internally, it is a lottery. It's like you have a chance to play it. There's no guarantees that you will win anything to some extent. It's just the mechanics of a lottery at a certain size, they kind of mimic. The volatility basically spikes down to some extent because as you own more of that lottery pool, your volatility basically goes down. When we talk to Carataz and talk to Loris and whatnot, the main thing concerns we had was  like we want to make a lottery product. We want to basically make shuffle staking part of that lottery products because we think that's interesting product innovation. And when we talk to like, how do I put this? When we talk to like industry players, within the casino industry, they're like, wow, no one's ever done that before. So it's like.  The way we kind of looked at it is basically like it's an innovation when it comes to lotteries. It's an innovation when comes to rewarding token holders. Like we don't really call it dividend. We don't push as a dividend. We push it specifically just as something we can do to reward users on platform and basically keep them on platform and gambling.  <Jason Kam (15:51)>   Yeah. Yeah. It's interesting design. I find it kind of cool.  <Sterling (15:56)>   Yeah, it's not perfect, I think there's a lot of, mean, shuffles, there's definitely a lot of things wrong with shuffles, a lot of things we've done right. And I'm sure as we go into the call, we can talk about that as well. There's definitely improvements there.  <Jason Kam (16:10)>   Before we get to the growth and the business aspect, I want to get a few more things straight. So GGR turns to NGR, and 15 % of it goes towards the lottery. You do have an equity component, which I guess is where the remainder 85 % goes to. Can you help me break down what that 85 % has kind of broken down into the equity part of your business?  <Sterling (16:27)>   Correct.  <Sterling (16:32)>   So I would say with the equity part, we haven't really done like many distributions, if at all, I'd have to double check. But on the equity side, it's not really equity per se, because you have to think about a crypto casino business a bit different than you would say an exchange business. Like I'll give you an example. So like hyperliquids, obviously like Jewel of crypto Twitter these days, like they're just seeing those revenue numbers go up like crazy. Like Jeff's built amazing product, like more power to him. It's a great business. So if Jeff has a hundred million,  in volume that goes through hyperliquid, can take, it's basically costless to him, right? As long as he has people trading on that, he can basically rip out 1%, half a percent, whatever the rake is from each one of those trades and basically shove it back into buyback and burn. When it comes to a crypto casino, it's actually a lot more like, uh,  The way you think about it is more like a trader. It's like you're growing bankroll. So the step process that you have to think about is completely different to most businesses that have revenue in crypto, which is like, to be completely frank, it's mostly exchanges. It's mostly centralized exchanges as well. So the way you have to think about it, yeah, yes. Yeah.  <Jason Kam (17:38)>   understand. It's a book value business. It's a book value business that compounds. guess, so $100 of NGR, and then $15 goes to the lottery. The $85, do you spend most of it in marketing? And then some gets left over, gets added to the bankroll? How do you, if you can disclose that.  <Sterling (17:59)>   A lot of it goes to bankroll these days just because the nature of Shuffle's crypto casino is like we do a lot of business with VIPs. VIPs are the main thing that grow our business. And it's a constant battle between how much bankroll you can grow and how you can basically scale up that VIP. So it's like when we were younger, say when the token launched and whatnot, we couldn't do $50,000 hands of blackjack just because if we had that, the variance on that is way too big. And just like a trader, your limits  are too big, just like if your leverage is too big, have a risk of of ruin. So essentially it is like we want to be able to grow bankroll as progressively as possible with our VIPs. So every time we grow bankroll, we're allowed to upper limits, grow bankroll, upper limits, grow bankroll, upper limits. And if we do that too quickly or we do that too in a case where it's not safe, it's a real threat to the business as opposed to crypto exchange where it's like, you know, someone makes a trade. Like all I really got to focus on is like basically giving that revenue right back to the token in the case of hyperliquid.  That's why Hyperliquid was done so well, I don't know off the top of my head actually what a bankroll is, but we're easily able to accept like $50,000 hands of blackjacks for certain VIPs. where limits are quite good when it comes to sports, off the street as well. Like I'm not sure what the specifics on that are, but yeah, like it's considerably better than when we first started with a token, when we first started the business obviously in like 2023. Yeah.  <Jason Kam (18:59)>   Got it. And how big is your bankroll today?  <Jason Kam (19:25)>   I'm just trying to get a sense of magnitude because the bankroll is basically your book value of the equity. If you're running $100 million in NGR, NGR is a lot higher because you pay out affiliate fees. You pay out $15 million to lottery. There's like an $85 million annualized income, which part of it, I don't know, $10 million, $20 million goes to paying salaries and whatnot. Your bankroll should be after two years, I don't know,  <Sterling (19:30)>   Yeah.  <Jason Kam (19:52)>   mid to mid a figures low nine figures is that the right way to think about this.  <Sterling (19:56)>   I think it's the right way to think about it, but I would also say it's like you're putting that capital to use. It's like, it's not like it's like sitting there. Like you're basically just using it to get those next, that next level of users. and the way I kind of think about it is like, stake is the behemoth in the room, right? Like if you think our bankroll is like quite decent, like stakes bankroll is significantly better, right? Like they're able to basically take anyone's bets, anyone's size. Like if you're a billionaire, if you're a multi-billionaire, all that type of stuff. So they can basically accept all these VIPs at face value and take them on as clients, which is great.  as a casino. With Shuffle, it's growing against that's very tough because the network effects of capital, I guess, to some extent is super strong mistake. Where Shuffle's done really well in the last year or so is that we've been able to pick off some of these major VIPs from Stake and convert them over to Shuffle as a platform because Shuffle's like from a performance point of view, very similar to Stake, from a VIP management point of view, we actually do a lot of things better than them. So being able to grow bankroll as aggressively as  <Jason Kam (20:34)>   Yes.  <Sterling (20:56)>   can makes it so like the top line growth in business is so much better just because you can onboard these VIPs that typically haven't been able to go to any other casino because Steak has been the biggest guy in town. So it's a bit tricky to be like oh yeah like these guys are making a ton of money they're not using it all they're not giving it to token holders they're not giving it to equity or whatnot it's just like we're still in growth mode we're still trying to get more VIPs from guys like Roubette and Steak and we're just starting to get to the point where we can take on more and more VIPs with our bankroll.  <Jason Kam (21:25)>   Yeah, I totally understand that because there's a real difference if your bankroll is 100 million versus like 500 million because to me, that's just the equities treasury that you could do discretionary buybacks, the shuffle token, if you so choose to. So, so I guess, I guess you can't disclose it is what I'm reading into it.  <Sterling (21:42)>   I can't really disclose it now, but like the thing is with the, guess we have to talk about is like, you know, how we view the shuffle token in the future and stuff like that. Because like, you know, from my perspective and from a lot of people's perspective, yeah, I, up to you, honestly, like I can, I can talk about anything, but yeah.  <Jason Kam (21:45)>   That's fine.  <Jason Kam (21:51)>   Yeah, we could do it now, we could do it later, mean, whatever you want.  Yeah. Why don't we talk about growth for a second? Because to me, at least, the growth of a casino is the volume is not an easy feat. mean, you're able to claw away to VIP users. I guess the best way for me to phrase this question is that on the 100 million-ish kind of NGR you have today, with this current base, what would make you happy?  or what would make the management team happy in a year or two years time? Is there a number you want to get the NGR number to? And to get to that number, yeah, yeah, yeah. Or what kind of expenses do you think you need to run to increase that number?  <Sterling (22:37)>   It's not really it.  <Sterling (22:44)>   Yeah, this is thing, like it's not really a number for us. It's like, we want to be number two solidly. Like we want to be in that half space between Rubet and Stake. Like we don't want to be number three anymore. We don't want to be number four. We want to be basically that, that rate on Stake's tail where they're nervous about us. and to do that for spending it, it's really tough because, to be completely frank with a lot of crypto casinos and like a lot of people have been around a lot longer.  Their bankrolls are bigger. They just haven't been able to grow deposits that well, but they spend so much money, obsessive amounts, sorry, excessive amounts of money on basic things that aren't worth it. So a lot of the things that we could use to grow, in like a regular market, I say regular with big quotations, like in a regular industry, like just gets overbid, like crazy. Like there's some examples of like, I'll give you an example. So like a gambling streamer that has like a thousand  Sorry, like, yeah, say like a thousand concurrent views or say, or say a thousand views on YouTube video. How much do you think like someone in industry would pay that person a month to stream like, say like two videos, three videos a month? How much do you think we pay? So a thousand views a video, they make four to eight videos a month. How much do we pay a month? Or how much does the industry pay a month for that person?  <Jason Kam (23:51)>   1000 per.  <Jason Kam (24:00)>   I have no idea you pay $10 $50 per viewer, something like that.  <Sterling (24:05)>   It's like 10 to 15,000 US a month just to get that person and they're doing a thousand views. it's like the bottom end of the market is extremely strong. And then on the top end, you have guys like TrainwrecksTV, guys like Aiden Ross that Stake is like, paying, I think the rumors are like, you know, almost like a hundred million US. Like they're getting paid more than LeBron James to stream slots. So like that entire market where lots of growth is for us as well as other crypto casinos,  <Jason Kam (24:11)>   That's about right.  <Sterling (24:35)>   is like massively, massively overpriced. So it's a bit tricky. Yeah, it's really tricky. mean, thing is, you're trying to be a value investor as much as possible. So with us, we've had a lot of success with finding new markets and finding new ways to grow. So when it comes to streamers, that's a big deal for us. We kind of identified a weird niche where it's like, we were first to this. It was like...  <Jason Kam (24:40)>   So how do you grow? Or do you want to grow? Yeah. How do you do that?  <Sterling (25:03)>   This is going to sound ridiculous, like roided out weightlifters. Like that was a whole niche that we basically took over and owned. It's super bizarre to say a lot, but basically like that demographic was not really identified as like some place where you could stick money into and you'd convert to users. So.  For people that are like more like on the internet and stuff like that, it's like guys named Togi. This guy's like Steve will do it. Togi used to be on shuffle.com. Now he's with Rubet Steve will do it. Same type of thing where he's like these, you know, these big bustled up guys that basically like are hyper masculine. We were super early to that. We made a ton of ROI when comes to like that conversion. And then we kind of work with people that like really love Shuffle the Brand because I think like a lot of these  Crypto casinos are kind of faceless, they're nameless. Like if you want to take a call with them, you wouldn't be able to talk to anyone. It's kind of like with Rollbit, like who are the founders of Rollbit? No one knows, but like everyone knows what Noah's face looks like from the crypto casino point of view. You're taking a call with me, this is my real name. Like that type of stuff lowers the cost of capital for us, like quite significantly when it comes to growing.  <Jason Kam (26:10)>   How do you calculate internally, how do you think about the ROI of some of these marketing deals? Do you offer them cash? it affiliate, by gambling volume? Is there a framework that you guys use?  <Sterling (26:21)>   Yeah. So like usually most of the industry does actually, don't know how real estate and all these guys used to do it, but like a lot of the industry, they do is they take a look at, they take a look at what the music, the creator can bring to the table. It's kind of like influencer marketing in its very essence, but you're just overpaying for everyone.  That being said, like we work with really great partners that are like unbelievable, repping shuffle the brand, like kind of those type of guys and the people we want to work with just because the rest of the industry is so predatory when it comes to pricing. as soon as there's some sort of hype or some sort of momentum behind it, they'll push like basically all their dollars into bidding that up. So we kind of have to compete on just being like the best place to hang out with on top of like place to work with. So when we look at it's streamers and whatnot, maybe like an initial deal, we'll look at like.  How many concurrent viewers do they get on kick.com? How many concurrent viewers do they get on Twitch? What does their affiliate data look like if they've worked with another partner before? What do they like to talk to? What's their demographics like? It's kind of intangible stuff like that. And then we can kind of pass them on a deal. But most of the time, the best deals for us, and the best deals for us growing, is working with people that really want to work with us and work with the brand.  And that's been probably like our best area of growth is working with service that love us.  <Jason Kam (27:42)>   So those guys, don't take cash upfront. kind of just.  <Sterling (27:44)>   So what the, sorry, I'll cut you off there, but basically what it'll do is like, say it's like a deal for, you know, Jason would give you a casino deal. You talk with Shuffle on Twitter sometimes and every month we'll deposit $10,000 of balance in your account. That's yours. You can withdraw it. You can use it to play. You can do whatever you want with it. You can give it to your community. You can basically use any of those methods to kind of grow your audience or whatnot.  And that's your money. it's, not ours. Like we give it to you and that's your raw balance. So all our industry basically works like this. You have a raw balance that you can use the gamble or use the withdraw or use the pay for other things. But that's basically how it works. It's like you evaluate a deal, you give a raw balance. That usually plays on your platform. They may use it in other ways, like giving to their community members, but that's like the kind of like, yeah.  <Jason Kam (28:30)>   I see. then you assess them every month. Like, you delivering gambling? Are you delivering NGR to us? And then usually there's a re- okay.  <Sterling (28:36)>   Kind of. Yeah, kind of. It depends though. It's like, it's a lot more contextual. It's like, if, if someone has like a great partner for us historically and they're having a bad month, we're not going to be like, like you're on the street where like some other casinos would be like, okay, we have milked this cow dry, moving on to the next cow. You know what I mean? Yeah.  <Jason Kam (28:54)>   I see. So it's a tough thing because your NGR is not recurring, so to speak. Over time, gamblers do lose money. So if your growth effort doesn't pan out, the NGR actually drops over time until all your gamblers go bankrupt. So I guess from what I gather from you, actually growing this run rate number is quite challenging. It changes from month  <Sterling (29:17)>   it's extremely challenging. And like, if you look at our docs from way back in the day, there's some months where we didn't do any buyback and that's because we lost $5 million that week or we lost $2 million that week. We lost a hundred grand that week.  was just in the negative. So it's again, it's a lot more like growing your trading account rather than growing hyperliquid to some extent. And that's what's really tricky. A lot of people aren't very good at growing their trading account. And a lot of people, even if they have an edge or an implied edge with us, right, we have an edge against our players, of course, it's really tough to grow bankroll. And especially if you don't know what you're doing. So that's why it's really tough for these really small casinos to grow because they can't take on VIPs to grow. It's really tough for mid-market casinos to grow because there's always someone else that can service them.  it's very tough and that's someone else's stake.  <Jason Kam (30:05)>   Let me put this to another question that if you want to become the number two and surpass rollbit and become this, what do you have to do to get there in the next 12 to 24 months?  <Sterling (30:15)>   So yeah, would say for once, we're in front of it a bit when it comes to like all these metrics, when it comes to like, we pass them firmly, which is great, great to talk about. But Rubets are number two, Rubets like.  <Jason Kam (30:24)>   Nice.  <Sterling (30:30)>   Rubet's had a lot of growth in the last year. Basically, they are the over payers. If Stake doesn't pay for someone, Rubet's going to come in and basically drop a ton of cash on these guys. So it's been really tough to grow on that streamer angle. We're looking at a lot of different opportunities though. Obviously there's stuff when it comes to sponsorship. We haven't really touched that yet.  Stake.com obviously has the F1 team. Rollbit has their front of Jersey on Southampton. Rubet has Chelsea FC, I think either on the side or like maybe like as an official partner or something like that. Like we haven't really touched that yet. We've done really cheap things of way to do that. So we sponsored Crypto Fight Night for like a couple, a couple iterations of that. Like when Ansem and Barney fought, like we were one of the title sponsors for that. That's been really good for us. But that really doesn't, that's really small potatoes now compared to going from third to second.  Um, I think the main thing with us is like, lotteries is a massive category that hasn't been touched by any of these other crypto casinos. And to be honest, I think like the way we're going to do the next iterations of the lottery and stuff like that, it's just, it's going to be basically a whole other vertical for them that I don't think they'll be able to compete against once we get to that point. So the way we're thinking about it is like, we have to try new things. We have to try stuff like sponsorship. We have to basically start paying more, maybe for more streamers, just so we get more people in the door.  not overpaying but just like just doing it like just going out there and spending more money and then on top of that doing new and innovative stuff because that's what we're really good at like I think if you asked anyone in the last year like what the best marketing or the best like kind of inbound for Casino was it was Shuffle's airdrop  We went from a hundred million a month in wager volume to two billion in one month. It's like unheard of. It's like never been done before. So we have to do that again, basically without doing token missions or anything like that. Just creating a new product category, creating something that's more crypto-ish. like, that's what I'd like to talk to you about at the end of this call is like talking about lotteries and stuff, because that is super, super exciting.  <Jason Kam (32:29)>   Well, we can touch on that now, which is kind of the next question. I was trying to get a guidance out of you on NGR, but I guess that's not how you think about it. You think about the size of your kind of book compounding over time. And there could be a lull in your business, and you just can't grow that number. Interesting. Maybe let me ask it this way. What are some of the most exciting things that you're working on right now that could kind of drive your business to the next level? Is it?  <Jason Kam (32:57)>   different type of sports betting? it the lottery talk that is something else we haven't touched on?  <Sterling (33:02)>   Yeah, I think the sponsorship side we talked about is obviously important. It's something that you can spend a lot of money on and get a lot of eyeballs on. lot of these casinos that have spent money on it have seen decent returns from stuff like that. I think from a, we're like a product-led company. If we wanted to make a casino that felt like every other casino or felt like BC Game or some of these other casinos that are kind of mish-mashed together, we could do that. But we're product-led. The reason why we have users and the reason why we have users that stay and keep playing on a shuffle is because  because like the products grade. So basically what I'm trying to get at is that this whole new category with the lottery is like something where we have a massive edge in where it's right now, erase the shuffle lottery from your brain as far as like a product goes. Like think about it from a crypto person's point of view or like the way I think about it is.  Lotteries have basically been an idea that's been in crypto since 2015, 16, basically ages ago. Like there should be a global lottery that basically anyone in the world can play. Anyone in the world can buy a ticket. Anyone in the world can log on and basically play this Powerball or play this Mega Millions. So the way we want to kind of do that is like do more of a crypto product because lotteries are like one of those things that from a point of view of like, you know, how we've been talking about bankroll and growing that and whatnot.  It's actually like a lot more durable when it comes to like how it works and whatnot. Like you have this big float of cash that you use to basically incentivize ticket sales. You have a lot easier time tracking sales as well, like with mega millions and say like something like Powerball, right? Basically once it enters a certain number or enters a certain EV, it takes off like this. It's very easy to track basically that revenue. So.  If we can do lotteries the right way, and when I lotteries the right way, mean lotteries like on-chain, permissionless.  <Sterling (34:50)>   basically anyone in the world can buy a ticket. Like I think that's a crazy, crazy business opportunity for shuffle and specifically shuffle token as well. Just because right now it's like, right now we're like Binance before like BNB was like a network coin. We're like just BNB at the moment. Like we're not BSC. And to that extent too, we're kind of like Solana when Solana was just kind like an FTX coin. Like you really couldn't do much on chain. You could do stuff on chain, but the product wasn't very good. Now we're basically trying to take that lottery from that BNB  to like a BSC experience where it's going to be something that's on chain, something that anyone can play and someone that anyone can really build on top of. So I know Mitchell, like kind of talks about it in the bid club, like this LST idea of like, basically, okay, if you have a lottery that gives up yield, like we should be able to plug that into every other concept that exists on chain, like Pendle, liquid staking tokens, all type of infrastructure. And that's like an idea that's been in my head for ages. I've been wanting to do something like that for a really long time. And it's just like, we haven't had...  the resources of the focus that kind of go from BNB to BSC, but now we do. So if I had to like summarize this, it's basically like we're looking at the lottery product as a category in the casino. That's super interesting, but even more interesting is like bringing that on chain and doing that with like all the tools that make that experience great now. Cause like, you know, back in the day it's, or even still to this day, some people just don't get on chain. Some people don't get that you need to make it feel like a great product. And like, we can take that knowledge from shuffle.com and  basically apply that to like a decentralized permissionless on-chain lottery that involves like shuffle token and stuff like that. So that's kind of like the most exciting thing for us.  <Jason Kam (36:29)>   What, I guess, timeline and form factor of what that might look like for a typical user?  <Sterling (36:34)>   Yeah, I think the thing is with us is like, there's like a lot of moving parts of this. Like, I think like the stuff we can do to make shuffle better is like so easy to me. It's like right in front of me. It just like hasn't addressed yet. It hasn't been like, I think we kind of go after. So with us, it's like, if we do something on chain, like shuffle the coin is on ETH mainnet. It's like, what year is it? You know what mean? Like no one trades on mainnet anymore, but that's a consequence of.  basically us launching at the wrong time. We launched when the biggest runners of the day were like Unibot and Pepe on ETH Mainnet. It's a very different ecosystem now. And to be honest, from a user point of view, no one would ever play an on-chain lottery where you got to spend money on ETH Mainnet. It's got to be on something like Base or Solana. So one of the big innovations we want to do is basically just bring Shuffle onto a chain where it can be used on-chain and be part of DeFi. So don't really have too many details more outside of that.  looking at two the networks, I think you can kind of guess which ones to look at, to basically shuffle there. And on top of that, creating a smart contract that basically allows us to do the on-chain Powerball and then as well as that have the on-chain shuffle lottery. So kind of the similar format now, but the whole yield and like being able to like access that yield is super easy to do because I know I'm going on and on about lotteries and stuff like that. But like one of the key takeaways from like why this yield like doesn't get arbitraised away from like a trader's point of view is like you have to deposit on a  So if you're like at a hedge fund or your family office or your prop fund or whatnot, basically no one's going to sign off on depositing millions and millions of dollars onto a casino. Like no one will write off that risk. So it's like, if you think about it from that perspective, like the product gets better on chain from a shuffle lottery perspective, the user base gets bigger because it's basically permissionless. Anyone can go and buy a ticket. And on top of that, the network effects for actually having on chain lottery is absolutely massive. it's hard to describe.  But basically, if you can do that product, it's really, really strong.  <Jason Kam (38:33)>   That makes sense. I guess the transition to different chain and actually, it going to be on mobile first product? Is it to be a mobile first PWA product or is it going to be desktop?  <Sterling (38:40)>   So, say it again, mobile first.  <Sterling (38:45)>   Yeah.  That's basically like the, can do both, but like essentially what we'll have is like basically this, this lottery product that exists outside of Shuffle, but it's still connected to Shuffle on the backend. So the way we're kind of thinking about it is like shuffle.com is again, like Coinbase or Binance. And then you have the network kind of thing attached to it. So with Coinbase it's based with BNB it's BSC. And basically those two things interact with each other, but anyone can access this, this pool of lottery funds and still be connected to this pool like this.  <Jason Kam (39:16)>   Right, but you're not launching a layer one or a layer two. You're just creating a pool that is on chain somewhere and any people can tap into it. Okay. But the first product you come out with using this pool would be a, cause I'm imagining it would be like a mobile first PWA product where you can use Apple pay to like buy a lottery ticket, something like that.  <Sterling (39:34)>   Yeah, I mean, that'd be the perfect use case. Obviously it's tough with gambling, getting like on the app stores and stuff like that, but like there's so much good tech when it comes to like, I don't know if you've used like stuff like HyperLigure and stuff, they use Privy for all like their logins. Ostium does stuff where basically you can basically deposit any type of USDC or Solana or whatever and basically be on the network. Polymarket does that perfectly. So having a product kind of like Polymarket, but for lotteries would be the ultimate goal for us.  <Jason Kam (40:04)>   How soon can you build this? it in the works? Are we looking at next year? What does it look like?  <Sterling (40:13)>   We're still talking with bunch of the partners for this, but we're trying to aim for end of this year for like getting this out. But again, like my focus is mostly on that. And then the rest of team will continue to focus basically on the core casino. basically Shuffle Lottery will still exist. Shuffle Lottery will still be something we do, but this is about like basically democratizing that, making it easier to access rather than just being on the casino.  <Jason Kam (40:38)>   Got it. So it's like a mass market blockchain backend ring fenced, probably mobile, highly entertaining, like polymarket type of lottery experience running on a faster chain.  <Sterling (40:49)>   Yeah, basically. It's like basically over the last six months, I've learned everything there is to do with lotteries. And one of the big innovations from lotteries back in the day, and I know this is a complete diversion from crypto and all that core uses, but lotteries used to be little pools of capital in each state. So it's like the state in New York would have a $10 million lottery. Oregon would have a $5 million lottery. And all these individual little states would basically run their own lottery pools and use it to the governments or fund whatever.  And then the eighties or nineties, there's this innovation called the multi-state lottery organization where they connected everyone's prize pool to the same prize pool. So a Powerball ticket sold in one state is connected to another Powerball ticket sold in another state. So instead of having 50 lotteries with $1 million prizes, you now have one lottery all interconnected with a $50 million jackpot, which helps everyone because you get more sales, helps everyone because it's just more interesting products when you have all everything kind of connected. And what we want to do at Shuffle is basically  create that multi-state lottery thing on-chain where basically we have shuffle.com is that kind of like first front end for the lottery. And then we have this on-chain prize pool where anyone can play and basically connect to. That's kind of what we want to create because lotteries, as you know, like there's not really any great ones. even like, if you think back to like 2019, you have like pool together. That's not really a lottery. You have Megapod, which is on base. That's not really a lottery either. It's like more of a raffle system. Like there really isn't.  And there's such a huge opportunity to create basically like the internet's powerball. And that's kind of like what we're looking at next. Yeah.  <Jason Kam (42:25)>   I see. Does it move to needle versus the $50 million you give to the shuffle lottery stakers?  <Sterling (42:34)>   Yeah, I think so because it's a lot more durable when it comes to like revenue. So like the way we kind of look at it is like if you can sell a lottery ticket, like lottery tickets margins are like, you know, 50 % goes to the prize pool and like from like, from a conventional lottery's point of view, the like, basically the revenue is massive. Like if we sell a Plinko bed or we sell a sports bed or whatnot, that usually like margin is like, you 1 % to 10 % or  With lotteries, it's like in the 15 to 50 % margin. So that revenue is a lot more durable when it comes to being able to basically feed that back into the token. And it's just like, if you can grow that and you can have that innovative product, I also think it unlocks quite a bit on the other side of shuffle, which is associating it more with lotteries and basically this fun thing that everyone plays rather than gambling to some extent. So it's like a kind of a two-edged prong where it's like, if you can kind of get that product out the door and you can feed users into it,  it. You can basically create a network effect that is more durable product that has more user base outside of like pure crypto people like you can get more consumers on it and on top of that it's just like a way easier pill to swallow than just like pure gambling because everyone plays lotteries. They're the most popular gambling product in the world. They're endorsed by governments etc etc.  <Jason Kam (43:53)>   But it seems like it's a year-end kind of thing. It's not imminent.  <Sterling (43:56)>   No, not in the next week or so, like, you know, it's going to be something that's going to be big focus for us outside of the corkus, you know.  <Jason Kam (44:02)>   Got it. Is it as big as your other efforts or are there any other efforts that's like similar size, smaller, bigger sports betting or any other?  <Sterling (44:11)>   I would say on the sports betting side, in the casino side, it's very iterative, right? Like we're trying to basically grow our games. We're trying to grow our, like make the product as good as possible. And that's like, you know, improving the amount of providers we have on the platform. That's creating new games for users of play. So from our side, it's like we have a bunch of originals, like originals in our sense just means like games we make ourselves. So it's like Plinko.  Dice, Kino, Mines, to like someone that's never been on a casino, these probably don't mean a lot to you, but they're basically games that are replicated across every casino that you go on online. And basically we want to grow that stack because a lot of our competitors are starting to invest more in original games and we think that's pretty important for us too.  <Jason Kam (44:55)>   So those efforts are more incremental versus if the lottery kind of works, it will be more transformational to the valid capture. Okay.  <Sterling (45:01)>   Yeah, extremely, extremely. Like I think if the lottery takes off, it's a generational product, because it's like one of those things in crypto that's been talked about forever. it basically like Vitalik, if you go back from like 2017, he's talking about lotteries. If you go to like the original Bitcoin threads, they're talking about like lotteries that Bitcoin can provide for and like you place with tickets for it. Because there just hasn't been an internet lottery yet. So like shuffle the token and shuffle the company. Like we really want to basically give our best efforts at creating that.  <Jason Kam (45:31)>   Do you plan to up the tick rate of 15 % on the NGR to the token?  <Sterling (45:36)>   for NGR, I think maybe in the future, but definitely not at this moment. We're still growing. If we were to stake position, it'd be something we'd look into, but it's not something that's not a radar. We're still looking at trying to grow the pipe when it comes to lotteries and the rest of the games and growing bankroll.  <Jason Kam (45:52)>   Yeah, I mean, guess regarding the lottery, just because I haven't done the deep dive like you did. I just can't wrap my head around what it could mean for the shuffle stakeholders, because the economics of this thing is very different than a casino or a sports betting. And it seems like there are a lot of go to market barriers that prevented it from being big. There's infrastructure issues of crypto that prevented from being big. I guess.  <Jason Kam (46:22)>   Just what would success look like for you if this lottery thing worked? Like, are we talking about 100 million per annum of valid capture to token hold? Like, what would it look like if you were to paint a picture?  <Sterling (46:31)>   If I was to paint a picture, it's like...  When we have like a product like a lottery that is like has a solid user base, like with Shuffle right now we have 45,000 active users that play like at least once a week or whatnot. Like that's, that's pretty big for a casino. Um, with a, with a lottery, like the amount of people that play lotteries in real life, lot of people that play lotteries across the world is massive. Um, the revenues are a lot more durable and in theory, this lottery would be something that we'd give like most, if not all of that revenue back to the token. So obviously.  I'm a big admirer of hyperliquid. I love what they've done with the product and stuff like that. The reason we can't do hyperliquid for shuffles is the whole reason I basically talked about on this podcast is like we need to grow bankroll. When it comes to you, lotteries, they're so much more durable and so much easier to like project out when it comes to revenue. They're fully like, basically lotteries you can't lose as a product, right? So the way I think about it is like if you get to a point of view where the lottery is doing, you know, say it's like a hundred million dollar lottery or  which with Powerball Omega Millions, the starting jackpot's at 20 million. So you can get to a point where basically you have equivalent products and you have it where anyone in the world can kind of play this equivalent product and you have these revenues that are a lot more durable.  And you can connect it to the core casino, like say like shuffle.com. Like that is a crazy great product as far as like giving as much back to shuffle token holders as possible because like the opportunity there for connecting that internet lotto to web free infrastructure is just something that hasn't been touched at and something that's super exciting for us.  <Jason Kam (48:07)>   Hmm. I guess it hasn't been done. Part of it is in front of the part of it is it just seems like the cost to reach the end state customer to just pull up something and just do Apple pay, pay $5. While none of the channels I think are very friendly because of regulatory reasons to that, that seems like a big issue of go to market. Is that, is that right?  <Sterling (48:31)>   Yeah, yeah, for sure. But I think that's correct. But in the same methods, like why did Shuffle take off? guess like it has all the same problems that a typical lottery would have on top of, you know, it's a scary product to use with like a more niche audience. Sure, there's whales and like there's lots of people like that, but...  I think like a generalized lottery with it connected to like a core casino is just like a killer product just because this core casino can basically market that lottery. And this lottery as well as being on chain is permissionless. So as it grows and as it gains that network effect of having say a 15, 20, $50 million jackpot, it gets a lot easier to sell to people. And it gets a lot easier for to basically get rid of those blockers because once it gets to a number that's exciting and it's real and people can play it.  It kind of goes on from there, right? It's just like the cold start problem is the tough part. And when you have a business that is doing well as like Shuffle OZ, it helps with the cold start problem quite a bit.  <Jason Kam (49:32)>   That is true. And I guess just to, because this is a big part of the growth effort, it seems like. Let's say it does get to like a $50 million jackpot and it kind of rolls every month or every other week, let's say. And for some reason, I heard about it because for whatever, like how do I go from hearing about it at that point to buying a lottery ticket in your mind, like at the end state?  <Sterling (49:55)>   In my mind, it's like any of these really great on-chain experiences. It's like, basically, if you go on Polymarket right now, you deposit whatever you have in your Coinbase or any other wallet. You deposit, you buy tickets, you wait for those tickets to resolve. And then when that experience is done or you've won $50 million, you can just withdraw it just as a permissionless app, almost like exactly how Polymarket does it. Yeah.  <Jason Kam (50:19)>   I see. Okay. And if I don't have crypto, I'll just like moon pay it like it'll be on the website. Interesting.  <Sterling (50:25)>   Yeah, like MoonPaint, MoonPaint, all those types of onboarding is so much better than even when we started to make shuffle like in 2023, like so many of the things have improved like 10X from there. it's, that's what makes it so exciting. Like that consumer side of it, we can finally do it now.  <Jason Kam (50:40)>   And Casino, like gambling, like this is okay with MoonPay? I guess you're doing it now. Okay. Interesting.  <Sterling (50:45)>   Yeah, it depends though. Moonpay and these onboarders and whatnot, they're kind of finicky. They're kind of like centralized exchanges where it's like, if you're too small and they can't make enough money on you, they don't really care. But once you get to a certain size and you get to a point where you make sense as a business, basically they come and basically want to talk to you. So it'd be the same thing for the lottery.  <Jason Kam (51:09)>   Now, how do you think about shuffle as a token going forward?  <Sterling (51:15)>   Shuffle is a token going forward. So like the interim, it's basically like what it is right now. It's a shuffle lottery. You basically will get a portion of shuffles out of yards and growing that as well as like, you know, doing small improvements to the shuffle lottery on site. But in the future, like we want to get to that point where we can shove as much as we can into a buyback or into yields or into staking or whatnot.  And a lot of that again comes back to the on-chain lottery part. If we can get that product right, basically we can turn on the taps when it comes to like basically feeding the token as much as possible. Just because like, you know, it's very clear, like you'd have to...  The way I look at it, like, if you're in crypto and you're an operator, if you're not looking at hyperliquid and seeing what they're doing, like if you have the ability to generate revenue or you have the ability to basically be a business, like a lottery or a casino or an exchange, like basically make money, I think the hyperliquid method is the best way to do it. And like, if we get to a point where the large product is done extremely well, I think that's like the best model to go for. But yeah.  <Jason Kam (52:16)>   Noah in interviews talked about wanting to get shuffle to the top 100. I guess the lottery is the way you get there.  <Sterling (52:23)>   Yeah, I think it's lottery. think it's like, even if, even if the lottery fuzz on space or say like, we don't launch it for another two years, think like shuffle the core casino is like in such a good place right now when it comes to bankroll, when it comes to like our tenacity to get more deals, when it comes to like what our sites are on for the product. So even if, even if lottery doesn't pan out or say, even if like, you know, we experienced like less growth or whatnot, like I think the core, poor businesses in such a good state at the moment that I think shuffle a token will  do extremely well just because like we're getting better at doing everything like you gotta be you gotta look back at this like from the perspective of us like we started with you know like two years ago and now it's like basically you know top two top three in a land that started in 2017 2018 BC game like 2016 like basically super long ago like these guys are kind of weathered warriors compared to us to some extent so we're still got a lot of white space  <Jason Kam (53:19)>   And how, because to me, it's a bit of like a black box outside looking in because NGR depends on how crazy people feel like every particular week of gambling. But I guess how comfortable, how much visibility do you guys have on the sort of one through six month look forward NGR figures of your business?  <Sterling (53:39)>   I think we kind of grow it like...  Like it's so tough because it's so whale dominated, right? Like some, some days, like some guy can walk through the door and like change the business overnight. That's what's so difficult about modeling these things out. Like if steak, if steak has a bunch of VIPs and they're not service correctly, like there's soup, there's no switching costs when it comes to these businesses, right? Like if you don't like the deal that steak's giving you, like from the perspective of a whale, you can go shuffle or you can go to roulette or you can go to a roll bit. So the way these guys stick around usually is like, uh, they'll leave steak, they'll try.  <Sterling (54:12)>   bunch of the casinos and they'll end up either back at stake or at shuffle. Just, it's just very, very tough to model out because one or two whales can just decide so much of your, of your NGR that month. So it's hard, it's hard to model out. The best thing we can do is basically keep growing our margins, keep growing with the users that we have on platform outside of whales. But again, it's tough to model for.  <Jason Kam (54:33)>   Hmm. Are you doing anything to improve liquidity or getting on some sandbox changes, stuff like that?  <Sterling (54:40)>   you  Oh man, I can talk about centralized exchanges all day, shuffle and stuff like that. It's such a frustrating thing. So way back in the day when we were doing our token lives, we did it kind of in a weird way from the point of view of now. Like this was like, we decided on this in 2023. But basically it was the only method we could really go and go to market with. So when we were talking to exchanges like Binance and Bybit and whatnot, they just do not want to, they, especially back then, they didn't want to take the risk on casino  coins because they kind of in 2017 and 18 they were kind of open doors to like casino coins so they had like fun token there's a bunch of other I think was like a unicorn was on Binance and stuff like that like there's a wealth of casino gambling coins basically at some point Binance said we can't do this for a more compliance reasons we couldn't they've really buttoned up on that point  I think most of the reason for that is because a lot of these guys have ties to mainland China or stuff that basically the number one rule on the wall is like no gambling, no casinos. So that's been frustrating to deal with prior in like 2023 because the first answer was always no. We kind of had to trot our own path. When it comes to nowadays, it's actually really interesting talking to people because when I talk to exchanges now, it's not so much about the risk because they've all taken that leap with meme coins and kind of all taking that leap with risk.  when it comes to like, you know, the Trump administration and whatnot. So the conversation now is a lot different. It's less about us being a casino and more about, you know, us having low volume right now, just because we haven't really put a ton of focus on the token as much as we could. Where that's being switched on now, where we're going to be going on chain with a lottery. We're going to be putting a lot more efforts into making the token kind of grow through that product, as well as like, you know, potentially switching networks as well. So it's less so about, you know, us being a scary gambling company with like very  <Sterling (56:33)>   users and more so about like can we get like the on-chain metrics right can we talk to the right people etc etc  <Jason Kam (56:42)>   So that's interesting. So two things. While the product of your lottery may only come by your end, the chain switching could come faster. You'd have a timeline of that, I guess.  <Sterling (56:53)>   don't have time like, cause we're still talking to dinner foundations, we're talking to dinner people about what we should do, but I think we have a pretty clear direction. just, when we can announce it, we will announce it and we'll go from there.  <Jason Kam (57:03)>   But if you do go to a different chain, will be a shuffle token itself will also be live on that chain, obviously, because of the lottery. interesting. And so if central exchanges now, you feel very confident then it's just a matter of paying the right dollars plus having the trading volume up, then you would be listed.  <Sterling (57:09)>   Correct, 100%.  <Sterling (57:22)>   I yeah, I think the thing is, like, the way I look at it is like, our users are so much different than crypto users. Like from a differentiation point of view, it's like, I'll give you an example. When we did our airdrop, our first airdrop in March of 2024, all our Japanese users had no idea what airdrop was.  Every single one of them. They had no idea what an airdrop meant. They had no idea what a token was. They had no idea anything about networks or whatnot. They didn't know what Ethereum was basically. All they knew was that they buy on Coinbase so they can deposit on shuffle and gamble with it.  that user is so different than the typical crypto user for exchanges. And the typical person that goes on these places and buys outside of like the feed onboarding ones, kind of like Coinbase, Kraken, Binance and some markets. So from a point of view of that, like our user base is so differentiated. It's a good add on for these exchanges. On top of that, it's what other parts of it? It's like.  We basically just, because we're so opaque as a casino at this moment, like we're just not very good at showing metrics. And like, that's the reason why shuffle token is like kind of suffering in price is that we don't really put out what our yield is at this moment. We don't really put out like how many users we have. We put out like kind of metrics we can share, which is like how much wage of all the token does, how many users like have it on platform, how much is staked on platform and stuff like that. But we don't really put it out into say like DeFiLlama Lama or any of these like really big kind of places where like knowledge cap  for like crypto. Yeah, exactly. Like, why not? It's such an easy thing to do, right? So with us, like, that's what we're to be focusing on next. It's like, you get on a network that makes sense for crypto. It gets more attention on basically our coin. We get like aligned with metrics. We get aligned with like, you know, basically being able to show like, hey, Shuffle is actually like the top 10 of these things. But I think it doesn't make sense right now because realistically speaking, we're a casino product. But in the next year or so, we're going to be turning more into a crypto.  <Jason Kam (58:51)>  Why not?  <Sterling (59:19)>  it's a product that basically more consumers could use. So when all those things kind of line up, it's kind of unavoidable from a point of view of like an exchange or anyone that's like on chain to like see these things, similar to like how Hyperliquid did it where it's like, wow, these guys are doing X amount of revenue. You can see the buyback, you can see the users. Like we want to get to the point of view where we have a product like a lottery that basically can show off that same types of metrics and keep like the casino business like relatively the same.  <Jason Kam (59:46)>  But the metrics tracking will come after you shift the chain. So that's not in time soon. early as it seems like a Q3, Q4 thing, right, at the early.  <Sterling (59:49)>   Yeah, correct. Yeah, correct.  I think we move pretty quick once we pick a direction and we're pretty close to picking a direction. It's just more about can we do this and like what are like, like basically picking what chain you want. Cause like, you know, everyone that's basically launching a coin these days or like if I did launch shuffle again, like it's very obvious where I'd go and whatnot. So it's just more about figuring out what's the best like basically network, what's the best culture for us. And that's what we're kind of identifying right now. Yeah.  <Jason Kam (01:00:21)>  Understood. Is there anything else we haven’t covered you want to talk about that excites you? <Sterling (01:00:27)>  There’s a couple of fun ones in here, honestly. I like the Rollbit question about “is the revenue real?” That’s always a fun one for people. <Jason Kam (01:00:33)>  I mean, is it real? I don’t know, but you’re above them now. So the question becomes, is your revenue real? It kind of doesn’t matter. <Sterling (01:00:38)>  Yeah, for sure. Well, if you stay for a lot, you’ll be able to see that real revenue with Rollbit. It’s always so weird because crypto people are super skeptical … even if it was real or shady, they couldn’t explain it properly. <Jason Kam (01:01:31)>  Um, so what I got out of this is you’re going to try to maintain and grow the ~$100 M NGR annualized—no promises—but you feel good about marketing and VIP growth. The big push is the lottery product by year end, with Q3/Q4 chain strategy and stakeholder‐metrics work before then. <Sterling (01:01:59)> Yeah, I think we’ve built a great crypto‐casino product, and now it’s time to grow a crypto‐native product on top—like Coinbase→Base or Binance→BSC. Not L2‐specific, but giving users a product that fully leverages crypto’s upside. <Jason Kam (01:02:01)> I basically covered it. <Jason Kam (01:02:22)>  Hmm—let’s give members three seconds to see if they have any questions. <Sterling (01:02:29)>  Cool, easy. <Jason Kam (01:02:33)>  I don’t think so. Sterling, thank you so much for your time. Really appreciate it. <Sterling (01:02:36)>  Yeah, I appreciate it. Thanks so much, Jason. <Jason Kam (01:02:39)>  Thank you.

TLDR In this episode of BidCast, Jason Kam speaks with Sam Kazemian, founder of Frax Protocol, about the recent passage of the Genius Act and its implications for the stablecoin market. They discuss the evolution of stablecoins, the importance of compliance, and how Frax will try to position itself as a leader in the digital dollar space. Sam shares insights on the growth strategy for Frax, including partnerships with major financial institutions and the innovative features of the FraxNet platform. The conversation also touches on the potential for AI initiatives within the Frax ecosystem and the future outlook for stablecoins in a rapidly changing regulatory environment. CHAPTERS / TIMELINE * 00:00 Opening * 01:02 Introduction to the Genius Act and Frax Protocol * 02:11 The Evolution of Stablecoins * 05:21 Frax's Vision for Legal Digital Dollars * 09:14 Implications of the Genius Act for Stablecoins * 12:01 Compliance and Merchant Trust in Stablecoins * 13:38 The Unique Position of Payment Stablecoins * 17:05 Frax's Competitive Edge in the Market * 22:21 The Future of Banking with Frax USD * 29:41 KYC Compliance and User Experience on FraxNet * 35:22 The Role of Stablecoins in Financial Systems * 37:51 Market Potential and Growth Projections for Frax USD * 41:12 Frax USD's Circulation and Use Cases * 43:41 Go-to-Market Strategies for Frax USD * 48:40 Tokenomics and Revenue Generation for Frax * 51:07 Future Innovations and AI Integration in Frax * 01:02:19 Strategic Partnerships and Future Outlook TRANSCRIPT << Jason Kam (01:05) >>: OK, we are live. Welcome to another episode of BidCast. I'm your host, Jason Kam, AKA at MapleLeafCap Today is May 21, 9 AM Hong Kong time. BidCast is being livestreamed to BidClub members. Questions are from the members and my own. Today I'm speaking with Sam, the founder of Frax Protocol. Sam, welcome.   << Sam Kazemian | Frax (01:28) >>: It's great to be here, Jason. Thanks for having me.   << Jason Kam (01:30) >>: Yeah,   well, ⁓ this call is actually really timely because ⁓ of the Genius Act's passage ⁓ yesterday through Senate. Is that right? ⁓ And I'm actually really excited to talk to you. I think let's dive right into it. The two big questions on my mind are ⁓ what exactly just happened to the Genius Act? I have some high level understanding of it making anybody that can issue a stable coin that are compliant a legal tender of M1.   << Sam Kazemian | Frax (01:41) >>: Yeah.   << Jason Kam (01:59) >>: But why does it matter to you? And then secondly, I know that you guys are transitioning. ⁓ There are a lot of things happening. Just walk me through their journey of how you went from what you were before to now for  Maybe those two things.   << Sam Kazemian | Frax (02:11) >>: Yeah, for sure. So   I think it's good to have like a two, three minute background and then actually getting literally to yesterday and what it means both for crypto stable coins, but also specifically for acts. So I've been in crypto for a really long time since 2013, since I was like ⁓ an undergrade at UCLA and I started mining crypto and all this stuff. ⁓ And I think the main important thing when it comes to stable coins, which back then there there was none like like Tether came out like the year later and like, you know, was this ⁓   This view that stable coins originally the ethos was the holy grail of stable coins is this decentralized stable coin that has all the properties of like Bitcoin decentralization censorship resistance fully non-custodial right and then also pegged to a stable unit predominantly USD because everyone uses it globally or wants to use it if they have access to it like this right and that's kind of the the whole point of algorithmic stable coins right like the the whole point is it kind of represented the very first like like   vision of the holy grail of stablecoin. That's why Terra was such a huge thing and then it got so big and then it blew up. All of these things basis and then also the very first version of Frax for people that probably listen to this, they're in the industry, they're ⁓ pros and veterans. The original vision with Frax was we have a really good answer to how to build this holy grail ⁓ algorithmic or decentralized type of stablecoin and Frax was one of the like the   legacy, Frax, which actually still exists, right? It became a household name in crypto, right? The Frax brand, everyone knows. And as the industry evolved, right? And that's another word for saying like, people realized...   There's no such thing as this algorithmic stablecoin that's pegged to a ⁓ centralized unit, the USD. ⁓ That's not the actual Holy Grail. That is not the top total addressable market, like the TAM of stablecoins in the multi-trillion dollar vision. What actually would be the Holy Grail is literally issuing a stablecoin that is   for all intents and purposes non-custodial, right? Sure, it could have a blacklist if you're a terrorist or whatever, ⁓ but it's on the blockchain, so 24-7 settlement, but the issuer of the actual unit that you're pegging to, which is in this case the US government, the Federal Reserve USD, actually says by decree of fiat, by decree of law, this thing is a dollar. That's the actual holy grail design of a stablecoin, right? ⁓   As an industry, we went from dreaming of this stablecoin being this Bitcoin-like thing that has this immaculate stability to realizing, okay, that's not possible, right? That actually goes against the laws of physics, economics, right? And that's not the actual largest total addressable market. I never actually would have expected, ⁓ literally, in the US Congress, literally legal tender, essentially, legislation or things like that.   for stable coins, which passed a very, very critical ⁓ hurdle yesterday in a positive vote to pass cloture, which is what your original question was. so, Frax's total new revamping of ⁓ our vision, our execution, and our roadmap is answering this call of actually the immaculate design for a stable coin. Like we're not pivoting, still this stable coin, know, multi-trillion stable coin vision is.   the actual legal digital dollar that is issued on blockchain, right, by like a protocol, by a specific group that the state actually literally says this is a dollar because we wrote a law that says if this is built in this way, this is a legal digital dollar. Just like they do for bank deposits, right, that are basically M1 money, right, all of the actual money in the economy, right? And so the...   Going back to your question a little bit is like yesterday was a pretty key procedural vote called the closure vote, which is in the Senate. basically all the time up to debate a bill can be ended so that it can actually be put to a official vote on the Senate floor. And ⁓ the genius bill, which is the stable coin legislation bill in the Senate, needed 60 votes to actually pass closure, which means go to a formal vote in which   Formal vote only requires 51 % or 51 senators out of 100. And since the Republicans have majority and this is a Republican sponsored bill, it's almost certainly going to pass. really the de facto thing is if it passed that, we're pretty good. Some form or another between reconciliation is what it's called where the wording from the House version of a similar bill basically gets negotiated and then passed to the president's desk.   essentially ⁓ procedural from then. Obviously the world is unexpected, some crazy things can technically happen. A bunch of Republicans can be like, actually like World War III is about to start. have more of part of like, we refuse to sign this until later. But for all intents and purposes, yesterday was extremely, extremely historic. That's why you saw the news and everyone tweeting, my God, this is amazing and all this stuff, which actually is the biggest ⁓ important thing for Frax's roadmap, because we've staked our entire   ⁓ redefinition, revaluation, and our entire resurgence on being the primary, ⁓ essentially, ⁓ allocation asset, like the, the frax, ⁓ token, right? Not the stable coin, the frax token, ⁓ being the, ⁓ investment asset. If you believe in this, this thesis and this worldview that the immaculate largest, market cap, ⁓ you know, like vision for stable coins is one where the issuer of the entity of the   of the unit you're pegging to is like, you are the thing, rather than trying to synthetically peg to some unit and then getting these bunch of money transmitter licenses and regulatory regional thingamajiggies and just literally going straight to the source, the source of the unit says, you are a doll.   << Jason Kam (08:37) >>: And to the extent that the bill passes, ⁓ I guess my read from it is that companies like USDC and Tether and what not, ⁓ they're no longer operating in the shadows. are now, ⁓ whatever they do is now legal. And with the added benefit of, ⁓ you know, the stable coin that they create should be accepted as legal tender for payments all over the United States and maybe globally. Do you read it the same way?   Or are there any other added benefits that I'm not understanding? To a stable condition.   << Sam Kazemian | Frax (09:09) >>: Yeah, think so.   So there's two things. One is... ⁓   It'll take a while for like so we've actually structured our new ⁓ FRX USD, Frax USD stable coin to ⁓ be pretty streamlined and like compliance specifically for this. We launched a little bit over two months ago, so basically it's new for all practical purposes. ⁓ But it'll be ⁓ probably a little bit harder with like the size and reserves and things for ⁓ I think Tether and Circle to, especially for Tether because they have to do the foreign issuance. ⁓   clause ⁓ specifically to actually get the Stablecoin charter, but I assume they will both do it. I assume obviously that this is not ⁓   This is not some like regional MiCa license or VARA or you know something like the Japan Money Transmission License or something. This is actually much bigger and there's a reason you can tell like this is not like hyperbole because they're all there and like right like if you noticed all everyone is staking their like political capital, their resources and all this stuff and like   Tether and Circle don't have like a token to pump or something, right? Like some people could be like, like this founder, like, I don't know, this L1 founder is there to like, I don't know, pump the price of their token or something. That doesn't actually apply. These are adult businesses, right? Like with real, like equity and all this stuff, Circle is trying to go public. ⁓ They know that this is like the biggest deal ⁓ possible for.   dollar pegged stablecoins. I don't know if you're trying to peg the euros or whatever or like yen or something, this doesn't really apply to you. But if you're trying to peg the dollars, this is literally the law that essentially says the government of the...   dollar issuer is saying you're basically a dollar, right, for all practical purposes, right? And so ⁓ that is a huge thing. I expect them obviously, I've seen them in DC when we've been there, I've been there. Paulo is awesome, he's actually really ⁓ smart visionary. ⁓ He actually has a lot of things planned and I assume they'll get their either payment stablecoin charter or some kind of interesting ⁓ US-based structure for it. Or either work with a US-based...   ⁓ payment stablecoin chartered entity ⁓ or start their own or something like that so we'll see   << Jason Kam (11:33) >>: And what does that, what does that actually mean once a company is now basically fully compliant? Like, I suppose it reduces the merchant's friction of dealing with you because they kind of trust you now. ⁓ And I suppose, you know, the, the, the users that use this April call will feel a little safer because it like, it's kind of unruggable. So it kind of helps BD, but, is there anything more to it to, your sort of growth journey going to the future?   << Sam Kazemian | Frax (12:01) >>: Yeah, it's   definitely a lot more to it than like a of a regional license. So let's just actually go through the main thing. There's only like a very short list of collateral that a payment stablecoin can be backed by. It's Fed reverse repos, 2-A, 2A-7 money market funds registered for the SEC, certificate of deposits at FDIC insured banks, or ⁓ RWA tokens representing those things. So like legal claims on those kinds of assets.   ⁓ You can only back it with that. You can't do like credit of like Apple even though it's super safe or like this other thing. ⁓ So it's just de facto.   just cash, like it's just T-bills and reverse repos and deposits that you know the Federal Reserve is an FDIC will always bail out, right? And so ⁓ it's basically riskless minus I ⁓ guess smart contract risk if we're being like super technical. And then there's additional provisions in the bill that says a payment stablecoin issuer can't do other kinds of activity like the company that actually has the charter can't so that there isn't credit risk so that it could go bankrupt and like other people can   and say, you did a loans department and then the loans people did this or that and then so we're gonna try to claw like the collateral there to repay people. It's actually very, very, very strictly written to basically be you get to issue dollars, like digital dollars. And so like that is the only thing ⁓ you can do. And the important thing about that is like banks can accept this as deposits.   and they can actually use it as settlement media. ⁓ That's actually pretty important because the banking system in the United States, they can't do this with anything else other than dollars, right? So like, for example, if you go to a bank right now today and you deposit like a million dollars of cash, ⁓ first they might arrest you because a million dollars of cash, right? Because then you can't do that. But if you just do it like that in a hypothetical world, right? When you log into your bank,   It'll show a million dollars, right? If you log into like Bank of America, right? And you just deposit it'll show a million dollars. The bank will then the next day go and lend 500k to someone else for mortgage, right? But then when you log into your account, it doesn't show half of it gone, right? It still shows for you a million dollars, even though someone else has been wired 500k, right? Like now that person has 500k to go buy a house, right? You can't do that with Bitcoin deposits. You can only do that with cash deposits.   After the Genius Bill, you can actually do this with payment stablecoin deposits, which is a very, very big deal. It's a very different thing. If you go to a bank and the bank takes one million FRXUSD as a deposit, you log into your bank, it'll show a million dollars. The bank can then take 500K of that FRXUSD, send it to someone else for like a mortgage, right? Package it, you know, whatever, do their credit risk assessment or whatever. When you log in, it'll say a million dollars.   << Jason Kam (14:43) >>: you   << Sam Kazemian | Frax (15:06) >>: That person now, when they log in, it'll say 500k. And so you can do this rehypothecation and it's ⁓ completely legal to do that. And you could take it as bank deposits, settlement media. ⁓ And you can't do that with other non-payment stable coins. So like, for example, like Dai, you know, I don't know, USDE, et cetera. Yeah.   << Jason Kam (15:27) >>: Yeah, I understand. Do   the banks have to accept it? Because it's now M1, effectively.   << Sam Kazemian | Frax (15:31) >>: So, no, mean, okay,   so technically, no one has to accept anything if we're being like lawyer level legal, like technically no private business even has to accept cash. Even if you go and like, know, if you look at a bill that says it's legal tender for all debts, public and private in the United States, there's a very narrow definition if you're asking it in that way where it's only required to be accepted.   A, by the government when you pay taxes and B, if you go to like a court of law saying this person is is indebted to me and they won't like repay me back and stuff. You can't just make up like this person needs to give me 10,000 goats, right? Like the law will say, okay, what's the dollar value of like 10,000 goats, right? And they can actually repay you in dollars and then the court will drop the charge. That's the only narrow definition of like, ⁓ that's why you see private business say no cash, no cash, we only accept card.   or some places say, no card, we only accept cash. ⁓ So technically in a lawyer definition, not required to accept anything. ⁓ But from a ⁓ prohibition perspective, they can now be accepted everywhere as dollars.   << Jason Kam (16:33) >>: I see.   I see. So previously it was, yeah, we just can't do that. Now it's like, well, we could technically do it, but we want our JP Morgan stable coin versus your Frax coin. But if it's that, then it's just a simple swap on chain and you can just deposit without going through the OTC route today. You kind of have to do several hops. Is that the right way to think about it?   << Sam Kazemian | Frax (17:05) >>: Yeah, so   exactly. that's actually a really good ⁓ segway into why Frax USD is unique because there's two ways this could play out, right? One is ⁓ everyone could just issue their own ⁓ colored, know, stablecoin, JPM coin, ⁓ know, Stripe coin, right? They have the bridge coin, right? USDB, which they're actually a partner of us. So can actually explain exactly how.   ⁓ That actually works in that relationship, which is a good example, but there's all these other things Wells Fargo USD, right? The Bank of America CEO said like we'll looking at both USD or whatever, right? ⁓ So why would someone ⁓ use Frax USD over their own, right? That's a primary question, right? If we take the premise that stable coins are objectively better in settlement, right? Because they're just new digital dollars. The next question is   Well, why won't they just use their digital dollars, right? They just actually do it. So there's usually two important things about it, right? Which is one is everyone is concerned that stable coins, because they're objectively superior than like old analog digital money, right? That they will get their AUM hollowed out, right? So banks are worried about their deposit base fleeing, right? And then people using it to mint like USDC or some other stable coin, right? And   Money market funds and other places with all type of cash are worried that people will convert, you know their ⁓ Money market funds to like USDC and then hold it on Coinbase, right? Because they have a reward right they have the USDC rewards up to four point one percent or something right and These are the main like two two issues, right? It's like well, we're gonna get our the AUM hollowed out right for banks for and money market for anywhere anywhere that has old money, right? And so they they have to decide do they actually? ⁓   issue their own or do they actually work with someone else? And the reason ⁓ I actually in the recent like keynote that I gave at like Token2049 compared Frax USD and then the whole frax vision similar to like Libra, the original like Libra vision is that we actually give the entire unit economics obviously minus some like, you know, protocol fee ⁓ back to everyone that's in this loose consortium of Frax And so for example,   ⁓ Anything that's legal, payment stablecoin, collateral, right? Any of our partners can mint FraxUSD by just using their own deposits or their own money market funds. So we work with BlackRock, we work with Wisdom Tree, and soon with Fidelity. They're like the biggest money market fund issuers, right? So if you have money market funds with them, you'll actually just be able to log into your FraxNet account, which is like this payment fintech app that we're building on top of the whole Frax ecosystem, and you can just mint FraxUSD.   right, just directly, and then they don't lose their money market fund, AUM. That just goes to the Frax ⁓ issuers balance sheet, right, backing Frax USD. If you're a bank partner ⁓ of like Frax USD and this consortium, your deposits don't actually get hollowed out. They just wire the Frax Inc, the issuer, right, the bank account, and then we back the Frax USD with those certificate of deposits, and then now your bank users can literally within your bank or in Zelle or in all of the...   US banking system send around FraxUSD. That's one thing, right? The second thing is the interest yield, right? Like what happens to the interest yield, right? Like what about the savings, right? And that's also a really interesting thing that we have with like the Fintech layer that we call FraxNet, the stablecoin bank account system that we've built, is that anyone can sign up and then just connect their Web3 wallet, any wallet that FraxUSD ⁓ is on any chain that we issue natively on.   And in real time, we ping their balance and then we distribute real time streaming yield on Fraxtal chain, their account on Fraxtal. They can sign up and register whatever account they have on the Fraxtal chain. And the Fraxtal chain is a high performance chain so that we can actually distribute real time yield and do these mint redeem issuances directly on that. And if you think about these two specific tokenomics, AUM aligned, like growth aligned, and then full   distribution of the underlying yield in real time, better than monthly dividends, better than checking savings accounts that don't give pretty much anything, because that's a business model to take all these yields. if you compare it to this objectively superior dollar, objectively superior streaming of yield in real time, and being able to custody your own dollars, if you want, you could also use a hosted wallet solution if you want to connect that to your Fraxnet account.   you're like a fund or entity or like a person that doesn't want to hold your own keys, but you can use your own keys, which is why it's really, really powerful. When you combine those two things, especially with everyone that we've talked to, you know, this isn't like the first week we're talking, we've been working ⁓ for months with this. This is actually extremely interesting and powerful for pretty much everyone, ⁓ pretty much, I'd say the vast majority of ⁓ institutions and partners that we've...   ⁓ been talking to. So it's actually a very very good model.   << Jason Kam (22:21) >>: And just to dive deeper into it, ⁓ it sounds like on the first point that they can kind of mint and burn as long as they're part of a consortium, that's your head start versus everybody else. Because if I were a competitor who is starting afresh, I have to still build these technical integrations. Is that fair to say?   << Sam Kazemian | Frax (22:43) >>: That's one of the most, yes. So first of all, we're already issued for, so we've launched about two months ago with a lot of tier one partners and we're issued on, I wanna say 14, maybe now it's 15, different chains. And so exactly, like both the partners on the institution side, but then the chain coverage, the cross-chain messaging system, we also have something that's a...   equally if not slightly faster than CCTP essentially, one-to-one, FRAXUSD movements. All of the technical and integration side is something people have to start over with. And the second thing that I think actually after yesterday, honestly is probably more important, is ⁓ progress on doing this in a compliant way to fast track payment stable coin ⁓ charter. ⁓ This is like the most important thing to be honest because when we talk to banks, they're like,   Do you are you because because they're all looking at this right like that's actually how you know that the legislation is not like a nothing burger because This actually in my opinion this actually proves this is the right type of legislation because to be honest like Banks don't like it because it actually removes their their kind of monopoly on creating ⁓ De facto legal tender dollars, right? ⁓ And so they're not only paying close attention to this but this is actually great legislation by the mere fact that it allows   new entrance into a market. Usually if you think of regulation, right, the primary thing people have against it is like, it gets incumbents more entrenched and then it becomes difficult to compete. Very rarely do you get regulation that actually the incumbents are like, ⁓ shit, no, please don't do this because it actually brings a lot of new fresh blood into a market to compete on the same thing. And so this is one of those. And so, ⁓   it's important for us to actually be ⁓ at the lead of that because otherwise there's no working with banks, Like banks actually need to work with payment stablecoins or like you said, look into issuing their own. In fact, that's actually the primary first two questions that is usually on the initial call when we talk to   << Jason Kam (24:57) >>: And, and then this recall, I guess one does like, let's say it's implemented and I don't know, JP Morgan will do this, but let's say, for example, I would now able to, let's say they work with you now. I go onto JP Morgan. say, I want to withdraw, right? I want to wire out and there'll be a new option. It's like, okay, wire through stable coin. And then I just, basically I would not be able to tell if it's frax or anything else, but I would say, okay, well, I want to send my money out on Ethereum and I can just type in my address.   And I just hit send. And on the back end, they would basically mint FraxUSD with you, and you will send it on Ethereum to my wallet. Is that roughly how it works?   << Sam Kazemian | Frax (25:37) >>: Yeah, that's actually that's correct. Or they don't even need to ⁓ necessarily mint it if they already have it. They might even hold it and be earning the actual yield underlying. Because again, that's capital on the bank's balance sheet. They can rehypothicate against that. Right. But if they hold like any other type of asset, like a synthetic dollar stablecoin, they can't use that ⁓ on their their capital side on their on balance sheet. Right. That's exactly correct. And actually, your example is even better because it kind of gets at a   additional answer of why they would use FraxUSD over ⁓ creating their own. We're on 14, 15 chains already and probably going to be more in the coming weeks. And so ⁓ if you issue a JPM coin, ⁓ great, but it's probably on Ethereum. Maybe after a couple months it's on Solana. Maybe after a couple months it's on, I don't know, BSC or something. Maybe a couple months later it's on Arbitrum. And then you have to have a whole group of people figure out, what's the messaging layer like that we combine all of these things and blah, blah.   Or you could just use FraxUSD and then use your own ⁓ deposits as backing of it and work directly with us. And it's everywhere, right? And also people know of Frax and it's a great DeFi household name and people use it on chain.   << Jason Kam (26:49) >>: And just to be clear, ⁓ JP Morgan, like only the Frax USD on Fraxnet would be able to earn interest. Or can I stake my Frax USD on Ethereum? Like, how does it work?   << Sam Kazemian | Frax (27:03) >>: You can hold it on any chain that we natively issue, which is like on those 14, I think actually now 15, but I'll check after this call. But anywhere that it's native, if you hold it and you just connect your Web3 wallet and obviously you sign a transaction proving you own that address and you hold it there, you will get all credit for holding it on all of those networks. And then you get a single real-time yield stream to a Fraxtal account that you have.   right, that you prove you own a Fraxtal account address and you just get real-time streamed across all of   << Jason Kam (27:37) >>: On your own L1, not on the 15. OK, so.   << Sam Kazemian | Frax (27:40) >>: Yes, that's great. That's great. In fact,   actually, that's a great reason to highlight that. reason ⁓ the Frax still is so important to this vision as like our own L1, right? Where the Frax token is the gas token and the staking token and everything is that if you actually look, and I talked about this on my keynote briefly, but if you look...   at the total number of addresses that USDC and USDT are held across the world. It's about 120 million addresses. Now I'm not saying each of those are unique human beings or anything, but imagine FRX USD just has 10 % of those. Just 10%. So like about 12 million or so addresses. You can't stream that on Ethereum or on Solana. What are you gonna do? Like if there's a PumpDotFun meme launch happening that day or some other thing or whatever, how are you gonna actually distribute   ⁓ real-time yield to that scale ⁓ consistently, reliably, in a non-custodial way, right, to two people's like Web3 wallets, without a very high performance ⁓ L1 that is specifically designed, obviously that's smart contracts, there'll be a DeFi ecosystem, et cetera, but its primary mission is actually to be extremely performant and cheap to stream real-time yield, mint and redeem, Frax USD, legal tender, dollars, and all of this stuff, right? So that it's actually...   the real answer to why another chain? Why do you need another chain? Why don't you just build this on Solana? Why don't you do this on blah, blah? You can't, with the scale that you actually want to actually provide this very, very valuable service.   << Jason Kam (29:18) >>: OK, that's interesting. So unlike any other staking-based ⁓ coins that you have to earn yield by staking, here it's as long as you hold it on any chain, will accrue interest, but only on FraxNet, your layer one. And ⁓ do I have to KYC compliant myself to get those interests out, or can I just log on and then bridge it over?   << Sam Kazemian | Frax (29:41) >>: Yeah, so you do need to, it has to be regulatory compliant actually. So the Fraxnet name is for the payment and banking app that you do KYC to join. ⁓ Fraxtal, the blockchain like fractal but with an X, that's the L1. And obviously it's a permissionless high speed ⁓ EVM blockchain. it doesn't require any kind of, know, KYC to use. There's like curve, convex, all of these ecosystem of.   DeFi and other things growing on there, but FraxNet, it is compliant. We do require KYC to do that. And then obviously ⁓ you connect your bank account, right, and that kind of stuff that requires like KYC and minting and redeeming to and from there. Certain things don't, right? If you want to actually mint and redeem FraxUSD for USDC or USDT or other future payment stablecoins, those are non-custodial operations if that's all you want to do.   through the fintech layer. There's no KYC for that because that's not necessary. ⁓   << Jason Kam (30:45) >>: Got it.   I'm just speaking from a regular use because if I'm a bank, I can figure out all that. That's very simple. But if it's me using FraxUSD, I'm just using this as payment, as storage. But my interest accrues somewhere and it's on Fraxtal, the main net. one first thing is that I can also just go on Fraxtal, the main net, connect my wallet, and then just yank that balance without KYC/AML. Is that...   I don't have to KYC/AML through Fraxnet because I have the access to Fraxol, the layer 1.   << Sam Kazemian | Frax (31:16) >>: No, no, so in order for it to actually   start streaming directly to your non-custodial wallet, part of the registration process is ⁓ the actual KYC-ing. The reason, by the way, the reason for that is both obviously compliance with the Genius Bill, but also ⁓ since there's an entity that actually issues the Frax USD stablecoin, just like Circle, just like Tether ⁓ Inc. and stuff. ⁓   all of the custodians that hold these balances for us, right, report to the government the yield that the issuer is earning, right? And so if the issuer is going to give all of, or pretty much all of the economics of that back out, they have to be able to report, like with clarity, obviously to the government, that we have given the yield out and here's who we've given the yield out to. Otherwise it'll be like, your company's...   to earn like $10 billion of revenue and then they were like, actually we don't have 9.9 billion of it. I don't think that's gonna really fly yet.   << Jason Kam (32:17) >>: Yeah.   How many users do you have on Fraxnet now and how rigorous is that AML KYC process? How fast can I go through if I have all the docs ready?   << Sam Kazemian | Frax (32:27) >>: So   actually the the the frax net Application with all of our partner integration that's going live next month. So frax USD itself is Stablecoin. It's fully redeemable. It's out. It's on all of these chains. It's on sonic. It's on ⁓ Solana, it's it's in used in PumpFun AMM It's being used in other places. Aave is looking at integrating it and all this stuff frax net the the payment system with the partners and   and Mint Redeem options actually isn't out until hopefully next month.   << Jason Kam (33:01) >>: And do I have to do a one-off KYC/AML or can I just log in through my Chase account, just connect Chase and then I'm basically KYC/AML through Chase. So I don't have to do it. Like how would that work in practice?   << Sam Kazemian | Frax (33:13) >>: We're actually   trying to streamline that so it's actually even ⁓ more painless than people think. ⁓ Because, for example, ⁓ you would have to, exactly as you said, through all of these different places, have to log in. But we've actually figured out a way that if you just ⁓ KYC once through the system that we're actually building, you can connect your bank, your brokerage, ⁓ pretty much everything. Obviously, I can't say for sure.   because like what's compatible, but so far it's once and done with everything, so far from how we've built it. So you only need to do it once at the beginning and then never again.   << Jason Kam (33:50) >>: Hmm.   I suppose there will always be a pretty aggressive actors that are pre-KYC on Fraxnet and they just kind of stream out the yield to Frax USD owners completely by, but it's those guys breaking the laws and not you. you kind of turn a blind eye to it. don't know.   << Sam Kazemian | Frax (34:08) >>: What?   So yes and no sort of like like anyone from an entity to a ⁓ normal person you and me can have a Fraxnet like stablecoin bank account right this this Fraxnet account ⁓ and so we actually expect new fintech apps and stuff to be built on top of like the Fraxnet like there will be an API obviously and things like that where ⁓ the actual new company like let's say like a fintech company right they have a Fraxnet account   And then under them, there's like hundreds of thousands of users, right? And then those users get downstream the yield and then our counterpart is just this fintech app.   Right? And so that's not even ⁓ unlawful. That's just, we actually expect that to be built. That's just layers on top of this foundational like stable coin operating system, right? Like that's basically what we're building. And actually I don't expect ⁓ very small like retail, like people that like hold like thousand bucks, 5,000 bucks, you know, those kinds of things to really sign up for like a Fraxnet account because everything they would want and need   is on chain, right? Like swapping this to USDC or like ⁓ maybe they would connect it just for their bank account, right? Like just to convert and come and go. ⁓ The people that have like $5,000, they probably stake in like Curve or like a high yielding, you know, like Place and things like that rather than ⁓ risk-free like, you know, ⁓ short-term T-bill rate, right? It's usually the entities, whales, ⁓ institutions, ⁓   large players, like large users and things like that, that have real cash that want to just park it, know that it's regulated, know that it's safe, or fintech applications that want a foundation that's safe and regulated to build on top of to then actually ⁓ offer unique services to a lot of the smaller ⁓ users in retail.   << Jason Kam (36:13) >>: ⁓ It would seem like it's a cleaner way of earning yield because you just, and even all the Falcon X of the world, they should just be able to OTC swap FRAXUSD to any other stable coin or USD with no slippage because they should be able to mint and burn very quickly.   << Sam Kazemian | Frax (36:29) >>: Yeah, literally like   any like, Frax USD to any payment stablecoin is one to one. So we actually already do that.   << Jason Kam (36:39) >>: Who is your custodian and who manages the yield generation?   << Sam Kazemian | Frax (36:44) >>: So it depends where the ⁓ assets are. So we have BlackRock money market funds, is ⁓ by BlackRock. We have Wisdom Tree, which is one of the largest money market fund issuers in the United States. We also work with SuperState, which is Robert Leshner's, ⁓ their custodian underlying is BNY Mellon. ⁓ We also work with Fidelity, as I was saying. And so it really depends on where ⁓ the underlying asset is.   of these places and we'll soon have like a few other big ones, bigger I would say, ⁓ partners to announce hopefully.   << Jason Kam (37:25) >>: The whole structure makes sense to me. And because it makes so much sense, I would assume there are other folks that are trying to do similar things eventually. I guess if you look out maybe 12 months into the future, ⁓ what size of TVL on FRAX-USD would make you happy, like if there's a target? And then what would you say are the use cases that drove most of that growth?   << Sam Kazemian | Frax (37:51) >>: So obviously, as the founder, I'll be both ⁓ aspirational, but then reasonable, right? Aspirational, honestly, I think that the total addressable market is 20 trillion. The reason for it, and then the logic is that all analog M1 digital dollars are, if you look at the Fed's own reporting, is about...   20 trillion, literally, like if you go right now on Fred, which is the Fed site, technically all of that is up for grabs, right? And if you actually think of how much stable coin market cap today is, it's about 200 billion, that's only 1 % of 20 trillion, right? Like that is literally, people think the stable coin market cap is high or really big right now, and it's mostly tether, that's barely a percent of the full.   digital dollars, analog digital dollars, right? Like the old system of money in the entire US financial system. And so the total addressable market is as much of that as we can convert. And so ⁓ the reasonable, like 12 month, you know, ⁓ guess here that I have to dial down to, you my excitement is like, these are pretty big numbers. And so if you think about it in like a measured sense, like what if we could convert   10 % of like our partners as money market fund AUM to digital dollars, right? Frax USD with real time streaming or 5 % of the bank deposits of like major banks, right? Those the total denominator is like in the hundreds of billions. And so if you take five to 10 % of that, that's about 10 to 15 like billion, right?   And so in the next like year, if we are to execute correctly, right, which is like, you know, ⁓ the tempered way of saying is we might not be able to, but if we actually do execute correctly, ⁓ I actually expect FraxUSD to be like number three behind Tether and USDC as the predominant ⁓ third thing that no one ⁓ expects this market to be ⁓ possible, right? And then everyone will be taking notes on how to actually approach this new.   regulated market as legal tender, you know, digital dollars. And like you said, I expect like people to copy us, which is fine. Like it's, you know, technically everyone's copying Tether, right? Like they were first in 2014, right? And so I'd love to see about 15 billion supply in the next like 12 months ⁓ from now. So like next June. And that's my conservative view of like, if we execute properly.   << Jason Kam (40:39) >>: So a quarter of circle, basically. And would that Frax USD be circulating in the way that circle is, which is across different venues of payments? What do you think drives that growth? Is it different FinTech applications, yanking out of a banking system to Frax USD and then people spending it? Is it like?   What would that look like? What would that 15 billion look like if you do achieve it?   << Sam Kazemian | Frax (41:12) >>: I think it would be circulating even more meaningfully than USDC is today. To be honest, obviously USDC is circulating meaningfully. People are using it mostly on chain and some OTC exchanges and large payments, cross border payments and settlements and things like that. It's just starting to be really used in visa underlying settlements or something as a test kind of case of stable coins and these things. I think FraxUSD   assuming again we get the payment stablecoin charter, we're like, ⁓ or first to market in this area, it'll be used within banks, outside of banks as payments. It'll be used for large ⁓ inter-bank settlements, for large account movements. It'll be used in credit cards. And then also obviously, because it's on all of these chains and actually Frax started as like a DeFi brand and is really well known for users on the blockchain, it'll be used in   all of the classical DeFi things that everyone is familiar with. There will be huge curve pools on, there will be Uniswap, there, know, Aave will have very, very deep, you know, multi-billion dollar Frax USD lending, borrowing, all of this stuff. So I would actually say it's, it'll be circulating more meaningfully than what people think of stable coins today.   << Jason Kam (42:29) >>: I see. So it seems like it's going to be more whale based. It's highly institutional across bank, across institutions. It'll be more parked like SUSD than like Circle being actually spent in small nominal amounts. It's how you imagine this.   << Sam Kazemian | Frax (42:44) >>: I   mean, I guess it depends on your definition, Would you consider ⁓ Circle's entire supply to actually just be sitting in ⁓ the Circle Reserve Fund and T-bills? Because technically that stuff is not moving, right? And so ⁓ I think what I would say is there will be retail usage of it downstream, but   they will be probably moving FRAX USD liabilities within FinTech or banks as like balance sheets. So I think I kind of got your question and what I think the real answer to it is, yeah, the movements will probably be fairly large, but people will be actually buying and selling ⁓ like in applications in small amounts and in large sums ⁓ over time, yeah.   << Jason Kam (43:41) >>: So it seems like your means of growth, ⁓ your go-to-market would mostly be BDAing ⁓ the fintech applications that build with banks on Fraxtal, on FraxNet, as well as just getting into more banks and getting into more financial institutions. Like that's your most impactful GTM. Yeah.   << Sam Kazemian | Frax (44:00) >>: Yeah, actually.   that's a good question because I actually think of ⁓ three types of GTM for stable coins that are are multi trillion and like opportunity. is the one is actually the tether one that I think everyone erroneously thinks is the only GTM of stable coins, which is go to places that don't have reliable access to the dollar and like bring them a digital dollar that's just really objectively more powerful than   old analog dollars, it's non-custodial, you could just send it to anyone else that's connected to the internet and all this stuff. That tether has ⁓ essentially created an almost near monopoly on it. you look at it, like USDC can't seem to break into there very well. ⁓ Tether is just this, I call it kind of the first contact theory of stablecoins, which is like anyone that first sees the light and uses stablecoins, right, first.   Whatever they use assuming it doesn't implode like Terra. They're gonna be content with using of all things ⁓ You know equal if they're not expecting yield or they're not you know ⁓ Thinking other things and stuff like that and so Tether already has that market a lot of people think because tether did that first the only real way to grow big is to go to places that don't have the dog which now they do because of tether by the way and and like try to compete with ⁓ tether   And I actually think this is ⁓ my contrarian view, which again, either this will pay off massively as like a, you know, top 10 crypto industry bet or not, ⁓ is that people are wrong about that. Tether already brought that they were right when it was ⁓ wide open. Now ⁓ Tether has a near monopoly on it and it's more difficult to actually get people that already use Tether to switch to a different stable coin. As you can see, USDC can't do it.   right? And then it is to become legal digital dollars in the United States. And now it's possible. It was impossible before. Now, literally after yesterday, it's almost certain to be possible and actually bring everyone that hasn't had access to objectively good ⁓ digital dollars to onboard to this new Web 3 revolution of legal, regulated, transparent, safe.   digital dollar stable coins. And so I think this is like too contrarian for a lot of people to think as it's like really popular to think, well, Americans already have Venmo banks and blah, blah, blah, and all this stuff. Therefore, the only stable coin, you know, GTM is to just copy Tether because we've already seen it. It works. It's like, no, no, no, they already have Tether. they've Tether has done a good job of upgrading most of the world that had zero access to the dollar and gave them a better   They actually leapfrogged the reliable analog banking system. There's a similar analogy where Africa and other developing countries actually leapfrogged the desktop computer era. They went from literally no internet connection to mobile phones, androids, iPhones, and pocket computers, essentially. They never went through the phase that America and the developed world went, where every home had a giant...   ⁓ you know, like dial up desktop, if you remember that, like during, you know, your adolescence and stuff, they just skipped right to the good stuff, right? Because they just actually didn't have the infrastructure for this stuff. We're actually stuck, like the desktop computer, we're stuck in the analog phase, and so we have to upgrade to the actual next generation of digital dollars. People actually ⁓ make a categorical mistake, in my opinion, when they say,   ⁓ we already have desktop computers, why do we need an iPhone? This is like totally, totally wrong, right? And so I think the important thing is people should understand that once people use like stable coins like Tether, right? And then another, there's no evidence that they're really itching for a ⁓ USDC or something like that.   << Jason Kam (47:54) >>: Yep.   Yeah, suppose   I understand your point, but I guess in the US, your value proposition for fintech companies and banks to use you is hopefully faster pace of transfer. And also they are effectively using short-term treasuries as stable coin. Like anybody who is kind of using this automatically get the yield or they just kind of transfer faster. And if you like, that's enough to drive 15 billion of TVL onto FrexNet.   << Sam Kazemian | Frax (48:40) >>: Yeah, like two things. One is a lot of people are like, well, there's a lot of friction. How are you going to get them to switch over? We're the ones actually talking to them, right? Like, not the ones, ⁓ not the people like ⁓ saying that there's a lot of friction. And the only friction that they're worried about is their AUM. Once they know that they're not going to get their deposits or their money market fund ⁓ AUM and their hard earned business clawed away.   << Jason Kam (48:50) >>: Hmm.   << Sam Kazemian | Frax (49:08) >>: and then they're gonna get this objectively superior payment media that is legal, regulated, and transparent, they're pretty sold. To try and offer it to their customers and all this stuff, there is actually not that much friction. In fact, there's a lot of appetite to try it, and for a first to it, I think, like I said, even 10 % of a really big number is like third after USDC and Tether very quickly.   << Jason Kam (49:34) >>: Yeah. And how long is that sell cycle into these institutions?   << Sam Kazemian | Frax (49:38) >>: depends on which one. Some of them are ⁓ much farther along in like having a digital asset team ⁓ really ready to try something. Again, they don't think it's friction. They're actually very excited to actually talk to us about this all the time and ⁓ get some big things going to have some strategic announcements and things to reveal in like two months time from two, three months since we start planning it. Others...   are a little bit slower. They're like, we haven't decided on a strategy to like tell the CEO and stuff. We're still exploring whether we will do the launch our own coin or do this or something totally ⁓ separate. And so that's probably more like a six month kind of thing. So it really just depends on which ones.   << Jason Kam (50:26) >>: Hmm. Let's say you get to your $10 billion target on FraxUSD. ⁓ Maybe walk me, and there's obviously an outstanding question of the transactional throughput on FraxNet itself, because that's the gas fee. But heuristically, Fraxtal, sorry, sorry, yes, I have to be very precise. There is a question around the velocity of how fast a FraxUSD transacts on Fraxtal.   << Sam Kazemian | Frax (50:41) >>: You mean Fraxstol, right? Yeah, L1 blockchain.   << Jason Kam (50:53) >>: But maybe walk me through a bridge on how that $10 billion of TVL, of FraxUSD, translates to fees or cash flow generation or whatever for Frax itself on an annual basis.   << Sam Kazemian | Frax (51:07) >>: Yeah, for sure. to go to the...   the FRAX token, the volatile, the scarce digital commodity asset that we actually upgraded used to be called ⁓ FXS, FRAX share. And it used to be a governance token because the original FRAX vision was to build an algorithmic stablecoin and ⁓ to answer the original ethos of decentralized stablecoins. In order to actually do this ⁓ Libra-like vision of an L1, that is the settlement and issuance chain and the real-time yield streaming and have   this system where essentially there's this enshrined digital dollar like this digital currency we needed to upgrade the token so that it's essentially an L1 token it's basically like BTC it's basically like ETH and it is a essentially a store value security staking token that you stake and you validate the chain and also gas is paid there's multiple sinks in the ⁓ ecosystem from   ecosystem apps that we've already built that were never tokenizing. It's only the Frax token. For example, people probably familiar with Frax Ether, ⁓ Frax Lend, and all of the Frax ecosystem apps. All of that income goes to both ⁓ staked Frax tokens as well as burning part of it. So like for example, there's Frax name service. If you have an L1, right, people want .frax, usernames, identification, payments, and human readable accounts. All of those, you need Frax tokens, right, to actually   get those names and unlike ENS, which has its own token, so all of the ETH that people spend to buy .ETH names get sold to actually go to ENS tokens.   everything in the Frax ecosystem that we've built just goes to the Frax token. So all the burns, all the fees, all the value sinks, and then you can think of the Frax token as this ⁓ capped emission L1 token that you can't change the emissions again unless you hard fork, which is the same as ether or BTC, right? It's not like an MSIG governance token where you can just like MSIG a mint, right? You need coordination of.   decentralized group of holders of stakers that actually provide security. basically, almost certainly, just like BTC, ETH, et cetera, the token emissions is not ever gonna change. So it's about 143 million hard capped over the next eight years. So it goes like 10 % emission, 9%, 8 % the year later, 7%, et cetera, et cetera, until it gets to 143 million.   You can think of it like a scarce digital commodity. then everything in the Frax ecosystem, the most important being obviously what we've talked about on this call, the flagship legal tender digital dollar, but everything goes to the Frax token, right? And then obviously the apps on Frax still chain, things that pay for transaction fees. There's the base fee that gets burned. There's obviously transaction fees for payments of Frax USD, everything there. And we're also exploring some like...   really interesting stuff at large numbers where maybe people would want to actually have real time yield streamed in frax tokens rather than dollars. You can opt in instead. like, let's say there's like, like we were saying, like 15, 20 billion of frax USD. Maybe some people want, you know, let's say half of them instead of getting the T bill yield, right? They actually want to just earn real time yield of frax tokens to be aligned on owning.   a piece of the banking network, right? The chain and the banking network of everything that they use. You'll have basically $10 billion worth of T-bill income of holders going to purchasing Frax tokens and distributing out to a wide ⁓ net of places that people hold Frax USD in like fintechs and banks and all this stuff, which is a very, very, very powerful distribution mechanism. That's more down the line, like a medium term thing, obviously, but...   The structure that we've built, the upgrade to the original FXS token now to just Frax and actually making it this scarce digital commodity that has multiple sinks, incomes and revenue stream, but also is this essentially scarce digital like, ⁓ you know, digital oil, digital L1 gas token, right? This unit of account in the entire Frax ecosystem was required to actually change the vision from this like DeFi, you know.   decentralized stablecoin token ecosystem to an all-encompassing L1 blockchain with a stablecoin vision.   << Jason Kam (55:47) >>: Yeah, I guess just to parse whatever you just told me into a more succinct way, ⁓ number one is that you have ecosystem projects that ⁓ the fees that they generate would be broken down into stakers as well as direct burn effects. Do you have a rough split of how you want to design it?   << Sam Kazemian | Frax (56:10) >>: ⁓ Right now it depends on each ecosystem project. Like for example, the FRAX name service that I was saying, all goes to getting burned. Like it literally just goes to specifically getting burned. ⁓ The chain, obviously that requires hard fork updates to change. Right now the base fees, it's an EVM chain, right? So it actually comes with EIP 1559 structure built into it. The base fees get burned, the rest goes to ⁓ validation, right? It depends on the ecosystem, yeah.   << Jason Kam (56:16) >>: Okay. Got it.   Good, okay.   ⁓ If you do achieve 10 billion of TVL, I guess that's 400 million of annualized interest based on current short-term treasuries. ⁓ Does the Fraxtal chain have a tick rate on that 400 million interest?   << Sam Kazemian | Frax (56:57) >>: Yeah, it's like whatever, so whatever is not ⁓ used in Fraxnet accounts, right? And not all of them will be, right? Like, you know, for example, it's not gonna be as extreme as Tether where like they get almost all like of like the circulating supply of USDT as like this money printing machine. ⁓ Our economics are not like that because we wanna build alignment and get very, very big, very fast rather than ⁓ have like zero or near zero rev share, but.   FraxUSD in Curve, FraxUSD in DeFi, in all of these places, ⁓ doesn't get the yield, right? And so all of that you can think of the Frax token as essentially tether economics, In addition to all of the L1 economics and all these things that I said, but all of the T-bill income goes directly to Frax stakers that are validating the chain, yeah.   << Jason Kam (57:51) >>: goes to stakers and not burning frax tokens.   << Sam Kazemian | Frax (57:54) >>: Yeah, that's the current structure,   << Jason Kam (57:57) >>: Do   you plan to change that?   << Sam Kazemian | Frax (58:00) >>: No, we don't plan to change that. mean, we can propose an upgrade of like the chain and everything and then the stablecoin issuance can change slightly. actually, it cool if your investor audience, what they...   << Jason Kam (58:16) >>: Yeah, will be interesting.   And so there is the non-KYC portion, there is KYC portion. The non-KYC portion, your take rate on that will be 100%. And that 100 % goes to stakers of Frax token to validate a network. And then off the KYC portion, would distribute all of it, I'm guessing.   << Sam Kazemian | Frax (58:32) >>: That's correct.   All of it maybe like right now actually we haven't set in stone but since it's centralized decision about five bips of like management fee which is like very very low but yeah pretty much all of it pretty much 95 percent.   << Jason Kam (58:52) >>: Got it. Five bips versus the 4%. No, five bips off 4%. OK. Got it. Got it. ⁓ Makes sense. So if you're successful in this effort, would, mean, Frax USD it would be a sizable stablecoin. ⁓ I don't know what the take rate would be based on percentage of non-KYC AML customers, but let's say 10%. I have no idea. So that would be a $40 million.   yield generated on top of the fees within the ecosystem, ⁓ as well as the sort of transactional throughput, which will be sizable, I think, on the $10 billion fees, ⁓ we should be looking at a pretty sizable staking yield on top of the frax inflation itself. And that's what's going to pull up the frax token value. Am I missing anything that's value capturing for the token?   << Sam Kazemian | Frax (59:49) >>: I think you basically got all of it. And the thing I wanted to actually stress is like, this is a very streamlined, ⁓ like tokenomics. We methodically did it this way because like there's different views, right? Like you could micro tokenize all of the ecosystem, like sub-dows, right? Or something like that. And then do like farming or whatever. And we have the exact opposite view. We have one single token distribution, very, very clear.   ⁓ hard capped supply that is not a governance token that can be minted. has to be hard forked if it ever is gonna change. It's basically not gonna change. ⁓ And this entire token gets everything. We don't have, there's no like ⁓ equity model where you you've probably seen Uniswap Labs and the Uni token and then they do the equity raise and then so then there's a front end fee of like ⁓ for the equity holders and then it's like, okay, well.   They just launched UniChain. Is it owned by Uni holders? Cause they're admitting to like, you know, where, how much do they take? Every single thing ⁓ that we've built is actually ⁓ entirely for the Frax token. And it will always be. And our goal is to actually do the exact opposite of like the hyper tokenization of every single like small like project or whatever, and make it so that everything goes to the Frax token. There's no like equity. There's no.   second token. In fact, that's why we upgraded FXS to make it very clear. It's basically this sovereign L1 scarce asset that's used as gas, that's used as staking security, that's also used when you stake it to govern certain DeFi parameters as well, but it also runs the chain. Everything is, ⁓ so you could kind of think of it like a restaking token, right? Of all the DeFi ⁓ layer ⁓ ecosystem products and things like that. And so,   That I think makes it truly, if we are successful, like a top 20, top 10 crypto asset in the next five years. If we're successful, it is basically a digital commodity that's scarce, that has a unifying purpose, and its distribution continues to increase the more its legal tender, digital dollar, continues to be a universal used across the world in the US.   <<Jason Kam (1:00:51) >>: Hmm.   And do you fund yourself ⁓ by selling Frax tokens or do you fund yourself with the treasury that you built up over time?   <<Sam Kazemian | Frax (1:01:17) >>: ⁓ There's a small amount that is allocated to the actual funding. I think it's actually about 12.5 % of the ⁓ emission, right? Like the 10, nine, eights, I like the yearly emission. 12.5 % of that is ⁓ to the team that actually runs the protocol and everything. And also the funding, there's like a public ⁓ governance vote every year for like budgeting of like actual just like...   dollars like we need to run everything, salaries, keep the lights on, things like that.   <<Jason Kam (1:01:53) >>: Got it. I know we're almost on time. There are two things I do want to ask you before we go. Sorry, we're running a little over. ⁓ I've also heard about this AI effort you're doing. ⁓ We don't have that much time to cover it, but it's going to be on Frax.   <<Sam Kazemian | Frax (1:02:11) >>: Yes, that's correct. It's definitely going to be on Frax. I call it kind of the AI VM, which is like, ⁓ I think a lot of the things that, ⁓ this, but by the way, it's just, it's R and D. So like, this is not anything where actually like, it's not part of the roadmap. It's just something that is really interesting with certain partners like IQAI and other ecosystem DApps. And it is basically a way to ⁓ have shared state computation of inference.   compute, right? Everything in AI right now is basically ⁓ off-chain computation and then maybe you prove it with ZK proofs or there's like a T that you trust, like a trust execution environment, right? And ⁓ you assume that the execution from that is ⁓ valid. And so our actual R &D effort is can we ⁓ create a novel cryptographic scheme that actually binds   inference compute from arbitrary foundational models so that it's easy to actually prove what the output tokens are ⁓ to the actual input tokens of a model. And actually we're getting pretty interesting results. like if there's anyone that's really into ⁓ essentially creating a shared space runtime environment for inference of models, ⁓ hopefully it'll just be basically something we can have.   in addition to the EVM on Fraxtal, that's the structural design. But this is a long-term thing that is ⁓ basically just a passion project, evenings, late nights of us and some of the team.   <<Jason Kam (1:03:53) >>: And just to be very clear, you're spending 90, 95 % of your time pursuing the stable coin growth journey for Frax and maybe 5 to 10 % on this. OK. OK, good. So I got out of the way. OK. And then the last question I have, is there anything we haven't covered that really, really excites you, like any bigger brands or companies you're working with that could really catapult the TVL Frax USD that we haven't really covered yet?   <<Sam Kazemian | Frax (1:04:01) >>: Yeah, I would say 99.9 % of the time.   In terms of like what I can like ⁓ announce, I guess ⁓ the main one is Stripe and Bridge. So we've already people know it is public. We'll make a more specific direct announcement together. But I think like the one I'm most excited about is ⁓ Stripe and Bridge on the payment side. ⁓ Superstate and Wisdom Tree on the money market fund, the custodian ⁓ side on those. ⁓ But the reason I really like   Stripe and Bridge partnership is that Stripe recently announced like the stable coin financial accounts, if you saw that in their annual ⁓ product releases. And that's essentially ⁓ a basic version of Fraxnet, if you think about it, right? Because what did Stripe announce? They announced your bank is connected ⁓ to your Stripe account and now you can mint and redeem ⁓ USDC.   right, and the internal Stripe stablecoin and then it's called USDB. ⁓ And then you can also just directly pay merchants right in your ⁓ stablecoin bank account, right? I think it's called the SBA or stablecoin financial account. I think they use the word financial because bank is a regulated term. This is actually what Fraxnet is, but way, way more, right? Fraxnet is way more because you can mint and redeem from brokerages, from banks, from Stripe. Actually, that's part of the partnership is that   We're working with them for full FRXUSD orchestration. And so that's going to be super exciting. And as well as ⁓ making sure that every merchant that has a Stripe account, right, can receive send and receive for FRAXUSD. And ⁓ think of it like an even higher layer of ⁓ the Stripe financial accounts, like an aggregator of all of those features in one platform, essentially. ⁓ And so I'm...   Pretty excited for that specifically because it's a good demonstration of what we're building in a single partner that really dramatically increases the payments use case ⁓ overnight of Frax USD. Honestly, more than pretty much any other stablecoin that exists other than Tether and USDC. Overnight, any merchant and stuff can essentially accept it ⁓ much more ⁓ than pretty much any other stablecoin.   can say other than maybe maybe PYUSD as well, right? Cause PayPal integrates it, but then it's, it's FraxUSD.   <<Jason Kam (1:06:51) >>: Cool. ⁓ This is very helpful. I want to thank you for your time. We might get you on later to talk about how fast the Frax USD TVL is growing. But Sam, thank you so much.   <<Sam Kazemian | Frax (1:07:04) >>: Yeah, I'll definitely, I'll take you up on that. See you in a few minutes.   <<Jason Kam (1:07:08) >>: Thank you. Stay on for a little bit.

TLDR In this episode of BidCast, Jason Kam interviews Xin Yan, CEO of Sign Protocol, discussing the company's revenue model, growth strategies, and the importance of community building. Xin shares insights into TokenTable's business, which generates significant revenue through claiming fees and OTC transactions. The conversation also explores Sign Protocol's attestation platform for government services and the potential of tokenized stocks. Xin emphasizes the emotional value of community and the company's vision for the future, aiming to create a strong brand and foster crypto adoption globally. CHAPTERS / TIMELINE * 00:00 Opening * 01:06 Introduction to Sign Protocol and Revenue Overview * 04:11 TokenTable's Business Model and Market Positioning * 07:05 Growth Strategies and Future Projections * 10:10 Sign Protocol's Attestation Platform and Government Partnerships * 12:55 Revenue Models and Profit Allocation * 15:52 Community Building and Long-term Vision * 28:40 Building Community and Emotional Value * 34:43 Strategies for Community Engagement * 39:25 Government Partnerships and Revenue Potential * 45:06 Future Growth and Opportunities * 52:59 Summary of Key Insights and Closing Thoughts TRANSCRIPT <<Jason Kam (01:06)>>: Ok, we are live. Welcome to another episode of BidCast. I'm your host, Jason Kam, AKA @MapleLeafCap Today is May 15, 2025, 5.15 PM Hong Kong time. BidCast is being live streamed to BidClub members. Questions are from the members and my own. Today I'm speaking with Xin, the co-founder of Sign Protocol. Xin, welcome.   <<Xin Yan (01:31)>>: Hey, thanks Jason.   <<Jason Kam (01:33)>>: Yeah, well, congrats on the TGE. I'm sure it's a long time in the making. We're going to dive right into it. I want to talk about the business that you run currently. ⁓ Remind us and the listeners again, what's the revenue that you're run rating exiting 2024 and what is it running today?   <<Xin Yan (01:51)>>: Yeah, we have like two business, TokenTable and Sign, which we're building like digital infrastructure for nations and companies. But last year, most of our revenue come from TokenTable, which is a token distribution platform. And our business model is pretty simple. Like say, every time when you claim AirDrop, the most likely you're claiming from TokenTable and you pay us like a point five dollar or something. And so last year we make $15 million and this year I think we're going to definitely make more.   <<Jason Kam (02:21)>>: Got it. Sorry, and that's $15 million on maybe 50 cents on an airdrop, I guess, across 30 million wallets. That's kind of how you calculate it.   <<Xin Yan (02:32)>>: Yeah, yeah. just, most of the revenue come from like, claiming fee, AirDrop claiming fee, but we also do some OTC because we also handle the unlocking part, right? So for the unlocking part, it's ⁓ natural if we we broke, do the brokerage and make a OTC transaction fee from both sides. And combined makes 15 million.   <<Jason Kam (02:58)>>: Got it. What's the split between the fees you charge for OTC versus the actual kind of claiming fee?   <<Xin Yan (03:05)>>: 60 % of claiming fee.   <<Jason Kam (03:08)>>: Oh wow, So OTC, you charge 2.5%, 5%, something like that?   <<Xin Yan (03:14)>>: Yeah, 2.5 % from each side and ⁓ without spread.   <<Jason Kam (03:20)>>: Wow.   Wow. OK. I mean, that's real revenue. That's how much is that? That's like a couple million dollars of OTC. And how much notional was that? I guess if you just run the math, that's like 100 million plus of notional that exchange hands through you. OK. And that business is zero in 2023?   <<Xin Yan (03:40)>>: Yeah,   Yeah, in 2023 we haven't started and last year I think the demand is actually growing a lot because we have been seeing all the VC tokens are Launch was very high valuation. So VC actually think about oh, why not? just I'm just selling all the locked token. Also like all the other deal size is pretty big. So it's easier for us to doing this  sure   <<Jason Kam (03:58)>>: Hmm.   Got it. And   then on the 10 million, that's TokenTable fee claims. That's $0.50 on, I guess, $20 million. OK.   <<Xin Yan (04:19)>>: Yeah, it's more than that because for some   of important partners, we have revenue share. So last year we distributed a token to 14 million addresses and the number largely come from TON ecosystem because TON ecosystem usually the project have super large airdrop like addresses. So like last year, I think we cover about 90, 80 % of TON ecosystem projects. Every one of them like, Notcoin docs   <<Jason Kam (04:49)>>: Catizen What else? There are four of them.   <<Xin Yan (04:52)>>:     yeah, but many of them. we distribute a lot of them. it can contribute a lot of revenue.   <<Jason Kam (04:59)>>: ⁓ Well, we invested in Catizen, but that ecosystem is kind of fucked. I'm looking at your business, that's $15 million. Let's put that OTC aside. Of the $10 million, do you expect a pretty tough comp this year? There won't be another TON summer, or hopefully there will be, but are you going to grow that business this year?   <<Xin Yan (05:19)>>: Yeah.   ⁓ yeah, I think so. think, ⁓ so...   You know, Token Table is definitely for us as a bear market strategy. So we just like stop dreaming about all the fancy applications. think about also what's the core of like, I think I remember like in bear market, we have one chat, it told me like, have to find something like high frequency, but also like ⁓ related to transactions, money, and Token Table actually fit that perfectly. So like, whenever, whether of the market, like people launching, keep launching   tokens. Last year was TON, this year we have new partner KAITO. Kaito's airdrop through us. All projects on Kaito Leaderboard will distribute token through us, and also virtuals also launch Genesis, basically a platform for more private to raise money. All these projects tokens are locked on TokenTable smart contracts. There will be more to announce   here there will be in this and basically a nice generation of launch pads and it's combining is not just like pumpdotfun it's more like ⁓ more transparent on their using smart contract to control their distribution and stuff. Actually I think we're eating a lot of the market share on this.   <<Jason Kam (06:39)>>: Hmm.   Got it. ⁓   <<Xin Yan (06:47)>>: By the way, there's also some of the centralized changes learning from  Alpha. And for regulatory reasons, they can't build a platform to distribute tokens to their users. So they need a third party, like a technical partner. So we're providing our product to them as well.   <<Jason Kam (07:06)>>: very cool. So if you can break it down for me, like last year, how much of that 10 million is ton related and how much was not?   <<Xin Yan (07:12)>>: I would say half up, yes. Half is from TON. So TON, have large airdrop addresses, but we have important partners. We have to share our revenue. But the other partners come from like StarkNet, ZetaChain, which is a bad example, and also the other players. So there's also lot of Layer 1 launch their tokens to us and all their ecosystem projects naturally using TokenTable.   <<Jason Kam (07:29)>>: Hmm.   So looking at this year and maybe going to next year, the ton numbers just goes down, I'm guessing. And then how do you think about the TokenTable ARR this year, next year with the remaining 5 million?   <<Xin Yan (07:56)>>: Yeah, so this year...   We see different opportunities. Firstly, like I said, the next generation of launch pads. So there will be more assets created. ⁓ It was a much more serious tokenomics than PumpDotFun Basically, that's one observation. So last year, people think about, we're going to do fair launch, everything on PumpDotFun It's so fun. But gradually, people realize, OK, it's actually darker than VC coin, because they have infinite snappers. They basically already control 99%.   and dumping on whoever come later. So ⁓ I think that's why this year there's so many new launch pads and have a better, more transparent tokenomics. It's fair to give Dev some token, right? And it's fair to make a whole Dev token, a lot to their team, very transparent. So we're contributing to this and I've seen good trends. And a set of this, I think ⁓ more, ⁓   also   trying to partner with different centralized exchanges think...   They're also trying to make the VC coin markets more regulated in a sense. We are inventing our own ⁓ regulatory framework. I gradually realized, right now, the standard for VC coin, usually less than 20 % for team, 20 % for foundation or something, it's actually more more standardized. So we will become part of the framework as well. ⁓   I think that's also an opportunity. in the future, when people ask your tokenomics, they don't just ask for a pay chart, they're asked for your TokenTable, which is backed by smart contract. And the third part is actually more aggressive. I think it will take some time, but I realize they say...   <<Jason Kam (09:45)>>: ⁓ that's very good.   <<Xin Yan (09:54)>>: If we ever want to get token to the US market, we wrap it into a stock. Because in US, the infrastructure for trading stock is much more mature. But reverse thinking, if we want to get stock into global market.   we'll wrap it into a token, right? Because the token trading infrastructure in ⁓ different countries, like ⁓ say Vietnam, Turkey, and all the other countries is much more secure, like matured. So we are also working with some partners on that, like Direction as well. And I think it will be huge because ⁓ say for our community, we're gonna build an app for our own community. And if we see the app as a distribution platform for good assets and community.   ⁓ and services, we don't want to distribute meme coins. We only distribute the best assets, which is US ⁓ stock wrapped token. that, think, still, like blockchain offers the best ledger technology and token can help distributing US stock wider, ⁓ lot wider.   <<Jason Kam (10:42)>>: Hmm.   So there are couple of things we touched on and let's put the sort of tokenized stock aside. It seems like the cleanest way for Token Table to grow, aside from these like non crypto native efforts, would be centralized exchanges forcing projects to kind of use to use, they themselves distributing tokens, more launch pads and like Kaito and everybody else and then new projects that pop up. All of that kind of hopefully replacing the sort of ⁓ tough comp from TON.   Is there a number like a revenue number that will make you happy this year on TokenTable versus $10 million last year? Is it like 15, 20? Like what's in your mind? It's like a good number.   <<Xin Yan (11:35)>>: I think so based on the first half, we would expect like 20 minutes. But if we expect like the second half will be much better, it will be 30 millions Yeah.   <<Jason Kam (11:48)>>: wow. OK, ⁓   And then ⁓ before we get to OTC and the growth efforts, there are a couple more questions. ⁓ The DocuSign equivalent for Sign that doesn't do any revenue currently.   <<Xin Yan (12:00)>>: Yes.   <<Jason Kam (12:02)>>: ⁓ Are you going to still focus on it going forward or is that kind of the emphasis effort?   <<Xin Yan (12:07)>>: Yeah, it's come from a long way. say, in the very beginning, have our application called EthSign as a contract signing application, decentralized. And later we abstracted into a attestation platform where you can Sign and Sign everything on chain. So, and this year we find a perfect opportunity. So, I should start from last year and basically we realized, okay, so I want to explain this a little bit more because I think when I do the startup,   see the potential in this is ⁓ think about the blockchain offer the best verifiability. you can make additional information verifiable at a global level. And if you think about it, there's very few stuff have this feature.   passport, like say your ID card doesn't have this level of verifiability. That's why when you go to KYC as a centralized exchange you need to hold your passport and take a picture and that verifies nothing. It just verifies, okay this looks authentic, but there's no way we can mathematically verify if your passport is real or not. But if we make using blockchain using the cryptography framework, like the rebuild verification for services for different stuff.   That will be a different world. Like say, you're...   your graduation certificates, ⁓ proof of funds from a bank can be verified. when I say I'm Chinese, when I apply for a US visa, I don't really need to fill all the form and prepare all the docs. It usually takes weeks and stuff. That's the reason behind why we're extending a contract signing application into a attestation platform. Then we realized there's a lot of ⁓ ways, there's a lot of opportunities we can   build like public services for governments. So last year we start to tap into this area because there's also like some of the some some some thinking from bear market. I realize that   Crypto itself is like a locked box. There's a limited amount of people and limited amount of liquidity with infinite incoming assets. So that's why all the prices are going down. ⁓   We need to think about like, can people from outside world actually benefit from crypto? Right? Say if they're not interested in Degen aping or something, can they actually benefit from this? And we, our team always ⁓ have, we want to do try more pilot projects or something to showcase how, what blockchain technology can do. So last year we worked with two countries, one is Sierra Leone.   The second one is Ras Al Khaimah which is one of the seven Emirates in UAE. So we built an ID system for the country. And this year, think ⁓ there's some more players interested in pushing crypto adoption at a global level, at a country level.   And we are a strong construction company. In a sense, we're building digital infrastructure based on we provide a chain, provide verification services. And based on verification services, we build ID system. We work with the other. ⁓   ⁓ stable coin providers and custodian providers and based on ID and stable coin we built welfare distribution system. Soon we're to see an island as distributing their base income to all the citizens.   through actually TokenTable, but we call it national asset distribution system. It just verify who you are and claim your stable coin. And also for pension, we can do it as easily. like a certificate verification and proof of fund and voting is all just, you actually, every time you vote, you actually Sign your intention on chain. So it's all like auditable, transparent, or fair, as much more fair and simple. So basically right now we're, this year,   I think for Sign, on Sign side, it's not just TokenTable Mostly we're gonna push this to nations and big companies. We also have a few pilot projects with Citibank and airlines. They also think about ⁓ some interesting ideas. ⁓   <<Jason Kam (16:45)>>: Yeah. I want to touch on that in just a second, because it seems like this is a zero revenue, but decent optionality type of project. You kind of.   <<Xin Yan (16:55)>>: No, EthSign is a revenue project because it's basically we're offering free services hosted on blockchain.   All the other stuff what I'm talking about, it's real service and we're providing at a national level. ⁓ So definitely charge money. The business model is actually very traditional. First you have a contract, like say two year, like development, three year maintenance. And then we charge like say every time when you apply visa, you pay a visa fee and we will take a cut from the visa fee. So also charged from day to day like usage.   <<Jason Kam (17:34)>>: So how much are you getting from those two countries per disk onto? Those are pilots.   <<Xin Yan (17:37)>>: No, no, this is a, so   yeah, this is only pilot products, but this year on the contract we're signing is real. And I think by the end of this year, we're able to really like have a report and talking about all the details about the contract deals. Yeah.   <<Jason Kam (17:55)>>: We'll talk about   it a second, because this is actually quite exciting. ⁓ I mean, 2G and 2 Big B efforts are, like, tough, but once you Sign them, I don't think they can rip you out that easily. ⁓ Before we get there, so, I mean, if you made... ⁓ The $15 million are pure margins. I mean, you're giving some away to TON because of the revenue split. ⁓   <<Xin Yan (18:18)>>: after giving after revenue share.   <<Jason Kam (18:20)>>: ⁓ it's net. Okay, great. So 15 million, that's gross profit. What's the cost structure for you like and then what does the profit go to?   <<Xin Yan (18:31)>>: So profit like mostly like So our cost is very simple because we're all like we're just building softwares and we don't really have a lot of sales so it just like people salary and So the revenue mostly go to on the just purely go to foundation and we use a large portion of the revenue to buy back investor tokens   <<Jason Kam (18:55)>>: Got it. So ⁓ buy back the seed investors tokens.   <<Xin Yan (18:58)>>: Appreciate it. appreciate it. We're buying back to C-Round.   <<Jason Kam (19:00)>>: Precise investors.   Got it. And what's your cost basis currently with your FTE?   <<Xin Yan (19:07)>>: What was?   <<Jason Kam (19:08)>>: What's   your run rate cost for your amp? Are you breakeven already? Are you making a lot of money based on this ARR run rate? Can you disclose that?   <<Xin Yan (19:14)>>: I really   expect you ask so many like numbers bro. It's like two delusions bro.   <<Jason Kam (19:21)>>: I mean,   look, you're a listed company now. think your token holders might want to know. If you can't say, that's fine too. Yeah.   <<Xin Yan (19:26)>>: Yeah, Again, it's, so on   salary is mostly like 250k around, like every month. And, but we also have some other like a marketing operation budgets. And so every, every month they buy us 350k. Like, but it's, it doesn't count, like say if we host a big event or something.   <<Jason Kam (19:49)>>: So you're solidly profitable with like 10 million of profit every year and then that profit historically has gone to buying back pre-seed private investor stakes. Now that you're listed you can kind of still do that but now it kind of accrues to Treasury and just sits there. So there's no buyback of a token yet at the moment.   <<Xin Yan (19:59)>>: Yes.   Yes, yes, so right now we're, so firstly we're trying to make more money and secondly we're also like raising, like looking for new investors to buy the previous investors out. think a lot of investors they raised from, they raised their fund in 2021 and right now they're entering the exit period. So like I think they want, they might want to exit. So we're helping, we're trying to actively looking for new investors.   <<Jason Kam (20:20)>>: Hmm.   ⁓ And then when you think about the cash that come in, do you think of it occurring to equity holders, if there's any, or do you think of it occurring to token holders in the future?   <<Xin Yan (20:43)>>: I'm just token holders and we were trying to convert everything into token holders and we don't want to complicate the structure and stuff.   <<Jason Kam (20:45)>>: Mm.   Got it. ⁓ So I mean, by the end of this year, then, without even the new efforts that you're building, which are exciting, we'll get into in a second, you should be making like 20 million bucks of profit just about maybe even higher. ⁓ How do you think about the allocation of those profits going forward? it be redeploying the growth efforts? Do you feel like it would be sort of accruing value to the token? How do you think about the capital allocation for this cash flow coming in?   <<Xin Yan (21:17)>>: you   Honestly, I didn't spend too much time thinking about this because we ⁓ haven't get there yet. ⁓ I think about two things. ⁓ before everything, think ⁓ the team size is very healthy around 20. So we're not going to build a hundred people team. ⁓ two things, one is we're going to use money to buy back investors because I realize that.   ⁓ As the token price going up, the selling pressure is very high. So right now we're making like a 20x for pre-seed investors, like 30x for pre-seed investors. If our token price getting higher, honestly, I'm worried about the secondary market. So if we're making money, we can easily get them by the mail like earlier. They also feel happier because they don't want to lock with us for three more years.   So that's something I want to do. Secondly is ⁓   We want to find more partners at a global level. So right now, say for all the 2G deals, usually we work with local partners and we build a GV in every country. besides that, we also build in a very vivid community. And for the community side, it's not just looking for a mod in every country. I think we need a strong partner in every country. So for that, we need to think about the operation strategy in different countries.   and also having more local partners, I assume that will cost us some money if we are doing serious global expansion.   <<Jason Kam (23:00)>>: Got it. And the rest of the cash, I guess, just kind of sits there, earns a yield for now, if it's not being deployed.   <<Xin Yan (23:07)>>: Yes, yes, I think if we'll start to like have a full disclosure of like the foundation treasury and if people in bear market, even the worst market, if people see you have a hundred million euro foundation treasury, people will feel a lot safer. I think that's very important. We will have more cash.   <<Jason Kam (23:29)>>: Got it. ⁓ Shifting to growth for a second, ⁓ I'm looking at your 20 million revenue base maybe this year or next year. And then as far as I can gather from public resources, there are four ways of growth that you kind of telegraphed. The first thing is your 2C app called ETHSignPass. ⁓ There is your 2G effort that you talked about and maybe two large B efforts that could translate to something. ⁓ There's a TokenTable slash tokenized stock route.   And then lastly, there is this potentially significant growth that could come from OTC venues. ⁓ Those are the four things that I kind of observe. First of all, did I miss anything? And then secondly, I guess, can you just go through each of them and kind of rank by what most excites you first? ⁓   <<Xin Yan (24:15)>>: It's   actually last year's plan. I think this year we'll make it much more clear. So this year we're having three things we're working on. One is TokenTable, which is still like claiming fee and ⁓ OTC transaction fee. So that's one side. And secondly is Sign We're going to talk about Sign and stand for sovereign infrastructure for global nations later. But like Sign, mostly we have 2G efforts. We're building digital infrastructure for nations.   have a revenue, we'll have a contract from like a ⁓ nation's treasury or something. So we'll have a very stable like revenue source or something. ⁓ the third part is we have our own community and we're launching an app for our own community. And we say when we're distributing, ⁓ we choose good assets, good services here. So I think we might have some sort of income like revenue from like ⁓   bringing as long as good service we're able to charge a fee. And also same as assets, right? We are making assets more accessible. And so it will be fair if we charge like 5 % or something. So I think ⁓ that's also another revenue source for this year.   <<Jason Kam (25:32)>>: Hmm.   Which of those do you feel like gets you the most excited, I guess, the next couple years?   <<Xin Yan (25:41)>>: I think ⁓ one by one. So firstly, TokenTable has ⁓ been verified as solid, as the most mature revenue source. But the second one, I think the best time window is this year because this is something literally doable after Trump launched the coin.   So basically it's a green light for every nation. The government says it's okay to do it. So we're also pushing it very hard. I think we'll see some future in this and we want to be the best company in this. And the third part, it actually...   the long-term plan, I sometimes I think about how great community a project can build. There's no limit. The sky is no limit, right? Say, basically it just said, in our community, we have our own currency. We have our own reputation system. We have our own badge of honor, right? Say, and... ⁓   We're building a global community from different country where people have same culture, same vision. And we're also actively providing more services and assets into this community. So I think the third one is actually, from long-term speaking, is the most ⁓ exciting one. But...   <<Jason Kam (27:01)>>: Mm-mm.   <<Xin Yan (27:02)>>: I don't think people see the power yet because the way I understand the value of token is at least two parts. Say a token is not a pure cryptocurrency, it's also not a pure stock. So pure stock is the value come from like say you have a good services business and revenue and that reflects to your economic value in your token. The second part is ⁓   The crypto ⁓ currency value, like how strong your community are, right? Say like Bitcoin only have a pure strong community and some meme coin have pure strong community and that supports the tokens value. And we are trying to have it both. So we have a strong business so people know, okay, this guy gonna be here for a while. I don't worry if I hold. And secondly, I want to use the.   our product, our service to let people see our vision. We want to make our community aligned by our vision, just like SpaceX. Your product doesn't necessarily need to be used by your community. But as long as you are carrying everybody's vision, you can easily build a community.   So now we have our ⁓ product, I think, is called everything under signed up global is our website. We're talking about globalization. We're talking about like the super sovereign infrastructure we're building. So that's the vision. And whoever aligns or admires our vision and joins our community. And that's somewhere we're going to really spend.   time and the efforts to build. So we're going to gradually see the power of our community. That's what saying.   <<Jason Kam (28:45)>>: It's   a little vague to me. guess the first piece that comes into play is the SignPass app that you're going to launch.   <<Xin Yan (28:53)>>: So, SignPass is also one of the experiment projects we built last year. So basically, we're thinking about we want to work with a country and so whoever has SignPass can enter that country and we actually made it. So ⁓ that's from last year. But this year, when we're working with more countries, ⁓ I don't think they're going to call our product SignPass. They want us to become part of their services.   services providing to all their like citizens and visitors they'll say powered by Sign that's the best thing we can get because we will not call it a Sign pass anymore.   <<Jason Kam (29:33)>>: Got it. So when you say the community as your third pillar of growth, it's a little vague to me. What is it exactly? I think vibing on Telegram or Twitter and Discord does not constitute how to tangibly create value for Sign, aside from people spending more cash dollars on Sign. What is the vehicle that gathers people's wallet share and have them spend dollars on the Sign token itself?   <<Xin Yan (30:01)>>: you   <<Jason Kam (30:01)>>: Is it like   a religion? What is it exactly? Okay.   <<Xin Yan (30:03)>>: I think so. think it's   you can think of it as a mini religion because ⁓ if you, because like sometimes like with like, like you think about like the revenue or something, but see the most revenue generating company in this world right now as a company, whoever can systematically providing emotional values, right? Say Louis Vuitton.   That company didn't make money from making bags. It's making from selling bags, selling the brand, selling the emotional value. People feel good when they have Louis Vuitton bags. that's what I'm saying. I think right now, like where we're at the world, where like tech is not just providing like ⁓ enough food or like ⁓ quality of life. ⁓ I think we have enough in a sense, right? So we have even have more. That's why we're overweight or something.   The problem with us right now is we don't have emotional value, right? Say, if you are a nine to five person, what are you going to do after back home? You want to have more friends. You want to have more people talk not about work. so I think our community is somewhere.   Like we're basically systematically people creating, providing emotional value to each other. People have a very interesting vibe. have a, so the most shocking part, ⁓ but by the way, also I think this is good example. Basically, think about Haidilao right? It's a hot pot restaurant. But what's the hot pot restaurant famous for? Because people are dancing there. People are celebrating birthday ⁓ party there. So they have a very strong culture and stuff.   based on the culture, based on the songs, based on their services, they build a community around, based on the hotpot businesses. And I think that community actually bringing this hotpot business a lot of revenue. So you basically...   <<Jason Kam (32:07)>>: I get what you're trying to get to, but let's break it down one by one, which is the Louis Vuitton bag, people buy it because it makes them feel a certain way and it shows status. And that status, you know, Louis Vuitton, the company charges premium to, which accrues meaningfully to the stock. That's why it pumps. ⁓ With Haidilao, people are not used to in China good services. By offering a good service and quality ingredients and, you know, kind of a great franchise, they can charge a premium on the food they offer.   which accrues to the stock of Haidilao. In your case, you're talking about people vibing in your Sign community. They may not be buying Sign tokens. I mean, maybe they are. Like, is that what the translation to the Sign? OK.   <<Xin Yan (32:44)>>: Maybe they are. Most important   thing is more people know Sign So more people know Sign and the Sign distributed wider. So with a token distributing wider and more people knowing it and people generally not intend to holding it. So why not say like in crypto community there's a different community. So firstly there's a farmer community where they just engage in project.   before TGE and go to next one after TGE. So that's the seller community. like say Bitcoin, so most of people are of say holder community, Say like we, like we, that's why I emphasize that the value of token as one side is a business value, the other side is a community value, as the consensus value or something. As long as you build a large and strong enough community and people will tend to buy, hold, at the same token.   And the value of a currency depends on how large scale people accept this idea and this currency.   <<Jason Kam (33:47)>>: I see. I think I roughly get it. But it's effectively increasing mindshare. then because of the belief he installs, increased volume share of that mindshare.   <<Xin Yan (33:56)>>: I want to emphasize increasing mindshare in the real world, not in crypto. Because I think right now people have fierce competition in getting stronger mindshare within crypto. But like I said, crypto is a place that was limited like a liquidity and limited amount of people and too many competitors in this. It's the right ocean. outside of crypto, like say,   Which like you go to a street as a random person like what like which cryptocurrency, you know, they don't say like Bitcoin Dogecoin Yeah. Yeah. Yes. We want to become the next one after these names   <<Jason Kam (34:28)>>: XRP dude, yeah.   Okay, so what are the top one or two things you're doing to like... This is probably money well spent on the treasury that you build. But what are the one or two things you're planning to do?   <<Xin Yan (34:43)>>: So you're building community.   <<Jason Kam (34:46)>>: Yeah, or just increasing mindshare, ex-wallisher. Like building a religion.   <<Xin Yan (34:49)>>: ⁓   So it's a systematic work. firstly, I think we need to make sure people understand who we are.   And so internally we need to have a very clear consensus on what the fuck is Sign and where are we want to go and so what do we like and what do we don't like. So we make it very clear before TGE we don't want farmers, we want builders. We don't want you to do ABC for us to boost our numbers. We want you to be the best version yourself contributing whatever you like to do. If you like create content, create content. We help you boost your   like followers, if you like building websites and building meme makers, we help you, we appreciate, as long as for good face and good intention within the community, is welcoming. So we make these stuff very clear. We even write an orange print, so from blueprint, so it's orange print. So this is one thing, and secondly,   We built a system. The system is, you think about the community as a virtual nation. There's ⁓ different from a nation. just says it's not a, it don't have a physical territory. But we have currency. We have a credit score. So credit score is reputation, something not tradable.   Also, if you invite a person, that person's reputation score based on your reputation score. And that person make any malicious stuff, harmful stuff, and your reputation score got harmed, cut or something. So we have algorithm behind the scene. But we give people a badge of honor. So it's SBT. One second, I'll take a phone call. Sorry.   <<Jason Kam (36:48)>>: Of   Yeah, got it.   <<Xin Yan (36:55)>>: Okay,   so and we're having different roles in this. So basically it's like building framework, like allow people to contribute into this framework. So they can get ⁓ exchange for rewards. Like we have four roles in the community right now. We have support warrior, which is reply guy, which is like you just like reply, retweet other people's content or something.   And content creator, series builder, whoever building different games, people building games, people building websites, people building ⁓ like... I don't know how to say in English, but there's a lot of funny stuff in the community. ⁓   <<Jason Kam (37:38)>>: Mm.   <<Xin Yan (37:41)>>: also serious products. the first one is Orange in My Vein, so people who invite the other people joining the community. So we encourage, we allocate 30 % of our token to reward these different roles we want.   <<Jason Kam (37:58)>>: How do you measure that these organic, like, I'm thinking this is like organic community effort versus you actually spending dollars and buying TikTok influencers in Web2, for example, that's like a concerted corporate effort. How do you measure these like organic efforts as effective?   <<Xin Yan (38:14)>>: I think there's two part of two trick. One is that we don't make the criteria very transparent. You don't tell people if you do A, you'll get B. So people, so firstly, those like a serious farmer will not participate in this. And the more people like they willingly betting, they trust you or they love you or something. So they put in their effort first. And secondly, as we build a score. ⁓   system. definitely need to build a quantifiable system behind the scene. But you don't tell people. We don't build a leaderboard or something because it's going to hurt people. We don't want to define people by how much followers they have. We don't want our R drops are mostly getting by KOLs. Because we know the most loyal community come, like 90 % of loyal community, their followers are around 100 followers. stop.   <<Jason Kam (39:12)>>: Interesting hmm good luck. It's an interesting effort. I think it's probably pound for pound that book the biggest It will deliver the biggest impact to your token ⁓ versus the business. This is cool Yes Shifting gears a little bit ⁓ on the 2G effort, which you experimented with two governments last year You talked about it bearing fruit after Trump now blessing the industry   <<Xin Yan (39:25)>>: It's a pure cryptocurrency part, yes.   <<Jason Kam (39:41)>>: as something that would translate into larger scale, sort of multi-year servicing contracts that could deliver meaningful revenue potentially to the business. ⁓ My imagination, the two question is, one is these are ⁓ 2G and 2 Large B are very painful. It takes a long time. They can back off any second. ⁓ How is the progress so far? Like, do you have a lot of deals in the pipeline that are just ready to be signed? And then secondly, you probably can't disclose too much because of NDA, but...   <<Xin Yan (39:50)>>: Rest.   <<Jason Kam (40:10)>>: To the extent you can, what is the order of magnitude of these revenue dollars on a per year basis should we be thinking about versus the 20 million you have today per annum?   <<Xin Yan (40:20)>>: Okay, so I can answer the second one. if like we're taking a, so it depends on the country, how big the country. Say if we're building an ID system for a like 50 million population country, the year revenue, we can think about 50 million US dollar. So, just think about it, right? So $1 per person is easy.   <<Jason Kam (40:42)>>: Five zero. wow.   <<Xin Yan (40:50)>>: So it's a phenomenal revenue source, I will say. And traditionally, it's earned by other ⁓ traditional weird companies.   <<Jason Kam (41:02)>>: IT   service and companies have 10 % net margins. I'm guessing your margins here will be much higher.   <<Xin Yan (41:07)>>: Yeah, much higher. think it depends on like ⁓ the This blockchain itself is actually just way simpler than traditional like SaaS systems   <<Jason Kam (41:19)>>: Do you have any competition in this area?   <<Xin Yan (41:23)>>: That's why we don't, we will quietly talk about this because we don't invite the competitors. But it's okay. I think it's the idea was spreading. And for the first question you were asking as well, it's actually go faster or go like much more faster than we expected. And I would say the most...   <<Jason Kam (41:27)>>: Okay, I'm sorry.   <<Xin Yan (41:48)>>: most of the reason we're gonna give credit to President Trump, because he literally do a lot of people, politicians wanted to. And...   And so right now, with the regulatory framework, it basically says, And we're offering very concrete features that benefits people. When we pitch to a country, say, OK, we're going to build you a digital ID system, like no physical card needed. Everybody just download the app. And the ID, the residency, the ID card will   app will become ⁓ your stable coin account. It's actually very simple to crypto guys, right? But when we talk to countries, they well, it's something we haven't seen before. And we also like putting all the pieces together. We're not offering one application. We're offering a stack. So for the stack, we'll tell them why you need a blockchain, because you want to access to the global liquidity, because you want your dollar, your own like fiat currency. ⁓   have a global equity. You want your own business projects being wrapped up to real assets raised from the global market. And also you want your own people getting better services and stuff. And we build you blockchain. And why we're building a blockchain? Because on the top of it, we're building different use cases.   like stablecoins and like the other stuff and on the top of these we also have more like concrete use cases that we can easily help you distributing money to like wherever you want and the cost is super low compared to existing solutions so we'll make it very clear and the third part is we are strategically targeting to those countries who just have a new administration   like say Thailand, they have a new PM, just start from late last year. I say the new PM wanna do a lot of new high-tech stuff. So it's naturally, it's just a lot easier.   <<Jason Kam (43:52)>>: Hmm, and I know that it's really hard to commit to timelines because these things always change  but to your best guess like ⁓ Here's a better question ⁓ As far as the pilot programs or these beta the beta rollout these things goes ⁓ What when do these things have to happen for you to be happy?   <<Xin Yan (44:16)>>: So every contract I Sign, I'm very happy. I would say, I think my best case is next month, we're going to see a project announcing they're going to use our projects to distributing their own stablecoin to every citizen. So that will be a huge step. We might also be very happy to distribute our token to every citizen in that country. So that's a better...   <<Jason Kam (44:20)>>: Okay.   So it's   the next month for some that's signed or that's in the world, okay   <<Xin Yan (44:45)>>: That's fine. Yes, firstly, they're stable   coin. And secondly, we're also going to pair our own like token to show appreciation to celebrate this. So that's part of reason we minted 10 billion token because there's 8 billion people.   <<Jason Kam (44:55)>>: Very cool.   Hmm. ⁓   I guess you'll have a lot more clarity after one or two cases being proven out and by this time next year, know, you probably, no need, wow. wow, okay. So we should come on a podcast again maybe by like Thanksgiving or something. You'll have a lot more to update. This is really interesting. ⁓ Okay, ⁓ is there an order of magnitude of this business kind of realizing itself by your two or your three versus TokenTable would make you happy?   <<Xin Yan (45:13)>>: No need, no need. By the end of it, yeah.   <<Jason Kam (45:36)>>: Let's push forward two or three years from now. You would say, my god, this 2G business is 5x the size of TokenTable. And that's quite nice. How do you think about the heuristics between two businesses? Because that's how you split your time.   <<Xin Yan (45:49)>>: I don't think like that. I just try to see what's opportunities and I go 100 % on the new opportunities. I say like on TokenTable in crypto native markets is pretty much we already have the largest market share in this direction. So we're just looking forward to researching and see if there's a way we can turn stock into token and distribute at a global level. And before we actually figure it out, we find the right partner   right distribution channel will just go all in on the like the national ⁓ like digital infrastructure building stuff because on this like I know there's a revenue source but right now we're the the leading ⁓ players on this we talk to the countries we see what they need and we build we have ability to build what they need I think   What we build still have a very strong network effect as long as we chip in, as long as people are using our products, we're making standards. And actually, it's not just we are making standards. We are working with our blockchain partners making standards. Think about this. There will be more ⁓ national fiat being minted at CRC 20 on a certain blockchain. So ⁓ it will bring a lot of revenue or transaction on that blockchain. in the future,   There will be more assets minted under one standard, which is ERC 20 There will be more digital information, like your identity, minted on a certain blockchain with a standard. That's over a sample of cloud test stations. so that's the opportunity we see. And we'll just blindly go all in for it. And I don't know how big it can be, but we'll see by the end of this year.   <<Jason Kam (47:31)>>: Hmm.   ⁓ On the OTC side, ⁓ some other questions that I have ⁓ regarding the OTC actual transactions. My imagination is the more projects you work with and distribute, there's actually a larger stockpile of tokens that you can run OTC on. Is that correct? in your mind, how do you think about that business going from maybe three to five million dollars last year going forward?   <<Xin Yan (48:04)>>: So firstly, honestly, we realize, especially in bear market, the critical native assets, the trading volume is not that big, honestly. Say, even in Q1, people mostly expecting Bera Chain movement to be super good products, but movement already ⁓ blown up.   and Bera Chain trading volume as ⁓ the private rounds price and right now it's very similar. So there's no very active OTC deals.   It's just not that good. So, right now our strategy is we're targeting to like, so firstly we're targeting to those funds who have a large back and help them sell some of their backs. And secondly, we're targeting to less than five projects that have a billion dollar valuation in period rounds and haven't launched tokens. So, we're also targeting them because usually OTC trading volume   get a lot larger right before and right after TGE. So we're just trying to get these deals.   <<Jason Kam (49:22)>>: So this will be a pretty volatile, unpredictable business line. The OTC transactional. OK. Got it. ⁓ OK. So it's hard to commit to any sort of numbers. And then on a tokenized stock or any RWA part, that's exciting. I think I've heard about you talking about it in the past. How far along are we, do you think, from that being material to your business?   <<Xin Yan (49:25)>>: Yeah. Yeah, will say yes.   I think it's just a lack of a distribution channel. Actually, we talked to backed.fi   backed.fi ⁓ think already successfully tokenized Coinbase stock. But the trading volume is very small because they only minted a coin on base. And there's very few people on base want to buy a coin. so the problem is they can't reach the right people with the token they minted. So they need distribution channel. And we build our community. ⁓   community and we see the global community in the future will become a distribution channel of these good assets. And so that's why we spend so much time and stuff on different areas and looking for local partners.   <<Jason Kam (50:34)>>: Hmm.   Are you selling ⁓ actual listed companies or are you selling custodians or the middleware stack that allows for stocks to be traded for tokenizing the stocks on chain?   <<Xin Yan (50:51)>>: I think right now our best guess is we work with a company like backed.fi They already figured out how to wrap a stock into a token and we just sell the token.   <<Jason Kam (51:04)>>: interesting. And that's leveraging, I guess, your TokenTable connections in the past. You know where the institutional buyers are. have the OTC desk. that? No.   <<Xin Yan (51:13)>>: I think it purely depends on how big community you have or how best distribution channel you have. Because the buyers are not institutions. Institutions have a lot of ways to buy US stock. It's the real retails who cannot buy US stock.   <<Jason Kam (51:36)>>: I see, because of the community you built and you have direct access to them, you're now like, oh, here's Tesla stock. Do you want to buy it through their app or something? And they just, okay, interesting.   <<Xin Yan (51:43)>>: Yeah, yeah, yeah. We're   going to build an app. So within the app, like say if we put in 10 assets, one of them will be signed and the other nine, I will say we'll put US stock instead of all the other meme coins, which are going to drain our revenues back.   <<Jason Kam (52:03)>>: I see. then in these kind of business deals, when you work with a partner, you make the transactional fee, I guess. that's kind of it. Okay. Understood. ⁓   <<Xin Yan (52:13)>>: So   if we are being like, look at it, we can charge a lot because people from, like say, people from Vietnam, if they want to get access to US stock, they're willing to pay 25 % more.   <<Jason Kam (52:30)>>: Yeah, got it. I think I covered a lot. Let me just summarize what I've learned. So off the 15 million revenue last year, the OTC portion of it is unpredictable. So we'll see how that goes. But of the 10 million, aside from all the optionality that you get from 2G businesses, you want to grow it to 20, 30 million by the end of this year or next year. It seems quite visible because of the standard that you're setting with central exchanges and new projects.   Tokenized stock is a nice option, but we'll see how it goes. And I think the big option here is, ⁓ because of thanks to Trump and thanks to your hard work, you're on a path to potentially kind of catapult all your figures, both on adoption as well as 2G relationships, that some of these 2G contracts could mean hundreds of millions, if not billions of dollars, if you deliver to the right party over the next couple of years. ⁓ Did I miss anything?   <<Xin Yan (53:23)>>: Yeah.   No, it's just, so know, so sometimes I just don't worry about it's grow too fast. I worry about if we can't deliver because say if we're working, we get contract from governments, some of the quality of these engineering, these products is way more complicated. So we have to build the best products.   But you know, interestingly, their expectations are also pretty low because a lot of time when you're when we're like government's software, it's usually super bad. It's all crap, right? So like, we want to the best like stuff to them and we want the government talk to each other. So, oh, I heard about Sign, they build a very good product. So something, it will be very interesting.   <<Jason Kam (54:02)>>: It's all crap.   Yeah, I   think all you need is like one or two use cases and have like this very public president like Trump talking about you. like, I love these guys. And then and then it's going to just take off for you. ⁓ Well, it might be worth my worth spending the money. and the last thing I missed is ⁓ the upside on devaluation of your token would come from your concerted marketing effort organically for now. So if you do that well as well, the multiple like it should just expand. ⁓   <<Xin Yan (54:23)>>: Yeah, it will cause...   You   <<Jason Kam (54:42)>>: Okay, I don't have any other questions. Let's see if the group has any I'll give you three seconds. ⁓   Okay, I don't have anything else. there anything else we haven't covered that you want to talk about?   <<Xin Yan (55:00)>>: It's just the Orange Dynasty. So our community is actually called Orange Dynasty and the whole brand color is just orange. And I sincerely inviting you all like spend less time on numbers, but spend some time on like say joining some community to see like how people actually like talk to each other because that's the biggest lesson I learned this year. I realized that in the next area, in the next 10 years or 20 years, the most important stuff we can sell is not   It's not something that materialized, it's emotional stuff. I talked to lot of AI founders and the most touching one, I really want to invest, is one guy told me he want to build an app that can bring ⁓ my grandfather ⁓ back to talk to me.   <<Jason Kam (55:56)>>: Mm-hmm.   <<Xin Yan (55:56)>>: that's really ⁓ made me very emotional. And I think about this a lot. So I think in the next decade, we have AI, have robotics, ⁓ people will be different, right? So we're never competing. We're not gonna see ourself as a...   machines right now like say how we value each other is like we're valuing like machines like how many hours you work, how much money you make in the future will be different and the same as we think about company, same as we think about currency.   <<Jason Kam (56:32)>>: That's a touching note to end on. ⁓ Xin, thank you so much for your time.   <<Xin Yan (56:36)>>: Thanks Jason.

TLDR In this episode, Jason Kam interviews Brandon, co-founder of Layer3, about building a crypto-native two-sided marketplace. Brandon shares how Layer3 serves gig workers, traders, and emerging market users, generating strong revenue with plans to double to $30M. He introduces a bold IAC-inspired multi-brand strategy, explores asset issuance and trading, and stresses the importance of mobile UX, smart capital allocation, and transparent investor relations to fuel sustainable growth. CHAPTERS / TIMELINE * 00:58 Introduction to Layer 3 and Its Growth   * 03:50 Understanding Layer 3's Consumer Base   * 07:07 The Business Model and Revenue Streams   * 10:00 Market Dynamics and Customer Acquisition   * 13:03 Profitability and Financial Strategy   * 15:54 Future Growth and Market Trends   * 24:33 Revenue Growth and Sales Strategy   * 25:39 Innovative Multi-Enterprise Subsidiary Model   * 28:58 Exploring Trading and Asset Issuance   * 34:20 Focus on Product Development and Market Entry   * 36:00 Inorganic Growth and Market Optimization   * 39:55 Capital Allocation and Future Strategies TRANSCRIPT <Jason Kam (00:59)>  All right, we're live. Welcome to another episode of BitCast. I'm your host, Jason Kam, aka Maple Leaf Cap. Today is May 14th, 2025, 8 p.m. Hong Kong time. BitCast is being live streamed to BitClub members. Questions are from the members and my own. Today I'm speaking with Brandon, the co-founder of Layer 3. Brandon, welcome. <Brandon (00:22)>  Yeah, thank you for having me. Excited to be here. <Jason Kam (01:22)>  Yeah, I remember us talking like, I don't know, three or four years ago when you sourced me from Twitter. then it was just kind of like, I don't know, you were an investor back then and you're now a founder and I'm sort of an investor running a fund. Really glad to be interviewing you and talking about L3DA Token and the company. We're going to jump right into it. guess here's a thorny question for you. I don't think your mind share on Twitter is all that big for L3D project. So how do you have 300k to 500k MAU today and where do they come from? <Brandon (01:59)>  Yeah, it's a great it is a great question. I would say mind share wise we probably could do a better job The business itself has a pretty natural flywheel to it that took I think a year or two years to build But it's no different than any traditional aggregator and the flywheel Essentially is that we're a two-sided marketplace for those in the audience who maybe are a little bit less familiar on one side you have Protocols so large layer one and layer two ecosystems as well as hundreds of apps and the other side you have consumers that come to layer three for discovery And so when we first started, it was very hard to get that flywheel spinning because you couldn't go to protocols and say, we'll help them acquire users if you didn't have consumers and consumers didn't come to your platform because there was nothing to discover. Like there was no marketplace that'd be akin to Airbnb not having inventory. so we just sold to anyone who would listen to us primarily at the app level. And I basically just would pass these people and say, hey, like you should distribute your token through layer three. We'll help you reach users and so forth. Ultimately, we got that flywheel spinning through just a lot of hustle. And now when a new ecosystem comes to layer three, if it's a new layer one or layer two, with that comes a whole new cohort of users. So as a for instance, if we do something with Bearer Chain, there's a whole cohort of consumers who want to explore the Bearer Chain ecosystem that then come to layer three to discover and explore Bearer Chain on our platform. Now, I would say roughly 45 % of those consumers will then stick around to go and do other things in the layer three ecosystem. So each time we have that, that sort of incremental ad on the B2B side of our marketplace, we're able to acquire new consumers and that flywheel happens pretty organically. So while the core layer three footprint on social perhaps is not as significant as you're pointing out. What you have is each of these brands promoting their activations on layer three. And then that helps us acquire a natural consumer footprint. And that flywheel is just constantly spinning in the background. So that's really how we think about it. And then I'll also note just before I pause is when we define our monthly active users, we're defining users as those that are transacting on the platform. So revenue generating users. So it is, think, an intellectually honest definition of the word. Cause I think a lot of people are just, you know, site visits or things like that. <Jason Kam (03:11)> Yeah, monthly active paying. I guess my question is more so towards like, who are they? Because they are definitely not loud on Twitter. It's almost a completely different segment of the market versus your typical, you know, US-based or China-based 25-year-old aping, you know, DJing coins. Are they like Indians, Pakistani, Argentinians who just like no job and they just click and just make money? Who are they? <Brandon (03:34)> Yeah. So I often say there's three types of consumers in this industry. The first is the consumer who has a profit motive through effort. So that's your play-to-earn gaming, airdrop farming nowadays, Kaito, things like that, where they're spending their time and their effort to express their profit motive. They more or less view themselves as gig workers on-chain. Like instead of driving for Uber, they're just spending time clicking around on-chain. This cohort, unfortunately, by I think the intellectual class, has a bad rep—like they're lower quality users and so forth. But by and large, most chains are built on the back of their work. Most ecosystems are built on the back of their work. So that is one cohort. The second cohort is profit through capital. These are your traders. They're speculators. These are people spending time on Pump.fun, on Hyperliquid. They're trading spot, they're trading perps. They tend to be higher LTV in so far as they're higher wallet balance and you can generate higher fees from them. That has, I think, greater mindshare on crypto Twitter just because it's a higher-value cohort and more people are competing for that share. And then your third is basically your consumer in the emerging market that doesn't care about crypto, but benefits from access to basic financial rails. Our product serves right now the first. We have a number of bets aimed at serving the second, but that just gets less mindshare on crypto Twitter. They are viewed to be a lower caste or class in the hierarchy of status within this industry. But that doesn't mean that you can't build a really powerful business around them. And it also doesn't mean that they're not valuable consumers. These people spend most of their days on-chain. Again, they do view themselves as gig workers. So there's kind of an argument to be made for the fact that we know the marginal rate of on-chain labor because we serve all these ecosystems in a really interesting way. No chain, I think, would be able to come to market without appealing to this segment. Very few apps would as well. And that's how I'd classify them. As far as geos—yeah, I think you're looking at more emerging markets, places where that time is really valuable and the earnings that they can get from spending their time on-chain is valuable to the family's bottom line at the end of the month. <Jason Kam (05:33)> And their loyalty is more to you, I'm guessing, because this is viewed as a place to earn. They don’t really give a shit about what protocols there are. They kind of just—money, like, let me do these quests. <Brandon (06:31)> Yeah, exactly. I think it’s someone who maybe makes a living by driving for Uber and also across Uber Eats and so forth. They have a tremendous amount of loyalty to Layer 3. I do think that sometimes they discover things that they’re super interested in—like Eclipse is an instance. Right now, I think a lot of consumers have discovered the Eclipse ecosystem through us and are spending more time there. So that organically happens. The other thing you have to bear in mind is we try to take a really unopinionated view. So long as a protocol or ecosystem is audited and it’s a usable product, we will try to serve them. But a lot of times those ecosystems or those apps, maybe they don’t really have good utility or the 10th DEX isn’t that much better than a Uniswap. So in those cases, the consumers might be a little more mercenary. They’re coming to get paid to spend time on that DEX. But the teams don’t mind it either. Because, as you know—and I think many people on the call know—different teams are playing different games. Some are trying to get a listing, so they want their metrics to look good. Or they’re trying to get a raise done, so they want their metrics to look good. When I say that, I think sometimes people have allergic reactions, but that also exists everywhere else in software too. If a team raised a seed round and they’re trying to get a Series A done, and they have $500,000 in the bank, they know that if they don’t get that Series A done, they’re probably going out of business. So they’re going to spend a lot of that through Facebook or Google ads to get their metrics higher so they can fundraise. And I think the same dynamic exists here. <Jason Kam (08:09)> Yeah, it was extremely relevant, I guess, before this year, where your means of exit is to low float high FTV exit through active market makers on Binance, let's say. I would imagine for protocols who needed on-chain transact, especially layer one and layer two—like on-chain transaction, active users, active paying users—the dirty little secret is they sort of paid. Like, they got those numbers they wanted through you and a few other actors. <Brandon (08:39)> Yeah. I mean, pricing power in this industry is downstream of whoever can help you achieve your goals, right? So there are two goals teams have. One is generating a great business, and the other is generating a good token. And a token is downstream of good listings and so forth. You know, hopefully in the fullness of time, the good business is the first prerequisite to a good token. But right now there are different games in the market being played. But anyway, you have pricing power if you can help them accomplish the “good business” part. And that’s where we sit, which is—they come to us and say, “I don’t have users. Help us get users.” We can help them do so. But as I mentioned, the tooling and the infrastructure that we’ve built is intentionally unopinionated. So they come to us and say, “We want to generate revenue.” We have the mechanic to target users who have higher wallet balances or fee spending—we can get them to a positive ROI on their spend or positive ROAS. If they come to us and say, “We just want as much transaction activity as possible,” we can also do that. Where we draw the line is we don’t help with social or Discord engagement or anything like that. That’s just a really murky business, because if you try and help them get a bunch of bots on Twitter, what you're going to end up doing is diluting the Layer 3 user base to a point where it’s pretty much unapproachable for anyone who wants to reach high-quality users. So we intentionally, for business reasons, don’t serve that need. <Jason Kam (10:01)> And I guess for any protocols who need this kind of on-chain transactional throughput, are you pound for pound the cheapest solution out there? <Brandon (10:10)> I don’t think we’re the cheapest, no. We do price on a premium basis relative to others. So I would say we’re not the cheapest, but we’re the most effective. <Jason Kam (10:19)> You are the most effective because the transactions that came from you do not look like bots, and they are the highest fidelity data that they can present to exchanges. <Brandon (10:29)> Yeah, I mean, if I had to point out, there are probably two or three market misconceptions about our business. One of them is that they’re bots. It comes back to the classifications I had mentioned earlier: these people are spending time with the profit motive. Like, no one wakes up and is like, “I'm passionate about swapping on the 10th DEX on Avalanche.” That’s just not a consumer that exists, no matter how much the founder wants to believe it. But there are real people with real wallet balances, and they have the propensity to stick around. So we ran this analysis—it’s a crude analysis—but basically we took an aggregate score on the quality of the project based on how much funding they had, how many audits they had, and so forth. We were trying to isolate: if the project is high quality, will our consumer base retain organically within their base? For the top 25% of projects by that score—which again, it was somewhat subjective, but based on how much they had raised, how long they had been around, etc.—60% of the consumers we brought to them retained organically. So if the project is high quality, the consumers we bring will retain. But there’s also a long tail of low-quality projects where we can’t promise that our consumer base will retain, because again, no one wants to spend time on that DEX. <Jason Kam (11:41)> That's cool. And then you made 20 million dollars of ARR last year? <Brandon (11:46)> Roughly. I mean, last year public numbers were 16 million. We closed the year on a run rate basis of 20, but all in we booked 16. Profitable since Q1 of last year. <Jason Kam (11:57)> Can you break that down? How many accounts contributed to that 16 to 20? And then how does that—that's the cash flow—how does that flow down to your actual profit number? <Brandon (12:09)> Yeah, so we make money in three ways, but I’ll simplify it and just say there’s B2B revenue and B2C revenue. So B2B revenue: protocols pay Layer 3 in some form to distribute their token or reach users through our business. There’s a huge range in the way that we price those because some teams are pre-token, some are post-token, some are going through TGE. So sometimes we’re getting a percentage of total allocation, sometimes they’re paying more of a SaaS fee—things like that. That’s part of our business. Over history, probably 50% of our revenue comes from B2B. Then there’s B2C. So in B2C, you have trading fees. We have a bridge and swap natively built on top of Socket and LiFi where we take a fee. It naturally fits into our product because consumers are spending time across 40 chains and 500 apps, so they want to move assets around. Then we have what’s known as a credential fee. Users spend 25 cents every time they complete an activation. They spend that fee because of the downstream earning potential they get from it. It’s basically just like their ticket to earn on Layer 3. That also, on the B2C side, is about 50% of our revenue. As for the protocols that we serve: we have about 40 chains that we’re live on. Not all of those chains are paying customers, but we serve them. Then above that you have probably 500 to 600 different apps—most of which are paying. The contract sizes really range. Basically, we segment this no different than how you’d segment enterprise software. You have your large enterprise, which are the chains—you’re typically looking at high six to low seven figure contracts. You’ve got your medium-sized enterprise, which are the larger blue-chip apps—your Compounds, your Aave's—there you’re looking at higher six figures. Then you’ve got your long tail of like Seed to Series A audited apps—there you’re looking at closer to five figure contracts. As for how that flows through to our bottom line: look, we are a 17-person team, so it doesn’t take a lot to run this business. We’re not operating a chain, so our infra costs are relatively low. We do maintain a pretty healthy margin. How we think about that profit: we had put on an experimental buyback for the past two quarters, which we plan to pause. I think our thesis is no different than traditional capital allocation. We feel we’re still early enough and growing fast enough that we want to continue to reinvest into organic growth. But at some point, we would explore buybacks. <Jason Kam (14:35)> Yeah, and ARR is basically pure profits—like it’s on a net basis. You don’t—you kind of don’t pay it up. Okay. And 17 bodies—it’s like less than five million a year I’m guessing. So you are like deeply, deeply profitable. <Brandon (14:48)> Correct. <Jason Kam (14:49)> Okay, that’s great. Therefore, you don’t need to ever sell your token to fund yourself, I’m guessing? <Brandon (14:55)> Yeah, correct. We don’t need to do any type of fundraise for cash needs. We do find value in having investors. A lot of our business comes from referrals. And so if there’s an investor that we think brings geographic presence or has an interesting portfolio that we can cross-sell into, we’ll obviously find a way to work with them. <Jason Kam (15:14)> Got it. Then the profit now rolls into a treasury. And does it accrue to equity? Do you dividend it out? Or you’re retaining it for growth and in the future it will accrue to the token? How do you think about that split? <Brandon (15:24)> The latter. It’s a value that accrues to the token in all cases. For regulatory purposes, there’s an equity entity, but there’s no value that’s accruing to it. The basic premise is: we had experimented with buybacks, but I think we’re three and a half years into our journey. And if you asked a marketplace that was three and a half years old whether or not they wanted to do buybacks or reinvest in growth, they would say reinvest in growth. Marketplaces are businesses of network effects. <Brandon (15:54)> And I think our point of view is that if we can continue to maintain a healthy financial profile, why not reinvest that into growth in a way that’s organic? We have explored inorganic, but to be honest, I think we’re not at the scale yet where we can do acquisitions that are accretive. So it would be something we’d explore downstream. <Jason Kam (16:14)> I mean, you should have a pretty sizable treasury at this point—is it like 10, 20, 30 million dollars type of treasury that you have? <Brandon (16:22)> Between 20 and 30. <Jason Kam (16:43)> And the projects who need a higher valuation—for whatever reason, for fundraising, for exits, whatever—and then your business is a ticker on that. Given what we’re seeing in the changes in the private market and how these companies trade, do you feel good about this year’s ARR continuously growing? Or do you feel like it’ll be a tough comp this year versus last year? <Brandon (17:05)> So the heuristic in private venture markets over the past 20 years—and this is hard to substantiate—is that 40 cents on every dollar raised went to Facebook or Google ads. That’s the number that’s often thrown around. Our worldview is you probably want to handicap that a little bit. But call it 20 to 30 cents of the treasury of most projects will go towards growth in some capacity. And growth in the history of the internet always goes to the most efficient distribution channel. So if we can prove to be efficient, then why would we not be able to capture that? So I think we’re going to continue to see spend there. As for expansion—look, for better or for worse, the industry has created a pretty interesting incentive that you know well and is talked about on Twitter, around the funding of new chains. And in order to launch a new chain, you do need a lot of capital. So as long as that continues to exist, I think we’re going to continue to see expansion on the B2B side. These chains are increasingly competitive with one another. They need mindshare, they need users, they need transaction activity. And we’re one of the more efficient places for them to spend that money. That trade, in and of itself, as a macro trend, is great for business. For any aggregator, the strength of your product is how many consumers you have.  Aggregation theory is a term Ben Thompson from Stratechery had popularized. And I think most on the call are familiar with it. The basic premise is that you’re aggregating the supply side of a given market—so Amazon aggregating e-commerce, Netflix aggregating content. You own a distribution channel or at least lease one, but you have a direct relationship with the consumer and you can achieve economies of scale and capture a lot of value in doing so. But all of those businesses—the strength of their business is downstream of how many consumers they actually own. And so the way we think about our North Star for business expansion is: owning more types of consumers. I had mentioned those three cohorts—we kind of own the “profit for effort.” If we can continuously own the “profit for capital,” that’s great for us, because then we can go and serve a lot of these products that want to reach those consumers. And we can get them users who have wallet balances maybe close to a million or two million in size. So figuring out creative ways to serve that cohort, as well as the first cohort, is how we think about expansion. Because it just gives us more pricing power. You’re seeing this today, right? Binance, or all the exchanges like that—I’d argue they have probably the best pricing power in the industry.Because teams will pay upwards of $10 million to get that distribution. So that’s hopefully how we can go about growing. <Jason Kam (18:30)> I guess a part of your business growth would come from just signing on new customers who need metrics. And most of them are layer 1s and layer 2s. Does the propensity to spend from a customer increase or decrease after the TGE? <Brandon (18:53)> On a number basis of customers, I would say it decreases. On a dollar basis, it increases. So you see increased spend from Optimism, Arbitrum, Base—right? We’ve served those ecosystems now for many years. And we’ve been able to acquire more revenue per period from those teams. So higher quality ones—they’re growing, they have healthy treasury management. You’re also selling into a really sophisticated buyer. A lot of these teams hire people who understand how to measure ROAS and things like that. But then you’ve got this long tail—where I’m selling into a founder, the founder raised, call it, $20 million for some new chain from a group of investors that maybe many on this call probably don’t really respect. And that’s a less sophisticated buyer. They’re just trying to juice their numbers. And then they don’t do anything. Their chain doesn’t really exist. They don’t really build it. They’re just playing this trade that’s existing in the market. So they’re a little bit harder to retain on a number basis, but the dollar basis continues to expand because the higher quality ones spend more—if that makes sense. <Jason Kam (20:54)> Yes. So those scam projects turn off, but they pay you a lot of money and they’re kind of dumb. And the good customers—you have a higher tick rate over time, wallet share expands, because this is not one you maintain. <Brandon (21:04)> Yeah. That’s where our business is similar to Binance. And I’m not comparing the two profiles—I don’t want to come across as ignorant. Binance is in a world of their own. But at the same time, what happens is you have certain projects that come to these exchanges and you have such significant pricing power because they’re insensitive to the cost. They just want to get through this period. And there, you can capture a lot of revenue. And you’re always going to have a supply of those projects because of the way venture funding works. But then there are ones that are lifetime customers. If you were to look at Facebook’s customer base over time, I imagine you’d have something very similar. There are a lot of venture-backed companies that have spent on Facebook or Google ads that ultimately went out of business—but contributed to Facebook’s top line. But then the ones that retain over time—the Nikes, the Coca-Colas—those are large, large parts of their advertising revenue. <Jason Kam (21:54)> So the revenue from scam projects, from new L1, L2 launches, and the existing customers kind of taking up their wallet share—do you feel like that's a significant source of growth for this year? Or would you sort of prefer a higher growth trajectory from, let's say, the second bucket of users, which is accessing the higher value group that is CT? <Brandon (22:15)> The latter. I mean, hopefully the efficiency of markets is that we get just a higher quality customer base that sustains over time. They continue to grow their spend over time. We attract larger and higher quality consumers, different types of consumers. That would be the direction I want our business to go—I think it's healthier. You’re selling into a more mature buyer set, a higher quality buyer set. If all of a sudden macro changes—let's say rates go to zero, capital goes out on the risk curve, LPs fund venture firms, venture firms start plowing money into these types of businesses—we’re still net beneficial. But that adds some cyclicality. You're going to see a spike and then you're going to see a trough. Whereas I'd prefer that we grow our marketplace with customers that can grow with us. <Jason Kam (23:03)> And then of the user base who are more pronounced in CT and do have more capital—what’s the effort to kind of grab them, which hasn’t been in focus in the past? <Brandon (23:17)> Are you talking on the consumer side or the B2B side? <Jason Kam (23:21)> Consumer side—the folks who are actually clicking and doing things on site. <Brandon (23:46)> We haven’t spoken too much about this yet, but when it comes to crypto, consumers really resonate with specific brands. And oftentimes brands are relatively baked. If I were to go to most people in the industry and ask them what they think about Layer 3, I think they'd have a predefined opinion on it—and many consumers as well. Our worldview is that if we want to reach some of these consumers, we might need new brands to do so. And we might need new surfaces—be it on mobile, or more of a trading-style interface. A user who has a wallet balance of one to two million is going to interact with a different UX and a different brand than a wallet balance of 10,000. So that’s how we're going to go about reaching them. That’s the current strategy—to build new brands under the broader Layer 3 umbrella. The analogy would be: this exists on the internet, right? There’s a certain consumer for Instagram, a certain consumer for the blue app on Facebook. If you look at a business like IAC, which owns Expedia or Match, there are all these different types of brands that resonate with different consumers, but they accrue to the same parent equity—or parent token in our case. And that’s how we would think about it. <Jason Kam (24:33)> Yes. Hold that thought because we’ll get right into it. But before that effort takes place, do you have a target for what your ARR looks like—excluding that effort—for this year or next year? <Brandon (24:45)> I’d like to double. I mean, I think we could expand our revenue base in our current business to double. So that would put us around the $30 million mark. We’ve got some work to do on that, just based on the year so far. But one of the things is—we’ve gotten the marketplace to a point where we can expand. If we add a new salesperson, that person can get to kind of a 3X on their costs—which is the rough rule of thumb for enterprise software—pretty quickly. So in probably 60 days, a salesperson on the Layer 3 team can basically pay themselves three times over. And that is where I think we’re going to reinvest—just adding more bodies to serve more ecosystems, to hopefully get the flywheel spinning. <Jason Kam (25:27)> Very helpful. Tell me about this ICI multi-enterprise subsidiary effort, and what's the most exciting thing right now on that front? <Brandon (25:39)> Yeah, I think we’re still trying to keep some of this close to the chest. But if anyone in the audience is familiar with what Barry Diller built at IAC, I think it’s an interesting model. The way the model worked was you’ve got a parent company that creates new brands—Expedia, Match.com, etc. Those new brands reach new audiences, get to a point of maturity, and then they spin. And when they spin—in the case of IAC—the IAC shareholders get a claim on the stock that spun out. So it ends up being extremely accretive for stockholders. I think no one has tried to do this in crypto for a few reasons. First, a lot of time, capital, and attention has gone to infra—so there hasn’t been that much human capital thrown at consumer in an interesting way. Second, there’s less sophistication in crypto capital markets and being able to tell the story to capital markets. A lot of people immediately think “grift” when they hear of multiple tokens. But you could do it in a way that’s unified and in the true spirit of how equity markets work. Third, people understand that consumers resonate with different brands, but they haven’t tried to do it with one unified distribution footprint—which is how we’re trying to do it. One shared infrastructure, one shared data layer—because we have a tremendous amount of data on all consumers in this industry. So that’s how we’re thinking about it. Time will tell whether the strategy proves successful. IAC obviously did it at much greater scale—thousands of employees, much more mature business, greater balance sheet, etc. But if we do it the way we aspire to, we can pull it off in a really accretive way. That accretive way would be valuable to token holders. If you’re a token holder, you get a claim on any spin. If the asset’s not spun and there’s no new token issuance, then the cash flow automatically accrues anyway. <Jason Kam (27:27)> It’s obviously early days, but when you do it, would it be similar to equities—where you just get the airdrop and nothing is retained? <Brandon (27:40)> Correct. <Brandon (27:45)> Nothing is retained by the company. But in theory, you have all investors and team members as token holders, so they benefit too. You’d also have retail. There are some nuances you’d want to solve for. Equity markets are a little more mature—you have a more entrenched shareholder base and less churn than in token holder bases. So to solve for that, you could have some kind of claim period. Athena has done this really well where you get your vested Athena. And I think it’d be something similar—where you kind of get a vest, and if you sell your parent token, then you forfeit that vest in some capacity. But we’d need to think through the true structure. We’re many years away from there being a spin on a token, but the concept would be: divide to compound. It’s an interesting model and has worked really well for something like IAC or Liberty Media. <Jason Kam (28:44)> For sure. Can you share anything about what you’re trying to build—or at least what lanes you want to pick? <Brandon (28:58)> There are two lanes: trading and asset issuance. Those are the two largest markets to reach new consumers in. Asset issuance has a wide range in this industry. How we’d approach it would be something net-new and interesting from a consumer point of view. On trading—we believe there’s a gap in the market, despite many teams attempting it—for a truly unique mobile experience. One that combines the primitives we’ve seen over the past few years: spot, perp, prediction markets. Things that appeal to crypto consumers and also to consumers outside of crypto who like the intersection of equity markets and sports betting. There’s a gap to serve that market. And if you can do it, you can capture an extremely high LTV base. <Jason Kam (29:50)> Is it going to be entertaining—like livestream Robinhood—or more serious? <Brandon (30:17)> The former. Look, Gen Z is entering the workforce. There’s a massive wealth transfer from Boomers and Millennials to Gen Z. They like internet-native experiences. Sports betting participation is increasing. Flying to Vegas is decreasing. This is all coming online. There are many interesting primitives—trading on Hyperliquid, prediction markets. People are more familiar with parlays and betting UX. So there is absolutely a viral consumer product to be built on mobile that combines these primitives in the next five years—it just hasn’t been built yet. We feel we have the right ingredients to bring something like that to market in a differentiated way. But the challenge is not the product—it’s the distribution. You either need the distribution channel or an insanely viral growth loop. <Jason Kam (31:59)> How much money do you plan to spend on this? <Brandon (32:03)> If we follow the IAC model, we could create subsidiaries and source capital via financing. Balance sheet is strong, so we can invest ourselves too. From an R&D perspective, probably $2–3 million per bet as a cap, but likely less before you know whether it’s working. <Jason Kam (32:57)> I’m guessing that’s just for the product. Marketing will cost a lot more? <Brandon (33:08)> Yes. But if the product is revenue-generating, we could finance the ad spend through a claim on cashflow—like in traditional software. It wouldn’t cost too much to build—six months with a good team. But the bulk of spend is definitely in advertising. <Jason Kam (33:53)> So how far along are you? Should we expect this by Thanksgiving or Christmas? <Brandon (34:00)> Yes, that’s the timeline. <Brandon (34:06)> We’ve been thinking about it for maybe five months. <Jason Kam (34:10)> Thinking, but not building? <Brandon (34:14)> We’ve laid some groundwork—but we want to keep most of this close to the chest. <Jason Kam (34:20)> Got it. So that’s trading. And asset issuance is more preliminary? <Brandon (34:30)> Correct. It’s a big market. We’ve done some mapping of what’s worked and not. Asset issuance could mean Pump or Tether/Circle. We’re mapping it out and think there might be something compelling. <Jason Kam (35:00)> So it’s one bet at a time. Trading is first. <Brandon (35:04)> Exactly. Focus is key. We’re four years into our business with 17 people—we’re not going to say we’ll be the next IAC just yet. But we want to thoughtfully explore adjacent lanes without distracting from our core. <Jason Kam (35:34)> So just to be clear, you’re incubating these—not just investing in them? <Brandon (35:43)> Exactly. <Jason Kam (35:47)> Got it. So we talked about two things. I think these are cool. I think the IAC-style spin model makes a lot of sense. It's interesting. Anything else that’s on your mind that gets you juiced? Are you buying other things? What else are you thinking about? <Brandon (36:00)> We would be interested in inorganic growth if something compelling came along. One thing we looked at was a whole new cohort of Stake-style competitors. This is something crypto Twitter doesn’t like to talk about, partly because many of these aren’t venture-backed. But a lot of these crypto-enabled casinos throw off a lot of cash—not Stake-level cash, but still meaningful. We’ve looked at some of them. I was in Dubai two weeks ago and spent a full day with one such team. Nothing has really clicked yet from an alignment perspective. You’ve got to manage your house balance sheet, your risk. But if you get those parameters right, then it just becomes a game of growth—how do you acquire more users via ads? That’s a game we could potentially play. But again, one thing at a time. Inorganic growth would be interesting because you're acquiring a consumer base and a profitable engine. And a lot of the people building these types of businesses might not want to run them long-term. The second thing is within our core business—there’s still a lot of work we can do to optimize distribution. If you’re a protocol and you show up to Layer 3, you get access to this no-code builder—like Facebook Ads Manager. You predefine criteria, load your budget, etc. That can always be optimized: how to reach the right consumer at the right time, what’s the best reward profile to get the behavior you want. That engine is already humming in the background, but we can still do more. We want to continue expanding B2B revenue in our core. <Jason Kam (37:58)> I see. So just to summarize: as long as the space sees L1 growth and VC funding, hopefully you’ll double that business this year—maybe hit $30 million. Then with optimization, more customers, increased tick rate, and wallet share… Then off your treasury, you’re probably going to spend on one bet this year and maybe two next year. These could result in a token airdrop spin fashion to token holders. And those could be worth a lot—depending on success. Am I missing anything? <Brandon (38:44)> The inorganic piece. But again, that’s… <Jason Kam (38:46)> …but it doesn’t seem like you’re too seriously looking into it? <Brandon (38:50)> Yeah, I think that’s a lower probability. There’s enough focus on optimizing our current business. If we can take our current cost structure and maintain profitability—there’s still plenty of room to expand. That takes a lot of time, effort, and focus. If we can pull that off and also explore one adjacent area—that would be a successful next 18 months. <Jason Kam (39:25)> Last question before I open it up: after Trump, how does your view on the value accrual model for your token change? Say you run out of growth options, already funded your bets, and still have a huge cash pile. What’s the best use of that capital? <Brandon (39:55)> Before and after Trump, our worldview was always that capital allocation is a studied practice. There’s decades of research on how to do it well. There’s a great book—I imagine you’ve read it—called The Outsiders, about capital allocation by eight of the greatest CEOs. There are a few things you can do with a balance sheet: * Invest in organic growth (more product, team, etc.) * Inorganic growth (M&A) * Return value to token holders via buybacks or dividends * Retire debt (though we have none now) Dividends make less sense in crypto due to tax inefficiency—it’s like staking or yield. So it would be some kind of buyback. <Jason Kam (40:48)> And you’re comfortable with that? <Brandon (40:51)> Yeah. We’ve gotten to a point where there’s enough precedent for teams with our structure to do a disclosed buyback. There are disclosures you need to make. That’s something we should talk about—disclosures. I have thoughts on that. But yes, we’re open to buybacks once we reach maturity. Problem is, the token holder base is still relatively unsophisticated—less so than even retail equity. So you get “when buyback? when burn?”—and that’s not healthy. If you’re 3 years in and growing, why would you do buybacks? <Jason Kam (40:56)> And when you say disclosures…? <Brandon (41:58)> I think many problems in the market today are due to inadequate disclosures. And I don’t think the SEC will fix that. The U.S. equity markets matured with a period of no disclosures—and then came the SEC. But the SEC worked because disclosures led to access to the most liquid capital markets. Crypto doesn’t work that way—you have deep, liquid capital globally. So if you have to go through the SEC, you’re just handicapping yourself and not gaining access to deeper liquidity. Disclosures should come downstream of liquidity venues—primarily the exchanges. We should see disclosures like: * Team unlocks * OTC sales * Investor holdings (similar to 13Ds) That would massively improve the market and attract institutional buyers. <Jason Kam (43:20)> Sure, but the kicker is—they have to be rewarded for disclosures: better funding, higher valuation. That might take a while. <Brandon (43:28)> Exactly. It’s a Silicon Valley meme: when businesses have no economic incentive to do the right thing, they won’t. If the incentive isn’t to produce revenue, then more teams won’t try. The question is: can we get liquid crypto markets to a place where the incentives align with disclosure? <Jason Kam (44:00)> Would you guys have an investor relations portal? <Brandon (44:07)> We have a data room I make available to anyone who asks. We’re a 17-person team, but I’d like to do quarterly investor calls and be super transparent. That’s something we’re working on. <Jason Kam (44:22)> Cool. I don’t have any more questions. Anything else you want to add before we wrap up? <Brandon (44:33)> No, this was a great conversation. Our journey started four years ago—before you started what you’re doing now at Folius. It’s been interesting to watch the markets evolve. Despite cynicism on crypto Twitter, we are moving toward maturity in liquid markets. And what you’re doing—even this series—is a step in the right direction. Thanks for having me. Great chat. <Jason Kam (45:02)> Yeah, thanks for your time. <Brandon (45:04)> Cool.

TLDR In this episode of BidCast, Jason interviews Tien, the co-founder of Pendle, discussing the dynamics of yield token (YT) supply and demand, Pendle's revenue model, partnerships, and the introduction of a new protocol called Boros (@boros_fi). Tien emphasizes the importance of improving value propositions and the potential for growth in the DeFi space, particularly through institutional collaborations and innovative trading solutions. CHAPTERS / TIMELINE * 00:00 Opening * 01:06 Introduction to Pendle and Market Dynamics * 04:17 Sustainability of YT Supply and Demand * 07:17 Value Proposition and Market Strategy * 09:54 Revenue Generation and Fee Structure * 13:11 Partnerships and Institutional Products * 15:59 Innovations in Trading and Collateral Management * 31:37 Exploring Asset Variety and Revenue Streams * 32:55 Understanding Market Mechanics and Liquidity * 34:48 Position Sizing and Trading Volume Goals * 37:20 Revenue Potential and Market Opportunities * 40:40 Target Audience: Hedgers vs. Speculators * 43:13 User Education and Adoption Strategies * 45:28 Future Expansion Plans and Risk Management * 48:50 Institutional Adoption and Real World Assets * 51:58 Long-Term Vision and Market Potential TRANSCRIPT << Jason Kam (01:06)>>: All right, and we're live. Welcome to another episode of BidCast I'm your host, Jason Kam, aka @Mapleleafcap Today is May 13th, 2025, 8 p.m. Hong Kong time. BidCast is being live streamed to BidClub members. Questions are from the members and my own. Today I'm speaking with Tien, the founder of Pendle. Tien, welcome. << TN (01:28)>>: Yeah, thanks for having me. << Jason Kam (01:30)>>: Nice. We were chit chatting before the set. I really wish I'd bought it at five million. You should have grabbed me by the collar. But I think back then it was Eigenlayer that was most of the TVL. And then now it's Ethena I guess the first question, which is probably on the of the viewer's mind, which is, I was never quite sure how sustainable the demand and the supply of YT would be. And therefore, was never that kind of confident in the longevity of the bottle. It kind of always concerns me that with every maturity of the big sort TVL wave, it will always make me nervous a little bit if I were a Pendle investor. How would you as the founder address this issue of the kind of longevity of both YT supply and demand? << TN (02:25)>>: Sure. So we started gaining more traction when we tokenize points, primarily starting early last year. And then we started seeing pretty healthy traction around like YT and PT dynamics. With time, more data points emerge. And I believe that now the point speculation has become a lot more sensible versus when it first started out back in early last year. So what I'm seeing right now is that the, because there had been a lot more data points from the last one year or so, the Yeah, YT pricing is also a lot more competitive now. The premium attached to YT is not as significant anymore compared to, again, like ⁓ Q1 last year. ⁓ And more importantly, what we're seeing right now is that points have become quite an essential part, a go-to-market strategy for upcoming projects, especially the pre-TGE ones. Sometimes even the ones... that have already done TGE, but they're looking to make... like try to gain traction. For example, like Syrup, like they also have points in place. Ethena is another good example. So like from our perspective, points will be here to stay. The onus is on us to try to look for opportunities that can enable us to retain liquidity to the best of our ability. So on average, I'd say whenever there is a maturity event, we would see about 30 % of retention. in the first seven days. Usually if we have good markets, the liquidity will continue to flow in over the next couple of weeks. we have, like if you look at the Pendle TVL chart, it would go up and then it will come down at maturity event, and then it will continue to climb back up over an extended period of time. So the way we stay relevant is continue to be very thematic in our approach. We need to look for good opportunities. So for example, last year, Aside from Eigenlayer and its ecosystem, we also saw very healthy traction with the launch of Ethena pools. And then towards the end of the year, we also experimented with BTC markets and that did fairly well. So we were able to capture like these opportunities, work with the top projects in that particular segment to try to stay relevant and then of course, like help them grow. This year, we see a lot more interest around stable coin and real asset tokens. So. we have been very aggressively listing these markets to cater to demand. So when one maturity happens, at least there are optionalities for existing liquidity providers to roll their assets into. So, yeah, as long as we provide a healthy and competitive opportunity, like let's say APY in a range of 10 to 15 % for LP for fixed rates, we would be a top of mind. when it comes to liquidity provision and yield opportunities. << Jason Kam (05:49)>>: I suppose I hear you on the point that the TVL know that you exist. So when the maturity happens, they roll off and because they're still aware of your platform, they look for other TVL opportunities and deploy accordingly. I suppose the question is a bit more thematic, which is it's kind of hard to point fingers to what the next big thing is after I can layer. And it just so happens if you have popped up. ⁓ It seems like if you know has staying power, you know, there's a lot of things they're working on ⁓ But invariably, you know that might taper off or that might kind of flatline and if your token holders are looking for this continuous growth I Get it here recently, you know the TVL D5 should be growing but but you know what gives you the confidence that you know, it will always kind of be this Potential points and airdrop dynamic where you will always be capturing an increasing share of the pie << TN (06:46)>>: Yeah. So we have to keep improving our value proposition. So in the beginning, when we were much smaller, I would say we were trying to leverage on the hype of another project to try to grow our TVL. But right now we have also realized that we are able to offer certain kind of value proposition that no other protocols can offer. For example, we've been very focused on getting PT assets distributed to as many venues as possible. Now, previously, the main offering for Pendle is to enable points to be tokenized and then traded freely. But on top of that, like we recognize that PT can actually be a very, very good asset to be collateralized across money markets. So that's what we've been working on. Now, Pendle probably accounts for more than half of more force TVL, Euler, maybe. 20 % or so. then recently we've also got onto Aave with a PT sUSDe and eUSDe. So in two weeks time, the overall TVL hovers at around like $800 million for these two PT markets on Aave. Where we see our core proposition here to other protocols is that like, because now we have healthy distribution outlets, if a protocol gets listed on Pendle and let's say they do well, We help accelerate their growth. We promote them to the prime markets. There's a good chance that the curators across like different money markets can pick up these PTs, set up the markets and enable certain kind of strategies to take place with all these different distribution outlets. And with that in place, then there is some dependency on not just Pendle, but also on the underlying. And then it creates a very, very synergistic relationship between Pendle and the underlying here. And yeah, it would help ⁓ both our protocols grow and gain like TVL traction. yeah. So aside from just money markets, right? We also will have other implementations, like for example, in our Citadel vertical, like we want to get like bridge PTs to other ecosystems. We also want to work with the likes of Ethena to enable like institutional products. << Jason Kam (08:48)>>: Mmm, I can see that. Okay. << TN (09:11)>>: So that will come in the second half of the year. But the broad theme here is to have better distribution for PT assets so that we can offer unique proposition to the underlying protocol and then help them grow. So it's not just like a one way relationship. << Jason Kam (09:30)>>: I suppose it's cool because there's a scale benefit to this which is naturally the traders want a most liquid YT asset so by having size you get that and then Only when PT gets to a certain critical mass do all of these money market protocols want to onboard it as collateral because if there's a liquidity So I suppose that's a good that's a good argument And let's go ahead << TN (09:53)>>: Yeah, I think, yeah. I was going to say like how we're looking at it is like now because we have so many applications now, we try to at different stages of the say the TVL life cycle, we try to be value adding. Let's say when a new market sets up, it probably has 100, 200K of TVL. So we will do, we will provide some materials for these protocols to market themselves. Once they get to one to $2 million in TVL, we would be more directly involved and then grow it to 10 mil. Like from 10 mil onwards, typically there would be interest from curators to get the market set up on Euler or Morpho. So with Euler and Morpho, the growth can continue to compound. Once they hit say like a billion dollars, for example, then that would be a serious case for Aave. << Jason Kam (10:47)>>: That makes sense. And you did turn on permissionless listing through you, on ⁓ March of this year. How's that going? << TN (10:54)>>: Hmm. It's going fairly well, but I'd say like there are some aspects of the listing process that we can continue to lubricate right now, how we, so we're not entirely, we, we allow for self-listing, but it's not a free for all kind of portal because with points, one of the more important components of it is that the points are tabulated off chain and then distributed on chain. So there's a lot of trust that needs to be present in order for the points program to be effective and ⁓ sorry, mainly effective, right? So with Pendle, like in order to get the market set up on Pendle, we need to know who the issuers are. So basically that means like we need to at least know like it doesn't have to be a completely KYB KYC kind of process, but we need to have someone to be accountable for the issuance of points. So whenever there's an interest, they would have to submit an application and what we'll have to do is to get like the telegram set up. ⁓ And then we can guide the listing process and the The turnaround time target is around 48 hours. Like we're still maybe in the three day, four day kind of ⁓ time period, but we're working very actively to reduce the time to get listed to 48 hours. And the last thing we want is to have many, different random wallet addresses set up markets for, let's say, PT sUSDe. they are unaffiliated to the official points issuer and having too many markets, maybe with just one day apart from each other, with no guarantee of points could be very dangerous for the end user. And that's what we try to avoid here with our listing process. I think we still have to go through several iterations to improve the process, but over the course of last month, ever since we really started to step up on our listing process, ⁓ we have already seen about 25 markets listed on Pendle through the community portal. << Jason Kam (13:18)>>: the last month. << TN (13:20)>>: Yeah, last four weeks. << Jason Kam (13:21)>>: Okay, that's versus the pace of harmony like before this was implemented. << TN (13:27)>>: Well, before it was, ⁓ because when we started up in March, the marketing wasn't done very right. So we probably had very minimal in the range of like single digits. ⁓ And we had to go out quite aggressively to reach out to some of these partners to submit the application. The most successful case that we have so far is actually Open Eden cUSDO. ⁓ We helped grew the market to over a hundred million dollars in about a month. ⁓ Now they're on prime and then we're also working with curators to get their assets listed on like  Therefore they've been listed on Morpho and Euler. << Jason Kam (14:11)>>: Got it. Regarding the sort of three and a half to four billion of TVL today, I just want to talk through the numbers a little bit. Brush me through between how that revenue, how that TVL translates to sort of the fees and revenue for dependent protocol and how it occurs to the token itself. << TN (14:30)>>: Sure. So Pendle has two sources of revenue. One is through the swap fees of the AMM. So PT YT trades will have a portion of that ⁓ fees attributed to V Pendle treasury. And then the other one is the YT fee. So YT fee is currently 5%. But what it means is actually 5 % of all the yield that is generated. So let's say ⁓ using stETH for example, If the yield is 4%, that fee from Pendle is going to be 5 % of that 4 % APY. So it's actually not too significant to most users, but it actually makes quite a big difference to the vePENDLE distribution. Collectively, over the course of the last 12 months of fee distribution, basically from these two categories, we've distributed closer to $30 million in fees back to vePENDLE holders. Now these fees consist of swap fees and then the YT component, which constitutes a portion of like points and then they realize into tokens and then we distribute the assets in kind. So the swap fees are actually fairly independent of the overall TVL. That TVL is where the YT 5 % fee looks at. And yeah, basically with $3.9 billion in TVL, we estimate that the amount of fees that the underlying assets could generate probably in the range of 10 to 20%. And then of that, we take a small cut of 5%. << Jason Kam (16:24)>>: Yeah. And that 30 million is inclusive of the, ⁓ of the YT trading fee of the swaps. Okay. Yeah. << TN (16:30)>>: Correct. Yeah, of the swaps. << Jason Kam (16:36)>>: And then and then that on the 220 million sort of vePENDLE state based on the average yield is like 10 15 percent But if you stake it over four years you get to you know, the  choose to like 25 40 percent just about that's what you saw historically Are you are you raising your fees or reducing your fees keeping to the level going forward? << TN (16:51)>>: Yeah, historically, yeah, that's... Yeah. we are optimizing the fees and we, because like we only started with the fee optimization end of last year, we realized that we've been undercharging because compared to what the other protocols, like the other yield protocols were charging, let's just say like Convex, they would take somewhere between like 17 and 20%. Whereas like for Pendle, we were charging 5%, excluding the swap fees. ⁓ So yeah, with respect to the other yield protocols, like we think we can be more aggressive in optimizing our fees without jeopardizing the trading activity on the platform. So ever since we started that fee optimization exercise in December last year, we've seen like fairly healthy traction. So the same amount of activity would give us two times or three times more fees relative to the previous period. << Jason Kam (18:00)>>: Yes, and sorry, and that 30 million currently you gave me over the last 12 months only makes him part of that lift and take rate. << TN (18:09)>>: Sorry, come again. << Jason Kam (18:11)>>: The $30 million you gave me on the last 12 months revenue that accrues to pendle ve staker only takes into account part of that take rate lift. It's not the whole thing. Right, because it only started in December of last year. So if you flush through the optimization of take rate going from 5 % to whatever, 10, 15, 20 %... Okay. Okay. So... << TN (18:34)>>: Yeah, yeah, yeah. It could improve. << Jason Kam (18:39)>>: Okay, so on the same $3.94 billion, you could be looking at $50 million, $60 million. Is that fair? Or is that too much? << TN (18:50)>>: I think potentially possible, ⁓ but it will be very gradual. It's not going to be, it's not going to be a two X like in a month. << Jason Kam (18:53)>>: Okay. Okay, got it, makes sense. And just so I get the right numbers, the vePENDLE to get paid in more Pendle or to get paid in USDC? << TN (19:12)>>: Well, so USDC is the... Starting May, the distribution will be in the form of USDC. Previously, it was ⁓ ETH. << Jason Kam (19:20)>>: Yeah. Okay, how do you feel like the SEC would feel about this? << TN (19:28)>>: So with the vePendle distribution, actually it's not ⁓ a free distribution. Users are required to vote for markets in order to be entitled to the fees. Effectively what that means is if you have VE Pendle and you do nothing about it, you don't get the fee distribution. You have to use the votes that you have, which is in the form of vePendle, and then vote for the pool. << Jason Kam (19:45)>>: Hmm. << TN (19:52)>>: that you think would generate you the highest amount of fees. Let's say in the last couple of weeks, it has been eUSDe. So let's say if you pledge your vePendle votes to eUSDe on a weekly basis in between epochs, whatever fee that the market generates, it will be prorated to the fee votes that you contributed to the pool. << Jason Kam (20:17)>>: ⁓ Did you talk to Paul Atkins or anybody at the SEC about this design or you kind of just talked to lawyers and they blessed it? << TN (20:25)>>: It was more, so we didn't speak with SEC. We, we, learned it from, yeah, we learned it from, from, yeah, the likes of, vePendle like, sorry, ve curve, ve curve was the inspiration for us. And then consulted legal counsel to, structure, ⁓ a design that we think would, would make sense. << Jason Kam (20:29)>>: Okay. Yeah. Mmm. It certainly feels better now than before November of last year. think the users would prefer this and I would imagine, we looked at PenPy in the past, but do you see any sort of convex attempts in the future where it's kind of vePendle owned, auto-compounding through this USDC? Do you fund any yourself? Do you see anything that's legitimate? << TN (21:17)>>: I don't know that's really hard to say because Yeah, no comments there like we we yeah << Jason Kam (21:21)>>: Okay. No offense. Okay, worries. I'm just curious. By the way, that question is on every Protocol Founder's Mind. We'll get more clarity, I think, by August or September of this year. I mean, if you know takes up a big part of your TVL, I forgot what percentage it is. What can you tell us about that partnership going forward? There's a bunch of stuff like the potential TVL ramp. << TN (21:39)>>: Yeah. << Jason Kam (21:51)>>: There's a bunch of other things they're working on. There's the SPV they're talking about. You talked about the PT efforts. ⁓ Walk us through your relationship with them and what's exciting on that front. << TN (22:03)>>: So with Adina, it's been a very synergistic, cordial relationship. They're arguably one of the best teams that we've worked with because they are so focused on their positioning and they have the, they are very competent and they have the ability to execute well. We account for approximately 50 % of sUSDe, TVL. And in the same way, they're also a pretty significant portion, about 50, 55 % of Pendle's TVL. So the reliance from both sides is definitely very, very present. We typically explore, like at least for now, in the schemes that both of us are expanding towards, like with Ethena, the convergence, like the institutional products, like we typically would partake in their expansion efforts in the same way with Boros. They have also an interest to take part in the products that we're going to build. ⁓ So I would say right now, yeah, we're very tight to each other and we need to make sure that we perform well together so that we can continue to grow. << Jason Kam (23:25)>>: In particular on the PT effort, I forgot where I read about it, but like the SPVs that the institutions they work with, like, can you give us a bit more color on what that effort is all about? << TN (23:39)>>: Yeah, sure. So with... With the institutional play from Ethena, it is more a partnership with Securitize and then they announced that they will be launching iUSDe. So this iUSDe is basically a Securitize SPV ⁓ acquiring USDe and then issuing iUSDe that can only circulate among the white listed addresses. << Jason Kam (23:56)>>: Yeah. << TN (24:13)>>: So what we'll do is we will have a KYC implementation of Pendle to service this liquidity pool. ⁓ Not too different from Aave Arc because it would be a very similar kind of approach. << Jason Kam (24:32)>>: and the buyer of that iUSDe PT would be similarly institutions. << TN (24:40)>>: As simulatly as what? Sorry? << Jason Kam (24:42)>>: Institutions, institutions, there are KYC AML institutions. On chain or are you gonna put like an SPV like wrapper so somebody on your team or some other team can kind of just start marketing to like panel of individuals or something so they can start buying PTs directly through hedge fund structure. << TN (24:46)>>: Yes, yes. Yeah, so how we're thinking about it, and this is not the final form, but how we're thinking about it is to have KYC entities, whether individuals or funds to be the, ⁓ to target or focus more on the YT purchases. But basically, yeah, YT. ⁓ Because if we have a KYC implementation and we have a << Jason Kam (25:20)>>: the YT. << TN (25:29)>>: like a DeFi implementation, right? Like there could be arbitrage opportunities that exist between these two implementations. And then someone in between can up the markets and make the offerings more competitive. << Jason Kam (25:46)>>: Interesting. Okay, so do you expect this thing to be big at all? Or is this kind of, know, second to all the other things that are, that's happening? << TN (25:56)>>: I think initially the traction might be slow because people are just too used to DeFi and then without having to do any kind of KYC and then participate in markets. So until we find, I think to be fair, there is a lot of potential for a product like this, but it will have to go through a PMF search period. So the initial traction is likely going to be relatively modest and once we are able to find like a specific use case for this particular product then the growth can accelerate. << Jason Kam (26:36)>>: Okay, well in a sense you're relying on Ethena sort of program the iUSDe and the institutional adoption and sales. So the ball might not be in your court. Okay, I understand. I wonder which one I should ask first, but maybe let's do it this way. Why don't you walk me through how Boros works and not, I kind of know how it works. You pay fix, you get floating, you pay floating, you get fixed. But would it be like the centralized exchange kind of order opening kind of way or would it be like a like if I'm an institutional user, right? What would I? What would it look like? Do I have to deposit TVL as a notion as like a collateral and then I have notional attack like how that look like in terms of operation flow? << TN (27:15)>>: Mmm. Yeah, yeah, sure. So yeah, I would think of Boros not too dissimilar to a perp. So if you want to set up a position on Boros you would have to deposit collateral. And then with the collateral in place, you can long or short the rates. So the first use case for Boros is going to be the trading of funding rates. And we'll start with very vanilla markets on Binance. So the BTC USDT, ETH USDT markets. the rates will have to be published on chain by an oracle. For example, like Chainlink or Pith. at the end of every funding cycle, when the rates are made available, then the settlement will take place. Now, so just to give an example, right, using Ethena on their specific use case. So currently they would long spot short perp and then their subjective funding rates exposure. This funding rate at this point in time is very volatile. Now, so when there is boros and let's say the funding rate is good, 10%, 15%, they can deposit collateral on boros ⁓ and then they can short the yield on boros for, let's say, until maturity. And then what that means is whoever takes the long side will have to ensure that Ethena continues to receive the fixed amount of funding rate. let's say 10 % ⁓ between the point of entry until maturity. << Jason Kam (28:56)>>: ⁓ And the payment happens based on when the funding rate is calculated. << TN (29:03)>>: Correct. So the settlement, let's say the market settles every eight hour. It will also be the case on Pendle. << Jason Kam (29:07)>>: Yeah. How much leverage would one be able to implement? << TN (29:15)>>: So we initially will start with something that is a lot more modest, like say two times, but eventually we will definitely increase it. But it largely depends on how comfortable we feel about the system and then we scale gradually. So to give some examples, ⁓ we estimate in order to hedge out the funding rate exposure of a million dollar worth of position. whether it's like BTC USDT or ETH USDT, the amount, and let's say three months maturity at 10 % APY, the amount required is approximately $15,000 because we're considering just the rates alone, independent of the underlying. So the capital efficiency, I think is one of the more important propositions we have with Boros. And then if we couple that with higher margin factor, << Jason Kam (29:57)>>: Yeah. Yes. << TN (30:12)>>: it can go even more efficient, but it's not going to be available immediately. We will have to use a couple of months to try to scale the system. And once we hit a sweet spot, then I think we can be more aggressive with the offerings. << Jason Kam (30:25)>>: Sorry, just so I understand, like a million dollar notion of position over three months, it's 5%, right? So it's like $50,000. You're saying that I can get the same level of interest rate exposure on bars for $15,000 effectively for the whole million. Okay, because the rates just doesn't move. Okay. And that will be enough to kind of hedge, but if it really moves violently on top of more collateral, but it could get blown up very quickly. << TN (30:43)>>: Correct. Yeah, for the whole million. << Jason Kam (30:55)>>: Interesting. Okay. And what kind of collateral would you accept? Would you accept, yeah. << TN (30:56)>>: Yes, yes. It will be very highly related to the market. Let's say if it's a BTC USDT market, the collateral, the preferred collateral would actually be say, wrapped BTC. << Jason Kam (31:20)>>: It'll be a wrapped BTC Okay. Would you? << TN (31:22)>>: Yeah. Or, or let's say if the market is ETH, then like it will be ETH. << Jason Kam (31:28)>>: Got it. Okay. But would you also accept, you know, things like sUSDes collateral or, you know, or PT es collateral? Yeah. Okay. << TN (31:36)>>: Eventually, Yeah, eventually I think like we can also definitely consider like more, a broader variety of assets, especially if they are like USD denominated, then I think there is a potential for us to consider those. ⁓ But again, like it's not going to happen day one. ⁓ We try to make the collateral to be as closely related as the market that's getting traded. ⁓ stable coins will also be considered but the long tail stable coins I think like it will be something after. << Jason Kam (32:14)>>: Yeah, and how do you charge for something like this? The users who open up a position. << TN (32:22)>>: Yeah, so there will be maker taker fees, ⁓ exact details to be decided, but that would be the primary, yeah, that would be the primary source of revenue stream for, for Boros. And then on top of that, there will also be a component where you'll get, ⁓ charge as well. similar to the YT fee that we talked about of the fees that are sorry, of the yield that gets treated, like a percentage of that will be extracted. Bye, bye, Boros. << Jason Kam (32:54)>>: I see. And just to understand, because there is Oracle rates of the funding rate that exists. and that's the rate that gets traded here. It can deviate versus the Oracle rate that is live because of the just bid ask position. And that difference that Delta creates the funding in that period of time between the sort of the buyers. Okay. Okay. and << TN (32:59)>>: Yes. Yes. Yes. Yes. << Jason Kam (33:22)>>: And you make your own markets or would everybody be treating against like a pool of LP caps? << TN (33:27)>>: So it will be an order book. we will have actually multiple ⁓ ways to bootstrap liquidity. So firstly, we will be running a bot just to make sure that we have sufficient liquidity, baseline liquidity to get started. And then we'll also be engaging a market maker at least one to launch this product with us. ⁓ We don't have a lot of experience writing an order book. We have some experience with V2 limit order order book, but with something that is as new as Boros, we require external help. So that's why we need the market maker to come on board with us. And then the last aspect is actually to have an automated market maker that distribute << Jason Kam (34:08)>>: Yeah. << TN (34:20)>>: liquidity across the book. So let's say if you're someone who might not be too sophisticated and you don't know how to place order, whether long or short, but you can just put your money with this vault and this vault will automatically distribute the setup positions across the book. ⁓ So yeah, hopefully it generates like positive return. << Jason Kam (34:40)>>: Mmm. Yeah, and on day one when you launched this, I guess in your mind, what kind of a notional position size should one expect to be able to open to hedge or to speculate? << TN (34:57)>>: Bleh. I would think at the range of let's say like 400k to 600k for a start. Yeah. Notional. Notional. Yeah. Yeah. << Jason Kam (35:08)>>: Notional notional or collateral notional. Okay, that's not that big Okay, but what's your goal in mind like ha ha because I mean some of these guys have you know Five ten twenty eight million dollar position open on like block. They probably want to hedge the funding with a similar notional Like when do you think can get there? << TN (35:24)>>: Yeah. Yeah, so hopefully by the end of the year we can service 40 to 18 billion dollars of daily trading volume. Notional. << Jason Kam (35:39)>>: OI open at one time at the end of the day. Okay. << TN (35:41)>>: Yeah. << Jason Kam (35:48)>>: By the end of the year, how would that, let's say if you get there, right, by the end of the year, every day there's like a 50, 40 to 80 million of OI being opened. Or just opening, it's just there. I'm guessing you'll be charging fees on that OI that's outstanding. How would that translate to revenue or fees to the Pendle Protocol? Like if you can just bridge that for me. << TN (36:04)>>: Yes, yes. Yeah, by our very early estimation, it could probably translate to about like $2 million in fees. ⁓ << Jason Kam (36:20)>>: Okay, so if a $40-80 million OI is maintained throughout the entire year, it would translate to about a $2 in revenue. << TN (36:30)>>: Yes. Yeah. << Jason Kam (36:31)>>: Okay. And this would be on a much smaller collateral base, like 40 to 80 million. Based on your math, it would be like, I don't know, a couple hundred K of collateral being put down. << TN (36:43)>>: Yeah. << Jason Kam (36:45)>>: Okay. Interesting. Yeah. In your mind, this like a, cause this is just this year, but like, what would the kind of metrics this have to do to make you happy? Cause you spent all the effort here. is this, do you start this effort because you feel like the TVL for Panda would self hit the plateau? << TN (36:46)>>: Yeah, not too big. Yeah. Yeah. << Jason Kam (37:10)>>: Or do you feel like this is the next leg of growth that really catapult the revenue? Like in your mind, how are you thinking about the revenue potential here over time? << TN (37:19)>>: think the revenue potential for Boros is very substantial because the amount of products that can be traded on Boros is not confined to just funding rates. And we start with funding rates because it is a concept that is quite like that, that, that, is quite native to CeFI and DeFi and people who are already like who forbid in crypto space long enough with no funding rates quite well. So I think from our very early days when we were deciding between the different markets to focus on. Funding rates appeal to us because every day there's probably two, $300 billion of debt, ⁓ like per volume, and every single one has funding rate exposure. And funding rate also powers protocols like Ethena and Resolve and many others. So we think there's an opportunity for us to service this category of products. ⁓ But on top of that, there's also opportunity for us to use the same instrument to enable the trading of rates for POS staking yield. For example, like ETH staking yield, those are fairly essential, but they are not very meaningful if you were to trade the rates on V2. Like we've had stETH market, but because the band of fluctuation is so small, typically in the range of 3 and 4%, you need a big, big underlying in order to make meaningful return for something that fluctuates between 3 and 4%. So the capital efficiency is actually very important for rates of that kind. And we think Boros can serve this ⁓ product category. Similarly, the same product can also be extended to borrowing rates. Because right now, I don't think there's a very scalable way to trade fixed borrowing rate. Um, or yeah, there are markets there, but they're typically more P2P. Um, so, so I think Boros can also service that market and then eventually if possible, we'd like to see how we can use the same product to service use cases outside of DeFi and CeFi. So it could be a unique and niche rates, but I'm sure we can find something if like interest rate is, is, is a big market of six, $700 trillion. << Jason Kam (39:21)>>: Hmm. << TN (39:48)>>: Yeah, that's like I'd say like a slightly longer term goal, but we strive with something that we're familiar with native to crypto. << Jason Kam (39:49)>>: Hmm. Hmm This is still a At least because I have to really play with it to understand but this is a pretty complex instrument because it has to do with Because it has a maturity to any sort of tranche. There's a eight-hour settlement period You're not really just long the spot price. You're kind of long stripe strip of you know interest payments kind of over time I guess aside from people who are speculating based on inside information like, oh, this is happening, like it's going to absolutely  Aside from those people, who are the natural participants for this market, you think, that will contribute to that $40 billion that will go away? << TN (40:35)>>: Yeah. So I think there are a group of hedgers and a group of speculators. In the beginning, I believe the more sophisticated retail who are speculators would be the primary target audience. But eventually, once we get to a certain scale, then the hedgers would most likely start to take interest in the product. with speculators, it's fairly, sorry, it's like speculators are speculators. If there's money making opportunities, then they would be interested in the product. So how we need to appeal to this group of users, I think it would largely revolve around packaging and how we appeal to them. So one good thing about funding rate is that the feedback cycle is actually fairly short. So let's say if you have a view that the BTC USDT market funding rate would go up in the next... eight hours, you can actually express a view using Boros. You don't necessarily have to stay on until the maturity, even if it's like five, five months, six months away. So as long as you have a view that is going to go up, long it. And then once you're, once you're in the money, you can realize the profit. So this is, think one of the main reasons why we wanted to support funding rates, because whether it goes up or it comes down, there are money making opportunities for speculators to take advantage of. And then going to the hedger sites, I think the first category of users would be, yeah, like say the Ethena and Market Makers, they have Delta neutral positions, long spot short perp, and then they are subject to funding rates. If they short it, they can ensure the amount that they receive. And then on the other side, the natural longs, as far as we're concerned, << Jason Kam (42:05)>>: Hmm. << TN (42:33)>>: We think options desk could potentially be a very suitable group of users because when they sell options, would have to hedge by longing PERP. So they are typically the payer of funding rates. If they log in on Boros, they are basically logging in the amount that they pay. So they are less susceptible to the funding rate volatility. So with this product, we hope to bring about two types of hedgers. alongside many, different speculators to find a consensus in the market. << Jason Kam (43:12)>>: Hmm. It's a very interesting product. It's necessarily more complex actually than the perp that we're used to. So I would imagine in the first couple of months when I trade, it's like people are going to get fleeced, know, aping this way. << TN (43:25)>>: I so. I think the first couple of months we don't have to focus too much on metrics. We will keep a score of our progress. But the core effort coming from us has to be on helping users overcome that learning curve. So a lot of educational efforts and a lot of one-on-one sessions with funds or hedge funds that could find usefulness in this product. I think this is something that we learned when we were building V2 in the early days. We, because we're based in Singapore, and fortunately for us, there are quite a number of liquid shops and hedge funds in Singapore. We were able to reach out directly to these funds, schedule a one-on-one session, and then help them understand the proposition of Pendle V2. In the same way, I think we'll have to go back to that very, very basic stage of helping our potential customers and users to understand the product. And then from there on, we hope to be able to accelerate our growth. << Jason Kam (44:30)>>: Do you expect that sort of 1 to 20 to 1 to 40 type of fee ratio versus OI to maintain as you scale up the OI? Because like 40 to 80 million of OI maintained throughout the year translates to 2 million dollars of fees. But if it's like 400 to 800 million of OI, is it then 20 million dollars of fees? should it go up or down? << TN (44:55)>>: At this stage, I think it will be fairly linear. I think we'll have to see if that happens. That will be a good problem to talk about. << Jason Kam (45:09)>>: I guess eventually you're going to go into alts as well aside from the Bitcoin on buy-ins kind of thing and you also talked about staking and other sort of esoteric markets. How soon do you think you will be doing those things after the logic bars? << TN (45:16)>>: Yep. Hmm. I want to say it's fairly hard to give a timeline for the, so, so because a lot of it really depends on how, how the risk system is. Cause like when we're, when we're dealing with ⁓ a product that, that involves margin liquidation is typically a big risk consideration on top of that, like the entire product is going to be fully on chain. << Jason Kam (45:32)>>: Okay. << TN (45:56)>>: So there's also like contract considerations as well. We need to be able to manage these two components effectively before we feel comfortable scaling it up more aggressively. So we'll have to start with the very vanilla markets and then over time as we scale up, we can support more markets on let's say Binance and then at the same time, more different venues. once we, yeah, I don't know, like hopefully not too long. << Jason Kam (46:24)>>: Yeah. << TN (46:25)>>: Hopefully not too long. << Jason Kam (46:27)>>: If the liquidation of, because there's so many ways to go wrong, right? That the funding rate could be manipulated. Not that it's pretty complex, but let's say if it does goes through, let's say if liquidation does happen and you're left with a hole with collateral, who, who puts the bill of hole? << TN (46:48)>>: So we as much as possible have to prevent that from happening. So there are multiple different safety procedures that we have in place to basically prevent that from happening. We don't ever want to get to a place where there's a bet debt and we need to service the bet debt using our own resources. So like kill switch, that's like the baseline. And then we will have to have automated systems to detect when there is a liquidation event that's happening. instead of like, so one of the things that we have in place is to have a maximum amount of, let's say rates movement. So it cannot go from, let's say 10 % to 1 % in a single block. has to go from say 10 to nine to eight in multiple different blocks. Just so that our system has time to respond to these events. So these are, I'd say like, we have a couple of that. ⁓ mitigation and precaution measures that we will introduce with the launch of Boros. And then we'll also have new concepts like margin floor that will be very specific to Boros. << Jason Kam (48:10)>>: But let's say if the worst case scenario were to happen, you'll be selling $pendle to pay. << TN (48:16)>>: In the worst case, maybe yes. << Jason Kam (48:20)>>: So we kind of talked about two efforts that could really drive, I mean, pair of pursue everything being the same. Four billion of TVL could transfer to 30 million of revenue now. It could be 50 to 60 if you lift the tick rate over time slowly, with two million in addition to borrowers if it all goes well. I guess there's something else I want to ask about, is Solana expansion and TradFi effort. Do you feel like that would be a good driver at all for you? And if not, then is there anything else that really excites you? << TN (48:52)>>: Sure. So with Solana, like it's an ecosystem that we've been looking at for quite some time now because Solana traction is very, very meaningful. And we're definitely very impressed by the growth of the ecosystem in the last two years. We will actually start with Bridge PT. So basically minting PT of ⁓ the likes of Ethena or specific assets on Ethereum and then bridge over to Solana and have it ⁓ available for purchase or sale on Solana natively. The full implementation will take place a bit further down. So that is actually part of the V2 expansion that we still haven't disclosed too much info, there are... So how we're thinking about expansion is... ⁓ Now we have V2 and then we're going to have Boros. So Boros is the new product that we're launching, but we also need to take time and effort to research and develop the like V2 and make it even more compelling a product. Like V2 is not going to be the end state. ⁓ The current implementation of V2 will have to undergo improvements and that will be something that we potentially look forward to next year. ⁓ So with Solana, that is part of that expansion plan. << Jason Kam (50:23)>>:  so, so... Got it. So like maybe some swap fees on PT, on Solana,  but not sure how big. Full Solana rollout with like, I don't know, like Cloud and, know, Penta, Huma and those things would only happen next year, basically. << TN (50:45)>>: Yeah, with Huma, actually, we are exploring ways to enable the rates to be traded. So that is under work, but it's not going to be like a Pendle full deployment on Solana. First, we will have to maybe do some form of bridging to enable the markets to move across, ⁓ say, Ethereum and Solana. << Jason Kam (51:11)>>: ⁓ So then that leaves us with the Trashby Institution adoption. I guess you don't expect a lot to drive too much of your revenue. ⁓ What about TradFi Is that a big driver? And if not, then is there anything else we haven't covered that really excites you in the next couple of months, of course? << TN (51:28)>>: Hmm. Yeah. So, so again, I, I'm not so sure about the TradFi I think this, my sentiment was, something that I, that I also mentioned earlier. I think the growth would be relatively modest in the beginning, but it is an important vertical for us to, to, to start getting involved in because I, I just think in the future, maybe not too long from now. There will be opportunities in the real world asset segment. And I'd say like quite a bit of real world assets like tokenization would involve some form of institutions, KYC. So those are the hurdles that we need to overcome in order for us to fully capitalize on opportunities with that particular segment. Right now, while we still have some time and resources, we need to start going in, but we might be very early for these upcoming opportunities, but I think it's better to be prepared and be okay with low traction for maybe a year or so. ⁓ And hopefully they result in meaningful return subsequently. << Jason Kam (52:42)>>: So not much from TradFi but important effort longer term. ⁓ Is there anything we haven't covered that really excites you? << TN (52:47)>>: Yes. ⁓ I think we've chatted quite a bit on aspects that excite me. I want to say, I don't know how to express this, but I feel pretty good about Boros. ⁓ But again, << Jason Kam (53:12)>>: Hmm. there's something, there's something in there because like, ⁓ there's a hurdle of nothing blows up and this is a very different product than Pendle itself. Exciting product. ⁓ there must be something in there that gives you the hunch that the optionality of this revenue potential, it's far bigger than the sort of $2 million guidance you kind of just gave. ⁓ what is that optionality you think like? << TN (53:37)>>: Yes. << Jason Kam (53:40)>>: Is there something that you talk to clients about that they're like, this makes you feel like this is really going to pop? Like what is that? << TN (53:48)>>: So I think 40 to 80 million dollars. again, I don't know how to explain this, but I think there is a fair shot that it can do a couple of billion dollars in trading volume a day. So maybe in two years. << Jason Kam (53:55)>>: Sure. A couple billion dollars of notional, unnotional. << TN (54:06)>>: Yeah, yeah, yeah. So it's going to be a pretty big leap from the 40 to 80 that we estimate for this year. And I think the, yeah, the addressable market is what excites me first and foremost. And because of that, the revenue potential I think can be quite immense as well. << Jason Kam (54:29)>>: I suppose it is because the per market is such a sizable market and the funding rate remains something that people just take but have no way to hedge out over extended period of time and by talking to all the traders who kind of Want to pay a small like they kind of want to just hedge it you feel like the opportunities there is going to create a tool for them interesting You ⁓ << TN (54:41)>>: Yes. << Jason Kam (54:55)>>: I guess it's complex enough you don't feel like the hyperliquids of the world would just steal it. << TN (55:00)>>: It's a very different product because like the system required is going to be very different. We're like, this is, this is, would say like the distinction is fundamentally similar to how we perceive rates to be traded on a Pendle AMM. And let's say like a spot asset on Uniswap because the, the, the underlying that we're dealing with are just different. So the AMM. at least in the case of V2, is denominated very differently. So when we construct Boros, it's also like we have concepts that are inspired by futures and perp markets, but effectively we're dealing with very different products altogether, very different kind of asset altogether. So the construct would be very different from the current set of perp. << Jason Kam (55:55)>>: Interesting. I know it's not a fair question, but how do you bridge the 40 to 80 million of OI throughout the year to like a $2 million revenue? Like, what's your mental math there? << TN (56:10)>>: I'm just thinking, even if we don't have any, like, let's say like the trading activity. Okay, so the 2 million was largely based on the fees that we extract from just having that OI in place. No frequent trading activities. taking aside that swap fees. << Jason Kam (56:34)>>: Got it. ⁓ Sorry, it's a tick rate on the taker or the maker plus the small tick rate on the yield of whatever percentage and then those combined maintain throughout the year. Okay. Well, it would be a good to bridge. think I'm sure investors will ask about it later on. You'll have to do a dashboard, I'm sure. Okay. Okay. And then how do you... ⁓ << TN (56:49)>>: Yes. Correct, correct. Yeah. Yeah, yeah. << Jason Kam (57:06)>>: How do you fund your operations today? You have a big treasury, you sell tokens, how do you fund it? << TN (57:12)>>: Yeah, so we've been fairly lean. have been, so we raised some money in 2021 and 2023 through OTC rounds. So we're still running on that. We will be turning on a fee switch for a Pendle V2 when Boros goes live. So that means instead of distributing a hundred percent of the fees back to vePENDLE holders, we will be extracting 10 % for team. operation and at 10 % for ecosystem growth, that should allow us to be sustainable already. << Jason Kam (57:49)>>: Got it. Got it. Okay. Very cool. So, so, so whatever number I have projecting forward, you know, like 30 going to 50 to 60 plus two, I'll multiply it by 0.8 or something. That'll be what's going to be vePENDLE. Okay. Makes sense. Very good. Um, I don't have any other questions unless members who do let us give you three seconds. << TN (58:03)>>: Yeah. Yeah, correct. << Jason Kam (58:18)>>: I don't think there are any. ⁓ Well, TM, thank you so much for your time. This is really helpful. Pretty exciting. << TN (58:25)>>: Yeah, thanks for having me. Thank you. << Jason Kam (58:28)>>: Thank you.

TLDR In this episode, Jason interviews Smokey, co-founder of Berachain, discussing the innovative BoyCo program, the dynamics of the TVL and the implications of the $BGT and $IBGT tokens. Smokey shares insights on market performance, future initiatives to drive economic activity, and the cultural aspects of the Bera community. The conversation highlights the importance of user engagement and the potential for Berachain to evolve as a significant player in the blockchain ecosystem. CHAPTERS / TIMELINE * 00:00 Opening * 01:02 Introduction to Berachain and BoyCo * 04:04 Understanding TVL and Bera Token Dynamics * 07:03 The Role of $BGT and Market Behavior * 10:07 Investor Perspectives and Market Pressures * 12:54 Future Initiatives and Economic Activity on Berachain * 31:21 Engaging the Community: Power Users and Protocols * 33:34 Incentivizing User Actions: Beyond Passive Liquidity * 35:56 Gamification and User Engagement Strategies * 37:14 Tokenomics: Rethinking $BGT Emissions * 40:57 Building Protocol-Owned Liquidity * 44:10 Growth Strategies: Expanding Application Ecosystem * 46:26 Cultural Dynamics: The Role of Community in Success * 57:16 The Search for Viral Moments: Driving Adoption TRANSCRIPT << Jason Kam (01:03) >> All right, we're live. Welcome to another episode of BidCast. I'm your host, Jason Kam, AKA Maple Leaf Cap. Today is May 5th, 2025, 1 p.m. Hong Kong time. BidCast is being live streamed with BidClub members. Questions are from the members and my own. Today I'm speaking with Smokey, the co-founder of Bera Chain. Smokey, welcome.   << Smokey (01:24) >> Hey man, thanks for having me.   << Jason Kam (01:26) >> Yeah, good seeing you in Dubai. It was fun. Well, here's an important question to you just to get us started. Tell us about the boyco and how it came to be. I think it's got, you know, two and half, three billion of TVL and the unlock for the Bera chain token is coming soon from it, a 10 million of it. When is that coming and what do you think happens to the chain afterwards? Maybe let's start with that.   << Smokey (01:50) >> Yeah, you   got it, Yeah, so a couple things. To answer your first question, think Boyco came as bit of what I think is somewhere between an improvement and I guess a spin on some of the existing pre-launch programs we've seen done for different chains. We've seen everything from having a chain or an L2 live without a token for a number of months and sort of trying to incentivize TVL on different applications. We've seen people incentivize bridge deposits, et cetera.   We didn't think that either of those are the right move. ⁓ we fundamentally very much view Bera Chain as a leverage bet on the application layer, right? If one was to sort of put Bera Chain in nutshell, it really is an accelerator for the app layer. And with that, we said, okay, well, what is the way that we can give the applications on the chain the absolute best chance of succeeding from day one? And I think that part of doing so is helping them bootstrap initial capital, right? And I'd argue it's more important for those third party apps on the chain.   to be able to do so than for us to be able to say, okay, yes, we've got this much dead TVL on a bridge. So that was the concept of Boyco, per se. And to answer your question, that capital or some portion of that capital, should say, and those Bera tokens will be unlocking in about one and a half days. So on Tuesday morning, EST, so not too far out now, what do I expect happens? I think a couple of different things.   I think that we probably see some of these positions roll over from these standalone vaults that were generating Bera tokens into yield earning or yield bearing strategies and in $BGT across the chain. I think we see a bunch of dead TVL or very mercenary capital bridge off the chain. And I think we probably see the chain revenue to TVL ratios ending up regulating a fair bit. Yeah.   So I think on one hand, I'm sure I will see a bunch of threads on Twitter that are like, fair change, TVL just fell in half or something of the sort and a bunch of exclamation marks and thread below emojis or something. But I also think I'll see very little change to the actual application layers and builders in the case of the TVL that didn't really matter.   << Jason Kam (04:04) >> Mm.   Do you feel like, ⁓ I guess there are two parts to this. There's the, what are those TVL doing currently? Are they ⁓ going to straight out, you know, exit their $BGT position? I guess they can't. And then the second thing is after this unlock and then the TVL sort of moves over, ⁓ do you expect them to outright sell the Bera token to get, or do you think it's already hedged?   And do you expect their behavior in the sort of TVL out provisioning be any different? Are they going to keep on sort of providing TVL on dumping or do you feel like the ones that leftover are a bit more or a bit less mercenary than before?   << Smokey (04:49) >> I suspected the ones that will remain are a little bit less mercenary than the initial groups. ⁓ I think that as a rational actor, I have to assume that every single token that is given out will be sold. That being said, there's obviously work that we're doing to ensure that ⁓ transition is done smoothly. ⁓ So basically, would say that we've actually set up a set of rollover vaults, if you will, that basically allow people to say, hey, I was in this position and I can...   know, zap over to that position. ⁓ Or hey, I've just gotten these Bera awards and now I can like deposit them in protocol X, Y or Z. ⁓ So yeah, I think we're trying to make it as easy as possible for people to take the rewards they got, or take their existing deposits and find something productive to do with them. ⁓ But you know, I always have to plan for assume for the worst case scenario.   << Jason Kam (05:43) >> And from your conversation with the largest TVL providers, do you feel like the hedge at the head of time or do feel like the heaven and they're just... I'm genuinely curious what those people are thinking right now.   << Smokey (05:56) >> I think that there's probably a meaningful amount that are hedged, especially for the more sophisticated LPs, but I cannot say for sure, you know?   << Jason Kam (06:05) >> Do you expect more boyco like structures in the future where you inflate more Bera tokens for TVL provisioning or this is kind of a one and done type of deal?   << Smokey (06:16) >> I think that there will be, I don't really expect to do that kind of a program in the future. I think there's definitely some good lessons from this. I think that on one hand, I think that we were able to draw a bunch of attention to good applications. And I think that it certainly gave them a bit of firepower and in some cases some of the best rates on swaps or borrow slash lend on ETH, et cetera.   But at the same time there was also capital that wasn't the most effectively used that we ended up subsidizing, right? So I I don't love that part I think that if we were to do anything in the future if we were to do it again It would be much more focused on majors, but I don't think the focus would be on TVL I think it would be a focus on you know, productive capital. There's natively fee generating   << Jason Kam (07:02) >> I feel like a this is why I kind of want to get you on this and talk you through the talk through this a is for my learning but but be ⁓ The price word today actually makes this very interesting which is one can perhaps make the argument ⁓ a large part of the Bera ⁓ Is hedged or if it's not maybe the hedges roll off? ⁓ This will be There will be like eight to nine months where there will be no more Bera emission   And ⁓ on Ethereum it's unlikely that the $IBGT or $LBGT of the world would be becoming a Bera So you have this asset that hopefully will have no net emission. The unlock that prevents people from getting involved is now gone. So you have this lease of life, so to speak, to really ramp up the protocol. ⁓   Am I thinking about the emission the right way or am I missing anything in the middle that could really change the supply-demand structure?   << Smokey (08:06) >> No, I mean, I think that's quite directionally correct. think that the thing to keep in mind, of course, that there are generally emissions is that we are an L1. in the case of proof of liquidity, you're very much fundamentally renting liquidity and network activity with those emissions as opposed to security as you would in a standard proof of stake chain.   So, but yes, I think that you've got the mental model correct. There's no other, you know, unlocks. There's nothing else hitting the market apart from just the general, you know, block rewards.   << Jason Kam (08:40) >> And before we get to the cool things that I'm sure you want to talk about, the new developments, I just want to get a... It took me a bit of time to get up to speed on what's going on in your chain. It's a little bit of a new concept for me. Maybe just some clarifying first and then we'll dive into the PDF for center growth. All of the emission happens in $BGT, correct? There's no emission in Bera. And...   << Smokey (09:05) >> Yep, correct.   << Jason Kam (09:09) >> The only form of liquid, like if I'm staking Bera outright, I would get $BGT, but that's not sellable unless I convert it one-to-one to Bera. But $BGT currently trades at a premium, so a rightful economic actor shouldn't be doing that.   << Smokey (09:24) >> That's   Yep, you've got it. I think a long-termist or rather an economic actor who's thinking about maximizing perhaps their yield potentials would likely say, I'm going to hold my $BGT. I'm going to delegate and or boost it to a validator and earn somewhere between 200 and 1,000 % yields. And then I'm going to perhaps in the future convert to Bera LP it, do whatever I like with it after.   << Jason Kam (09:52) >> And then the $BGT premium manifested through $IBGT and $LBGT created by Infrared and the other protocol, I'm forgetting. It's currently at a 30 to 50 % premium, is that correct?   << Smokey (10:07) >> Yeah, yeah, exactly. It sort of trades at Bera plus some future facing value of the bribes and or incentives I'll be going towards $BGT over time.   << Jason Kam (10:16) >> Yeah, and you would feel that that is the major source of driver to their premium that $IBGT has.   << Smokey (10:24) >> Yeah, I'd say that and of course some degree of implied value of that liquidity in that you're maintaining the optionality of having that $BGT, which is always redeemable for one Bera, along with the future-facing value of whatever might come towards it.   << Jason Kam (10:39) >> Why would anybody own $BGT versus the liquid portion, liquid parts of   << Smokey (10:44) >> Yeah, mean, great question. I think that you have a lot more control over what exactly you can do with that $BGT if you own the naked $BGT. And that notably, each validator has a different yield profile, right? And there's many cases where there's a validator and they'll have like, know, 500 % or 1000 % APY, while a, you know, given $IBGT or $LBGT type derivative will have, you know, fractions of that, Given especially the scale of some of those protocols as well.   So I think that there is value in being able to have that. At the same time, certain validators on Bera Chain will basically choose to accept incentives and or direct their emissions towards different protocols that may in turn give them incentives in the form of different tokens. So some groups might basically say, hey, I'm just going to profit max and I don't really care what like what tokens I get as long as I can liquidate them for max profits.   Others might say, hey, I'd rather stack Bitcoin or I'd rather stack stables and be much more selective with that. And of course, in the future, as we move towards fully on-chain governance, we do expect those holding $BGT to have a greater role ⁓ in actually being able to guide the network's decisions. But I'm not going to pretend that people care about governance to start, at least. I think that that has been a bit of a meme in many cases. But I do expect that role to evolve over time.   << Jason Kam (12:11) >> I see. So it seems like the difference is future potential benefits and incentives going to $BGT stakers ⁓ has additional governance step ⁓ for that incentive to go to, let's say $IBGT owners. It's not like, okay.   << Smokey (12:28) >> Yeah,   yeah, like I think that that's it's, that's partially true. It's also just like you have a greater degree of choice when you own naked $BGT than when you own $IBGT because in the case of $IBGT or $LBGT, you know, it's it's it's Berapaw or Infrared, choosing where your where your tokens are being delegated. As in, you know, which validators your your your $BGT is being staked to. In the case of having naked $BGT, it's it's it's sort of, you know, your call and   << Jason Kam (12:54) >> Got it. In a sense, it's a very clever mechanism. I want to spell out a little bit because ⁓ for most of these chains, the initial emission comes out and it's just nonstop dumping by every other actor. But in this case, it's cleverly circumvented as the initial ⁓ inflation comes in the form of $BGT. And because of the bribes dynamics, the high yield props up the premium.   ⁓ and actually gives people incentives to own and purchase $BGT. So, ⁓ supposedly speaking, Bera should not be negatively impacted by any of these inflation. What we have seen, however, is a bit of a different dynamic, which is you can blame it on potentially market conditions. But why do you think, like I would have thought Bera would have performed better? There are a couple of reasons in my mind of why that might be.   I thought it could be because of the Boyco unlock. ⁓ I thought it could be because of the dynamics where all the Mercenary Actors are ⁓ max long $IBGT and then shorting and hedging Bera on the other side. I could see the reason of potentially no natural buyer of the token because everybody's kind of owning the $BGT to yield farm. ⁓   I guess it's not a fair question because you don't control the market, when you're strategizing the team and thinking about the price performance, ⁓ what do you think you could have done differently? Why do you think would have cost this price action that we see today?   << Smokey (14:30) >> Yeah, I mean, a couple things. I think that you've hit a number of the potential points. ⁓ And I think that they each have different degrees of truth, right? For example, you know, the long $IBGT or long BGG derivative short Bera trade is an idea that's been thrown around a lot. Sometimes it ends up being invalid just because like the funding rates on Bera have been pretty aggressive in terms of shorting, right? So, you know, unless you're willing to play that out for six to eight months, let's say.   << Jason Kam (14:51) >> Yes.   << Smokey (14:57) >> It can end up being a pretty tricky trade to throw off, not to mention that you really can't get any form of size into $IBGT as of yet. Though of course it's great for your retail trader that's thinking about throwing in a 100k or 500k or whatever it might be. I also think that like, you know, a couple things. One is that we found that for a meaningful period of time, there's still a fair bit of balance on exchanges from, you know, the Binance Launch Pool Program and presumably the initial airdrop.   that has very much tapered off towards the last couple of weeks, honestly. And I think that beyond that, if I was to be as bold as to say this, I would say that we are one of few protocols this year, or few protocols in the last few months, that has not scammed our launch, if I'm to say that relatively bluntly, in that we do not have a three-thread insider supply of a bunch sitting with   bunch of people are in one spam wallet. There's actually tokens in circulation. And that means there's tokens for people to sell. ⁓ And that's bit of a gift and a curse. I think a couple other things sort of slung away. ⁓ One was I think that as we transition from sort of like lighter stage, or what I should say is like, you know, the first form of POL, which is just pairs within the becks or native DEX, to sort of like a free for all. I think that we took the reins off that a little bit too quickly.   in that we opened it up to all these pairs that might not necessarily use Bera itself. And on one hand, that was great because it meant that there was lots of bribe revenue going towards $BGT and more and more incentive for people to hold $BGT. But it also sort of did not balance that equation effectively in terms of having enough reason for people to say, okay, yes, I'm going to hold the Bera token. Right? So I think that that equilibrium was not effectively reached in the first place.   And I think that that's something we've actively spent time and effort working on over last little while.   << Jason Kam (16:56) >> And this is also speaking on behalf of potentially other ⁓ Bera holders, just to clarify. ⁓ Do you guys crime and have you OTC any tokens yourself?   << Smokey (17:07) >> have sold zero tokens in any which way. know, no, and that's to, you know, like saying no, no, what's the right word? I'm not trying to double speak in any way. So it's not like, oh, I have an OTC, but I've, you know, sold through a market maker. Like, no, like they're, you know, myself and, you know, our team members have done nothing of the sort. No crime, perhaps not enough crime, honestly. Like maybe the crime was the answer. But I think that we're happier this way.   and are down to play a long game and sleep well at night in terms of legal and moral risk, if you will. We've had a of people ask us about stuff, but honestly, I think we've done things quite by the book, perhaps too by the book in some cases, and that's fine.   << Jason Kam (17:49) >> Yeah,   if anything, sort of large giveaway of Airdrops without any logging definitely contribute to the selling pressure over the first couple months.   << Smokey (18:00) >> Yeah, I mean,   100%. And like, look, there's lots of stuff that is on us that we could have done better too, right? And I'm the first person to, like, I believe that if you're gonna eat shit, don't nibble, right? I think that one of the things that we allowed to happen was sort of like this, like, know, Bera as a farming chain narrative to exist. And I think that we'll see more and more of that dissipate over time. But I think just given the DeFi heaviness and the DeFi focus and the ecosystem, and the fact that people could potentially even earn $BGT without having a $BERA   It's just like, okay, yeah, I'm gonna go farm on bera, right? ⁓ Interestingly enough, this really hasn't translated into as much of the market pressure as people might think. And that like 80 plus percent of ⁓ $BGT is still actually not redeemed and is just in the form of $BGT, either in LSTs or on the market somewhere else. ⁓ But I can understand why it can contribute to that image of like, okay, yeah, this is a chain for farming.   << Jason Kam (18:56) >> And the VCs receive, like the investors, ⁓ they're staked. I guess the unvested Bera positions can't be staked, but they earn $BGT. Is that correct? Okay.   << Smokey (19:04) >> Yep. Correct. That's correct. Yep.   They're in $BGT and notably, I think like at one point, we were getting a lot of flack for investors taking and I understand that. think, you know, again, hindsight is 2020. But we also raised our first round in, you know, in early 2022, when this was pretty much, you know, the standard operating procedure. So I think that what I can say is that the vast majority for blocker awards   do not go towards validator staking slash, know, Bera of stakers alone, they go towards protocols, participating in proof of liquidity and those vaults as a whole, right? So even though there is a staking rate for insiders, if you will, I do not believe that that is a contributor really to market action and also kind of very much aligns because we have every investor's wallet and knowledge of their selling or lack thereof.   << Jason Kam (19:58) >> And so far, I read somewhere there's only like 200k $BGT being converted to $BERA Is that roughly correct? I don't know if the number's handy. Yeah.   << Smokey (20:06) >> ⁓ I would have to   double check on but I believe that like, you know I would actually think it's probably a little bit more than that and that there's been like I want to say like 12 million ish $BGT emitted over time And I think that out of that like 2 million ish has been redeemed something like that so like So that it kind of goes closer to that number that I mentioned I've like, you know, like over, you know close to 20 % only if $BGT has been has been redeemed   << Jason Kam (20:24) >> I see.   I see. Interesting.   << Smokey (20:37) >> And then I'd say   that the, notably the vast majority of that is actually, you know, from LSTs again, slash Infrared and their iBERA process. ⁓ So like, you know, that $BGT being ⁓ redeemed is actually just pretty much auto-compounding into iBERA, or a very large portion that is as well. So again, that's why some of those numbers don't particularly concern me.   << Jason Kam (20:47) >> Hmm.   Interesting. I thought that one point of concern is those that redeem at such a high premium and just, I don't know if they're straight out selling. Those are probably the merchant reactors who don't want ecosystem, but I could be mistaken. ⁓ And the last part about this housekeeping I want to get through before we go to the real questions. ⁓ Is there any real sinks?   << Smokey (21:14) >> Correct. Yeah, no, I think that's fair to a point.   << Jason Kam (21:27) >> ⁓ that is current or planned for for Bera and $BGT at all in this market versus just straight-out staking   << Smokey (21:34) >> Yeah, I mean, like, I think there's a few different things within the ecosystem that have already seen quite meaningful uptake. On one hand, if one even just looks at a very simple, you know, Bera, iBERA type pair. like basically Bera paired against its LST within Kodiak, for example, that's often, you know, found itself to be in the mid double digit APYs So somewhere like the, you know, the 40 to 60 % range, our funding rates have been hilariously negative. So in many cases, you know, one can actually supply Bera on, on Wasabi.   and earn close to 100 % APY on that. Similarly, solid profiles in Euler and Dolomites, so lending markets. Each of those, they basically found themselves with some between 20 and 60 % yield profiles at different points in time. So beyond just pairing against other volatile assets and potentially taking on IL, I would say that there has been no shortage of, I'd say, what's right word? I'd say there's been no shortage of opportunities for   for people to do stuff with their Bera on chain   << Jason Kam (22:36) >> Right, but I guess do Beras get destroyed in one way or another through usage?   << Smokey (22:41) >> Ah, understood. I don't think that we're at that point yet in that like, know, Bera chain is basically, you know, fully EVM identical. So, you know, even our gas logic is identical to Ethereum's, right? And that means that, you know, it's meant to take some time and have a little bit more action prior to those gas prices actually, you know, driving up and EIP 1559 really kicking in and being able to see meaningful, I'd say, Bera destruction, if you will, by that method.   << Jason Kam (22:44) >> Hmm.   << Smokey (23:10) >> That being said, do believe that we'll see more and more changes in the not too distant future or improvements, if you will, that will help to take Bera off the market and to drive more value towards bera over time.   << Jason Kam (23:24) >> think that's a good segue because naturally going over time because bera is a layer one chain ⁓ that needs economic activity over time. ⁓ I would imagine the burn activity comes from people doing real stuff on it. ⁓ What are some of the biggest initiatives that really excite you going forward? One or two or three that you feel like could really kickstart economic activity, sort of change this?   perception, your farming chain, like what are some of the most exciting things on the horizon you're working on?   << Smokey (23:58) >> Yeah, man, where to start? I guess I'll throw a few different ones across different sectors. One that I think you are very familiar with as an investor is called PuffPaw. So, you know, for viewers who are a little bit less familiar with that, PuffPaw is a quit smoking to earn deep in project, built natively on bera chain, super experienced farming, fuck, founding team, I guess Freudian slip there.   with experience basically building Web2 vaping products for an extended period of time and shipping for leading brands in the space. They've already done $7 million in sales, have deals with some of largest vape distributors across APAC. And what's quite interesting for them, in my opinion, is on one hand, besides interesting sort of node slash game theory and then virality vectors, is that they're monomaniacally focused on building a product that Web2 users and laypeople can enjoy.   And on one hand, it can actually have positive health benefits of being able to reduce people's nicotine consumption over time as they effectively earn more tokens as they smoke lower concentrations of nicotine. But on the other hand, actually procure somewhat interesting healthcare data that can even plug into these cognitive behavioral therapy type solutions. ⁓ So I believe that those are the types of projects I can very easily scale to tens if not hundreds of thousands of users.   and have those people, you know, transact on Bera chain with very little lift. It can be sort of these like mass distribution events. It's the same tune. There's groups like wombo slash w.ai. These guys, if you've ever seen a picture of, you know, pregnant Biden and Trump kissing or something of the sort, they're likely responsible for it. They have a consumer AI app that was quite viral 200 million plus downloads.   You know, still eight figures of active users and they're actually looking to effectively back end that into a decentralized, you know, compute aggregation platform where a user who has an application on their, you know, phone or web app can actually, you know, basically contribute their passive compute towards, you know, the W.AI protocol. The issue with most of these protocols is that they're a grift because no one wants the actual compute, right? And it's like, cool, I've got all these like H1000s or whatever, but who cares?   And on this side, since Wombo actually has a successful Nvidia back to utilizing, you know, real people, web app and, and, and, you know, mobile application, they can actually dog food the product and actually be their own first customers before selling into another number of other locations. So I think that gets very interesting. I think groups like over under are very exciting to me. They're a computer vision powered e-sports betting platform.   ⁓ built by X NSA and Robinhood guys. And they've basically trained on ⁓ a number of different e-sports streamers and their gameplay and use that to basically identify the odds of a given event happening in game. And what gets really exciting there is that ⁓ with, I'd say, a very small number of streamer partnerships and a couple thousand users, they're ready cashflow positive and growing quite rapidly. And they have massive horizontal distribution potential.   Because with user retention stats of an average of 30 minutes spent per day per user, five hours per power users, et cetera, and a 10 % rake on that volume, I think that's very much something that can very easily scale to, again, tens or hundreds of thousands of users by using Bera chain for settlement, using POL to incentivize utilization of the application, or VIP type programs, and actually allowing people to do something that they want to do.   There's all sorts of weird spicy stuff in between from compute loans to people building digital passports for pet identity that's working with some of largest pet stores in the world to people building fan engagement platforms for large sports teams and soccer groups to some of the largest market makers in the world and precious metals all come into Bera chain think that those are all groups I think see the combination if on one hand.   ⁓ a real user base and community that's ⁓ interested in and excited to engage in some of these projects. And finally, a chain that's actually been built from the ground up to act as an accelerator for its applications and help to reduce the customer acquisition costs and drive value to those apps themselves with the hopes of effectively constructing a chain level venture portfolio that allows for the greatest degree of success and the greatest potential for UnicornBets to come out of that ecosystem.   So yeah, mean, yeah, those are sorts of some of the ones at a high level that I think will be very interesting both from a distribution and fee generation point of view, simply because they'll have, you know, thousands and thousands of users hitting bera chain whether they realize it or not.   << Jason Kam (28:59) >> That's helpful. guess a couple things there. ⁓ Are these heavily liquidity dependent protocols? I'm assuming they are self-contained, they don't need billions of dollars sitting on there to be drawn. Are they attracted to you because guess Bera chain give them Bera token grants and that's why they're attracted?   << Smokey (29:06) >> Mm-hmm.   Yeah.   << Jason Kam (29:26) >> What ultimately attracted them? it the users? Is it like, yeah.   << Smokey (29:27) >> Yeah.   I think that, ⁓ so the nice thing is like, we don't do grants of any sorts. And we've always kept it that way. We think that, you know, if anything, POL is the closest thing that one can get to like a perpetual grant to the chain level. Of course, it's not a free grant. It's a grant that comes at a bit of a discount, if you will, in that, you as the application are hopefully paying 80 cents and the chain is giving you a dollar for your LPs. I think that it's been a combination of factors.   To answer your question, think that a lot these are not deeply liquidity centric and that's kind of a good thing. There are of course like variants like on the other side, there's a group called like Daylight for example, which is like a D-Pen slash RWA project for decentralized power grids. And they work directly with like with local PPAs to enable users to aggregate and contribute power to wider grids and to perform a part of that marketplace. Those guys will be looking to bring in, know, hundreds of millions of dollars of capital.   to actually finance our operations and throw off quite meaningful yields. But I'd say that a lot of the other groups, including Daylight, have come to us for one of two reasons. One is that I think that we have a very sort of outbound user-facing and developer-facing customer acquisition effort. And we try to very much be an extension of the team wherever we can. Some of these groups also ended up going through sort of the accelerator program that's arm's length to bera chain called Build-A-Bear.   So puffpaw and overrun during paw pass are each examples of that. That were sort of like, you know, where we helped along the way as a team was building out. In many cases it's that, you know, the team either has a great idea and a great product, but has no idea how to pitch or, you know, a really good, you know, pitcher, but no fucking clue how to do product. Like they just have some part of the equation missing. And then I think on the other side, a lot of these groups,   we're able to see that there's actually a community of like rabid power users that want to try new things and want to be that first audience who actually interacts with exciting new protocols and things being built on chain. ⁓ So I think a lot of it was, you know, ⁓ the right degree of proactive business development and really getting your hands dirty and finding ways that POL can benefit the applications themselves. And on the other hand, ⁓   really just, I'd say doing the work of figuring out how we can make apps win.   << Jason Kam (31:55) >> So the TVL heavy ones it seems is pretty straightforward like daylight. This is a good place where you can bribe your way to billions of TVL Rightfully so and that's if that attracts them and then for the crazier applications Their belief is ⁓ a feverish sort of audience base Naturally serves as onboarding to them even though they don't get the proof POL token incentive   << Smokey (31:58) >> Yeah.   Yeah, 100%. And I think that like, but that will very much evolve into is, you know, some of those groups that want that feverish audience base, finding the action set or the group of actions within their protocol, that's most exciting for them. And then incentivizing that, because I think that a common misconception, this is our fault, because it's almost something that we learned more about in post or as a chain went live, is that, know, while POL and proof of liquidity,   sort of points towards active liquidity at the highest level. What gets most interesting, arguably, is when that can be used to not just incentivize passive liquidity, but actually, you know, a given action, right? So a certain amount of volume being done on a perps dex, a certain amount of spins being done on a casino slash betting project, a certain level being reached in a video game, a certain amount of hours being spent, whatever it is. As I think we believe that many applications   ⁓ have a point or a sort of an inflection point within their life cycles, or sorry, within a user's life cycle, where that user becomes infinitely more valuable to that app. And if POL can actually be used to help users get to that point, then I think that becomes very interesting as well.   << Jason Kam (33:34) >> That's actually a very important point. I don't think it's ⁓ well disclosed or well discussed. I believe there's a new initiative where the $BGT emission focus could shift in the future from purely being TVL to hopefully well structured on-chain activities, ⁓ which has more to do with, know, DAU growth to a protocol or on-chain transactions. Is that roughly correct?   << Smokey (33:53) >> You've got it.   Yeah, and I wouldn't even necessarily say DAU or I imagine it's more just like user value, right? Because if that means that you take one user and turn them into like your absolute turbo-whale power user, then sick, right? If that means that you can, you know, build a VIP program, awesome. If that means that you can build a, you know, sort of spicy MLM program that allows you to onboard lots of people, also works. You could very much figure out a program where you effectively give someone a receipt token.   if they manage to onboard a hundred other people to a platform and incentivize that action, right? Like, I very much think that the sky's the limit for what you can incentivize with POL because you can very much find a way to issue a dummy receipt token that is representative of a given action and then use POL to drive value towards that. So I think that that gets really cool of you if one is creative enough in what needs to be done.   << Jason Kam (34:51) >> I see.   How soon could this be pushed out, you think?   << Smokey (34:58) >> It's already happening. like the first use cases that we've seen have been in purpose volume. We've seen groups put forward applications in the forums for like effectively like trading bot volume as well. So thinking like incentivizing trading and engagement on effectively like small slash low caps. I think those are both really interesting and I think we'll see more and more exotic applications this in the next little while.   << Jason Kam (35:24) >> ⁓ The other thing I think   we talked about... Yeah, go ahead, sorry.   << Smokey (35:27) >> I was so like, know, I can very much imagine something where, you know, Puffpaw looks to incentivize people who are, you know, hitting, you know, who are basically using their application or using that vape, like on a daily basis up to X period of time in the same way that, you know, certain games you log in and you get a bonus every day for seven days or whatever it is. Right. I do believe that there's a really interesting gamification layer. I was even thinking about, you know, could we collaborate with kind of on like a, a yapper vault of some sort. Right.   There's group works that the bera baddies want to do in terms of a content generation vault. All these things, of course, get increasingly ⁓ nuanced and spicy and subjective as they get more complex. And of course, you need better guardrails in place to make sure they aren't extractive. But at the same time, I think that if used ⁓ thoughtfully enough, POL can be an absolute weapon for people looking to build an ecosystem.   << Jason Kam (36:23) >> It's kind of a complex topic because there needs to be a way to track these things such that they I guess, can be gamed. And I would imagine in the end it translates to economic value of the chain. ⁓ So one other thing before we get to this holistic economic equation, which we'll talk about in a second, but the other thing I think we talked about is ⁓ the $BGT today is emitted ⁓   << Smokey (36:38) >> You've got it.   << Jason Kam (36:51) >> to protocols and to stakers, but none of that goes towards, ⁓ know, Bera chain to protocol, or none of it goes towards sort of occurring to Bera chain itself. Is there any plans to change the tokenomics a little bit to sort of make this emission more value creative in that way, sort splitting up the $BGT emission?   << Smokey (37:14) >> Yeah, I mean, I think that you hit it on the nose. And it's something that's been the topic of discussion within the community, within myself and in liquid funds, founder friends or investors, cetera. And that right now, I think there's an argument that $BGT can be a little bit too OP. like, know, gift and a curse, right? Gift because it means that there's lots of $BGT sort of basically kept off the market, slash prevented from redeeming it to bera up.   which is great for us from like a, you know, sort of a flows point of view. But also it's not enough to just reduce sell pressure on Bera. There has to be a reason for it to go up as well, right? Beyond speculative premium, especially in a sort of like wacky market like this. what has been increasingly contemplated, and I suspect that there will be some version of this that is ultimately implemented, you know, subject to governance and community sign-off is effectively, you know, a sort of a variable rake or tax.   you know, bariffs, if you will, ⁓ on the bribes that are going towards $BGT. Because right now, even at the lows, like, you know, $BGT bribes are receiving between $75 to $100 million, you know, annualized, and it leans on the upper side of that, to be clear. You know, so within the first, I think, five weeks, it's like 10 million bribes. ⁓ So that's like pretty non-trivial. ⁓ And what we believe is quite interesting there.   is to actually have a portion of those bribes going towards building protocol-owned liquidity for bera $HONEY, which is one of the most traded pairs in the ecosystem in the chain DEX. Because what you get that way is that on one hand, you effectively get eight plus figures of pressure going towards building that bera $HONEY LP over the course of a year, assuming that the rates stay constant and that that is a reasonable representation of the future.   along with the ability to consistently generate an ideally auto compound fees from bera $HONEY LP itself in the DEX slash the chain native DEX which can, at its peak has thrown off a hundred K a day. And I believe could quite feasibly throw off 25 to 50 K a day as it scales again. Right. So we think that that gets quite interesting because on one hand, I think it allows a number of different groups and a number of different protocols to enter the bera chain ecosystem.   and bribe ⁓ and still drive values of the Bera token, whether it's a stable pair and LST pair, et cetera, and not be seen as this extracted while at the same time driving direct value to Bera in a manner that is actually, I'd say growth oriented as opposed to like just doing like buybacks or something to say buybacks We think about this as how do we actually build something that has the ability to compound.   << Jason Kam (39:59) >> And just to just just I understand it clearly ⁓ Currently $BGT is emissioned bribe is being paid back to ⁓ the $BGT stakers and validators What what is being talked about is a percentage of those bribes being taken to I guess through you guys and goes into being sold for $HONEY and Then gets added to the $HONEY bera repair. Is that fair?   << Smokey (40:26) >> Yeah, it would depend on the composition of the bribe. Let's say the bribe is like 80 % Bera, right? Of course, in that case, we wouldn't try to sell Bera for $HONEY. But what we might do is say, okay, you can take that Bera and match it against $HONEY that's generated from the DEX fees at the moment, right? And then contribute that to Bera $HONEY LP. So effectively taking non-bearer denominated portion, effectively nuking that into $HONEY, pairing that against the Bera.   and adding that to the backs.   << Jason Kam (40:57) >> Why not just straight up buy a $BERA ?   << Smokey (40:59) >> You could, but buying $BERA alone is just that, right? And I think it's actually even more fighting gravity. I think that what we can do by actually having that contribute towards protocol-owned liquidity is that on one hand, that's a little bit more, I think, in line with the thesis of bera chain as a whole, in terms of just actually finding ways to have the applications drive value to the chain and vice versa. And beyond that, actually reserves the value to compound, right?   So one could say, okay, cool, know, take $30 million and buy Bera or you can say, okay, take $30 million and 15 million of it goes towards buying Bera as part of this Bera $HONEY LP. And that Bera $HONEY LP then starts generating, you know, 50 K a day. And that 50 K a day becomes $18 million a year, right? Of course I've, using naive and or, you know, sort of not ⁓ fully nuanced math there, but I think the goal is to build something that can actually be growing in value over time as opposed to just   you know, saying we're going to do buybacks because it's hot right now.   << Jason Kam (42:01) >> I think that would marginally help. Right now, help me think about this. So 10 % of annualized inflation in $BGT, how much value are the validators and stakers getting back in bribes versus that? Is it like a two to one, five to one, six to one today? Do you have a goal to where you want to get it to? Yeah.   << Smokey (42:09) >> Mm-hmm.   Mm.   Help me understand the question a little more as in when you as in like basically for every you know dollar of $BGT emitted how much is like a valid or a staker earning kind of thing? Okay, got it. I mean, I think one of the better representations of that is kind of like the the $IBGT slash like, you $LBGT premiums, right? Because I'll basically tell you that like, you know, people are pricing that including those emissions at between 30 to 50 % premium.   << Jason Kam (42:27) >> Yep.   Yes.   << Smokey (42:50) >> And I do expect that to decrease over time quite naturally as the supply of $BGT increases, right? ⁓ Unless people just, and I believe that at that point, a bit of an equilibrium will also be reached where supply of $BGT will increase. Then some people will say, okay, these yields are, you know, aren't high enough to be attractive for me. They nuke it into Bera. Then they, you know, do whatever with that Bera. Maybe they sell it off, et cetera, rinse and repeat.   << Jason Kam (42:51) >> Thank you.   I see that would make sense. I guess the equation what I'm trying to arrive at is $BGT is being admitted. ⁓ The bribes go back to go straight back to the people that sort of own the $BGT and are staking it. In the future, what could happen is ⁓ because that's just kind of a TVL game sort of, but in the future, ⁓ a big part of $BGT would go towards those that don't stake like or don't provide a TVL, but they are contributing activity.   Additionally, part of the bribes also goes towards activities that, well, effectively directly supporting the Bera token or becoming an LP pair. I guess, is there a goal in your mind of how big those activities would be to really start hitting the goal in your mind? And how soon do you think that'll happen?   << Smokey (44:10) >> Good question, I think the tricky answer, unfortunately, is that it depends. But I think that some of these applications that I'm most excited about will very much be in growth stages within the next two or three months. And that, for example, Wombo is pretty much ready to go within the next month or so. The PuffPaw guys just set up their foundation. OverRender is live and in beta at the moment. And I suspect after a little bit more product testing, we're probably going to mass expansion mode. PawPass is building out their infrastructure at the moment.   You know what mean? I think a lot of these are not like SoundCloud wrapper, like big things coming, know, months and months away. I think they're actually very much either accessible at the moment already or on the horizon in a manner that's accessible to people.   << Jason Kam (44:58) >> I see. So I guess in the short term, just get through the Boyco Unlock and then work on all of these ⁓ effectively BD activity on chain, getting more protocols to launch, contributing to the burn, and then pushing through the two changes that we talked about on shifting $BGT incentives from just pure TVL to on-chain activity or anything that signals real economic activity, and then potentially adding the Bera to, ⁓ it basically adds to a protocol on liquidity that drives fees. ⁓   << Smokey (45:27) >> Yeah,   << Jason Kam (45:28) >> Am I   << Smokey (45:31) >> I think you've got a good sum up there, And I think it's almost equal parts fundamentals and narrative, right? In that I think that on one hand, being able to be able to say, hey, this is how this actually expands the fundamental scope of applications that will make sense on bera chain because they don't just have to be paired with Bera. They don't just have to utilize Bera, et cetera, to actually contribute to Bera's value. Of course, it'll be, you know,   favored and think that we'll see greater focus on ones that do utilize Bera because then you sort of get like a nice double whammy. But I think it's actually something that increases the net TAM of things that are interesting and that may want to engage with Bera chain. And then I think that on the other hand, it's actually about us just being able to tell that story more. And I think that we've always like to date, like, you know, we have shied away from, we haven't done anything with, with KOLs or, you know, sort of a non-inorganic marketing, if you will.   And that's to say that we're going to lean into that either, but I do think that we can do more concerted growth pushes and actually do a good job of telling people about all these things. ⁓ Because I think over time, ⁓ these are ultimately the types of businesses that are palatable and make sense to later stage institutional capital allocators. And the ultimate positioning or the ultimate way that I imagine that people will view bera chain is almost like a bit of like a Y Combinator at a chain level, right?   in that the chain itself is helping to effectively reduce the customer acquisition costs or bridge the gap for this portfolio of like 50, 100 early stage companies. And even though the chain itself will be a little bit of a loss leader to start, let's say it ends up having like net two, 3 % inflation when considering the offsets from bribes and index fees and stuff like that, one can very much see that over time, if two of those companies ends up   you know, making it out the hood and then that actually getting meaningful adoption, then I think that pays massive dividends to bera itself, right? Not in the financial sense, but in the colloquial sense. ⁓ So I think that being able to really build out that vision ⁓ and have it be something that think growth stage investors can align with as well is quite important for us because I think it's a lot easier to say, hey, this chain allows all the things that are built around it to succeed more than anywhere else. ⁓ And I think that's   a bit more of a palatable narrative than, know, here's this chain and you hold this token to get more of this token over time. And, you know, of course I'm a little bit biased as I am sort of pitching my own vision here. But I think that from the conversations we've had so far, that idea has resonated quite well with people.   << Jason Kam (48:12) >> What's your, I think that's a good guide point. think it would be sort of transactional volume and transactional fees in combined, hopefully, eclipsing ⁓ the $BGT inflation giveaway. ⁓   << Smokey (48:24) >> I think it'll   be that and something to be said about like user count and network effects that are downstream of that. ⁓ Because, you know, in many cases, like I actually, you know, there's, there's worlds in which we have millions and millions of transactions and then, perhaps actually just like, you know, gas feed up. But I think that that takes a while. And, know, if there's anything that we've seen from Solana that isn't always the easiest way to win. But I do very much think that you can get enough distribution from that to find real massive sinks for a token.   << Jason Kam (48:54) >> What's a KPI for yourself, let's say towards the end of the year or 2026 to drive that economic activity? What would categorize success for you in that front?   << Smokey (49:05) >> Yeah.   I think that there is a series of North Star revenues that we think about, or North Star KPIs, my apologies, that we think about. On one hand, we look at the effectively bribes and our $BGT volume that's coming in and really how much value is going to the $BGT token, and how much is coming into the system as a whole for bribes. Because that's really one of the best sources of economic health, et cetera.   I think that alongside that, we'd look at on-chain volume, we'd be looking at fees slash revenue, transaction volume. ⁓ If there's one that I'll be thinking about the most, it is probably that bribe ratio in terms of both ratio and magnitude. ⁓ Just because I think that tells us how much people are willing to put up and how much people want ⁓ effectively the Bera token and or the closest thing to the Bera token in the form of $BGT.   << Jason Kam (49:35) >> Hmm.   << Smokey (50:01) >> And I think that, you know, from there, all the other stuff is downstream because if we've done that part right, then we should also be seeing meaningful transaction volumes. We should also be saying, you know, non-trivial TVL. We should also be saying non-trivial DEX volume, so on and so forth.   << Jason Kam (50:17) >> and where are they now and what's the target.   << Smokey (50:20) >> Right now they're like, you know, not too crazy, like, you know, 50 mil a day of that. And I think that, you know, where I'd love to see us, you know, did you say end of 2026? Okay. I mean, look, I think that I would love to see that like, you know, 250 mil plus a day by, you know, by the end of the year. And I think that, you know, by the end of 2026, probably want to double that at least. And I think that, know, ⁓ sorry, not transactional volume. That's like, like, like, dex volume per se.   << Jason Kam (50:29) >> Sure. Or whatever target you connect yourself to.   has actual volume on chain. is.   << Smokey (50:49) >> And if I was to look at transaction volume, think we're doing about like a million a day right now. I think that we'd probably like at least five X that if not more. like, you know, I think that, you know, sort of five and 10 million would be sort of like next milestones for us, if you will. For context, ETH is normally between like, you know, like one and 1.2, 1.4 of that. So like, I don't think that that's a crazy high bar for us to hold ourselves to either.   << Jason Kam (51:12) >> Do you foresee a day where ⁓ the bribes eclipse the $BGT admitted?   << Smokey (51:17) >> Unlikely. ⁓ Just like in that, think it's irrational in most cases, unless an application is incredibly bullish on the future of know, Bera, slash $BGT, etc. To be like, yes, I'm to pay more than a dollar for a dollar, even if that dollar that they're getting is yield bearing, like which is the one situation I can understand that framing within. ⁓ But I think it's a little bit of a tough sell otherwise, you know.   << Jason Kam (51:40) >> ⁓ How do you fund your operations today? Like all of these, the cost that you do, do have a treasury of VC raised capital that's USDC yourself? Are you selling Bera Like how do you fund your operations?   << Smokey (51:53) >> Yeah, so was a zero Bera selling and we're hoping to keep that this that way for as long as possible. know, on one hand, recently the the foundation moved, you know, effectively the USDC that's collateralizing $HONEY, or stablecoin into Coinbase. That's helpful in terms of earning yield there. There's also a deal with PayPal USD, which I would not ⁓ disclose the exact terms of but effectively allows the foundation to earn a cut of the the PYUSD yields.   that are basically, I should say the T-Bow yields from underlying PYUSD across the ecosystem. And I think that that's probably one of the more healthy ways to go about it in that the goal is to get to a point where it's sort of like break even and or cash flow positive off of stable revenues alone. I wouldn't say that we're there as of yet, but I think that that's also a very feasible goal because then you sort of de-risk the foundation dumping on your head part of running a company.   and investing in a token.   << Jason Kam (52:52) >> I think the way I think about it, you kind of need the flywheel to spin the other way, which is ⁓ something that creates significant wealth effect as an underlying consumer product that ⁓ soaks up Bera and $BGT. then ⁓ I think that would create demand for Bera and then expand the premium for $BGT. And then in this process, you know.   << Smokey (53:12) >> Yep.   << Jason Kam (53:17) >> Effectively attract activity and TVL out back in again and then that the loops flex this the other way Until that happens you're kind of just grinding to get more activity on chain And you have maybe like eight to nine months to do so aggressively so that it becomes stable. Yeah   << Smokey (53:20) >> Yep.   For sure.   For sure. And I think that there are certain products that I think have a fairly high chance of doing so, especially those that have a little bit of an element of looping in there.   << Jason Kam (53:42) >> Hmm interesting. When are those coming you think?   << Smokey (53:46) >> I think that the infrastructure for them already exists and the actual plays themselves will probably exist in the next couple of months.   << Jason Kam (53:54) >> Got it. Understood. ⁓ Is there anything else we haven't covered yet that you're really excited about? I think we covered the potential POL change, we covered the Bariffs we covered some activities that you feel like could really jumpstart on chain. ⁓ We talked about Boyco Is there anything else? Am I missing anything here with the thesis?   << Smokey (54:12) >> Yeah.   You know what?   I think that one part that's intangible but is a little bit interesting and is often a meme, but I'll throw it out there because I do believe that it's an important part of the bera chain ecosystem or thesis is that like, I think that culture is one of the most difficult things to quantify, right? And I think that one can try to ascribe a number of different characteristics to what is culture, if you will, at the chain level.   But I think that whether that be, you know, the NFT ecosystem that Bera Chain originally sprung out of, whether that be stuff like MiBera Maker or Steady Teddys, whether that be stuff like the Bera Baddies I think Bera Chain has like a fairly rich culture that ultimately translates to interesting, you know, barbell effects. And then I think you sort of have two types of people primarily on Bera Chain. One is your giga mercenary who's like, I can make money here. I'm going to be here to make money.   And the other is like the, really fuck with the vibes here and I'm going to be here because I fuck with the vibes and I'm quite price insensitive because I'm entertained by this. And what's interesting is I think that you can find, you know, ultra wealthy folks on both sides of that spectrum. And that I recently had the pleasure of meeting one of our larger whales who has, you know, a very meaningful Bera position. And he was like, yeah, man, I'm here because of the steady teddies. Then I slung like, you know, 20 bucks in here. And I'm like, all right, that's sick.   Thank you for your service. ⁓ And I think that's, you know, easier said than done and something that's quite difficult to underwrite and very interesting to see in action. I would give a particular shout out to the Bera Baddies as well, because even though like, you know, people like to make fun of them at times or gives them a hard time for being girls in crypto. I think that I've rarely seen this degree of speed and depth of penetration of a community.   in that if you look at like, you know, number of the girls on crypto Twitter who either work at different companies or are getting deeper into the space, you'll start to see Bera Baddies in their bio. They have like close to thousand girls who were signed up. Like 500 of them have completed like a course on how to use POL and like gotten like certificates and stuff, which is hilarious. And I actually think that they will be an absolute weapon when it comes to distribution for content and broadly applications on Bera and overtime. Like they have like, you know, streams on a   weekly or bi-weekly basis that end up pulling in, you know, five to 10,000 users quite regularly. And I think that's nothing to scoff at given that one of the biggest issues that crypto has right now is distribution as a whole. So I think that when you, you know, take an interesting financial system in POL, combine it with a incredibly strong application layer in some of the groups that I mentioned among many others, and then sprinkle a community slash culture element on top, then you end up with a very interesting package in terms of, you know, catering to   social, emotional, and financial needs, if you will.   << Jason Kam (57:06) >> Yeah, I suppose all that it takes then is for you to find something that is, potentially go viral and drives a lot of that back to the chain, right? You kind of just waiting for that.   << Smokey (57:13) >> Yeah.   Yeah, I mean, I think that every chain ideally finds its like eureka moment or it's like, you know, it's golden goose. And I think that again, until until it's at that point, it's like a shots on net venture approach. And I have no issue with shots on net.   << Jason Kam (57:33) >> Cool. Let's see if the group has any questions. Let's give it three seconds.   Smokey, thank you so much for your time. Get some rest.   << Smokey (57:47) >> Of man, thank you so much for having me.   << Jason Kam (57:49) >> Yeah, thank you so much. Don't hop on.

TLDR In this episode of BidCast, host Jason speaks with Vishal, co-founder of Stride, about the evolution of their liquid staking protocol within the Cosmos ecosystem. They discuss Stride's business model, revenue generation, and the current state of liquid staking in Cosmos. Vishal shares insights on building a decentralized exchange on the Cosmos Hub, the importance of partnerships with Eureka chains, and the strategies for onboarding new customers. The conversation also touches on the alignment with the Cosmos Hub, future goals for Stride, and the execution risks involved in their ambitious plans. CHAPTERS / TIMELINE 00:48 Introduction to BidCast and Stride 01:47 Vishal's Relationship with Magnus and Interchain Labs 04:07 Stride's Business Model and Revenue Generation 05:36 Liquid Staking in Cosmos vs. Other Ecosystems 11:19 Future of Stride and Capital Needs 14:13 Building a DEX on Cosmos Hub 19:01 Partnerships and Order Flow in DeFi 25:12 Building on Cosmos Hub: Opportunities and Challenges 26:44 Fee Structures and Revenue Models 28:10 Aligning Stride with Cosmos: Revenue and Tokenomics 29:09 Defining Success: Milestones for Stride 31:27 Business Development: Strategies for Growth 33:21 Onboarding and Customer Engagement 34:03 Liquidity and Market Dynamics 37:23 Competition and Collaboration in the Cosmos Ecosystem 40:02 Investment and Alignment with ICF 42:12 Improving Token Liquidity and Accessibility 45:40 Future Products and Execution Risks TRANSCRIPT << Jason Kam (00:48) >> ⁓ All right, we are ⁓ live. ⁓ Welcome to another episode of BidCast. I'm your host, Jason Kam, aka at Maple Leaf Cap. Today is April 11th, 2025, noon Hong Kong time. BidCast is being livestreamed to BidClub members. Questions are from the members and my own. We plan to only cover liquid tokens and Web3 related equities in this podcast, where participants may own the instruments discussed. All opinions are our own and Bid Club is not being compensated for the content produced. Nothing we discuss is investment advice, nor do we believe there's any material non-public information in the episode. Today I'm speaking with Vishal, the co-founder of Stride. Vishal, welcome.   << Vishal (Stride) (01:30) >> Hey Jason, thanks so much for having me on. Super excited to be here.   << Jason Kam (01:33) >> Yeah, man. Why don't you tell us about like a, the a relationship with Magnus and Interchain Labs, who seems to be running Cosmos Hubs these days. How do you get to know him and like, what's your working relationship like?   << Vishal (Stride) (01:47) >> Absolutely. Maybe to start, run, or I was one of the co-founders of Stride, a liquid state protocol in Cosmos. We launched like three years ago. We actually were founded, I think within a month or two of when Skip was first founded, or at least publicly announced. Skip was Mag and Barry's company that got acquired by the ICF. So this was in like March of 2022, maybe. And then September of 2022, and then we first met them at Cosmiverse. So was right when Stride launched.   << Jason Kam (01:53) >> Hmm.   Hmm.   << Vishal (Stride) (02:14) >> Skip was just getting off the ground. They had like a med client that was getting like pre rapid adoption Started talking then but we didn't have a professional relationship at the time that just I know we're around the same age Just started companies in Cosmos. We were super excited the space and kind of a lot of them shared goals outside Then maybe like six or twelve months later skip started expanding far beyond them and doing a bunch of like IBC stuff I'm gonna start doing stuff for relayers or just generally consulting with teams for how they can improve the UX across chains   << Jason Kam (02:37) >> Hmm.   << Vishal (Stride) (02:42) >> We started working with them then on some Stride, like tokenomic stuff. So we're thinking about ways we can use the revenue ⁓ and in particular, could we like swap the revenue for Stride. At the time it was just kind of hard doing Cosmos because all the DEXs are on different chains. So we started working with them there on that. Then over the years we worked with them quite a bit on IBC stuff. They've done quite a lot of upstreaming to the IBC repo and ⁓ 70 % IBC traffic is run by Skipco today. And Stride is one of the largest IBC consuming chains.   << Jason Kam (03:07) >> Hmm.   << Vishal (Stride) (03:11) >> So we have lot of work on kind of the IBC layer and then SkipGo also. We've done quite a lot. We integrated to the Stride website, giving feedback on it. It's their primary front-end widget and we've worked with them to integrate all of Stride's features through that. So it's been kind of a long journey. would say the first year was maybe more social and we worked together over the last few years. But over last six months, we've been working together super closely, probably talking every day or two about Stride's new endeavor with the Cosmos Hub and kind of what their dreams are for Atom and how   << Jason Kam (03:29) >> Yeah.   Yeah, I mean, we just spoke with them. And they basically asked 90 % of the workforce took IBC in-house and then basically chopped all of the external vendor relationship. And do you feel like they are sort of labor constrained at the moment? They have to outsource a lot of work to folks like you and co-building things together? What's the working relationship like now that he's sort at the helm of ICL driving value to Atom   << Vishal (Stride) (04:07) >> Yeah, yeah, absolutely. think they are, they're nothing constrained, although I don't know if it's labor constraints, they actually, I think, inherited quite a large number of people at the ICF and ICL and with the ABC teams, the Cosmos teams, et cetera. My sense is they're really trying to focus in on a few core goals, like when they kind of were, took over the ICF leadership, they have a, they have like kind of an uphill battle, know, Atom had been, they had been struggling for a while, there was like a, not a clear product direction.   There's a lot of a discontent outside the ecosystem. I think they are, truthfully, they've been quite effective. I think they're trying to do a very targeted plan on like three big things or two or three big things they want to ship, focus entirely on that. And I think they actually have more like shrug the organization to focus just on those goals. And I think as a result, they're trying to delegate like other sub tasks to other teams. like, for example, like in our case, they know they want a lot of swap flying right through the hub, but they don't think they have the ability to like take that on when they're also kind of   << Jason Kam (04:40) >> Hmm.   << Vishal (Stride) (05:06) >> evangelizing the ecosystem. And so that's what we're on the left.   << Jason Kam (05:09) >> We'll talk about that in just a second. And on the Stride's core business today, if I'm not mistaken, you are deleting restaking protocol on Cosmos today with about 40 million of TVL. Yeah, go ahead. Liquid staking, sorry. 40 million of TVL, just about.   << Vishal (Stride) (05:11) >> Yeah, bye bye.   Yeah, one small thing, liquid staking, not resaking. Yeah.   << Jason Kam (05:36) >> Yeah. Walk me through how does that ⁓ 40 million TVL sort of translate into fees to the protocol.   << Vishal (Stride) (05:45) >> Yeah, yeah, we have a very simple business model. Basically, you can think of it as the same as LIDO. Every six hours or so, the protocol accumulates staking rewards from all the tokens that are staked. 90 % of those get sent to get reinvested and get auto-compounded back to the LSD holders. 10 % gets taken as a fee to Stride. The vast majority of that revenue gets used to buy and burn Stride. About 15 % gets used as payments for security for the blockchain.   << Jason Kam (05:58) >> Hmm.   Yeah, so the math is ⁓ 40 million TVL. It's mostly $Atom at the moment.   << Vishal (Stride) (06:16) >> Yeah, the are largest token, but we have 15 different LCs, but like $Atom, $Tia, $Osmo, $DYDX, that's the majority.   << Jason Kam (06:23) >> OK.   And the blended yield is like 10 to 15%, just about. OK. So 40 million times 10 to 15 % yield times 10 % tick rate ⁓ times 80 % sort of fee capture to stride treasury itself is about ⁓ half a million of run rate revenue. Is that right?   << Vishal (Stride) (06:27) >> Exactly. Yeah.   Yeah, right around there. think it might be around 450 like fairly than 7 day average if I remember correctly. But it fluctuates a little bit. Some of the yield is real yield from protocols like DYDX or osmosis for example. But I think it should be right around 450 to 475 right   << Jason Kam (06:56) >> Mmm.   Got it. And I guess that's revenue going directly to ⁓ token holders through DirectBot.   << Vishal (Stride) (07:07) >> Exactly. Yeah, yeah, it's flyback and birds.   << Jason Kam (07:10) >> Okay, so how do you fund yourself then?   << Vishal (Stride) (07:12) >> Yeah, we have been pretty fortunate. We had a super round like three, ⁓ almost three years ago and then we've done one initial round of financing off of that and then the ICL is giving us some financing right now. So, entirely funded through token sales.   << Jason Kam (07:19) >> Hmm.   ⁓ sorry. ⁓ From previous rounds and then plus ICL's grants. So you kind of don't have to sell tokens in the open market to sort of pay for it.   << Vishal (Stride) (07:38) >> Exactly, I just want clarification that ICF not ICL misspoke. ⁓ Yeah.   << Jason Kam (07:42) >> ICF, okay, yes, very important. Magnus was   ⁓ very keen on telling me that it's different entities and sort of independent decisions. Okay, that makes sense. And do you give away any incentives at the moment of stride to the stakers?   << Vishal (Stride) (07:49) >> Yeah, yeah.   Yeah, it's a great question. So, stake is going to a little bit. It's never been very inflationary, so it's around, I think, 2 % stake and yield with like around 2 % inflationary as well.   << Jason Kam (08:08) >> So it's not that much. So people are really getting what they get from the base layer. OK, that makes sense. I I guess one question that people are always wondering is, mean, Ethereum, I forgot what the number is. It's like a 30%, 40%, 50%. A very high percentage are not only staked, but they are done through things like LIDO, whereby for every other ecosystem, including Solana, I mean, like,   supposed to talk to Sanctum, but everybody else is like extremely low liquid staking. Why do you think that is and do you think there's ever chance of getting it up?   << Vishal (Stride) (08:44) >> Yeah, no, it's a very good question. And I think we've seen almost the first counter example recently because of the parachain. And I think it's actually somewhat consistent. With Ethereum, I think there was a lot of historical reasons for Lido. So when Lido came out and launched $StETH it was basically very difficult to actually save $ETH at the time. For a retail user, was basically inaccessible. Even for most institutions, it's from a security perspective, infrastructure required, 32 $ETH minimum.   << Jason Kam (08:50) >> Hmm.   << Vishal (Stride) (09:11) >> The fact that staking and the kind of versus associated were a little bit like, I would say complicated or opaque to a lot of like fund managers. A lot of people like, you know, use Lido then. And then now that there's so much adoption and so institutional, ETH has by far the most vibrant DeFi ecosystem. That has kind of led to a huge adoption of ETH and it's kind of used kind of throughout DeFi. For other ecosystems, staking is much simpler. Mostly because they've developed it or iterated on it.   << Jason Kam (09:21) >> I see.   Mmm.   << Vishal (Stride) (09:39) >> And so you really don't have to use LSTs unless you want to participate in DeFi. And right now, think most chains, like the vast majority of tokens are not in DeFi. They're kind of held on CEX's or held in regular wallets. So we see typically, I think, like 5 % liquid staking rate for most ecosystems. The one exception I would say, though, is Bera chain. I think for two reasons. One, it is quite hard to stake your Bera And as a result, doing it through liquid staking brighter is much easier.   their whole ecosystem is entirely geared around DeFi. So even the tokens held by ⁓ like investors or insiders are often deployed in DeFi. And I think we've seen huge,   << Jason Kam (10:20) >> So do you expect that for cosmos like I think it's like 2 % liquid staking do you expect a number to go up meaningfully in the future? Is it pretty difficult?   << Vishal (Stride) (10:28) >> Yeah, I think it can go up to like maybe five to 10 % if DeFi goes up. Cosmos has a very immature DeFi market relative to other ecosystems. And think we're getting into parity, I they'll get that number up. To get really high numbers though, like we see on Ethereum or elsewhere, I think we'll have to see some real innovation on the LST layer or some big increase in trust. And those are two things that won't go back right now.   << Jason Kam (10:48) >> Yeah.   And   people are staking themselves on Atom is pretty easy. Just go to the hub and go cap. You probably have to see some Ponzi Pool 1 and Pool two games being played with the sort of liquid stake.   << Vishal (Stride) (10:56) >> Exactly. Yeah.   Yeah, or   if it's something like you can use the  tokens in DeFi product early maybe to earn fees or something, then there's an additional reason to stake. But in general, think for most dollar scenes, they're very restrictive to just DeFi.   << Jason Kam (11:11) >> Hmm.   Do you foresee yourself ever needing capital by selling ⁓ tokens in the market or raising? I think you raised $12.2 million over time through three rounds of fundraising plus the grant from ICF. ⁓ You're self-sufficient, I'm guessing for a while with the burn today.   << Vishal (Stride) (11:33) >> Yeah, exactly. think our hope is to never have to sell stride tokens in market. We've never done it. as a company, none of the founders have ever done so either. I think it's something that has a kind of big implications. You should be really confident when you want to do it. I don't know if the protocol is at that level of maturity yet. I'm pretty lucky, I think, to be able to take lots of funding from investors who have long locks and are willing to support us.   And the hope is that the protocol becomes much more revenue generating and we can use that revenue to fund operational expenses. We're a pretty lean team, this should be feasible. We were actually cash flow positive a little bit earlier this year, but then token prices have gone down quite a bit and yield's about a little bit as well. But even when we cash flow positive, then the revenue went to the labs or financial entities. But in the future, revenue's higher and we've got certain tented path to sustainability.   << Jason Kam (12:28) >> Sorry,   and 80 % goes to burn, but 20 % goes to team. at one point, cut.   << Vishal (Stride) (12:34) >> No, this is actually 20 % goes to Atom basically for providing security. Yeah, so none of it goes to the team.   << Jason Kam (12:39) >> Hmm.   I see. So how do you break even?   << Vishal (Stride) (12:45) >> Yeah, maybe a misnomer. I spent like the total revenue of the protocol was ⁓ higher than total expenses, ⁓ like development costs, but we didn't actually like carry it through.   << Jason Kam (12:53) >> Ah, OK.   OK, but you're still expensing salary. But I guess that's OK, because you still have a huge war chest plus the grants. OK, and in the next two or three years, you'll be OK, even if you step up the number of staffs.   << Vishal (Stride) (13:04) >> Exactly, yeah.   Yeah, think next year's we should be okay. And then the hope is that ⁓ with this new partnership, we can start generating some more revenue and then we can also use that to extend our own.   << Jason Kam (13:19) >> Yeah,   yeah, yeah. That would get to the really exciting part because half a million, I mean, the step up from 2 to 5 to 10 % of liquid staking percentage is, we will see. I don't know if Atom's going to pump so that like the 40 million turning into half a million of revenue. I don't know if that's going to like materially change in the future. But I think what's the most exciting, and correct me if I'm wrong, is that ⁓ because of the management change that happened with Magnus at Atom,   And because they need a lot of things being built in the Atoms Cosmos Hub, namely the DEX, the Liqudity Staking, the Lending, whole DeFi ecosystem. ⁓ Tell me more about your relationship with them and whether they're enshrining or levying some real growth effort that Stride is actively working on that may not be known by the market.   << Vishal (Stride) (14:12) >> Yeah, absolutely. So it's just got announced very recently. We've been working with them super closely to build a DEX and kind of a whole DeFi suite on the Cosmos hub. Maybe a little bit on the goal there and how much of it is like in try and make, how close are you working with them. The goal from them, I think they've announced Eureka last week. That's been like a big product release. Like the hope is there's a lot of liquidity on Ethereum, Solana, a bunch of other chains.   they can bridge over to these new Cosmos chains like Babylon. It seems like a very compelling product offering. have like 10 or so customers already, all of which are very large chains, bunch more on pipeline. But to enable that, I think they need a high quality DEX on the Cosmos hub in order to be able to actually bridge volumes over, be able to swap from token A to token B, and also to help to strap up the DeFi ecosystem on the hub they're trying to help build. we've been about this vision for quite a while and we're pretty excited about it.   << Jason Kam (14:49) >> Hmm.   << Vishal (Stride) (15:08) >> they wanted us to kind of build the stacks on the Cosmos Hub with the goal of serving these Eureka Chains. So that's kind of like what the original intent was. And then maybe a secondary goal is also to help kind of bootstrap the C5 ecosystem on the Cosmos Hub. In terms of kind of how the relationship actually goes, we work with them pretty closely. This is predominantly in like a goal setting, I would say, or kind of aligning on what's important to focus on. We talk with them quite a bit about what their vision is for Atom, who they see as the users in the first 90 days, first...   six months, one year, how can we help unlock those users? How can we help optimize the product for those people? We do that pretty close to them as well as kind of get technical help. We've had a number of years experience with Cosmos SDK, IBC, et cetera, to help out if they're blocked on something there. And in return, we get to be super close to kind of what they're thinking, what they're deploying, get really close to who the users are and who we're trying to build for.   And in that sense, we are very closely kind of working with them, know the roadmap, kind of help guide that roadmap. But it's not enshrined meant that ⁓ no one else is allowed to build a dex. Like anyone can come build in the Cosmos Hub. I don't think they're opposed to supporting other dexes either. I think that partnership with us is they really have ⁓ an acute need for a very high quality dex, and that's like, you know, immediately actually, to help serve these users. And we want to help do that. But it's not that... ⁓   << Jason Kam (16:10) >> Hmm.   ⁓   Hmm.   Hmm.   << Vishal (Stride) (16:35) >> No other DEX's can exist on the Cosmos hub.   << Jason Kam (16:37) >> Very clear. then this will be like a Uniswap v2, v3, v4 type of equivalent.   << Vishal (Stride) (16:43) >> Yeah, we're hoping to do right now is for community  and then we're doing a bunch of kind of extensions on that to add a lot of kind of constant features.   << Jason Kam (16:52) >> And the difference between that and osmosis is what ?   << Vishal (Stride) (16:55) >> Yeah, great question. They're quite different. So Osmosis is kind of a L1. It's built in the Cosmos SDK. And almost all the swapping logic happens on natural protocol layer. So you've got natural code that binds the blockchain together. As a result, they do a lot of custom stuff. So their chain can do all sorts of custom types of training strategies or CL deployments, wherever it is.   << Jason Kam (17:08) >> Hmm.   << Vishal (Stride) (17:21) >> But on the flip side, you can actually like plug into lots of other applications. So in particular, Eureka, because it all goes through Cosmos Hub, that flow can't go to Osmosis and that can kind of only be internalized by the Cosmos Hub ⁓ and like other DeFi apps in the Cosmos Hub. It's much easier to make like a call to smart contract lives on your chain, as opposed to having to do some bridge to another chain, get funds back, whatever it is.   << Jason Kam (17:42) >> And   when they turn it on, mean, Magnus is pretty shy about this, but Rabi, Phantom, MetaMask directly to you, Kepler still cost me my set. that the way to think about this?   << Vishal (Stride) (17:56) >> Um, so there weren't, I'm sorry, I think I quite follow.   << Jason Kam (17:58) >> Like basically, ⁓ can I use Rabi and MetaMask with your DEX?   << Vishal (Stride) (18:03) >> Oh yeah, oh yeah,   yeah, so sorry. Yeah, I believe so. I think that's the exact timeline on this is a little unclear and they're kind of working through it. But the hope is that this should be, the customers are using all sorts of wallets. The hope is that they're bridging people from Phantom, MetaMask, over to all sorts of really niche wallets. And the hope is that we can be supported by this goal of native integration. So your assets in the Cosmos Hub, yeah.   << Jason Kam (18:07) >> Hmm.   Hmm.   << Vishal (Stride) (18:32) >> Yeah, yeah, so yeah, it's a great question. So two fronts. So one, we're working with them on kind of using their treasury to help like bootstrap DeFi. They're still kind of trying to work through, I'd say with the legal team on what exactly they're able to do there. But we're I think tightly aligned on the goal of that they have a quite a large war chest and they really want DeFi to happen very soon. Working that pretty closely on like how they can kind of help make that happen.   And then the second thing is on that's all order flow. So I there's two ways order flow we're helping to get from our that we are getting from them. So the first is ⁓ order flow from Eureka chains. So people are swapping, you know, from Eureka, we'll be in the Dex and the Cosmos hub. That's going to be the centerpiece for all these transactions. We can process all that swapping. And the second is they run Cosmos Go, which is the largest IBC aggregator ⁓ or Cosmos aggregator. It serves a whole bunch of chains. If you guys haven't checked it out, definitely go check it out. ⁓ IBC off on.   << Jason Kam (19:01) >> Hmm.   ⁓   << Vishal (Stride) (19:31) >> Yeah, it's great. You can swap from any chain to any other chain. But we're doing a preferred partnership with them there. first, any swaps that go through there, if we have competitive execution price, because the UXs are being better for users, a lot of those swaps will go through us. They do around 70 % IBC volume today.   << Jason Kam (19:50) >> that's interesting. That's the skip go. That's basically, that's what it is.   << Vishal (Stride) (19:56) >> Yeah, it's skip go. I would say it's like the canonical front end for skip go, although people can also plug into skip go through an API. Yeah.   << Jason Kam (20:00) >> interesting. so   walk me through. ⁓ So what your DEX is live and running, let's say they see that it was like 50 million TVL, just for example. And ⁓ let's say for whatever reason, I want to swap from Solana, like Sol, and directly to ⁓ USDC on Osmosis, for example. And I'm hooked up with Eureka. In my mind, the flow goes like through Eureka.   The Solana gets bridged onto Atom Cosmos Hub, aggregated through, swapped through DEX of the Cosmos Hub's choice, and then through IBC bridged to Osmosis as USDC. Is that a right way to think about this?   << Vishal (Stride) (20:48) >> Exactly. the one caveat is that's like the intended path and that's the path that will have the best UX for users, like fastest thing, least number of transactions. But if the execution price is bad in that route, like let's say like you're trying to go from shiba inu coin over and it's like, actually, we don't have good liquidity on that. Then I think I'll fall back to whatever like the best taxes that gives you that price. But there's some trade off there on UX and price.   << Jason Kam (21:01) >> Mmm.   I see. So if Osmosis, for whatever reason, basically forks Eureka with their own treasury, and they can also Hulk it up with Solana, then basically the Eureka bridge would not sort of... It might prioritize Atom, but it doesn't have to. It could just like hop. then in that case, your DEX on Cosmos Hub would not get the volume.   << Vishal (Stride) (21:36) >> Yeah, it's a great point. if there's like someone that wants to spin up like other liquidity for these types of things, and then we don't do a good job of targeting well, we don't want users to go through our DEX like if they're getting a much worse price, you know, it's worse for them, they're not going to like the product, not going use it. But this exact case, think is not really possible to happen. And the reason is, Eureka is like a combined product offering with ⁓ the ICF and Atom. And so it's the bridge over to Ethereum or Solana, etc.   << Jason Kam (21:48) >> Hmm. Hmm.   Yeah.   << Vishal (Stride) (22:04) >> But it's also a bridge to your chain that you agree will kind of be canonical. So let's say like, Babylon signs up for this, they kind of agree that this bridge over to Adidas is canonical and they'll use the skip go routes and, or think Cosmos go rebranded routes and market makers, et cetera, to help you onboarding flow. If Osmosis did like another IBC connection, I think this aggregator would just ignore it because it treats only this route as canonical. ⁓ Does that make sense?   << Jason Kam (22:19) >> Mmm.   Hmm.   ⁓ And let's say there   are a lot of DEX that's being sprouted up. I doubt they're going to get the same level of TVL as you do. But let's say they get some TVL. And then through Cosmos Go, some volume gets routed over. And let's say it is a transactional volume. ⁓ That's when you get paid. OK. And what does a preferred partner mean in that case? Because it would seem like they would just split the order flow based on the fill.   << Vishal (Stride) (22:48) >> Exactly, yeah.   Yes, so I think they ⁓ will split the order flow based on the fill if the fill is sufficiently bad. But preferred partner I think is, ⁓ there's like a, the optimization for a aggregator I think isn't always just like cheapest or best execution price. They do like some mixed weighting of like speed, UX, ⁓ maybe like number of transactions to user. They don't have to like some aggregators that they do obviously just do best price like Jupiter.   << Jason Kam (23:13) >> Hmm.   << Vishal (Stride) (23:23) >> doesn't make sense to consider this like all the swaps are atomic, you know, just give you the best price for them. have like some ⁓ goal there. And so for us, because we're kind of heavily optimizing around the UX here, ⁓ we're hoping to build around the Eureka chains. And then the preferred partnership is if our best price is within a tight band of the next best option. let's say there's ⁓ making up a number here, but 10 basis points or 20 basis points of the next best option. But because the UX is better with the preferred partner, we'll still get that flow.   << Jason Kam (23:42) >> Hmm.   Hmm.   ⁓ OK. So it is quite nice. And is it on paper anywhere, or is it just like we like each other? That's why we're offering to you?   << Vishal (Stride) (23:55) >> Yeah.   Yeah, so we've kind of put together docs and sent this through. Some of this I think is everything's written down. I say we're very in tight sync around what we're trying to do here. And not all of it, I think can be like.   << Jason Kam (24:13) >> Hmm. Hmm.   Disclosed Interesting. ⁓ And how soon do you think this will be live? The product that you're building, like the first, like when is the first dollar of swap? Because IBC, your hair's already live, right? So like when is it going to flow through your product?   << Vishal (Stride) (24:20) >> Yeah, exactly.   Yeah, so we're pretty much just sprinting right now to get this out. This is our top goal. Our hope right now, we're targeting two months to get everything done. It's gonna be like, there's these number of contract changes on the backend and then fully above out front to make sure everything works for Eureka. There's some uncertainty in there though, mainly because there's kind of a number of moving parts here around like IBC, mean Eureka's SR milestones and ASPSTAR and software upgrades in the hub. So everyone's targeting two months, but.   << Jason Kam (24:39) >> Yeah.   Hmm.   << Vishal (Stride) (25:02) >> I think two to three might be like a safer time.   << Jason Kam (25:05) >> And are you aware of any other Dexs that are doing similar things on the Cosmos hub?   << Vishal (Stride) (25:11) >> ⁓   Yeah, I'm not aware of others on Cosmos Hub. There is an early great team called Ellis that is working super close to the Cosmos Hub. They have like a whole DeFi suite, so they like, they also do Spot, but they're also their own chain, just kind of send around Atom. ⁓ So far we haven't heard anyone else kind of building, specifically on the Cosmos Hub . Although I think given the Eureka just launched and there's kind of all this excitement, it's inevitable.   << Jason Kam (25:26) >> Yeah.   Yeah. And then the fee structure. And to be very clear, ⁓ there are three types of flows that could happen. The first type of flow is ⁓ the transfer. So like USDC on Solana to Atom, you will not get that. It's just done. The second type is sold to USDC, go on your hub, your chosen body, Cosmos Go aggregator, and you get the fee. The third type is for some reason people want to ape some coins.   And because you are the largest DEX, they ape on you, and you also get the fee. On the latter two cases, what kind of fee structure should we be thinking about here?   << Vishal (Stride) (26:14) >> Yeah, I think we're,   we haven't finalized anything, but we're thinking right now it's kind of mirroring osmosis. That's what lot of osmosis users are familiar with. It seems pretty healthy and sustainable. they have good market share and also pretty healthy revenues. That's something like 10 basis points for most swaps, but with certain pools having fee discounts, depending on how strategically important they are, or if there's like promotional period or something. The one additional thing I would add is on top of these two, the three users outline, I there's also two other kinds of users that I'm imagining.   One is just the aggregator users. So people who are just like generally using aggregators to move around ecosystems, a lot of that I think we'll also capture. And then last is, I think we're hoping to be the most like Atom aligned DEX. So anyone who's, you know, been in Cosmos for a long time or is like a real Cosmos OG, we're hoping to make kind of a really great product for them and will be the place that they, and a big part of that is that we're really trying to make Atom and Stride very value aligned. And so a good portion of Stripe revenue will be used to buy and burn Atom using the DEX will help.   << Jason Kam (26:47) >> Hmm.   Hmm.   Yeah.   << Vishal (Stride) (27:12) >> know, use Atom as transaction fees. So trying to get that in line as well.   << Jason Kam (27:16) >> Mm, OK. And those are really good points. I want to get to them one by one. So if it's like a 1 % pool, you will charge 10 vips on top of it, effectively, kind of. OK, OK. And then of the fee that you accrue in those volume, how should I think about the split of that to your team, the stride, and Atom?   << Vishal (Stride) (27:27) >> Yeah, yeah, exactly.   Yeah, so right now I would say the majority of it will go to Stride token, most likely Buy Back and Burn, although possibly Buy Back and LP, we're kind of actively evaluating the two and listening to people's feedback. And then the other minority of it, but still a healthy chunk, will go to Buy and Burn Atom, or Buy and LP, I think they kind of defer to Mag and Darian, what they think is best. Right now none of it will go to the team. I think the hope is that we'll get   << Jason Kam (27:52) >> Yep. Yep.   Hmm.   << Vishal (Stride) (28:10) >> the DEX to large-mess profitability, like even Osmosis has, I think, around $10 or $12 million a year in revenue. It fluctuates quite a bit, but ballpark there. We're hoping that it kind of takes a small chunk of this out to cover kind of operational expenses, but nothing's proposed yet, and I think we're hoping to only do it if and when the DEX is successful.   << Jason Kam (28:22) >> Hmm. Yeah.   That makes sense. What's it going to be called? You don't have to tell me if it's still in the works.   << Vishal (Stride) (28:35) >> ⁓ yeah, yeah.   It still doesn't work. I'd say we're like 98 % there, but like not everyone's fully happy with it. So it might change. ⁓ but we'll see.   << Jason Kam (28:41) >> Yeah, yeah.   Yeah, fair enough. think   coming up with a name is always the hardest. Funny enough. ⁓   << Vishal (Stride) (28:49) >> hard yeah we also have a lot of   stakeholders right so it's like a lot of people in the stride team you have a lot of people who and everyone feels strongly about names a lot of people on stride side but then also people from the cosmos community or the ICF a lot of people have lots of thoughts and so there's a lot of good ideas but it's hard to pick one   << Jason Kam (29:02) >> Hmm.   What would success look like to you if this product works? What would make you happy? Any milestones that you're thinking about that? Yeah.   << Vishal (Stride) (29:17) >> Yeah, yeah, absolutely. I'd say, like, probably like, there's some tiers, like some stages. Early on, we'd be very happy if we sort of like the majority of Cosmos users. And that's like our first goal. So I users who have wallets and Cosmos chains, where are they swapping spot? If we're the place the majority of them go, that's a huge first win. And they can get there early on like that, which we'll do shortly after launch. That's kind of our goal. Pretty soon after that, think our hope is to just process a ton of volume.   I think by end of this year we're hoping to do something similar to what most of us do today. I something like generating something like 10 and 12 million a year in revenue. The volume would depend a little bit on the fees, but they do something like 30, 50 million a day, something like 2 billion a month. I think we're hoping to get something like that pretty, hopefully not by the end of the year, but this year. And then after that, think a lot of our growth from that point, I would say that's kind of us.   << Jason Kam (30:08) >> Hmm.   << Vishal (Stride) (30:14) >> growing into and winning the market that we're in. And I think from that point, a lot of the kind of milestones that make us happy is growing one, the DeFi ecosystem on the hub, but I think more importantly, the Eureka ecosystem. And the second one is probably going to be a big part of our focus. So how can we get like more and more big customers to join Eureka? How to make the value prop bigger? Ultimately, every customer is like just more volume and more users for us. So I want to start dominating that. I think that the next goal there is really like   get the Eureka, like, IBC ecosystem to be the largest bridge in crypto. Like Max said, do 20 billion a month and a bridge volume from that. And then our fees can be, I then the Cosmos Hub would really be like a router for all of crypto and there's tons of value being created and lots of fees to generate there.   << Jason Kam (30:57) >> Hmm.   Yeah, you touched on a couple of things. One of them is ⁓ serving as BD function for Cosmos Hub slash Eureka. And the second part is potentially more DeFi products beyond just a Uni v3 fork that you did. Can you expand more on that? How is your BD approach going to be different than Maghnus's? And then when you talk about, it's probably like at least you're down a road when you build products, but what would those products look like if you were to build?   << Vishal (Stride) (31:26) >> Yeah, totally. I think at least early on, very much focused on the DEX, but trying to help like whatever needs these teams might have. So part of the BD function I think is also just like, you want more salespeople to kind of like hype up the value that you're making them bring. So Mag and Alexi do a great job on that, kind of follow on  that. But then, specifically on the DEX side, I think a lot of chains have a lot of like onboarding, huge pain point. Like there's basically been like only a handful of times in crypto, they can onboard onto an app and it's been like   reasonably easy. I think it's always a big drop off point for chains. We're hoping to kind of help make that good for those people, or those chains. So think about what are the tokens people are going onboard on? What's your launch date? How much volume should we expect? And then we have liquidity we want to deploy, and we want to use that specifically to help that onboarding for those chains. So that's a pain point we want to solve right at chain launch. Establish a partnership early, help as an ongoing basis. Here's what onboarding and offboarding flows you're seeing.   << Jason Kam (32:21) >> Mmm.   << Vishal (Stride) (32:26) >> or is it make that even easier for users? That's one thing. And the second is trying to find like other things we can do that will make the DEX like win for the other chain as well. This is little bit harder to do, I think, but we have a few ideas. So one thing is I think for all the Eureka chains, we haven't fully finalized this, I think something like this we will do. ⁓ Using something like half the protocol fees on those pools. So let's say Babylon, like the baby pool, use half those fees to buy an LP, the baby token.   drives alignment with that chain, like half the fees there going directly to help improve  for them. And also helps the stride DEX, like now we have protocol and liquidity on the chain, helps make us a bigger trading money for those teams. Yeah, and then we're hoping other stuff as well, like incentive matching. So like if other teams are willing to do incentives, we'll match them either with stride token or maybe like redirecting some protocol revenue, ⁓ might do like custom features for these teams. Mainly, we're thinking is there's so much leverage on the first 20 Eureka customers.   << Jason Kam (33:03) >> Interesting. ⁓   Hmm.   << Vishal (Stride) (33:21) >> We want   << Jason Kam (33:22) >> Hmm.   << Vishal (Stride) (33:22) >> to do everything we can to land those. Once you build those network effects early on, you get a ton of value from them during a lot of usage. And then every subsequent sale is much easier.   << Jason Kam (33:31) >> Do you have enough bodies? Do you do it in separation of the effort that Maghnus is doing? Or are you doing it together? Or are you all in the same group? How does that look like in reality?   << Vishal (Stride) (33:40) >> Yeah,   probably combination. My guess is they probably have tons of meetings without us, you know, like, and then when they want to talk about things like liquidity or how onboarding flows will go, we're much more involved there. And then we'll have separate conversations to take that further.   << Jason Kam (33:50) >> Let's wink it.   Got it. And so the next 12 months, the focus would be this bridge and just onboarding customers plus DEX, effectively.   << Vishal (Stride) (34:02) >> Exactly. Yeah. And on my mind, they're very similar. We're really focusing on the onboarding part of the funnel that's around the DEX and particularly like how can the DEX really like enable these flows? Maybe to give you like one example of kind of what we're thinking. We've been doing a lot of digging into like the aggregator volume in Cosmos and what retail users do. So looking at like a breakdown of different types of trades, like what tokens do users trading into and out of what, what sizes.   << Jason Kam (34:09) >> Hmm.   << Vishal (Stride) (34:28) >> And our hope is that we're striking a bunch of like deals for liquidity with the different entities and then we're hoping to deploy those specifically for These kinds of trades so hoping to do like the same thing here for the re-recover volume So you think of like what types of bridging block are we getting? Okay, it's usually under $5,000. Let's make sure we always have $5,000 at the best data-price and can deploy a bit more smartly there and it might be like it might not be like   << Jason Kam (34:42) >> Hmm.   Hmm.   << Vishal (Stride) (34:56) >> very value generating as an LP, like might be like pretty even. But think of it as the loss later to make the DEX more profitable or attract more usage.   << Jason Kam (35:04) >> And are you going to give stride incentives? OK, yeah.   << Vishal (Stride) (35:10) >> Yeah, we will, not not not not not terribly many. In the past, I think we've been more liberal than incentives and they work sometimes than other times. think our takeaways like, yeah, our takeaways. I think there's times we have like a flywheel that seems like it is working. And then the incentives really help you to help choose that. But oftentimes, you might have something that is really not like a very effective product and the incentives are not helpful there. And then we're hoping to first like   We ⁓ are pretty lucky, I say, because we have some low-hanging fruit for flow or volume that we can get from all the wraps on Cosmic Sub or Eureka. ⁓ From that, think, hoping to get some sense of what features are impactful or driving more volume that would make sense to internalize.   << Jason Kam (35:56) >> So you don't plan to use stride as the LP pair or something, right? But there might be atom incentives.   << Vishal (Stride) (36:01) >> No, no, no.   ⁓ It might be stride incentives too, but think they won't be like a huge amount of incentives.   << Jason Kam (36:09) >> Because it seems like it's an interesting place to ⁓ use, know, like, staked atom that is stride as the base pair. That kind of force, I don't know if, is that part of the plan?   << Vishal (Stride) (36:23) >> Yeah, no, it's a question. we just thought of this quite a lot. The one challenging thing is a lot of users want Atom at the end. Like they don't actually want Staked Atom. Like if they're going to go on bunch of CEX or do something else, they often just want to use the ATOM token. And so it's hard to have like a lot of liquidity or solely be St. Atom when users want Atom. I think what we do obviously run LST business and it's been part of stride.   << Jason Kam (36:32) >> Well, yeah.   Hmm.   << Vishal (Stride) (36:50) >> I think we're looking into right now is are there like idle pools of capital on the ducks that can be staked? So for example, like LP that is out of range sufficiently. And maybe when you LP that you opt into like, hey, I want to earn an additional yield. I'll take on this additional risk. Maybe we can have a lot of the assets in the ducks kind of staked and earning yield, but I don't think it be all of them.   << Jason Kam (37:11) >> That makes sense. ⁓ Do you feel like osmosis would be competition in any sort when you're going through this effort? Are they going to do the same thing? Yeah.   << Vishal (Stride) (37:22) >> Yeah,   no, it's great question. Our hope is that I think to not be competitive with Osmosis. And in some sense, I think we're definitely going to be somewhat competitive. Like they're a Jackson Cosmos or a Jackson Cosmos. But for the first year, for example, I think we have very specific, like two very specific customers, neither of whom are Osmosis customers. Like it's the Eureka chains and then it's the Cosmos have DeFi apps. Those are like inaccessible to Osmosis.   << Jason Kam (37:44) >> Yeah. Yeah.   Hmm...   << Vishal (Stride) (37:51) >> And   << Jason Kam (37:51) >> Hmm...   << Vishal (Stride) (37:52) >> then on top of that, think we're focusing on like token liquidity for like these new Eureka type chains like like Ondo or Babylon or a lot of these customers that barely Magmar talked about. But I was most of that, I think they're trying to focus on Bitcoin or building Polaris. They have like a very compelling and good vision, but I think it's just a different customer base. They're focusing like on unifying much different ecosystems. So definitely a little bit competitive, but I think   << Jason Kam (38:04) >> Hmm.   Hmm.   << Vishal (Stride) (38:19) >> We're very focused on just a very specific customer group early on.   << Jason Kam (38:23) >> It seems like Maghnus had conversation with you both. And Osmo was like, that's really cool, but we got a bunch of stuff going on. And for you, it's like, this is really great. You're 100 % of our focus. And that's ultimately the swing factor that made them decide to work closely. Is that the right way to think about this? Because why do I ask this, Vishal, is because I'm thinking about alignment. And I don't know.   imagine he probably needs somebody that really spends 100 % of their time on Atom. And I don't know also if they plan to own a lot of the Stride tokens to further align the incentive when the conversation happens.   << Vishal (Stride) (39:06) >> Yeah.   Yeah, yeah. No, I think this is totally right. So for us, I was most obviously, I think it was a natural candidate to also be the kind of DEX that really helps unlock Eureka, like the IBC and Eureka DEX. But I think for them, have a lot of like really, one, like good business lines going on. I think also just in terms of things they're trying to build out, like they've been working on Polaris for a long time. They're working on Bitcoinmosis or...   << Jason Kam (39:18) >> Mm.   Hmm.   << Vishal (Stride) (39:33) >> I should have pronounced this on Twitter, know, BGCmosis. BGCmosis, You know, they sound like these efforts are going well. I think they are excited about them. They've been in Cosmos for a long time. But I don't think they want to focus all their efforts on them or kind of be fully part of just of them and, you know, be on the Cosmos Hub or whatever else might entail. For us, was something we thought about for a long time. Like, truthfully, I think we've been a little bit like, just...   << Jason Kam (39:35) >> Yeah   Hmm.   << Vishal (Stride) (40:01) >> worried about the Cosmos hub over the last two years. There's been some big initiatives with them that were canned out, or it's been kind of a big leakage of users, been a ton of product direction. And so we weren't really sure how it was gonna be after  Mag took over. But it's honestly, we've had, been pretty inspired by them and been pretty impressed with what they've accomplished. And we've had a soft spot for Cosmos for a long time. When we first built in Cosmos, we'd been users for about a year. Before that, we'd...   << Jason Kam (40:15) >> Hmm.   Hmm.   << Vishal (Stride) (40:31) >> We're incredibly excited then, it's still about Hub Chains and I've really wanted to grow and be part of that. ⁓ And I think now we're excited that there's a clear path to getting there. The work that hasn't been for a while. And I think we're fully committed and we're happy to be fully committed to the Cosmos Hub and help build out that vision. And for Osmosis, I think they have their own visions. It's not any less good, but just different.   << Jason Kam (40:53) >> Would the ICF or ICL purchase a big slug of Stride through TCN Open or OpenMarket to further align the incentive? Or do you think that's not what they're going to do?   << Vishal (Stride) (41:04) >> It's possible, I think that they might be open to it. They haven't committed to anything like that yet, but they are making investment in Stride. I think it's something they're open to, but think legally they haven't done open market purchase or anything ever in the past since Operation. I'm not sure how else it would be. ⁓ But hopefully they keep getting Stride and they'll continue to be aligned with the protocol.   << Jason Kam (41:13) >> Okay. Okay. Okay.   Hmm.   And this tax effort is self-funded. How much grants are they paying you per month to facilitate this?   << Vishal (Stride) (41:34) >> Yeah, I don't know if they're disclosing the amount, but it... Yeah, yeah.   << Jason Kam (41:36) >> Okay, you don't have to tell me. It's my job to ask. You don't   have to tell me. Yeah. Yeah.   << Vishal (Stride) (41:42) >> Absolutely. It's a great question. But it's   a reasonable amount. I think this is a very big effort for us. We're all in on this. This is 100 % our focus. It's a big bet. We're very confident in it. But we're betting everything on this being a huge, Eureka really growing and seeing what we can do to help that. But at the same time, I they're also making a very big bet on us. The DEX is a big part of this reconition. They're next right after the hub. The hub DeFi ecosystem revolves around the DEX.   << Jason Kam (41:53) >> Hmm.   down.   you   << Vishal (Stride) (42:11) >> As a result, making a pretty reasonably sized investment to stride. But I think it's very like we, there's a lot for both of us to do to help the other person.   << Jason Kam (42:21) >> ⁓ That's very helpful. ⁓ How would you, I mean, it's so to buy if you're retail, like you can, but are you, plan to do anything to improve the liquidity of this coin at all? Yeah.   << Vishal (Stride) (42:35) >> Yeah,   yeah, absolutely. This has been a big pain point and the token is very hard to buy right now. It's something we've working on. It's been a little challenging in Cosmos, like the overall volumes and users have gone down. So the natural volumes got down. It's a little hard to of resuscitate that cycle. We've been trying to strike some deals more recently and should go live soon to help increase liquidity with a few market makers as well as   << Jason Kam (43:02) >> Hmm.   << Vishal (Stride) (43:04) >> think as when Dex actually comes out, you have a lot more control over, you can pair things with the token or you can direct incentives or make the pool fee free or whatever else it is to help make the token more liquid. I think one stride actually is a Dex, token location should be increased a ton. But it's also right now, I'd say a big thing that we're thinking about, part of this building out the stacks, think, and building out...   << Jason Kam (43:16) >> Hmm.   << Vishal (Stride) (43:30) >> is we want to make the token more accessible, because it's also part of the product. Or at least it helps enable, like it's standardized with the DEX itself, and so we to make that a big push.   << Jason Kam (43:34) >> Mm.   Yeah, I think it plays well with the DEX that you're building, and in particular with Eureka too. ⁓ Would you consider wrapping your token and then bridging it over to, let's say, Ethereum and then creating an LP pair there so that people can also buy more easily?   << Vishal (Stride) (43:54) >> Yeah, think we're not opposed to this. ⁓ So in full transparency, we actually don't do any of things on chains, as someone else does, but I think we'd be open to someone doing that. The only thing is, in the past, people have done this, ⁓ and we haven't seen very great liquidity for these tokens on other chains. So even like Atom, we bridged over to, Atom's drivers will do this, we bridged over to Arbitrum, and didn't see very much adoption or trading of a token there. In general, we don't see that much of this across any ecosystem.   << Jason Kam (44:06) >> Hmm.   Hmm.   Hmm.   << Vishal (Stride) (44:23) >> There are some memes that are exceptions, but general it's true. I think there's a loyal user base of people who trade a token, and they tend to live on one exchange or one website or one venue. And when you bridge somewhere else, users aren't too much of seller, they're unlikely to buy it. ⁓ But we are looking at ways to make the token more liquid than Cosmos.   << Jason Kam (44:36) >> Hmm.   ⁓ Do you feel like with this dex and the atom relationship, is there anything else we haven't covered yet?   << Vishal (Stride) (44:53) >> That's a question.   << Jason Kam (44:54) >> Yeah,   I think we covered quite a bit. ⁓ I think the only thing left would be if there are any other products, like lending. But I don't know. You've got a full plate. So you kind of want to crush the DEX first before thinking about anything else. So I don't know.   << Vishal (Stride) (45:11) >> Yeah, yeah, absolutely. Yeah, I mean, I think ⁓ in most ecosystems, Dex's are just so like, having a good Dex is so good, having bad Dex is so bad, but good Dex's can really capture so much value. it's much more, like, Perps is a little bit more, think, and maybe named point launchpad with pump fun. But in general, it's like one of the highest ⁓ value capture protocols in any ecosystem. And think it's where we want to make most, almost all our focus. And then I think if and when that's successful.   << Jason Kam (45:22) >> Hmm.   Hmm.   << Vishal (Stride) (45:39) >> we can start expanding more products, we'd sort of create a little bit more. But definitely maybe focus on the DEX. ⁓   << Jason Kam (45:45) >> Is there anything else that you has execution risk or keeps you up at night and is like, this might not work that we haven't discussed yet? It seems pretty clean. I thought this is exciting because your market cap is under 30 million FDV. If you hit anywhere close to the revenue target, you get comp to DEX right away. And because it's so thin, I don't know how much float is out there. You probably own a bunch yourself. This should really just work.   << Vishal (Stride) (46:14) >> Yeah, we're hoping so. think, yeah, I mean, we've thought about this for quite a while and I think we have a good structure here. Like it really does seem like lot of ingredients. I think that the key things for us is we have a guaranteed customer base with your customers and they have a burning need. And as long as we can do a good job addressing that need, we know where to get that volume. And we're fully kind of dedicated to addressing that need. Then there's like Hub DeFi ecosystem. Like they also need a dex. I think we'll be like kind of the de facto location for that.   And then these Cosmos retail, I mean, our volume, again, if we do a good job there, we can get a lot of that flow. There is some execution risk here. Like we have to make sure we do a good job. that means we to make sure we get liquidity commitments, make sure we can get like a, a good job managing on liquidity when we deploy it, make sure we actually understand what users want, like to make sure like, know, user A is going from, or like where users are reaching from or reaching to, like to understand deeply. So we have to do a good job of this, but I think if we do, we have a really good setup here.   << Jason Kam (47:06) >> Yep.   Who's your auditor, by the way?   << Vishal (Stride) (47:14) >> We use informal systems right now, so we've done like 12 audits with them. They are by far the best in Cosmos, think. We have lot of great auditors in Cosmos, but Informal develops the core Cosmos SDK. They're like the ones making everything. Great auditors. But we might look into other auditors for EVM. Informal is also good at that, but we're just not familiar with EVM, and so it's possible there's other good auditors we should look into.   << Jason Kam (47:25) >> Hmm.   Yeah,   it's Alec Halbourne. Happy to do intro. We can do it. We can do it offline. That's all I have. Let's see if the group has any questions. Give it three seconds.   Okay, that's it from me. Vishal thank you so much for your time. This is very helpful.   << Vishal (Stride) (47:58) >> Thanks so much, I really appreciate it, and thanks for having me on. Yeah, it was a pleasure.

TLDR In this episode of BidCast, Jason interviews Yu Hu, the founder of Kaito, discussing the company's impressive growth to a $33 million annual run rate. They delve into Kaito's business model, which includes information as a service and innovative marketing strategies like the Yapper leaderboard. The conversation also explores future revenue streams, the role of AI in capital formation, and the importance  of community engagement. Yu shares insights on tokenomics, NFTs, and Kaito's vision about InfoFi and how they plan to expand beyond the crypto space, setting ambitious revenue targets for the future. CHAPTERS / TIMELINE 01:00 Introduction to Kaido's Growth Journey 03:47 Revenue Breakdown: Information as a Service vs. Platform 06:56 Market Dynamics: Business vs. Investment Firms 10:07 Innovative Marketing Strategies in Crypto 12:58 The Future of Community Funding and Capital Formation 15:52 AI-Driven Solutions for Token Distribution 18:59 Kaito's New Product Launches and Market Positioning 22:03 Flexibility in Investment Structures and User Targeting 25:05 The Role of Stakeholders in Project Success 27:46 Speculation and Market Dynamics in Token Economics 35:55 Solving Distribution Challenges in Crypto 40:00 Innovative Referral and Incentive Models 43:19 Personalized User Experiences and Data Feeds 44:04 Information as an Asset: Trading Narratives 51:12 The Vision for a Unified Social Media Index 55:36 Revenue Models and Token Dynamics TRANSCRIPT <Jason Kam (01:01)>: All right, we are live. Welcome to another episode of BidCast. I'm your host, Jason Kam, aka Maple Leaf Cap. Today is April 23rd, 2025, 5 p.m. Hong Kong time. BidCast is being livestreamed to BitClub members. Questions are from my own and the members. Today I'm speaking with Yu Hu, the founder of Kaito. Yu Hu, welcome. <Yu Hu (01:24)>: Good to be here. <Jason Kam (01:25)>: Yeah. You publicly disclosed that you're now run rating at 33 million AR annualized. Can you just break that down for us, like where it's coming from? Because that was like a massive increase versus when I talked to you last year. <Yu Hu (01:41)>: Yeah, so obviously like the whole Kaito journey has been a bit of a massive growth, right? So at the very beginning of 2024, which is just over roughly five quarters ago, so 15 months ago, we were generating roughly 100K of revenue. And since then, there's been significant adoption on various different parts of the businesses. And so the number that we gave specifically was annualizing the Q1 revenue and the two kind of main components to it. One is <Yu Hu (02:16)>: what we call information as a service, which is the traditional business that we've been running over the past basically, started monetizing in early part of 2024. That's our API business and our subscription business. And then that's making a roughly, I'll say, somewhere between 30 to 50 % of the revenue that we disclosed. And then the other business is basically the new business that we launched in December and that's kind of the Yapper leaderboard slash what we called information as a platform business. Obviously Yapper leaderboard will be in the first product out there in the market but subsequently we're going to be launching a lot of the newer products and that's the other the basically the remaining part and yeah so that's that's kind of the whole makeup of the 33. <Jason Kam (03:11)>: Sorry, and the traditional Info as a Service business, what's the breakdown of API versus subscription? <Yu Hu (03:17)>: Yeah, so I mean, we're not breaking that down, it's both are basically, you know, both are growing still and both are very, resilient and, you know, cutting through actually. I think one of the underappreciated aspects of that business is it brings us all the... <Yu Hu (03:45)>: business relationships that we currently have. One of the things that people were kind of surprised about when we first launched the Yaps campaign is people were instantly thinking that this is another social fire farm, it doesn't have any fundamental, but actually all the stuff that led to the Yapper Leaderboard was because of the business relationship that we had over the years and clients are basically asking us to have new ways beyond just like doing analytics. <Yu Hu (04:15)>: asking us for new ways to actually... crystallized growth and all that kind of stuff. So the kind of the pro side and the API side both are still growing very fast and on the API side we're powering a lot of the, historically a lot of the kind of AI agents, applications, but nowadays we're doing a ton of large scale enterprise integrations in terms of, for example, we, I think maybe Maybe like a month ago, Falcon X announced that their new flagship product is integrating with all the kinds of data. So in terms of all the search capabilities, mind share, sentiment, a lot of the social graph stuff. And increasingly we're doing a lot more of these large scale enterprise integrations using all the data that we have. <Jason Kam (04:51)>: Yep. <Jason Kam (05:12)>: And the breakdown there, how much is investment funds using you versus businesses, generally? <Yu Hu (05:21)>: Yeah, at this point is more businesses than investment firms. think at the end of the day, that's the state of the market right now. you know, it's just a bigger portion of the crypto market is always going to be project teams. And project teams have... <Jason Kam (05:25)>: Yeah. <Yu Hu (05:45)>: uh... you know more dollars to spend uh... it's been frustrating <Jason Kam (05:48)>: Yeah, that's for sure. Or fucking poor. <Yu Hu (05:52)>: A lot of the funds actually, it's very interesting dynamics in a way that even some of the whales are able to deploy more money and dollar than a lot of the liquid funds in the space. This is a very different market structure and dynamics there. obviously at the same time, the benefit of working with all the projects is the business is very, very resilient. As long as the project's operating, as long as people are on the team, then basically people need the tools to be doing their jobs. And market going up or going down doesn't really have an impact. The same goes to API business as well. Once people are integrating with that, it's very, resilient. But also at the same time, a lot of the Yapper leaderboard clients that we have essentially materialized because they've been kind of using the information service platform that we built. <Jason Kam (06:56)>: I guess the churn there is low, but it kind of is cyclical only in a way that the market gives the funds and the companies more or less money. <Yu Hu (07:04)>: Yeah, and to be honest, like, for... So just in terms of the churn part, the high churn part is always the individual traders market. And I think it will be the same for a lot of the sort of a subscription based services in the space. The individual traders are very volatile, but it's making up a very little proportion of our revenue, even just on the pro side. And in the 33 million number, because annualized run rate number so it already factored in all the market downturn in March already. <Jason Kam (07:44)>: Yeah, and off the other part, which is the info as a platform, how do you make your, I'm guessing like 20 million dollars plus annualized there? <Yu Hu (07:53)>: Yeah, it's so we obviously have different ways of making money there and we are also in the process of expanding new revenue streams but currently we launch Yapper leaderboards with various different projects and as part of the service, we essentially run all the data indexing, analytics, and core marketing with every single project. And then we charge a fee for that, for the service. So one of the very big focuses for us in Q2 is basically having two new revenue streams, actually three more revenue streams coming out of the information, actually two new revenue streams coming out of the information as a service. <Jason Kam (08:22)>: Hmm. <Yu Hu (08:41)>: sorry, information as a platform business and then one more revenue stream coming out of the what we call the third leg which is information as an asset. So maybe I'll just cover the kind of the two additional revenue streams. So one is going to be Kaito . <Jason Kam (08:57)>: Yeah. Sorry, before I go there, I'll dive deeply into them just in just a bit. So like Bera pre-TGE, they come to you, like, I want to pay my KOLs and have them show me. And please help me devise a campaign and pick out the best KOLs who can show me. And I'll pay you a million dollars for you to devise a campaign. Is that roughly the right way to think about it? <Yu Hu (09:04)>: yeah. <Yu Hu (09:18)>: Yep. <Yu Hu (09:26)>: No, so it doesn't currently work that way. So the way that we basically charge is we charge a flat fee for data indexing, analytics, and all that kind of stuff. And each of the project would essentially set aside their own reward pool. We don't take any dollar from the reward pool. And every single dollar of the reward pool basically goes straight to the users. <Yu Hu (09:49)>: But as a service provider, we essentially run the data indexing algorithm and obviously the distribution of all the rewards. And then we charge kind of a six figure for that kind of a data indexing for one year of service. And then... <Jason Kam (10:07)>: Hmm. <Yu Hu (10:08)>: And then so upon renewal, people can essentially decide whether they want to renew the service or not. basically two big camps of projects that are considered in this one is post TGE. If you are a very mature kind of a protocol, then you can, you know, projects such as Polkadot, you know, back in the day, spend huge amount of dollar in terms of incentivizing KOLs and now using, you know, Yapper leaderboards <Yu Hu (10:38)>: essentially organically incentivized content creators and influence in the space the ultimate proposition that is in the past because crypto doesn't there's no digital ads in the space because you can't run any ads on Twitter then every single campaign and the main distribution dollar basically goes a handful of KOLs in the space which is very ineffective <Yu Hu (11:08)>: And and the majority of the times you basically Set aside a huge, you know either carry around or reward for a very handful of people And hoping and also at the same time you pay people upfront hoping that they deliver It is actually one of the most primitive and non-transparent opaque distribution methods in the world. So the kind of alternative solution that we came up with was that we essentially incentivize people to set up a public bounty so that it becomes freely accessible for everyone to essentially participate which generally generally speaking generate much better excitement across crypto <Yu Hu (11:58)>: but at the same time you only reward people based on their actual performance. So people need to put up the work and actually generate kind of a high value, high impact outcome to be able to qualify for being paid. And so essentially everything is essentially being rewarded after the impact is done. So that's kind of a kind alternative structure. And if think about <Jason Kam (12:03)>: Yeah, that's cool. <Yu Hu (12:28)>: I'll confer pre-TGE and post-TGE. Post-TG, you essentially always have some sort of marketing dollar that you need to spend for every single healthy company in the space and outside of the space as well. And people, for example, the Jupiter will be running their own content creator campaign, stuff like this. Every single community, every single big product will essentially run something similar. Historically, it's all manual. You basically go through thousands of different tweets. Some of the products use <Jason Kam (12:36)>: Mm-hmm. Mm-hmm. Yeah. <Jason Kam (12:51)>: Yeah. <Yu Hu (12:58)>: Twitter API which is costing them close to a million dollar a year in terms of just the data indexing and then you basically manually go through all of this and then you know pay your community member with you know <Yu Hu (13:14)>: with some sort of activities. Yeah, it's very manual, but at same time, it's all alternatives, for example, be like Polkadot back in the day, you pay actually 37 million that was disclosed in six months working with influencers and KOLs without very explicit metrics to essentially evaluate performance and effectiveness. So we're kind of changing this structure. <Jason Kam (13:15)>: extremely manual. <Yu Hu (13:44)>: a fraction of the money, you can now basically have alternative way of incentivizing the entire community and crypto Twitter to be, you know, talk about something that's either educational or insightful or talk about stuff that's relevant and very important for your narrative and some of the specific campaigns that you're doing and you can always measure kind of... combine this together with whatever campaigns that you're doing. For example, the way the Manta is doing this is Manta are launching a ton of new products. And every single product that essentially incentivize people to be educating the whole market about this new product. Either they're kind of the new index fund, the banking side of things, and stuff like that. And it's using a fraction of the money to essentially mobilize the entire. <Jason Kam (14:18)>: Yep. <Jason Kam (14:22)>: that's cool <Jason Kam (14:36)>: And the flexibility there is they can pay through tokens as well as US dollars. That's cool. how many logos are there with this $20 million kind of run rate? I'm guessing it's actually growing because it doesn't just go away after TGE. They might want to pay you less after TGE, but it's a SaaS annualized service. <Yu Hu (14:43)>: Yeah, and then go ahead. Yeah, sorry. <Yu Hu (15:00)>: Yeah, it's an analytics service and the so the way I think about it is two kinds of different markets. One is the pre-TGE market and the other one is the post-TGE market. The post-TGE market is effectively you're working with more mature protocols that have sustained for years of development, right? So they're not gonna, you know, go away. <Yu Hu (15:26)>: And then they have also substantial treasury, think about sustainable development, all that kind of stuff. And then they are most likely to be renewal, long-term sustainable, multi-year kind of contract that we think about. And then the pre-TGE market is a bit of both. So you have a lot of the... The primary focus for most of the pre-TGE market and the nature of the market is people would essentially spend significant marketing dollar going through the pre-TGE process because that's when you build up awareness and build up the brand throughout the process. And post-TGE, some of the projects will be able to continue to thrive, but some of the projects will not be able to make it over the long term. <Yu Hu (16:22)>: But essentially that part of the market, we convert some of the projects to be long-term customers. And some of the other projects will eventually maybe discontinue. But as long as the asset issuance side will always continue, then we'll always have a stream of more projects essentially launching through the mechanism as well. <Jason Kam (16:43)>: And how many logos do you have that contribute to that 20 million annualists? <Yu Hu (16:46)>: I think it's roughly somewhere between 40 to 50. <Jason Kam (16:51)>: 40 to 50. wow. OK, so they pay you a lot of money. OK, got it. Makes a lot of sense. So that's 20 million annualized, just about. Tell us about the two new products that excites you, and what kind of revenue do you think they'll help you drive? Maybe those two questions. Go ahead. <Yu Hu (17:10)>: Yep. So the way I think about the stuff that we're disrupting is if you think about the the Yapper leaderboard market that's kind of a democratized way to essentially launch attention. The two other ways and the two other things that we are very excited about one is a democratized the way to essentially form democratized the way to essentially help with capital formation and that's effectively a capital launchpad and I also think that that's probably where the industry is going because I think that a few major trends are happening right now is I think VC fund is going down <Jason Kam (18:00)>: Yeah, we're fucked. <Yu Hu (18:00)>: versus the last  I think liquidity is more fragmented in the market right now. I think over time probably the airdrop dollar is going to go down because there's just not enough liquidity that essentially sustains the frequent asset issuers. Especially for the airdrop dollar per project. <Jason Kam (18:18)>: Yep, agreed. <Yu Hu (18:30)>: But, and in some way, I also think that the airdrop market is... Some were indirectly funded by VCs because a lot of the protocols not necessarily have PMF at launch. So it is all based on the belief that in the future, because they have money at hand in the future, they can build a viable business. So that's the value that people subscribe. The market subscribe to each of the protocol at launch, which essentially supported the price at launch, which essentially benefits a lot of <Jason Kam (18:42)>: That's true. <Yu Hu (19:08)>: the airdrop recipients. I think that over time probably that airdrop market is going to go down. At the same time, I think one market is going to go up is with the absence of or with the decline of the VC funding market that the community funding market is going to go up. Because a lot of the projects will be thinking that with the same kind of a circulation that I have in mind, If I can't do a lot of the airdrops, maybe I just do more community rounds. So essentially to decentralize my holding. So I think that's a big market that we kind of want to tap into. And the specific angle that we have is, think up until this point, there's no mechanism that really very heavily leverages AI technology to really help with that distribution. One of the things that we did on Yapper Leaderboard is everything is basically algo-driven. So in the past, it's all manual, and people always wanted to kind of reward very loyal community members, right? But in the past, they couldn't do it because how would you even go about indexing all this data and then identifying the relevant people to incentivize a reward? The same thing actually goes to kind of the capillology part as well. If you think about community around, right now, there's just not enough data that's been properly indexed, provided by the people who are able to do this, to essentially map how all the people who are relevant. Imagine that you building a cross-chain protocol, then... <Jason Kam (20:51)>: Yep. <Yu Hu (21:00)>: A lot of the time, it's not really just about the dollar that you raise. It's actually about who you bring into the capital ⁓ you know cap  table and then be with you for the long period of time. And pre-TGE, post-TGE continue to be supporting you, creating mindshare, generating content for you, using your product, stuff like that. And what we are specifically trying to provide is with all the data that we have, if we are able to come up with a way to essentially use AI to identify all the most relevant people and also use algorithms to optimize the round, then it will be huge value add. And in terms of just optimizing the round, right? So you're thinking about a lot of different aspects to it. How do you even, like, historically people are all doing this on a manual basis. I think about how you see your structure in the round is all, I know these people, they're gonna be helpful. you should get them into the  Round. Stuff like that. In the future, it can all be run by an algorithm because with algorithm, can identify, you can index the most comprehensive data, you can identify the most relevant people who are deeply aligned and deeply passionate about the stuff that you're doing, that the most relevant, and there's no bias in terms of who you know, stuff like that. And you can be well-balanced in terms of geographical coverage, can be well balanced in terms of skill set, coverage, all that kind of stuff. So that's really the stuff that we're trying to do. That's pretty big. And I have so many follow up questions, but this is for both pre TGE private investments, as well as post TGE OTC rounds, or even just placements. Initially, what would you go to market with? <Yu Hu (22:55)>: I it can apply to both. TBD, how we gonna be doing this? We have a few projects in the pipeline in terms of the pre-TGE and I also think that post-TGE could be a very big market as well, depending on how people are going about that. <Jason Kam (23:19)>: And then the vesting and the custody is enforced by you or do you work with any partners? <Yu Hu (23:24)>: So we'll be working with other partners. <Jason Kam (23:27)>: OK, OK, cool. And then in terms of the flexibility, the flexibility of this product comes on a couple of sides. Immediately off of my mind is when you speak about relevancy. It's relevancy both to the core product that they're building as well as the relevancy as defined by the founder. I might want to open up around to people who invest in my competitors because I want to have them talk about me. How flexible would that be? And then secondly, if it's privates, how flexible would it be to tie the vesting or any type of terms, allocation size, to the actual sort of yaps or contribution that they have? <Yu Hu (24:06)>: Yep. <Yu Hu (24:10)>: very very flexible you can basically structure however you want this to be and you can also tap into both the social side as well as the on-chain side as well so one of the benefits of Kaito being a platform that has both a substantial amount of social information and the on-chain wallet connections and linking is we're able to have much more holistic user profile data. If you want to be targeting traders in Korea that have used a certain DEX protocol or that kind of stuff, we can essentially target those people instantly. so the amount of... obviously in a bit we can talk about kind of the own product, but this is kind of the ultimate premise in terms of how... <Yu Hu (25:04)>: basically the algorithm driven user targeting can be so precise that with the distribution that we have, can basically structure this in a most optimized way. So in a nutshell, it can be very, flexible. And at the same time, it can even introduce, because we have the analytic side of things, it can even introduce very, very interesting dynamics where you can have differentiation and different <Yu Hu (25:34)>: terms for different people based on proof of work post round. So you can even structure something like everyone will be getting at certain valuation. But if you are willing to put up the put in the work after the round, then you essentially over time will essentially get more favorable terms, either additional bonus or a status investing or that kind of stuff. So a simple example could be if you come and raise a yap <Jason Kam (25:50)>: Yes. <Yu Hu (26:04)>: round and every single Yapper can essentially come in at X dollar of value. Let's say for example 300 value, 300 FDV, 300 million FDV. But over time if you are willing to put in the work and continue to be generating mind share, Yapper about us, et cetera, and then based on your performance over a long period of time then if you are basically ranked top 50 over a one year period, then basically your effective valuation can come down to 100 million. So then it solves a big issue in terms of people... Basically, in the same round, people are paying the same price, but after the round, not necessarily everyone is contributing the same value to the deal. So you can essentially have a whole new different mechanism with the analytics that we have. <Jason Kam (26:48)>: Yeah. <Jason Kam (27:00)>: That's very cool. what's your tick rate and how's traction with this so far when you talk to projects? <Yu Hu (27:10)>: So can't disclose that, but what I can say is I think will be a very big flagship product for us heading into basically Q2 and Q3. <Jason Kam (27:14)>: Neither? Okay, okay, okay fine. <Jason Kam (27:31)>: And what's pushback from teams that you talk to that it seems very enticing? And if they are hesitant, are they like, this is so new, we want to see somebody else do it first? What's the hesitation, if any? <Yu Hu (27:46)>: Yeah, so interestingly, it's the other dynamics. It's the opposite of that. Basically, people are really keen to be number one launching with Kaito. Because I think our brand positioning is Kaito is always doing something new in this space. And people want to be associated, want to be the first one doing with Kaito. It's the same as how we are doing the Kaito own stuff. It's the same as when we kind of launched the Apple leaderboard, the first few projects are always getting outsized sort of attention and being kind of considered as the innovator in the space. So the same dynamics actually applies here. So we actually haven't been very vocal and public about this new product, but... <Jason Kam (28:36)>: Hmm. <Yu Hu (28:37)>: Basically, we are in this market, essentially, have a very, very deep relationship with pretty much every single pre-TGE company that's launching in the space. it's very much a lot of our clients are like, yes, we want to do this. <Jason Kam (28:55)>: Interesting. So this is like a different echo, but it's like interesting. And the public market OTC would happen much later, it seems like. <Yu Hu (29:00)>: Yeah, it's different. <Yu Hu (29:04)>: Yeah, so I mean, I do think there's different kind of differentiation and different dynamics, all that kind of stuff. And I think it's very much kind of just an extension of what we are already doing and essentially offering a service to the project as an alternative in terms of how they can be thinking about, you know, various different ways. And eventually, I think this is going to be very synergistic and complementary because at the end of the day, know, when people are very very close to TGE, then why are we, why are people kind of raised in a pre-TGE realm? There are only any two purposes. One is, one is basically decentralizing ownership. <Jason Kam (29:55)>: Mm-hmm. <Yu Hu (29:56)>: and getting the high quality people to be in the capital cap table and be for the long run. And the other one is also just raising awareness, sort of using that as a marketing event as well, Which is very adjacent to what we're doing in terms of the Yapper leaderboards and stuff. <Jason Kam (30:18)>: Hmm. That's fun. I wish you all success. This seems like it's a big product. I mean, I'm assuming it will be a tick rate based model for your revenue, like $10 million size round, tick rate, revenue. Is that? <Yu Hu (30:33)>: Yeah, so. The way that we think about the fee model here is, let's say for example, if you want to raise 10 million, and then we want to have a new different fee model and a different mechanism for this to be interesting. So the way we think about this is, for example, X percent of, let's say overall we take, the network would essentially take either, let's say, as an example, we take 5 percent, and then maybe part of that is stable and part of that is in token. But instead of Kaito taking a token, we redistribute all the tokens to all our stakers. So the specific dynamics there is we can have like 10 different LaunchPad, you know, protocols that launch through us and then they all have future tokens that they're going to distribute to the network. but we don't take the tokens, we don't think about divesting the tokens, all that kind of stuff. We essentially reserve the tokens for all the sKAITO token holders, and then they need to signal alignment with the project that they like. And then to be able to, in the future, get the tokens. So that becomes a dividend model, effectively, but... <Jason Kam (31:53)>: And well, it's not dividend because they have to do something to get it. <Yu Hu (31:58)>: They just stake <Jason Kam (32:00)>: but they have to signal alignment. They have to say something. <Yu Hu (32:02)>: But they have to do it. They don't have to do the work. Basically they just park their sKAITO to the specific project so it's Yeah, but but but that way the the reason why we want to do it that way is because We don't necessarily want to do the kind of the BNB model where? You know every single kind of a BNB holder is <Jason Kam (32:12)>: Interesting, okay. <Jason Kam (32:24)>: Hmm. <Yu Hu (32:29)>: is undifferentiated and you basically get tokens for every single project that's being launched. But actually we want to force all token holders to signal alignment to any specific project and then they become aligned with any specific project. And there's also kind of a very interesting market efficiency angle there, which is also kind of how we think about the whole InfoFi narrative. <Jason Kam (32:54)>: Yeah. Yeah. <Yu Hu (32:55)>: We believe that token holders are to be efficient in allocating their capital. So as they basically allocate, they're also constantly thinking about the future value of the tokens, et cetera, all that kind of stuff. There's a dynamic balance there. <Jason Kam (33:00)>: Yeah. <Jason Kam (33:07)>: Mm-hmm. Yes, obviously that portion would be as the additional interest and sKAITO is tradable, I'm guessing. <Yu Hu (33:22)>: Well, sKAITO is basically just a derivative of $KAITO <Jason Kam (33:25)>: Yeah, so then it like it opens up yield up. It's interesting. OK, I could see that. That's cool. <Yu Hu (33:29)>: And then there's going to be even more interesting dynamics there because we now have a Pendle pool. So for every S-client order, there's PT and YT. So. <Jason Kam (33:39)>: Yes, exactly. and you just go into pre-market, would the trading be done at your platform or is it somewhere else? <Yu Hu (33:47)>: No, no, no, this is not pre-market. But essentially, if you have the YT token, then YT can essentially stake with all of these different Launchpad products, which entitles you to get the future tokens. <Jason Kam (34:04)>: Yes. <Yu Hu (34:04)>: And all of a sudden it becomes the same playbook that, you know, backing, you know, for example, Q1 2024, and people are speculating in the future price of the token, and then by the way, it's essentially, you know, to get exposure to the token. <Jason Kam (34:14)>: I get that. get that exactly. I mean, you stake, you stake $KAITO that's your PT. And then you get a YT when you stick with a project. Let's say you get sKAITO YT mega ETH, but that's tradable and you know exactly how much you're getting kind of. And would that trading be done on your platform or is it be done on Pendle or something? Cause you. Okay. Okay. Yeah. Yeah. Interesting. Cause  that backward implies. <Yu Hu (34:23)>: Yes. <Yu Hu (34:37)>: we can essentially make a market for it as well. <Jason Kam (34:46)>: I mean, it's really illiquid, but it implies what valuation people think mega ETH will trade-up. Interesting. It seems like you should make a lot of money out of this and kind ponzies up the sKAITO thing. I think people who owns the sKAITO could be really happy. Tell me more. <Yu Hu (35:01)>: There's going to be lot of speculation and basically should be people thinking about different valuation for different tokens, how you structure YT, PT, all this. It's going to be very, very interesting. <Jason Kam (35:09)>: That's cool. Yeah. Yeah. Yeah. And obviously, the sKAITO holders who are whales already would be pushing the projects that they invest in to do around on you because they're cool. <Yu Hu (35:22)>: Yes. And that becomes a kind of a flywheel as well because essentially by decentralizing the benefits and the fees, we create more stakeholders for each of the Launchpad projects. Then, you know, that becomes a very, interesting dynamic. <Jason Kam (35:46)>: Yes, investing there will be on the same level as the folks who invest based under Yapper point. Okay. Okay. Tell me more about their own product. <Yu Hu (35:55)>: Yeah, I mean, so ultimately the own product is trying to solve the kind of the distribution problem that people are having. the way I think about the own product is, Yapper leaderboard is basically Yapp to Own. But in crypto, there's so much more than just Yapp to Own. There are... For example, trading, there's for example referral, there's for example incentivize the usage. The basic kind of different categories of incentive or campaigns. So essentially you're to be tapping into those. And by leveraging the distribution channel that we already have in two parts, one is we have. For example, 200,000 monthly active Yappers at the same time, a million registered users on the platform. So we can directly reach out to every single user that's pretty much active in crypto today. But at the same time, we can also distribute through the Yappers to essentially go to not just crypto Twitter, but all the other social media platform as well. So for example, if you want to target the Korean market, and not every single Korean is going to be looking at Twitter all day, but actually by targeting all the Korean Yappers who all have some sort of Twitter presses, they can then redistribute through their Telegram channels to essentially reach out to those users. The underlying premise of the Kaito own product is to solve the distribution problem because people can't use very specific digital ads or any sort of targeting. And that's where every single product is struggling with. They don't know how to effectively spend their incentive dollar. They don't have a very... Yeah, go ahead. <Jason Kam (37:49)>: Maybe to make it clear, because I'm a little confused. If I'm a Yapper today, I show on Twitter, and I use TikTok, I use Telegram, I use all these social products. And then I want to get paid through MegaETH, through Yapper. Walk me through flow of how I get paid. Let's say TG or TikTok or something. <Yu Hu (38:12)>: Yeah, so for example, we can, through the platform, we can distribute a referral code. and you basically get the referral code that's personalized to you and then you can redistribute this referral code to all the other people that sign up through you. So we can track specifically all these people are kind of onboarding through you specifically. And as platform, we can basically design different campaigns and that's kind of a referral to earn, right? So for example, for trade to earn, it can be very simple. We can be working with whatever wallet providers, whatever exchanges, whatever upcoming <Jason Kam (38:31)>: Hmm. <Yu Hu (38:51)>: you know, DEX competitors, you know, competitors and stuff, we can be either the first degree distributor in terms of directly distributing to the users or we can be the second degree distributor in terms of we distribute to the KOLs or the Yappers and then KOLs will then distribute to all the other people. And then the platform can take basically a success fee or referral fee or whatever. <Jason Kam (38:57)>: Yep. <Jason Kam (39:10)>: I see. I see. <Yu Hu (39:21)>: And then again, we can have the same interesting dynamics where whatever the fees that the platform is making can essentially redistribute to the stakers who are believing or have vested interest in a particular campaign. <Jason Kam (39:36)>: I see. So for example, if you work with Binance, mean, Binance gives you a huge ref like, mean, everybody can refer already. And then, and then that basically goes to all the Yappers. They all of a sudden have a quest, like a ref link of their own. It's like sign up to Binance and trade. And then Binance see a revenue go up. They basically pay you the fees and then you pay the fees to the Yappers that distributed based on their ref code. And you take a small slice in between, I'm guessing. <Yu Hu (39:42)>: Yup. Yup. <Yu Hu (40:00)>: Yeah. Yeah. And typically, always kind of the upper coming competitors that's trying to grab market share. they're basically a ton of a... I think the specific edges that we have is one is on distribution. We're one of the very few platforms that have the highest quality of users. Think about every single, it's not just kind of a KOLs and not just kind of a users. We have all the builders, we have the core of the CT and the entire, basically the highest quality of people in crypto are basically registered users. So the average dollar value of a <Jason Kam (40:28)>: Hmm. <Yu Hu (40:54)>: so that you can reach out so it is very, high here. <Jason Kam (40:56)>: Hmm. And the earn feature basically is tied to the SaaS service you already sell to these businesses. They already have a budget with you and you're like, hey, you want to try this earn product. that how you sell? Hmm. Got it. Hmm. <Yu Hu (41:05)>: Yes, and also the YAP leaderboard clients. and they can combine the two things together as well. So for example, if you are already setting aside, let's say 50 basis point of the token for Yapper campaign, you can essentially pair that up with a referral campaign. Right? So all of a sudden it's not just. <Jason Kam (41:25)>: That's very cool. <Yu Hu (41:29)>: You're not just incentivizing people to be yapping about you, but actually with a very, very clear call to action, which is yap about me, but also send this referral, get as many people on board as possible. And that becomes a much more holistic campaign that we can do. <Jason Kam (41:36)>: Yeah, sign up through. <Jason Kam (41:42)>: Hmm. Would the, with the users, cause it seems like you are not only profiling projects, but you're kind of also profiling users. Like as a, a Yapper on your platform starts contributing, naturally they'll have more affiliation with some projects over the other. Would there be at some point that the Yappers will have individual project based sort of, I wouldn't call it ranks, but just like affiliation or loyalty points, kind of something like that associated with single projects. <Yu Hu (42:15)>: I mean, they already have in a way that because we have like all these Yapper leaderboards and they would appear on certain Yapper leaderboards, but not on others. So there's exactly a ton of information that we have in terms of what are some of the typical projects that they will be interested in, typical narrative that they will be interested in. So, and we also have that people's own chain behaviors and stuff like that. So it's really kind of a holistic <Jason Kam (42:19)>: Yep. <Yu Hu (42:44)>: user profile, the yapp profiling that we have. <Jason Kam (42:45)>: That's cool. <Yu Hu (42:49)>: And I think by the time that this gets published, we already would have launched our feeds feature on the platform as well. Cause at the end of the day, know, Kaito is, you know, information product as well. So we want people to be going through the feeds on Kaito across like different social media or that kind of stuff, everything related to crypto. <Jason Kam (43:00)>: Welcome. <Yu Hu (43:19)>: Thanks! And we will essentially have personalized fees for everyone, stuff like that. And in the future, we're also going to be having a mobile version. So iOS, for example, which we already have on the institutional side, on the pro side. So we're going to be on the retail side. So in the future, everyone's going to get personalized notification in terms of, hey, what are some of the deals that's going to be interesting to you? This kind of product can be a very good opportunity because you are <Jason Kam (43:34)>: Yep. Yep. <Yu Hu (43:50)>: high back in a day and this thing is very much up and coming you know versus that <Jason Kam (43:57)>: Hmm, makes sense. That's cool. So we talked about two things. There's a third thing, like info as an asset. Can talk about that? <Yu Hu (44:04)>: Yeah, so information as an asset is basically the underlying premise of InfoFi is that information can be priced and traded as well. So we had a first partnership with Noise. So they are building on MegaEth. And that essentially allowed people to be trading narrative, trading pre-TGE mindshare, all that kind of stuff. So historically, in terms of a pre-TGE mindshare, the rational is simple. So currently, if you want a long MegaEth, there's no way that you can do it. <Jason Kam (44:32)>: Hmm. <Yu Hu (44:43)>: If you want to have a view on, you know, certain stuff, there's no way you can do it until the point that they basically get listed on some sort of pre-market, which is just a few days before the trading. but that becomes a vehicle where people can essentially express certain views. The same thing actually goes to kind of a narrative, with even, in my view, with even stronger proposition there. So like back in the day, everyone wanted to learn AI narrative. For example, I think about Q4 last year. But majority of the people got burned very badly because you basically should pick the wrong asset. Yeah. <Jason Kam (45:13)>: Hmm. <Jason Kam (45:22)>: Yeah, the coins are shit too. But anyways. <Yu Hu (45:25)>: And but but imagine that you can actually long different narratives, which is the easiest thing for people to understand. Like if I just want a long stable coin mind share stuff like that, I can basically just trade that, which is a mega trend that's also being manifested in traditional finance as well. For example, Fidelity will be coming up with a basket of tokens, not tokens, but obviously equities because people realize <Jason Kam (45:30)>: Yep. <Yu Hu (45:55)>: that nobody wants to due diligence on the video. People just want to trade what they understand. They want to trade trends or this kind of stuff. so we're going to start with all of these, but then in the future, a lot of the stuff can be tradable and you can be expressing your view on the popularity of a singer. There could be, you know, different trends they can be trading and all that kind of stuff. <Jason Kam (46:05)>: Hmm. <Yu Hu (46:25)>: all of a sudden it creates a whole new market that allows people to express their views. <Jason Kam (46:32)>: Interesting. I'm guessing that product would be using your Mindshare index as the underlying. And that oracle basically tell us the PNL of this PERP platform, whereby there will be an LP pool that takes the counteracting side of whatever longs and shorts of the PERP position people take. And then the deviation of the PERP price will be the funding they pay. Is that roughly the right way to think about it? <Yu Hu (46:59)>: Yeah, that's roughly it. There are obviously different ways. And if you think about the Polymarket model, they allow people to bet on stuff that will eventually have a definitive outcome. Right, either it be elections, sports events, all that kind of stuff. <Jason Kam (47:01)>: Okay. mean, it's yeah. <Yu Hu (47:25)>: But a lot of the stuff doesn't really have a definitive outcome. For example, if you're betting on whether certain singer is going to be very popular in the future, how do you even go about quantifying that? Right. But. <Jason Kam (47:39)>: Yeah. <Yu Hu (47:41)>: leveraging the information markets, can actually basically index all the social media content, then that becomes the source of truth in terms of whether that, the manager becomes a source of truth in terms of the popularity of that particular singer. And also at the same time, the interesting factor there is when people are trading Memecoin, people are really just trading narrative and the popularity of certain topics. But <Jason Kam (47:58)>: Yeah. <Yu Hu (48:09)>: The issue with lot of the Memecoin was there is just so many idiosyncratic token distribution and some of the other stuff that's in that. There's a lot of insider allocations and stuff that's just non-transparent. But... If you think about from an information market perspective, because everyone is effectively an insider, that makes nobody an insider. Because people collectively form the market. <Jason Kam (48:45)>: Yeah. I mean, this is an interesting effort. I, I'll be really curious to how it's because I, right off the bat, I can think of three questions, three problems. The mind share are, mean reverting because anything that's hyped got died down over time. The Yappers themselves can manifest the reality by just like tweeting. So they can kind of almost manipulate the market. And then the ultimate LP pool will run into this like insider, like toxic flow situation where. <Yu Hu (48:46)>: and happy. <Jason Kam (49:13)>: I'm going to bet size, of course, because I'm the project founder that's going to cost this wave of mind share. Would you rank this as the most excited effort that you have out of the three, or is this like a we're experimenting kind of thing? <Yu Hu (49:30)>: I think it will be a... So maybe let me answer the questions first and I'll talk about my view. So first things first is depend like the manipulation, the degree to which that certain things can be manipulated really depends on the market itself. if theoretically, if we're indexing every single social media in terms of the popularity of a singer, then... <Jason Kam (49:34)>: Yeah, yeah, yeah, yeah, Yeah. <Yu Hu (49:59)>: Effectively because the market is so big None of the guys will have our size impact in terms of determining that unless you basically bribe the entire market then obviously everything eventually is subject to manipulation, but if if the cost of manipulation is too high then basically wouldn't it wouldn't be viable and so that will be kind of you know, the ways to go about, but obviously like different markets will have different dynamics there. What's the other one? What's the other one that you mentioned? <Jason Kam (50:39)>: Yeah, I thought that you would get toxic flows. if, if, uh, if I'm long AI and I'm, yeah. Yeah. <Yu Hu (50:43)>: because of mean reversion? I mean, in a way that people can argue memecoins have mean reversion as well because everything's gonna go to zero eventually. Yeah, so I mean, I don't think there's any difference. <Jason Kam (50:51)>: That's right. Yeah, I could see that. I could see that. <Jason Kam (50:59)>: Yeah. If you were to rank the three efforts, before I go there, is there anything else that we haven't talked about that outside of the three that like, man, this is going to really jumpstart revenue for us off this current level? <Yu Hu (51:12)>: It's the possibility of going much beyond crypto. Because, I don't know, we probably talked about this last year. One of the grand visions of what Kaito really tries to build is something that indexes every single social media in the world. <Jason Kam (51:25)>: Hmm. <Yu Hu (51:37)>: The specific problem that I see in this space or in today's world is a traditional search engine is becoming less and less impactful because Google now does, for example, you will be saying that you use a Grok, for example, a lot, right? Because a lot of the useful information is on social media. It's very different from even just five years ago. But at the same time, every single social media is an isolated platform. Twitter doesn't want other people to be indexed in it. The data, Instagram doesn't want that, all that kind of stuff. The specific problem they're trying to solve and the grand vision or the kind of the long term vision that we have for the whole InfoFi economy is we believe that the only way to break that barrier to essentially index the whole... people call it the world garden for the whole internet is incentivizing users directly. People getting paid so that they will share their data with you. And then you don't do that by just indexing their data and then just give them money. <Jason Kam (52:41)>: Yep. <Yu Hu (52:51)>: To be able to have a sustainable business model, all of the stuff that you take from them needs to be generating revenue and generating sustainable business model as well, which is effectively what we have experimented in crypto Twitter. So incentivizing everyone to be sharing their data with us, but we create a whole new economy to have all the Yappers to be constantly being paid. <Jason Kam (53:19)>: Yep. <Yu Hu (53:20)>: It creates this whole new economy that's much more efficient than some of the old alternatives that existed in the market. And imagine that we bring this beyond... Twitter and then you know this because we use the kind of the probe before you know that we already index a ton of other social media platforms and all that kind of stuff from a technology perspective We can do it that if we were able to do this first within crypto across TikTok so many projects want to be incentivizing yappers on TikTok to the  branch out we can do this on Instagram it's going to be relevant for a lot of the specific brands within crypto as well <Jason Kam (53:39)>: Yeah. Yeah. Hmm. <Jason Kam (53:52)>: Mm-hmm. <Yu Hu (54:01)>: YouTube, all this kind of stuff. Telegram, Line, there's different kind of social media, stuff like that. And then ultimately bring this beyond crypto as well. Because if it works in a specific vertical, it should also work in other verticals. And imagine, imagine ultimately if we have... <Jason Kam (54:04)>: Yeah. <Jason Kam (54:12)>: Hmm. <Jason Kam (54:20)>: obviously. <Yu Hu (54:26)>: Basically, know information and data from every single social media platform where essentially we can also incentivize people to be linking their identities and all these kind of stuff because Today none of the type of forms can be talking to each other. I take those never going to be talking to Twitter They're never going to be sharing their any of the data together But if we as a third party platform can actually incentivize all the users to be linking their identities together Then we can be the best platform for any brands and marketing activities <Yu Hu (54:56)>: to be basically routing through us. And then we can control where it is kind of the most optimized distribution for all these economic activities to be happening. <Jason Kam (55:09)>: Yeah. I guess the question, there are two steps to it. One is sort of real world businesses through you, like paying influencers, showing them. And then the step before that is crypto entities paying through you to any user on any platform paying them. How soon would, you know, Bera be able to like, you know, pay TikTok influencers and Instagram? And then secondly is, I'm guessing you already solved the sort of, you can already know what kind of video they post because the relevancy of that content is obviously relevant to kind of what they want. Yeah. <Yu Hu (55:47)>: Yep. Yeah. So, I mean, in terms of the crypto adoption in various different social media, that will be pretty soon. Because I can tell you it will be in Q3. Sorry, in Q2. So it will be this quarter. Yeah. <Jason Kam (55:56)>: How soon? <Jason Kam (56:01)>: OK. like imminent. Great. OK. <Yu Hu (56:05)>: Yeah, very, very imminent. Because at the end of the day, we already index majority of the platforms. Like, we already index YouTube, already index Telegram, index Discord, all this kind of stuff. But the next one we're going to be launching is going to be TikTok. So we're going to have like TikTok leaderboard, stuff like that. And then, if, even if today, for example, if I asked you, <Yu Hu (56:31)>: who's the biggest TikTok crypto influencer? Nobody can give any, nobody has any idea even. Nobody doesn't even, nobody knows where to even start. Which was the case. before we launched all these  leaderboard, community leaderboard, all that kind of stuff. Because people have a rough idea in terms of the very top of the market, but then the long tail, people just have complete no idea. And that is where indexing the AI comes in. We can essentially create public leaderboard, evaluate people's influence, effectiveness, all that kind of stuff. <Jason Kam (57:00)>: Hmm. <Jason Kam (57:13)>: and obviously the sort of video and analysis that you will do through the AI would be able to, okay, that's cool. honestly, dude, like I think that's that along, if I'm not mistaken, just to summarize the capital launch pad and this effort that goes beyond just Twitter, earn, earn seems to be a really good feature at to the existing list of products. And then the mind share trading we'll see if it works. seems like it's early, but, those two that I mentioned seems to be the biggest revenue driver for you. in like the next six months. Okay. <Yu Hu (57:44)>: I think the information as an asset, which is the market stuff, is going be a wildcat. If it works, then it's going to be very big because trading is going to be obviously a huge revenue dollar. But TBD, if that works. But effectively, even if you look at fantasy top, right? <Yu Hu (58:08)>: that's effectively trading influence. And there are people who are basically betting big on certain stuff. <Yu Hu (58:16)>: So, and I think that, know, memecoin trading is effectively kind of a, there's different kind of a mechanism that we can tap into it as well. Like even just for example, having a, I don't know whether we're going to do it, but like if we have like a different way of doing the initial distribution for the memecoin launch, stuff like that, there are lot of the potential possibilities there as well. Yeah. <Jason Kam (58:37)>: Can you go a few minutes over because there are some really important, OK, great. Of all of these efforts, including the sort of 10 million from Research AR and API plus 20 million from the existing sort of the platform, of all of these new efforts also as they funnel through revenue, which part of it goes to the token and which part of it goes to the equity? <Yu Hu (59:01)>: Yeah, so the way that we think about everything now is all holistic. So basically, to think about the whole revenue stuff that we're generating and then routing everything through token buyback. <Jason Kam (59:15)>: OK, and that's discretionary. You have done 14 million annualized so far. <Yu Hu (59:20)>: 14 million annualized so far and recently we are salaried. <Jason Kam (59:24)>: Okay, any and it's purely discretionary, I'm guessing. <Yu Hu (59:29)>: Purely discretionary, but at the same time there is basically an ongoing commitment in terms of, we'll basically be doing this on a daily basis. <Jason Kam (59:41)>: OK, OK, good to know. And then what other token syncs are there aside from I can stake my Kaito? <Yu Hu (59:50)>: So the way we think about alignment and the network value distribution is in two forms. One is token buyback, which is effectively redistributing value to everyone who's holding Kaito token. The other part is through sort of drops. So the stuff that we talked about in terms of Kaito earn, in terms of Kaito Launchpad, all that kind of stuff is effectively creating additional values to the token holders, which no one is talking about today because obviously, having been launched, we haven't talked much about that. But effectively, <Jason Kam (60:16)>: Yep. <Yu Hu (60:36)>: you know, that's also going to come as well. So if I think about the return of holding Kaito token today, obviously one thing, there is a staking yield, which is roughly 16 % today. And the biggest difference of, I'll say this staking yield versus all the other, the majority of the other kind of staking programs in the market right now is a none of the team and investor tokens are able to participate, which is you know, none of the basically unvested tokens are able to, you know, basically put in there. And B is the entirety of the staking rewards are basically funded through the buyback program. So in a way that this is not inflationary, this is just disproportionately rewarding the stakers. Jason Kam (01:00:28.443) benefiting stakers Yu Hu (01:00:31.486) And so that's clearly sustainable. And if you look at the entire issuance of the token, the whole network is also in a net sink stage because... Jason Kam (01:00:31.685) I get that. Yu Hu (01:00:44.238) you know, currently we're obviously using a ton of revenue to be acquiring, you know, Kaito tokens in the open market. So people don't run into the issue of if I stay here, I get constantly diluted because the network is issuing 10 % inflation on an annual basis at the same time as all the other stuff going on. So it's actually additive in terms of the return. So you'd be thinking about if you're a state court, you'd be thinking about 16 % in terms of Yu Hu (01:01:15.051) in terms of the staking reward. Plus, at this rate, we're talking about 3 to 4 % of the entire, for example, token supply sink. And this is not just calculating the circulating. This is kind of the entire token supply in terms of the annual sink. But obviously, in terms of circulating, it will be a much bigger number. Yu Hu (01:01:42.54) And then that kind of should be added towards the return that people should be thinking about by holding Kaito, by staking Kaito. And then that comes to added benefit of any whatever drops and dividends that people were doing for the network. Jason Kam (01:01:49.329) Yeah, that's cool. Jason Kam (01:01:59.567) Yeah. And the relationship, I'm guessing, YAPS turns into tokens in the future. What about the NFT holders? Yeah. Yu Hu (01:02:07.534) Yaps has already turned into tokens, basically. Yaps effectively tokenize influence. Jason Kam (01:02:11.695) OK, so the yaps are just mindshare effectively. Yu Hu (01:02:19.778) in the network, you are able to directly monetize by signaling influence, like getting deals and having some sort of mechanism that we haven't announced in terms of getting direct benefits in the ecosystem. So it's almost like if you are a big influencer on Yu Hu (01:02:42.414) Facebook or TikTok or Instagram. This is just a better signal in terms of your follower and kind of influence. That won't be tradable because it shouldn't be. And it's just like Facebook did an airdrop to all the content creators in the early days. Jason Kam (01:02:48.583) I see. Jason Kam (01:02:52.099) I see that that will that won't be tradable that won't be tradable. Makes sense. Okay. Jason Kam (01:03:05.807) Makes sense. And then the NFTs, how does that tie to all the value creation? Yu Hu (01:03:11.052) So the way we think about the two assets, token is going to represent the ownership of the network. so over time, it will be decentralized. And then the NFT is basically a representation of the community. So we want more people to be holding the NFT, which is the reason why... we introduce a new mechanism where the NFT becomes a multiplier for whatever the benefits that you can get. So the ideal state is sKaito token holders, or Kaito token holders essentially want at least one Genesis NFT, and all the Yappers will also want at least one Genesis NFT, so that everyone essentially gets a multiplier in whatever the stuff that they do in the whole InfoFi network that we're building. Jason Kam (01:04:08.669) Got it. And then the marginal benefits of stacking decreases as the more end to you. Last question I have, I've taken plenty of your time. I guess we talked about all these growth efforts, right? Some of them are more exciting than the others. I wouldn't ask you for your guidance, of the 33 million annualized today, looking into year end 2025, is there a level of annualized revenue or annualized burn or whatever KPI you track would make you happy? Yu Hu (01:04:37.772) Yeah. I mean, so one thing that I've said publicly or I've done publicly is I basically acquired a million KAITO tokens in the open market and then put them on the self-imposed lock. And then within that lock, I put two milestones publicly. One is a 50 million target and the other one is a 100 million target. And I put those targets, annualized revenues target, yeah. Jason Kam (01:05:03.279) an annualized revenue target. Yu Hu (01:05:07.246) And so clearly we're thinking it is possible and it's achievable for the network to essentially get to 100 million. Otherwise I'm just burning my tokens effectively. that's kind of a, yeah. that's, you know, that's basically, I wouldn't put a kind of a time lock on that, but essentially that's what we're working towards. And I think that if we're successful on... Jason Kam (01:05:19.995) Yeah, it's benefit to all of us. Yu Hu (01:05:35.246) basically everything that we set out to do, it should be much bigger than a hundred million. Jason Kam (01:05:41.749) Very cool. Members, do you have any questions? Let's give you three seconds. Really appreciate your time, man. We haven't done it in English in the past, but this is fun. Thank you. OK. I'm sure everybody would appreciate it.

TLDR In this episode of BidCast, Jason speaks with Guy, founder of Ethena, discussing the company's business model, growth strategies, and future initiatives. They explore Ethena's revenue generation, treasury management, and the importance of institutional partnerships. The conversation also delves into regulatory challenges, the launch of iUSDe and Converge, and the company's approach to retail distribution and market dynamics. Guy emphasizes the potential for significant growth as the market conditions improve, highlighting the strategic vision for Ethena's future. CHAPTERS 00:43 Introduction to Ethena and Market Overview 03:43 Business Growth vs. Token Holder Returns 06:50 Revenue Streams and Treasury Management 09:52 Institutional Adoption and Market Dynamics 12:33 Converge and Institutional Integration 15:49 Securitize Partnership and Future Prospects 18:46 Challenges and Regulatory Considerations 21:49 Future Growth and Market Positioning 30:33 Exploring Growth Efforts at Athena 32:04 Progress on iUSDe and It’s Market Potential 35:39 Innovations in Fund Structures and Tokenization 38:13 Institutional and Retail Distribution Strategies 40:57 Navigating Regulatory Landscapes and Market Conditions 45:30 Competitive Landscape and Market Confidence 49:28 Roadmap for Future Growth and Market Positioning TRANSCRIPT <Jason Kam (00:43)>: All right, we are live. Welcome to another episode of BidCast. I'm your host, Jason Kam, aka Maple Leaf Cap. Today is April 17th, 2025, 5 PM Hong Kong time. BidCast is being livestreamed to BidClub members. Questions are from the members and my own. Today I'm speaking with Guy Young, the founder of Ethena. What's up, man? <Guy (01:09)>: Thank you very much, thanks. <Jason Kam (01:12)>: I guarantee you the members are here that you just don't see them. Maybe you guys should say hi in the message. I want to start with the Ethena's numbers. I I have some high level numbers here. 5 billion of USD outstanding, 40 % state, of which 600 millions is on exchange, 4.6 % APY last time I checked, generating about 240-ish dollars of annual interest income, if I'm not mistaken. How should I, are those numbers right? And then secondly, how does that translate to the revenue that the Ethena treasury or even the token holders are occurring? <Guy (01:50)>: Yeah, I've got a pretty long answer to this. So apologies for the length, but I have a slightly divergent view on this whole sort of question versus the rest of the market at the moment. So I think taking a big step back, I think before we start thinking about value capture back to the token, we need to recognize a few different things. One is like the life cycle or stage of a business just in terms of how long it's existed and where it is relative to where it wants to grow to. And then also the type of business is quite important here and whether it's a <Jason Kam (01:54)>: No. <Guy (02:20)>: Balance sheet driven business like Ethena or like a swap based business like a pump or a hyper liquid, I think they actually look very different. the reason for that is that the network effects and mode that you build from building a business like Ethena to something that's 10, 20, 30 billion dollars in size is very different to something like pump, which doesn't actually get more useful as a product, the larger that it gets. I think you can actually just look at like Tether versus Binance as a very clear reference point here, which is when these type of products become dominant, they are so much more dominant than their peers even in the trading space. so Binance market share, anywhere between 40 to 45 % and sort of shrinking actually through time. Tether market share, 70 to 75. And the reason for that is when these products become dominant, their network effects compound on each other, which is I want to use Tether because it is the most liquid and you continue using it and it continues growing and becoming more dominant as a result of that. The reason I'm giving this context is that... The Ethena story in terms of where it can go and my vision for where I want to take this is just so much larger than where we're sitting today. And I think that trying to clip too much fees back to token holders now of like a few hundred K or a million a week is just insignificant versus where I think the outcome of where we can take this is going forward and actually putting all of that cash into reinvesting into growth, which is basically just going to be the yield on sUSDe I think is a much better trade off at this stage of the cycle for Ethena's growth. Basic examples here was like, would the people who are listening to this call think that it's a better long-term outcome for Ethena to take $10 million and give it to a Robinhood or a PayPal or a Binance or a BlackRock or whatever it is to help distribute our product or spread that $10 million over a few weeks of fees that sort of come back to the token? My view is that the former has a much larger impact in terms of where we're going than a little bit of buybacks right now. But yeah, I think that that's my super high level view, which is there is just so much for us to go and do in terms of like integration and still growing this product, you know, quite literally five to 10x where we are right now over the next few years. And I think that trying to focus too much on capturing a little bit of value now might actually, you know. hinder your ability to actually go and to capture that. And I also think you want to get to a size where people just stop trying to copy Ethena and you just give up at some point and you just say, it's the biggest, it's integrated everywhere. And me as a startup coming to actually compete with that, I'm not even going to bother going forward. So that's kind of my view on things. I know that people in the market have this obsession with capital being returned to token holders and that kind of stuff right now. I think the one piece that I would sort of just stand back and say is that, <Jason Kam (04:40)>: Hmm. <Guy (04:53)>: Clearly this thing can produce a lot of cash in the right environment. This isn't sort of like a hand wavy. This is an L1 where if you 100,000 acts the activity that's sitting here at like a fraction of the cent, it might produce this much like 10 years in the future. I think it's quite clear that there is like a functional business model here that produces a lot of cash in the right environment. I just think, you know, like most businesses in the real world, Some people need to focus more on growth in the beginning rather than capital distribution. And I think if you go into any normal business and say you want capital returned within a year and a half of being live, it sounds like a ridiculous statement to make. So yeah, I think that's my view. <Jason Kam (05:30)>: Yeah. No, it's a good rant as a former investor in stocks. That's a right rant that I should be giving. And just to dive into that just a little bit, we should not be reading too much into the fee switch, because it seems like you're just not going to buy back, regardless of what the fee switch says. <Guy (05:48)>: Well, no, think there's sort of three phases to this, right? There's one which is you make clear to the market that there is no equity code that is rugging token holders for the fees. And we've made that like abundantly clear now, like the equity is taking zero cash from this at all. And I think if a token is not doing that at a minimum, it's completely uninvestable. So that has been crystallized that there is no sort of side door that's going to an equity company on the side. So that's like stage one. And that's what we sort of come to the beginning. The second one, I think, is showing that you can monetize. So it might not be <Jason Kam (06:01)>: Hmm. Hmm. <Guy (06:18)>: that you're taking 30 % of the gross interest income, maybe take five in the beginning and just show the market you can monetize this in some way, but it's not sort of the full extent of where you think that you can actually capture value. this product going forward. We've obviously done that through the lifetime of Ethena, so there's $60 million that's sitting in that reserve fund. That's like through cash that we've obviously captured through time with, know, percentage of the yield ranging anywhere from like 10 to 50 % plus depending on where the conditions are. So I think the fee switch that's coming in I think is more of a demonstrate and I'm obviously going to like vocalize this in the governance forum when... when we sort of tick off the pieces that are on there, but it's more just demonstrating to the market, we can skim a bit of fees off of this thing and demonstrating that you can monetize this, but we think the take rate here is gonna be X percent where in the future, once you're at 20 bill plus, interest rates are at 2 % in the real world, we think that that number can be much higher basically. So that's sort of the sequencing that I think about in the three different phases. And I think right now, Ethena's sort of between one and two, yeah. <Jason Kam (07:16)>: Yeah. then obviously, you do have the $60 million in the treasury. Of that $200 to $250 million of interest incomes that flows through, you talked about like $10 million to Robinhood, for example. What is now in your mind the annualized fees that come into the Ethena treasury that you can work with aside from the $60 million that you have today? <Guy (07:38)>: Yeah, I think like a take rate somewhere between 10 to 20 % on that is something that we've been able to capture while still growing. think that this is obviously, it's a very difficult conversation to have, right? Where the interest rate is fluctuating from like 30 % in December to four to 5 % right now. And so if we're having this conversation back then, the number was like in a run rate basis of 1.2. <Jason Kam (07:47)>: Okay. 500 or something. <Guy (08:02)>: It was 1.2 bill actually in December. That was like a great number. So I think <Jason Kam (08:04)>: Okay. Yeah. <Guy (08:06)>: that's a little bit of the difficulty here, which is like, yeah, we can be sitting here and talking about the numbers at 250, but like, you know how this market can change in terms of A, the supply growth and then also B, gross interest income. And so I think there is a ton of volatility even just like on the top line of Ethena. And I think that's just pretty obvious from like the product design. But yeah, think the rough numbers that you quoted at a point in time is sort of reflective of. <Jason Kam (08:31)>: Yeah. <Guy (08:32)>: We're starting now. <Jason Kam (08:34)>: And then the cash, the burn rate today, are you tapping from that treasury or is this separate in the equity box? <Guy (08:40)>: Yeah, no, think it's just with raise funds that we've had through the Actico and then through the foundation before we don't have any need to A, either sell tokens from the foundation again or B, raise any more capital to sort of pay for the operating costs. like Ethena's pretty lean. It's 25 people right now. where a lot of those heads have actually been hired for growth initiatives on both like the new chain supporting like the ethereal exchange and then some of the institutional stuff that we're trying to come out with now. So it's actually a pretty lean business in terms of like running operational costs that we don't really need to capture that much. <Jason Kam (09:13)>: Okay, so next couple of years, you don't see any need for tapping to the treasury. Okay. Okay. And your North Star currently is still the amount of USDe outstanding. Like that's the number you're trying to get up. <Guy (09:26)>: Yeah, I think that's correct. Obviously, I think this is a journey that everyone has to go through, which is you can issue the product in the beginning, but then you can be actually quite powerful as a forcing function to create new growth with some of these new initiatives that we're doing, whether it's a chain or other apps that are building around it. And so I think we've done that initial growth with existing apps that exist on chain right now. And I think the next push is putting in resources where... there are new things that are being built with USDe. I think in the same way that, you know, Luna actually, despite the ways that they didn't do a lot, right? I think they did one thing, which is pretty good, which is like say, we've got this core product, but we actually want to support these different teams in terms of building on that core product and allowing that innovation to sort of like be built on their dollar product. And so I think that that's kind of like the next phase that we're going through, which is pushing this ecosystem and Converge is one piece of that. Yeah. <Jason Kam (10:18)>: You can hear me right, Guy, when I'm speaking? OK, cool. And then I guess, how? And are you taking any fees on the BlackRock 144 billion? <Guy (10:23)>: Yeah. Yeah, so we take roughly 10 % of the gross interest income on that. I'd say our thinking around this product is less of something that... <Jason Kam (10:39)>: Okay. <Guy (10:45)>: You know, we're betting a huge amount on the success of the business or like revenue that we'll generate coming through this. You can sort of think about it as just a very complimentary product to USDe for both go to market, but then also the way that we manage like the backing for USDe. The secret source that people still I don't think have recognized, which is going to be coming live pretty soon with this is that actually USDtb is a very interesting way for us to tap into another source of yield, which is the over-collateralized lending market within DeFi. So you can sort of think about what Sky and MakerDAO access right now. We're about to have, this is on the Aave public forums, but about to have USDtb allowed as like a borrowable asset within Aave. Why that's interesting is that actually we can double dip as Ethena, which is we're holding USDtb and capturing the full TVL yield in the back of USD for the liquid cash portion. <Jason Kam (11:36)>: funny <Guy (11:37)>: And then you can also lend it into Aave and then collect the lending yield on top. it's actually kind of like, it's almost like MakerDAO SuperChargers, if that makes sense, where you can capture like both the lending spread with the DeFi plus the T-bill yield on top. And so that just allows us to actually, A, diversify a bit of the sources of like income that are coming through, but then B, actually supply dollars into markets where people are levering up as USD as well, like slightly below market interest rates. So yeah, that's one piece which I think... <Jason Kam (11:48)>: Hmm. Hmm. <Guy (12:05)>: will help to sort of smooth, yeah, yeah, smooth the, yeah. <Jason Kam (12:06)>: Let's go. I think last time we spoke, and I think a lot of us are pretty excited about this, which is the Central exchange adoption. mean, after Bybit, we're hoping for a couple more. And then you see Binance out there doing its own like USD1. I guess, is that still like a big effort for you to get on board with Central exchanges? How is traction there? And do you think that's a growth venue going forward? <Guy (12:33)>: Yeah, 100%. I think, well, the USD1 is very much a different product. It's obviously just like T-Bill backed with the World Liberty guys. don't know to what extent they're going to be pushing that very hard, but I sort of see it like another FDUSD on the exchange. I think the one reasonable piece is that BFUSD I think, has been not great in terms of like an outcome for them. I think it was sitting at 600 mil. They've done a, I think the management of like the, you know, return on the product.  and pick up has not been, I wouldn't call it a success relative to the size of Binance in general. Without naming names with exactly who's coming online, we did have a pretty unfortunate piece with this barfing stuff, which I'm happy to address publicly here, which is the German regulators having an issue with the micro application that we put through on USD and that actually paused two exchange listings that we had coming out. Obviously, I'm not going to mention by name who they are, but we...  to go with that and basically put a pause into that until we could sort of clear that. So yeah, part of the issue here is we're trying to get that piece cleared, which has been a big blocker for a lot of stuff that we wanted to do basically in the last month, which has been extremely frustrating on my side. And this includes our USD as well. So we've been just trying to work through that on our side. And once that clears, a lot of the stuff can sort of bring back to market. <Jason Kam (13:52)>: Do you have a sense of timeline on when the regulator will hold up when clear? <Guy (13:58)>: We're really hoping it's within the next 10 to 14 days. So we put out a tweet this week on basically agreeing with the German regulators to close down the minting entity that we had over there. And they just want to have a two week period where anyone who sort of held the USD within Germany has like a ability to come and redeem with us. So yeah, I'm basing what I can see right now. I'm hoping it has like full closure within 10 to 14 days. <Jason Kam (14:21)>: And that's the only holdup with this access. They basically tell you that once it's clear, we're ready to go. Is that the right way to think about it? OK. OK. Yes. There are a bunch of growth initiatives I want to go into. We can take Converge first, because that's the one that is the most recent. I guess the easiest way for me to ask this question is, how does it really work with once it's live? I guess, when is it live? And then like, How does it work with a fund like us or any Wall Street institution? What is the flow of dollar and what do people use it for? Why don't we start there? <Guy (14:57)>: Yeah, sure. Maybe I can just give you like a super high level what we think the opportunity is here, why we've been doing this. then, yeah, hopefully that sort of gives a bit of clarity from the top. So I think the frustration that we had on our side in the last couple of years is just actually looking at the inflows that we've had into the market and saying like really outside of BTC ETFs and a bit of stable coin supply growth, there's actually been no real inflows into the market at all. And you can actually just look at DeFi TVL versus where it was in 2021. And it's actually, you know, many, many, like 40 % below basically the peaks that it was sitting at during that time period. And to me, that was actually a very strong indication that we haven't actually built or delivered any products to what I think is the most important thematic thing that's going on within crypto now, which is the institutions are actually here and they're wanting to deploy their products and capital into our system. And really like BTC and stable coins have been the only thing that have actually been beneficiaries of that. So think given that we basically just have the view that if you're not actually thinking about how you're catering your products towards these pools of capital, you're actually just going to be left for dead if you're still continuing to just do the sort of DeFi games within our own ecosystem. Because right now all we've seen is really just like chips being reshuffled between different apps and different chains with no real inflows. If we also just take like another perspective on this, I kind of have a view that there's only two actual use cases for blockchains right now. There's speculation and think, know, meme coins and Solana and then derivatives on hyperliquid are kind of the two obvious use cases that are being dominated outside of Ethereum. And then the second one is settlement for stable coins and tokenized assets. And that second use case, if you actually believe the crypto thesis going forward and, you know, all financial assets start to move on chain and we start to build infrastructure around that, you should think that that second bucket is much bigger as an option. than the first one, which is just facilitating trading shitcoins, right? And we think that that second bucket, like Ethena plus Securitize is uniquely positioned to actually go and capture because you really have like two businesses that are coming from either ends of the spectrum where Ethena is taking... <Jason Kam (16:49)>: Hmm. <Guy (17:02)>: crypto native assets, i.e. USDe and then our institutional i.e. USDe product and saying, how can we put this in a format with different applications or just by itself to export out of crypto into TradFi? And that obviously brings new inflows into crypto. And then Securitize comes from the opposite end of the spectrum, which is saying we've got TradFi assets and they're going to do a lot more than just Treasuries. You know, their ambitions are to do everything like equities, private credit, Treasuries was sort of just the first step. How can we bring those assets on chain and then plug them into the financial infrastructure that like Ethena brings with its ecosystem? And so think that coverage over there is actually really interesting because you're coming from two ends of the spectrum of like DeFi plus TradFi coexisting within the same place. And so yeah, this is really the place where when we have this iUSDe product and you have the different RWAs that... securitizer bring on chain, we're actually just trying to build purpose-built applications and infrastructure for these people to use our products and actually bring in flows on chain. From like a user experience perspective, it actually looks almost identical to what any user would be experiencing right now. The only difference is that on some of the applications, there's going to be like an institutional button to turn like on and off. So like one example here can be a Pendle, right? So when you have iUSDe and you're trying to sell this to TradFi you know, it was 18 % analyzed roughly in 2024, but it's obviously an extremely variable rate. Your ability to go to TradFi and say would you like 10 or 12 percent fixed on the same asset is obviously extremely compelling to like a huge amount of capital that sits within TradFi, but they cannot interact with like a Pendle pool when you know a North Korean could be buying the YT on the other side. so the sort of like permissioning and compliance actually sits at the application level where we're saying everywhere that we found product market fit building financial infrastructure around USDe, if we put a very thin layer of basically KYC and permissioning at the app level you actually put that in a format where drag file can underwrite that. On the other side. So whether it's levering up like iUSDe on like Aave's new Horizon markets, whether it's putting it into Pendle producing like fixed rate returns out of that, all of these different areas that we found product market fit, all we're doing is saying like these applications can exist as like purely permission as DeFi or slightly adjusted for TradFi to be able to interact with them. that's like one piece that. And then at the chain level, I think there was a bit of a misunderstanding from the market when we came out and that was my fault in terms of how we communicated that. It's not like a permissioned private blockchain, <Jason Kam (19:07)>: Hmm. <Guy (19:18)>: which is kind of like the first read that a lot of people had. The only overlay that we have in this whole piece is that there's gonna be a staking component for NL, which is actually there for institutional users. You can sort of think about it as like a second failsafe behind the centralized sequencer that sits on like an L2. And so if you have some sort of hack or issue where whatever, BlackRock's lost hundreds of millions of dollars on this chain, the real risk is actually... people moving the USDe or bidl from that chain into another one where they can then sell it into ETH or some other asset and then sort of like escape with it. And really like the perimeter of where these things are unsafe is actually at the bridge layer basically, where if you're taking like USDe and bridging at three layer zero and it comes onto ETH L1 and is then able to be sold for anything, then you actually lose money. And so all this is sitting here is doing and doing is providing basically a way for these institutions to stay in there and actually be part of like the DVN that sits within like a <Jason Kam (19:57)>: Yep. <Guy (20:13)>: zero bridging network and so they have an ability to say actually if these are stolen funds that are trying to come out we're blocking that transaction and it's actually stuck within this environment until we sort it out and so it's actually like you can think about you know base running a single sequencer that is much more permission than anything that we're describing to do here because if Coinbase decides that that transaction is not going through it's not going through we're basically running this as something which just has a second layer of a safety net or guard rail, it's around getting assets off the train basically, if something catastrophic has happened. <Jason Kam (20:45)>: I guess then two questions is, what's the uptake so far from the institutions? Kind of who are they, if can disclose? And then secondly, I still have a bit of trouble imagining Bridgewater just 1 PM coming in here and just clicking buttons, aping somehow coins that are in fire blocks into, let's say, Pendle. Like for somebody like Bridgewater and Blackrock and like Viking and some other actual funds with real custodians that need to like ape into this stuff, how would they go about doing this on your chain? <Guy (21:16)>: Yeah, I think it's obviously going to be slower process than like... launching a new chain without a token and then doing a points farming campaign and then seeing the numbers go up. This is obviously something that's going to take a lot more time to actually do properly. This is something that I spoke about in the tweet when we released it. But you know, the things that are hard to do are usually the things that are worthwhile doing because no one else is bothering to try and get it done. So I completely agree with you. It's not going to be easy to get them comfortable, get them on chain and doing things. But it's also because the upside for doing it is so large that you should be taking that bet and putting in the work to make it happen. As it relates to your question around the uptake, We're obviously coming out with iUSDe stuff, which again has been paused because of this bathroom piece. But we have basically a half a billion dollar commitment from one entity that sits within Trad-Fi to come and like see this initial product. And that's just that they're comfortable to actually take it and use it on chain or on centralized exchanges as well. And so to me, it was a pretty strong indication that like a dollar with a structurally high yield, the demand for that isn't $5 billion. It's like north of 100. And we're delivering a format now. where we bought a single entity providing nearly half a billion dollars into that. And so I don't think it's actually gonna be like a demand side problem for like iUSDe the asset. The second, the piece that's gonna be a bit harder to draw out is saying like, do you wanna go and use this in interesting ways within like the infrastructure we put around things? And I think that, you know, that is gonna be something that takes longer to do and it's gonna be hard. <Jason Kam (22:24)>: Hmm. Hmm. So it seems like your combo would be more to like, you know, like us trust and SSNC and those vendors. And basically ultimately getting the funds that are onboarded to them to like somehow buy, you know, your products on, your chain. that would take. Yeah. <Guy (22:56)>: What? I mean, there are conduits that you can go through to sort of act as middlemen between like big pools of capital and coming on-chain to do these things, right? So like, you know, even just naming one fund, like Brevin Howard obviously has like access to a $50 billion LP base and they have like a division of their arm, which can actually use it. They're doing things properly on-chain. And so you don't actually need like every single entity on that to say like, I'm actually physically there doing these things is actually, you just need a few connection points to the right pools of capital where someone can be executing this on-chain. You know, some of them might <Jason Kam (23:03)>: Yes. Yes. Hmm... Uh-huh. <Guy (23:27)>: even face into whatever galaxy that's sitting there and saying, we can actually do these on-chain functions for you and manage that for you on-chain. There's another project, don't know if you've come across, Upshift, again, their whole product offering and saying, we'll collect these pools of institutional capital and then do all of the hard work that sits for you on-chain. So think the key is just getting the product that they actually want to use on-chain, which we believe a dollar with a structurally higher yield is one of those big products that actually makes sense. And then putting a... <Jason Kam (23:35)>: Hmm. <Guy (23:56)>: thin wrapper of compliance around it which actually allows them to tick the box to say that we're comfortable with that and then I think the operational piece of actually getting the money in and out and sort of doing things someone can always act as like a middleman to get that done and I think it's just sort of connecting those two pieces. <Jason Kam (24:10)>: Hmm. terms of, because eventually, if it works, the uptake here from outside capital should be meaningfully more than, let's say, $5 billion if you really nailed this. In terms of getting it to a certain level of heft, like couple billion dollars, are we talking weeks? Are we talking months? Are we talking quarters, in your mind? <Guy (24:31)>: Yeah, it depends how you define it, because securitizers have a very big chunk here and very small changes can materially move that number. So one example here is that we hold nearly one and a half billion dollars a biddle. if we flip a switch that moves from Ethereum to Converge and that's like the money that's sitting on there. And so there's quite a few of these pieces where if we're just making business level decisions to say, we're holding these assets here instead of there, and this applies to Securitize as well, their number can be much bigger, much quicker. So I think like, know, multi-billions in like a few months from launch, I think is reasonable, but a lot of these things are gonna be like business level decisions of entities that we're working with just actually shifting their assets in terms of whether holding them over there. So yeah, I think that that's fair and I think that I use it. <Jason Kam (25:17)>: And it seems like that effort is bigger than, let's say, bringing in stocks and RWA onto your chain. It seems like that's much smaller versus bringing capital in buying crypto products. For now. <Guy (25:28)>: The stocks will definitely come and I think there's a very interesting overlap with the Ethereal exchange that's launching on there where, yeah, they're not just wanting to do crypto perhaps. Like I think actually, and I've spoken about this on podcast last week, think that if I create a perhaps product around the equities, like a $10 billion. idea in isolation, if you can do that properly. And so I think there's interesting overlap between all of these other assets that Securitize can bring on-chain in spot format and then thinking about how you add these crypto primitives or derivatives and that kind of stuff around it. So yeah, it's definitely on the list of things I want to do. <Jason Kam (25:45)>: Yeah. Yeah. Yeah. Yeah, and I guess aside from the accrual to USDe itself, because it will drive USD TVL, when it comes to actual ENA contribution, there are, in my mind, three pieces, which is one, the Eth ENA being bought for staking. The second piece is the, I think you're going to use USD for grass fee. Does that just get expensed? And then thirdly, are you going to give out any token incentives on this chain to like facilitate action? I guess those three things. <Guy (26:30)>: There might be a little bit, but it's not going to be like an excessive farming campaign. think a lot of this has to be just driven by, Is that real demand from drive for all these products sitting on chain? And we have to rely on the fact that these products themselves stand on their two feet. So there isn't a plan to do some huge farming campaign for it. I would say, yeah. <Jason Kam (26:53)>: get a purchase for staking. <Guy (26:55)>: Yeah, there's API staking and then also we're releasing the tech documents that come out today, but there is going to be a sequence of this running on the train and the fees there obviously come back to Ethena as well. And obviously when you're including in exchange that's sitting on the train, there's a pretty decent amount of activity that could actually originate from that type of activity as well. yeah, there is also fees directly from the sequencer itself, which would all be due back to Ethena. So there's no new token that's coming out of that. <Jason Kam (27:22)>: Got it. So the Minimus ENA being kind of emitted for ENA stakers that are validators. And they will be earning fees from the USD. That is the transaction fee on this chain. And I guess you don't really expect that ENA being purchased for validators to be a material driver. You don't expect a lot of things to be brought and staked at the moment. OK. <Guy (27:43)>: I think that there'll be a reasonable amount, but I don't think it's going to be like at the size that you see on like L1s at the moment. But I think, yeah, basically amount of fees that are coming from the chain. But then also like the business model can be quite different, right? Because a lot of the chains right now basically rely on like flow and volume based transactions. <Jason Kam (27:49)>: Hmm. <Guy (28:02)>: to capture fees back themselves, but actually it looks quite different when you have USDe as a gas token because it becomes like almost like a balance sheet driven chain, if that makes sense, which is like the more apps that are using USDe and the more that it exists on the chain, we're just making it continuous, and extremes just from the gas token being USDe and obviously the backing that sits behind it. So I think that is one thing that looks slightly different here, which is it's all of the stuff that's sitting on this chain outside of the exchange are much more like NIM type businesses rather than like. transaction fee, MEV type stuff that you see normally. <Jason Kam (28:34)>: And since you have the hope that it's going to be a multi-billion dollar TVL on this chain soon, this is in addition to the current TVL of USD. And are there any, I guess, what's the best way to ask this? What kind of effort or which party is the most instrumental, you think, to this growth of this TVL? <Guy (28:43)>: Correct. Yeah, I think the first person that we're going to come out with around iUSDe with that number that I mentioned is going to be pretty big. That will obviously be the vast majority in beginning. I think the piece that we... <Jason Kam (29:11)>: Okay. <Guy (29:12)>: The piece, the reason that we've done this with Securitize and I'm not sure the market is of like fully appreciated now is that like they are obviously the tokenization partner for BlackRock and like everything that BlackRock decided to do on chain goes through Securitize. And so having them is like the deep, this is like the default issuance layer for everything that them Apollo and their are doing to come through here as the first step is a very meaningful thing I think because like if we think about what is the narrative for ETH right now it's like okay well we lost speculation to Solana we lost speculation to other places but you know institutions are building on our train we're actually challenging that in a massive way to say you don't decide that it's actually us as the asset issuers and stable point issuers, securitization, partners are actually deciding where these assets go and what's actually built on top of them like afterwards. That's like one of the big pieces for us, which is this huge optionality here for what else is there that BlackRock and everyone else that securitizes working with, what else are they wanting to do here and how can we sort of support that going forward? And being the default place that securitizes coming to do that business, we think is actually a very meaningful piece in terms of like, yeah. <Jason Kam (30:18)>: They are pulling, they are as a part of BlackRock pulling clients into you of kind of doing the marketing is this one. <Guy (30:25)>: Yeah, and also like whatever they come out with next, right? They've only done a treasury product coming out of BlackRock. There is a lot more that is coming. That is going to be A, through securitizing, and B, on converges, like the default issuance layer to do that. so that's kind of, yeah. <Jason Kam (30:32)>: Hmm. Interesting. The funny deal I saw recently is that they acquired a fun admin that a lot of funds use in this space. I wonder if that fun admin service could just directly plug into your chain. then secondly, they could sell to traditional funds as well. But that's interesting. That's cool. Would you say Converge is the biggest growth effort under Ethena at the moment? Or is there anything else that is big that you think we're that ranks in higher priority here. <Guy (31:09)>: I think iUSDe is going to be bigger just as a product because not all of it's going to be used on the chain. And I think just holding plain vanilla, iUSDe to or people actually just as collateral within prime brokers in the real world, putting it down to get leverage on investment banks, all those different pieces. I think that actually iUSDe to as a product can be bigger than Converge's chain. <Jason Kam (31:29)>: Yeah. <Guy (31:31)>: a higher level of confidence that there's extreme product market fit for that as a product versus us taking a pretty big swing at something that is speaking openly pretty unproven at the moment, which is how much more do these institutions want to do? So I definitely can't admit that the probability of that working the way that we've described it is definitely lower than us pushing our existing product into TradFi But like I said, think the upside for doing this is so high. <Jason Kam (31:41)>: Yeah. Yep. <Guy (31:57)>: still like a bet that's worth taking on our side. So yeah I think that's probably a bigger piece. <Jason Kam (32:04)>: So, tell us more about the progress at iUSDe. Like, how's it going? <Guy (32:08)>: I mean, it's all ready. It's literally ready to go. And this barfing piece again has slowed us out from coming out with it properly and the pressing and all that stuff that sits around it. So at a very basic level, all that's happening is we're putting a permissioning layer around USDe, the asset. So it basically has the same token format and standard that you see with BIDL where you need to be KYC to hold it and like sitting on a ledger and you can't permissionlessly send it through, you know. any DeFi app and that kind of stuff. The interesting thing about it is that once you put it in this format, you can actually then take it as like collateral to do a bunch of things, you know, even outside of crypto, which is like, whatever hedge fund is sort of taking this and has a relationship with an investment bank in terms of just getting leverage or like a prime broker, this asset then you can actually take out of crypto and say like, who else can like interact with this and where can we use this? And so yeah, for us, it's like, I think just speaking to people, the size of tickets and the cost of capital for people who sit within TradFi is that much lower. So like even 8-ish percent is pretty interesting to a lot of people in crypto when the duration is also so short. You can get your money back in seven days. So yeah, I think it's really just waiting for market conditions to be a little bit better where funding rates aren't literally below T-bills like they're sitting right now. And us to sort of clear some of the stuff around Buffin. Yeah, I am very confident in terms of like the size of demand that sits out there for a product like this with this kind of guy. <Jason Kam (33:40)>: Yeah, ownership of this will also be through, you know, like a Galaxy or a BlackRock. Like it's going to be wrapped before it's offered to like real financial actors that don't necessarily have to infer. <Guy (33:51)>: Yeah, this is actually a very cool piece and I should mention it, like you said, it's been set up in a very flexible, like fun structure where actually any hedge fund in the world. can come in and work with the tokenization partner that we're working with and actually just put their own fund structure on top of it. So the initial person we're coming to market with is just a very large hedge fund who's basically opening up a platform to all of their LPs and just saying, you can co-invest into this vehicle with us whenever you want. it's sort of like an investment manager that sits on top of the asset. And all you need to do is send them fiat. And what they're doing under the hood is saying, we're turning fiat into USDC, minting USD and holding like an investment vehicle that actually sits on top of it. And so all of their clients actually did not need to fucking touch <Jason Kam (34:04)>: Hmm. <Guy (34:29)>: any USDC managed wallet, anything, all they're doing is sending, fiat into a fund and buying like essentially shares of a fund that replicate the underlying. And so it's set up in a maximally flexible way where you can take the basic legal structure and fund structure that we put in place and actually just like throw in your own like new name that sits on top of it. So it's actually a couple of, yeah. <Jason Kam (34:48)>: Hmm. And this box, do you operate or securitize operates? <Guy (34:54)>: Securitize does basically like the fund admin, the tokenization piece of it, all of like lower level stuff that a lot of people don't want to touch. And then you could even be a crypto native fund and actually just say what... said like with our existing LP base this is sitting here and if you want to put money into this you know and that's sitting on top of it. <Jason Kam (35:14)>: That's That's cool. And I guess this is where we talked about before, which is at the minimum, short-term US treasury rates at the best is kind of the crazy yield that crypto offers through fund future basis, effectively. Cool. Well, probably hear about it more in hopefully two weeks. Fascinating. OK, so we talked about iUSDe. We talked about Converge. <Guy (35:26)>: Correct. <Jason Kam (35:39)>: There are other things we discussed historically. There's the apps for distribution. There's the potentially setting up an ETF and then just apes USDe, and then redeploying for buyback. There's like, I don't know, is there anything else on your list that you thought you're really excited about aside from the couple of things we talked about? <Guy (36:00)>: Yeah, I think the other cool thing with iUSDe that comes out of it is you can put it in a format that can actually sit within the ETPs and ETFs. So I think an ETF is much less likely now in the US, but we're making good progress on something in Europe around an ETP. so again, just getting into like an exchange traded format that you can actually just put into different distribution channels there, I think is interesting to us. The other one is... Yeah, I think just more apps that we've seen coming to market. we like the ethereal pieces opened up its test net now and there's been like market makers in a few like early tests that are getting involved there. And I think the initial feedback has been pretty positive. Obviously when these things are successful, they can be pretty large in terms of the demand sink for dollars that go into them. And I think the value proposition there is actually uniquely interesting to me, which is kind of you've got two of the killer products of crypto coming together in the same place, which is kind of dollar with a yield and then <Jason Kam (36:38)>: Hmm. <Guy (36:54)>: speculating on  and having those things like by default integrated with like Ethena providing liquidity I think is actually an extremely interesting and compelling idea even though the  space is obviously extremely saturated at the moment. And then I don't know if you've seen like a few of these things that came out this week. I just found this intellectually pretty interesting was this insurance, re-insurance businesses that are actually like underwriting re-insurance in the real world and <Jason Kam (37:07)>: Mm. <Guy (37:19)>: collateralizing it with USD on top. So you're almost stacking two forms of uncorrelated yield into a single product. And then they're actually tokenizing that product so you can then take it onto like a more. Anyway, I thought that was pretty interesting because like obviously the capacity to earn 10 % like uncorrelated real yields in addition to like what you're using on the sUSDe collateral. Pretty interesting product. And to me is just the thing that I find most interesting right now, which is kind of like. real assets or businesses coming in, putting a crypto primitive on top and trying to make it better in some sort of way. And I think that that's a pretty cool use case that's coming out of that. And then, yeah, as we spoke about publicly in the roadmap piece, we also have the telegram launch, which for anyone who's gonna be there in Dubai, we're gonna have some piece that we're taking out a token just around the department. So yeah, I think all the stuff that we've been speaking about here was really on the... Institutional side of the distribution like barbell and then the retail side. I'm pretty excited about I really think the two avenues there are kind of centralized exchanges plus Telegram I think the two most interesting retail distribution <Jason Kam (38:27)>: And this is issuance <Guy (38:30)>: It's more interesting than that. It's basically like, so right now you only have USDT within like the centralized app and the TON spaces, so not actually sitting on the TON chain itself. Think TON, I'm obviously excited about what they're doing, but I think we can openly admit that the DeFi ecosystem there is underdeveloped or immature versus the rest of the chains, and that's not a criticism. I think it's just a statement of where it's at. I think that that is less interesting to us than the centralized distribution of just sitting within the wallets as a savings technology that sits alongside Tether. So it's a pretty cool way you'll actually have within your main app that actually has the real users sitting within the wallet rather than like the DeFi ecosystem itself. You'll basically just have an option to toggle between USDT for payments, sending to your friend, all that kind of stuff. And then savings, which is sitting with Ethena, is like the only option there within the main app itself. The cool thing about that in my perspective is that, what is the one financial product on earth that like everyone wants out of finance? It's basically just holding a dollar in your bank account, getting a yield and then spending with it. And you're actually able to do that through a single token sitting within your... <Jason Kam (39:24)>: Hmm. <Guy (39:38)>: Telegram app itself. So holding USD, making saving saving like generating a yield on it and then integrating card payments as well directly within the app where you can actually just double click on your Apple pay and then just spend your USD that's in your wallet directly on your on your phone payment. So to me that's like very cool, very real use case that can actually touch the hands of like many. <Jason Kam (40:01)>: Hmm. <Guy (40:01)>: here is that we're also getting to work a bit closer with the Tether team because, yeah, think the Tether obviously was like the only asset that was sitting in there and they were quite defensive, I think, in terms of who else was coming in there to operate alongside them. I think the piece that people don't realize about Ethena and Tether is that 70 % of the perpetual market is actually denominated in USDT. And so what that means is that <Jason Kam (40:16)>: Yes. <Guy (40:29)>: when Ethena is backed one to one with pervs, a dollar increase in USDe supply necessarily creates 70 cents increase in USDT supply because as we're adding a short to the market, you always need a long to match that short. And so that actually creates like 70 cents of tether demand on the other side. So you can actually think about like, as Ethena is growing, 70 % of that growth is actually feeding through into tether on the other side, which is something that even Paolo didn't realize until like a couple of months ago. <Jason Kam (40:43)>: interesting. Hmm. <Guy (40:57)>: And so that's one piece where we're again, you know, I think they're like a bit more open now to us basically working on Telegram and TON now sitting there because they sort of understand that even if assets are flowing into Ethena, it sort of feeds through into them as well. And so, yeah, that's just. <Jason Kam (40:57)>: Hmm. And are the Germans holding it up still? Or is this separate as well? OK, this is completely separate. <Guy (41:17)>: No, no, this is more of like a technical implementation thing. We had to rewrite all the contracts specifically tailored for Telegram, and that's just taken a while to get audited. There's obviously many pieces of the business that's within Telegram across different teams and that kind of stuff. And I think we'd always guided towards Q2 for getting that product out. yeah, this has just been something that's been an attack in engineering rollout rather than anything else blocking it. <Jason Kam (41:43)>: Does having Ethereal prevent you from going on like hyperliquid, for example? <Guy (41:50)>: So we bought the ticket for Hyperliquid, which you might have seen. And so yeah, we've got the USD ticker there. We're just waiting for connectivity between Hypercore and the EVM, which allows the arbitrage to actually close before we actually start to put any real assets on that. The issue though is that Hyperliquid is not designed in a flexible enough way where you can actually just take that as collateral to trade on portfolio margin. <Jason Kam (42:04)>: Yeah. Yeah. Hmm. <Guy (42:20)>: going to have unless they rip up the entire order books being denominated in USDC. So the use case there is kind of like if you want to close your positions on perps and then swap into USDe as like a savings asset in the spot side of the book. So we almost said there's like an HLP equivalent if that makes sense within the spot side of the exchange. There's like a savings tool which is like one click away. Obviously USDe within the EVM can be useful in the same way that it has in other ecosystems. But I think <Jason Kam (42:38)>: Yeah. <Guy (42:48)>: Yeah, it doesn't sound like there's a big urgency or desire from the Hyperliquid team to either push portfolio margin on the exchange itself or allow for different assets as collateral on that. And so you're never going to be able to have this of like yield bearing use case on there until they've sort of like redesigned the way that they've done the exchange there. <Jason Kam (43:00)>: Hmm. I guess unless until like Ethereal makes significant headway in volume and traffic and TVL, they will start sort of maybe consider it. <Guy (43:18)>: Yeah, it's an interesting question there because like I think a lot of people have speculated around a hyper liquid stable coin coming as well. And I'm not saying this because we're building one and I'm trying to put down the idea but like finance can only grow FDUSD to like very low single digit billions. There's a very good reason for that and it's like when you shop your own stable coin into your own exchange, it's very limiting unless you can be using it across every single exchange. And the very interesting piece about this is that it's a huge <Jason Kam (43:31)>: Yeah. Huh. <Guy (43:48)>: It's a huge risk to your own core business, which is printing millions of dollars now to actually rip up the liquidity around one pair and say, okay, come do it on a new pair instead of the USDC one, because you actually just run the risk that people don't ever come back and make that pair of liquid again. And that's actually the moat that Tether has with Binance, which is no one wants to take the risk of ripping up the BTC USDT pair because it prints Binance $10 billion a year. And so, you know. <Jason Kam (43:57)>: Yeah. Uh-huh. <Guy (44:16)>: can make 4 % on that because no one ever wants to run the risk of killing the cost of the exchange business. And that's the same that I think hyperliquid is in now, which is it doesn't make logical sense to sort of risk the core trading business in my view to try and shoehorn your own asset in on the other side. <Jason Kam (44:21)>: Hmm. I guess since Trump became president, it's been about, I guess, a couple of months, has the US regulation gone more friendly to you? And importantly, the Stable and Genius Act that we hear, like, the way that regulatory sort of regime is going, do you feel like it helps you, the USDe? Does it feel like it hurts you? Is it important that you're regulated as like a payment stable coin in that regime? <Guy (45:02)>: No, not from my perspective. yeah, I'm very happy, I think, with where it's like landing at the moment, which it looks like there'll be a carve out for everything that isn't like pure payment stable coins right now. And they'll come to address it within two years. And I think, you know, in the conversations that we've been pulled into, there's like specific mention of Ethena and Sky being in this bucket of like other that they'll come to in like two years. So I think that that's as much as we could have asked for there. We don't have retail presence now in the US, which we are. <Jason Kam (45:22)>: Good? Uh-huh. <Guy (45:30)>: Exploring and we think that like our USD is actually the better sequencing of events here Which is like face off to US institutional users with your product first to sort of slowly get your way into the into the country in a in more conservative way and then the The plan that we have is to actually before actually opening up retail access Without sort of checking with anyone. We want to go into the SEC for a no action letter from them, which is basically just going in to say, this is our product, this is what we do, this is why we think it's beneficial to consumers, and can you give us the okay before we do it, before we come in. So I think that that's our approach, we just don't want to take any unnecessary risk now, which is sort of like presuming that people are fine with everything and risking something. So that's kind of our approach here, which is phase it in with our USD and the institutional product, and then get explicit confirmation from people there that they're fine with what we're doing before. fully open up the retail presence in the. <Jason Kam (46:26)>: and what's the timeline there? <Guy (46:29)>: I really can't give one so we've been in conversations with them but I think I don't want to overcommit on that side because obviously that's pretty much entirely outside of our control. <Jason Kam (46:37)>: Got it. has any of the, I wouldn't want to call it competition, but there are a bunch of folks that recognize the spaces trade, Falcon X, Sten X, CredX, I don't know how to phrase this question, but has any of them sort of pulled volume from you or do you view as any of them as like potentially threatening to your business? <Guy (47:03)>: I think the honest answer is no. Like a few of them have got to like low nine figure size. And I think I actually see the growth of one of them. like one was called Resolv and I sort of came out and I was complimentary to them saying like they approached the design, interestingly, and then they TVL out like four X in two months after I sort of gave the public. We had our own LPs actually leaving Ethena and they're like, you think it's safe? Okay. And then they went in there. <Jason Kam (47:11)>: Huh. Nice. Very helpful. <Guy (47:31)>: No, I think the issue is that everyone is kind of like already so many steps behind in terms of like integrations getting to the right places and that kind of stuff. I think maybe I'm being too dismissive here, but I think once you've got Binance Collateral, people will basically just stop doing that. And it just becomes an extremely high hurdle for people to come in and convince like these big platforms that have done the work on Ethena and got comfortable with what we do. I think the big piece here and I think it worked in our favor was actually going through the Bybit incident and some of the liquidation stuff that we have this year and having like literally zero issues out of what people perceive to be you know one of the worst right-tail events that could have happened sorry left-tail events that could have happened to Ethena without like any issues it actually built a lot of confidence in the market to say like <Jason Kam (48:16)>: Hmm. <Guy (48:20)>: it's actually pretty lindy now and there's a pretty high hurdle for what I need to see from someone else to not just use Ethena and be comfortable with what they're doing, if that makes sense. So I think if you're to come in and compete now, you have to so explicitly beat Ethena in terms of returns, whether that trade off makes sense, i.e. taking the risk on a new team who hasn't proven themselves at huge scale for what has been like, you know, over a year now. And I think that's just a pretty high hurdle for people to come in and do. So yeah, there are like, you know, there's been... I'd say five to 10 that have like emerged in the last year, they all get to like low nine figures with, know, side TVL deals and that kind of stuff and then sort of die off after. So, yeah. <Jason Kam (49:01)>: Understood. Got it. So if I were to summarize, it seems like the plan here is a piece, well, I wouldn't say a piece, but answer all the questions regulators may have. Figure out a way to get into the US, but in the meantime, solve the hurdles you have with traditional institutions that can onboard you through iUSDe. Clear the hurdles with more exchange adoption. Clear the hurdles for reaching retail at the moment mostly through Telegram. And hopefully you could get the 5 billion TVL to add another zero to the end of it, maybe in one quarter, two quarter. And then in the meantime, maybe increase the war chest from 60 million to, I don't know, call it 100 million if the yield and the 8 TVL increases. So you can start cutting $5 to $10 million deals with more strategic partnerships that widen the TVL. Is that the right way to think about your roadmap? Did I miss anything? <Guy (49:52)>: Yeah, think on the the just the cash piece of the end we don't like we can still capture that Those millions of dollars to like the Treasury or whatever and you know We can still fund those other things that I've described there very easily like we have more than enough money to go do those deals. I'm more an example of like growth versus like capturing value type thing, which I was just trying to give us like an example. So yeah, all those like pieces that we can go out and do aren't conditional on us generating more like cash income going forward. We can afford to do those things right now. I think the other piece I just wanted to get across was that this period reminds me very much of I think when we maybe did the first one of these around like six months ago, which is kind of just before we off in Q4 where, you know, <Jason Kam (50:08)>: Hmm. <Guy (50:38)>: TVL had stalled, rates were low, everyone's like, this thing's never growing again, it's like dead in the water. And then the thing about Ethena is that like, the growth is very violent and like... non-linear where you go through these periods of like lulls and you can see it on the chart and then it just adds like four billion in like a month when like rates come back. I think the piece that I just want to get across is that like even in Q4 of last year we really didn't have much of the infrastructure set up to even capture like a big amount of the opportunity. Like we had one centralized exchange. Aave wasn't even listed. Like if you remember we had to cap out the growth of Aave. It was like capped at like a hundred mil a week and then the opportunity sort of disappeared when I got to a building. <Jason Kam (50:56)>: Hmm. Hmm. <Guy (51:15)>: hadn't opened up for a billion of allocation directly from there. And you didn't have any of these institutional pathways, new pieces around Telegram and that kind of stuff. So the point I just want to get across is that when the market comes back, and that doesn't mean that yields are like 20, it means like 12 to 15, this is going to grow twice as fast as what you saw in Q4 because the tentacles of Ethena are just sitting in so many different places now where... the access point to just get in and for this thing to grow is that much quicker. so even as like a stepping stone bridge type thing, like Aave has basically completely de-levered its USD holding. So that's gone from like one and a half bill back down to zero. Like when rates are attractive to do that, like that's like one and a half to two bill, like just out the bat sitting on Aave. You've got a bill from Sky, which when it sort of clears that cost of capital that comes in like very easily from their treasury holdings. The telegram thing, like what we've been discussing with the foundation there in terms of like <Jason Kam (51:52)>: Huh. <Guy (52:08)>: targets, how we're both putting incentives and the incentives that are coming from the Telegram Foundation. That's like targeting one to one and a half billion as I could roll out that we're doing. And then there's this like iUSDe piece, which I mentioned, we're sort of expecting 500 to start, like, who knows how that big that is when it's like 15, 20 in size. So like, that's just like literally four different things that I've described there. And I think that's like three to five billion just straight out the gates without any normal sort of like return coming in the market. So yeah, I think that's one piece I wanted to get back was that actually the growth that you saw on Q4 was us actually with very, pretty limited distribution. I think that's where we are right now. <Jason Kam (52:23)>: Who knows? <Guy (52:46)>: trust from people like pre-buy bid. And so think when this does come back, if yields are anywhere even like close to 15 to 20, it's like north of $10 billion like very, very quickly. Like literally within that is my view. <Jason Kam (52:57)>: Yeah, that's very helpful. And then that's a good segue, which is kind my final question. And then maybe the members will have some more. It would seem like a lot of the groundwork and infrastructure work you have done set yourself up for step functions of USD TVL over time. And this is contrasting with a token dynamic where the best thing are happening now. And you have a cap table previously that probably need DPI and need returns. basically gunning the business for growth at the moment, which is redeployment of treasury dollars into growth efforts. I guess the high level question is, how do you think about maybe in the short term, the 3 to 12 month horizon, the potential decoupling of your token price versus the fundamentals in the TVL that you're building? <Guy (53:47)>: Yeah, I think it can happen and, you know, the token itself is always going to be quite reflexive to the cycle, I think, because like when there's an all the run rate, a billion of revenue in December doubled in a month, it looked like, you could argue even like cheap relative to the growth back then. So yeah, it's obviously extremely sick. I think the, we did obviously see like a lot of turnover in the cap table during this unlock, I think. And you can see all the stuff on chain. And I think we shared a note with some of, people on this call when it happened, there was quite a bit of selling that actually came through from some of the earliest investors who were up like 160, 200X basically around the unlock. I think that there's a big bifurcation within the cap table of the largest holders, including myself, plus just the largest VCs who actually have not sold a single token. And I think that actually comes out for a much larger outcome. then sort of smaller trading entities, trading firms and that kind of stuff, who basically sold everything that they did. And so there's like this very weird distribution of like, Some people have sold 100 % and then the others, all the most are basically holding out for much higher. I think, and obviously you need to do your own work on this. I'm talking about Invert, but like my perception is that the heaviest amounts of that has basically been washed through right now in terms of like that initial unlock that came through. And, Yeah, I think the piece to get across, and you can see this on-chain, that I myself haven't touched a single token. The majority of our team really haven't done much at all. And yeah, the largest holders themselves have chosen to hold high rather than take the liquidity that was there. <Jason Kam (55:26)>: Helpful, thank you. Any questions from the members and guys or anything else we haven't covered that you want to talk about? <Guy (55:34)>: No, I think that's it. think, yeah, difficult to come on here. think we're, I don't know, market is exceptionally weak, rates are down really low. We've had like many months of stalling growth, but I think, you know, we've been through this period before a couple of times last year. And I think the piece I wanted to get across was just, you know, we're still here trying to take big swings and big ideas to move this forward. And I think like before people will be surprised when the market does come back. <Jason Kam (55:37)>: Yeah, extensive. <Guy (56:03)>: how aggressively this could swing back to the upside. <Jason Kam (56:07)>: Cool. Guy, thank you so much for your time. Appreciate it.

TLDR In this episode, Jason speaks with Michael, founder of Euler Protocol, about how Euler bounced back from a major hack to reach $1B in TVL. Michael explains how their modular lending architecture, curator-led markets, and capital efficiency attract both major assets and long-tail markets. They discuss Euler’s liquidation system that minimizes penalties, their rehypothecation model, and how vaults boost yields for both lenders and borrowers. Euler is now expanding cross-chain and preparing to launch two new products: EulerSwap, a novel DEX that turns lending accounts into just-in-time liquidity providers; and Euler Earn, an aggregator vault system similar to Metamorpho but with broader access. While revenue is not the top priority, the team expects both products to significantly boost usage, lending demand, and consequently its TVL and take-rate, potentially ultimately driving Euler token buybacks and sustainable protocol growth. CHAPTERS 00:30 Introduction to Euler Protocol and Its Journey 03:22 Technology and Liquidity: Key Drivers of Growth 06:28 Capital Efficiency and Liquidation Mechanisms 09:31 Market Flexibility and Customization for Curators 12:15 Future Growth Strategies and Cross-Chain Expansion 15:37 Incentives and Revenue Generation in Euler 18:28 Funding and Financial Sustainability of Euler 33:36 Funding Operations and Token Management 38:36 Introducing Euler Swap: A New DEX 53:44 Euler Earn: Asset Management Innovations TRANSCRIPT <Jason Kam (00:00)>: I don't expect this to be ridiculous. Probably got a couple of people on, GM, we're live. Today is April 15th, 5 PM Hong Kong time. BidCast is being live streamed to BidClub members. Questions are from members and my own. Welcome to our episode of BidCast. Today we're speaking with Michael, the founder of Euler Protocol. Michael, welcome. <Michael (00:08)>: GM. <Michael (00:30)>: Thank you very much for having me on. Yeah, it's great to be here. <Jason Kam (00:33)>: Yeah, yeah. I mean, after all the crap that was thrown at you, mean, you guys are up to a billion dollar TVL now. Why don't you tell us about things like, how did you come from a debt from, you know, you know, hacked and then now to a billion, what drove that growth? Tell us more about that. <Michael (00:41)>: Yeah. <Michael (00:52)>: I mean, yeah, it's been incredible. I'm just absolutely delighted that we've been able to pull it back like this. We had high expectations, but maybe not this high, this quick. I think there's been a lot of different factors. Firstly, we'll get into probably at some point what we've built. I think it's fundamentally extremely good technology that's superior to competing technology in a variety of ways. <Michael (01:21)>: Technology alone isn't, isn't good enough. Sometimes you can build a 10 or 20 % better product. And if you don't have everything else in place, then that's not enough to, to overcome competition. I think like particularly liquidity is king in this, in these markets for a lot of different protocols. And so even if you've got 20 % better product, if somebody else has got the liquidity and you don't, then they can't use your 20 % better product. Right. So overcoming that challenge has been tough. Think Euler's model naturally lends itself to. to kind of growing liquidity because it uses this curator model, which is similar to some of the competition, Where rather than just build, have the Euler-Dao or Euler-Dao associates build a lending protocol, we have different risk curators that come in and build their own products in their own image. And they bring with them their own networks and their own contacts and their own reasons for growing these markets, many of which we're totally unaware of, right? So like some people ask me. <Michael (02:18)>: Why is it going so well on the X, Y, Z network? Or why is this market so big? And sometimes we just have no idea. I mean, the Resolve market, for instance, was one big driver in the early days. It's sort of slowed a little bit recently, but still doing quite well on Euler. But that was one, one market that went extremely well. It was curated by a team called Apostro. They knew the, they knew the resolve team. They knew. The fundamentals of that project seem very strong. Honestly, they knew a lot more about it than we did and that market really, really grew quite quickly on Euler. So that's just one example, one really nice example of something that took off and that's not because of us in a way. You know, we built the technology and facilitated it but we didn't directly have a massive hand in it. would say it's all down to Resolve themselves and Apostro for knowing that team and bringing it on board. <Jason Kam (03:10)>: And you would say that most of the TVL just happens organically, like you didn't do BD or anything. <Michael (03:15)>: Well, I mean, we have, yeah, we have one BD person at Euler who works extremely hard, who knows everybody, you know, he goes around and talks. So I wouldn't say we don't, it's not like we don't do BD, but yeah, a lot of projects, I'm sure everybody knows that a lot of projects start by going out. They have, maybe don't even have a live token yet and they'll secure, you know, some kind of headline figure TVL, which then comes in through some kind of private, private deal. And Euler hasn't had the liberty of doing that, right? Because we had a liquid slash liquid. token after after everything that happened and you know I think at the time we relaunched the fully diluted valuation of that was just was pretty much on the floor so it's not like we had the option to go out and offer somebody you know silly money to go out and bring TVL so in the end yeah we did some another driver was we decided to say well there are people who still believe in Euler there's a lot of uncertainty around the project can we pull it back so we decided to do a locked Euler reward campaign and that has been a big driver. So that uses public incentives where we essentially sort of wrap the Euler token up into a linearly vesting wrapper and then we distribute that. So I think that's been an important driver, especially to help new markets where there's a bit of a chicken and egg problem emerge and grow spontaneously. If you look at the dollar value of the public incentives we've done, it's still less than three million since launch year. <Jason Kam (04:39)>: It's not that much. It's not that much. And so most of the teams that onboarded you through the curation model, they basically thought, we need to create the market here. And this is just about the only solution in WIFI 2 that allows us to build or do what we want to do. And that's why we're building. Is that roughly the right line of idea? <Michael (05:02)>: I think so, yeah. I mean, you can't just add any old asset to something like an RV and establish lending and market, right? It's tricky, but a lot of new assets out there do need utility in lending facilities. So the other option is to kind of go with an isolated model that has been tried many times. It's partially the way that things work on things like Morpho, but it's often inefficient. And on Euler, the... protocol itself is just way more flexible than any of the protocols out there. So you can build more efficient capital markets on Euler than you can elsewhere. And so oftentimes that's one of the main reasons why people come to Euler is that there's just things they can do on Euler that they can't do elsewhere. And that's, yeah, so a lot of these new assets, been a massive proliferation, now, stable coins recently and things like that, that are seeking credit markets. <Michael (05:58)>: to help themselves grow and so they come to Euler to build. Yeah. At least as far as I understood it, the mechanism of V2 and your coding and design mainly benefited your collateral and lending in two ways. One of which is that your liquidation mechanism is a bit more advanced, which allows you to push the collateral requirement to be lower than your competition. And the other one is that Because of this hybrid model that you offered, the folks that deposit the assets are able to accrue slightly higher yield versus an isolated model, for example. Is there any way you can quantify for us? Well, first of all, am I missing anything aside from those two things? And then secondly, can you quantify for us what that really means for, let's say, a $100 deposit into your platform? How would it translate to like, some more additional yield or additional benefits to the depositor or borrower. <Michael (07:05)>: Yeah, sure. I did say they probably are the two key sort of capital efficiency drivers. And one of the things, you know, just to say upfront, what that means is when you're more capital efficient you don't have to spend and heavily bootstrap like others have done. Yes, but others have had to spend tens of millions of dollars in incentives to grow these markets. But if you have natural drivers of efficiency, then you can grow faster organically. So let's say the liquidation model first. I mean, <Michael (07:34)>: borrowers on lending protocols sometimes get liquidated. And on other markets, they typically pay essentially a penalty on their collateral when they get liquidated. That penalty essentially provides the incentive for the liquidator to provide the liquidation service to perform the liquidation. If you have a very big penalty, then there's a very big incentive. If you have a small penalty, then there's a smaller incentive. the penalty is always a percentage of the collateral. And so actually that doesn't really make sense, right? If I'm liquidating a hundred million dollar position, then a 5 % penalty could be absolutely enormous, both for the liquidated party, but also for the person, the incentive is just massive. $5 million for liquidating this position. It's just way more than any bot runner needs. These are all just bots willing these liquidations, right? So why do we need a 5 million penalty? It's insane. But 5 % on a hundred dollar position, you know, we're now talking $5. Is that even enough to pay the gas cost of liquidation? Possibly not, right? So the point is that the percentage penalty, the percentage penalties don't really make sense. What there is is like a fixed cost of liquidation. And then after that, there should be a kind of auction that runs to determine how much incentive you need to liquidate somebody. And that's essentially what Euler does. has this Dutch auction that's based on something called the health score of a borrower. And what it means is that large borrowers get liquidated at very low percentages. percentage penalties. I posted about this on Twitter recently, know, some of the, I think, off the top of my head, I think the penalties way less than half a percent if you've got, you know, if you're borrowing tens of thousands of dollars, which is at least an order of magnitude better than if you get liquidated on something like Morpho or AAVE In some cases, we were two orders of magnitude lower on the penalties charged, you know, if you're borrowing millions of dollars, then You definitely want to get liquidated. you are going to get liquidated, you'd much better off getting liquidated on Euler than on other platforms. So yeah, so just better for borrowers, I would say in that regard. But it also means things are better for lenders as well, by the way. You people often miss this. If you're taking someone's collateral and handing it, taking it out of the system to the, you know, to the MEV bots that run these liquidations, that means they're less collateralized than they were before, which means you push the system closer towards <Michael (09:57)>: insolvency than it previously was, right? So it's not just better for borrowers, good efficient liquidations are better for everybody in the system. And Euler has, in my opinion, the best in the business. I've posted about this many times. <Jason Kam (10:07)>:  Yeah. And since that is the case, are you able to push the leverage that a borrower can undertake so they have higher efficiency? <Michael (10:16)>: I think so. I mean we often get asked about this. Most of Euler's markets are relatively conservative on LTVs. I would say, and I'll explain why that is in a second as well when come to the next point you raise. I think if you were to run isolated markets like they have on more flow flowed, you could really push those LTVs much, much higher. But we tend not to have too many isolated markets on Euler even though it's possible to create them. Euler is very flexible in that regard. You can replicate more for all fluid type markets on Euler very easily, but most most curators tend not to build those markets. And the reason reason for that actually leads into the next point, which is what, why, why are things more efficient in terms of the, the class usage on Euler? It's because on Euler, you can essentially our primitive unit is a single vault and a single vault can be either used for lending and borrowing, or it can be used for as collateral or both. And so when you use it as both and you have effectively rehypothecation on the markets, that means you're earning interest whilst you're using something as collateral at the same time. That's exactly how things work on Aave. So you deposit ETH in Aave to borrow USDC, possibly to go long ETH. God forbid anyone does that anymore. You will often earn interest on the ETH you've deposited from somebody else who's actually borrowing that ETH, possibly to go long on. liquid staking token yield or whatever else, right? So that makes the cost of borrowing lower. So you going long ETH on something like Aave, then it does on something like Morpho. If you were to go long ETH versus USDC on Morpho, your ETH would be just locked in earning no yield. It would essentially be what's called escrowed and held in a vault, not earning anything. But on Euler and on Aave, the collateral often earns users extra yield. And so that, that extra yield makes the whole system more efficient. means that there's, you know, you don't have to, grow it, to grow a market like an ETH long position. You don't have to, you don't have to subsidize it as heavily with rewards. You know, I was looking recently and they just aren't, there's nobody going long ETH on, on more for on mainnet for example. I think there are markets on base like that, but there just isn't on, on mainnet. And I think it's cause it would be very expensive to bootstrap a market like that perhaps or. <Michael (12:45)>: Yeah, it's just a very different value proposition than it is on Aave or on many of the markets on Euler. So rehypothecation obviously comes with additional risk as well. I should emphasize that. It's not a free lunch by any stretch, but in many cases, a lot of markets, it does make sense to have a degree of rehypothecation and many curators want that. And then those markets tend to grow faster and liquidity tends to be stickier in those markets because the capital is just used more efficiently. <Jason Kam (13:15)>: And the yield generated on a collateral is certainly higher than a Morpho, but is most of the time not higher than that of Aave, assuming a similar level of utilization for borrowing. <Michael (13:29)>: on Euler, it tends to be a little higher than AAVE at the moment. I think AAVE I mean, it depends on the market conditions. would say. Frankly, AAVE is, is kind of underutilized at the moment. You know, there's the, the market's gone more risk off. You've seen the interest interest rates on AAVE have dropped below, you know, on, on, on dollars, they've dropped below, even the T bill yield, which is kind of insane that you, you earn less on AAVE than on, on T bills. So it depends heavily, but there's no reason why they should be any less. <Jason Kam (13:32)>: Mm-. Mm-. <Jason Kam (13:44)>: I see. <Michael (13:59)>: the yield should be any less on Euler markets than it should on AAVE. It really depends how the vault curators configured their markets. Some opt for more conservative parameters, some opt for more risk-on parameters, and which give higher yields. as always, there's no risk without reward, and it's up to the vault curators and the people who use those markets to determine, know, it's up to the market essentially to determine what people want. It's not a constraint of the technology in Euler like it... <Jason Kam (14:13)>: I see. <Michael (14:28)>: perhaps is on other products. It's a constraint imposed by the risk curator and then by the market itself on what it wants. <Jason Kam (14:38)>: . So for anybody who is like borrowing, instance, they are, it would seem like their collateral would earn well, they earn a higher yield and collateral at the moment thanks to high realization because AAVE given a sheer size is potentially reutilized. And then their liquidation, they will feel a little safer in cases of like extreme market conditions. And that plus the flexibility that it's offered to curators is what you would say. basically helps you get from standing start to a billion today. <Michael (15:12)>: I think so. mean, and that and the ability to heavily customize the markets, you can just build things on order that can't be built elsewhere because of the underlying flexibility of the technology. we built in this, you know, we say it's sort of the modular lending protocol, because what we did was we abstracted all the core properties of lending markets into discrete modules, which then the curators themselves can compose and build back together markets in their image. If you look at Aave, it's very opinionated. a very opinionated product, but on the more complex, more capital efficient side of things. If you look at Morpho, it's kind of on the other extreme. It's very opinionated, but it's on the simplicity side of things. Well, Euler isn't neither, right? It allows you to build either simple markets or more complex ones. And there are just all sorts of more advanced features that you can add. are advanced access controls for risk-curators to play with if they want more security or risk management control. <Michael (16:08)>: There are, you know, hooks for complaints and, and like, you know, trade, changing the way that markets work. One of the big markets on Euler was built by the Usual team. And it was the, it was, Euler was the only place in town that they could build this usual stability loan that they've got, right. They couldn't build it anywhere else. And so they built it on Euler using some of the more advanced, you know, features that the Euler vault kit provides them, that they can't get on, on another, on other, <Michael (16:38)>: Yeah, protocols <Jason Kam (16:39)>: Yeah. There's about 30 billion of TVL on Aave and then maybe five billion on Morpho. You're at a billion and the compound for Robert is pretty checked out building super state. like there's maybe like 40 billion up for grabs. How do you get from one billion to five billion? Like what are you building and what are you working on to get you there? <Michael (17:04)>: I so there's a few things coming down the line. mean, firstly, I think it's important to go to where users are and there are different types of users across DeFi, different networks. Euler's been moving cross chain quite rapidly to different networks and meeting users where they are. yeah, that helps for multiple reasons, not just because there's TVL on those networks, but it means that a user that possibly uses one or two of those networks gets more familiar with Euler across. across that. So you might, you might pick up a user that really enjoys using Euler on base for instance, and that's also a user of mainnet. And so they now, they might not have found your mainnet. They might have been an Aave user on mainnet, but they find you on base and now decide to, you know, so you pick up loyal customers and sticky TVL that way, I think. So it's important to go, go across network and yeah, we're launching on BNB today in fact, but we've had several other big chain launches over the past few months. <Jason Kam (17:58)>: Nice. <Michael (18:03)>: So that's one part of things. I think consistent growth and just lendy is really important. There's nothing better than just proving over time that things are secure. I mean, obviously all is like perhaps the most audited protocol in DeFi or close, it's right up there at least. But yeah, nothing beats lendy being live. I think AAVE proves that right. <Michael (18:33)>: AAVE V3 has been around for a long time. It's had its own issues in the past, but it's now been robust for quite a long time, I would say. And so people trust it for that reason. Just being, being secure and safe for a long period of time is really important. You see, you know, you mentioned Compound, they've been, they've kind of been checked out. think there's some, some efforts to recover their growth from the DAO from within the DAO, think, but as a <Michael (19:00)>: They've probably been lacking leadership for some time, but their TVL is quite high because ultimately it's an old protocol at this point and it has that lendy and has that trust, I think. And then the other thing I would say is, you know, it's no secret that Euler has been building a dex for some time. And so we're excited to launch that in the near future. That's actually going into audit at the moment. yeah, it's already had several really good audits come back and... <Jason Kam (19:09)>: . <Jason Kam (19:22)>: Okay. <Michael (19:27)>: Yeah, we'll hopefully have an announcement out about that in the very near future. But I think that's important because the way that the debt works will naturally drive more volume through the Euler lending market. It's not some separate product. You people ask why have we built this thing? It's not disconnected from Euler at all. It's in fact heavily dependent on it and a core part of the main Euler lending protocol. And that will increase capital efficiency even further. <Jason Kam (20:00)>: We'll be sure to talk about it. But it seems like it's more so about going on different chains at the moment and letting the long tail enablement do its own work. But you're not actively introducing incentives or, is that fair to say? <Michael (20:19)>: It's not that we don't have incentives. I mean we definitely do every new  chain deployment. We typically do a hundred thousand dollars of Euler incentives in this, this reward or token as a minimum and see, then, and then I think the incentives tend to be quite dynamic. So we see, you know, what works, what doesn't, what assets come on board. Sometimes there's incentive matching. depends on, what kind of proposals come through the DAO <Michael (20:46)>: So they definitely are part of it. It's not like we don't have incentives. Yeah, a lot of people come to Euler for those. Yeah, I think new networks are quite an important part of it. I mean there isn't that... I'm not a person that thinks that Euler should be on 100 networks or anything daft. I think there are probably going to be a handful that succeed over the... <Michael (21:11)>: over the next few years, I think we will, we've had this big proliferation and now we will probably consolidate on networks that can specialize and offer users something, a unique experience. So it's hard to predict ahead of time, which those networks will be in my opinion, you know, there are lots of great builders out there and it won't necessarily be the best builders that end up winning of course. So it's really hard to say, but I think, yeah, it's important that Euler's on those early. think if you, <Michael (21:40)>: If you try to grow somewhere a bit later, it's often much harder than it is if you're kind of a first mover on those networks. So yeah, that's definitely a key part of things. <Jason Kam (21:45)>: down. <Jason Kam (21:48)>: So being all chains, like BSC and BASE, and then there are more L2s launching, would you be compatible with the faster ones, like MONAD and MegaETH and those higher throughput ones, eventually? <Michael (22:05)>: Yeah, absolutely. Yeah. I mean, I expect things, the defocus systems there will be, will be a little different, I suspect, because of the things you can do once you have that, once the latencies, you know, change by orders of magnitude, that kind of changes the way that things like MEV work and so on. So I think there will be, there will be differences, but it shouldn't, shouldn't affect the value proposition of overclassed, Icelandic and boring, in my opinion. I think it's more, more likely to impact Dex's. Yeah. <Jason Kam (22:07)>: Okay. <Jason Kam (22:18)>: Mmm. <Jason Kam (22:30)>: Yeah. And just to understand, yeah, we're going to talk about the majors for a second, because I'll be pretty curious on how you incentivize the TVL there to grow. But it would seem like you really narrow it into a niche, which is none of the new launches of new tokens would get on Aave, because it's a common pool. if those collateral rug, everybody kind of there gets hurt. So it's a very rigorous process. But at the same time, doesn't seem like Morpho is flexible enough. It doesn't offer you a lean collateral And it doesn't sort of, it's this almost curated process. even opening a pool there takes a bit of effort. And the tech there may not support this kind of flexibility. So you're kind of the only game in town when a new protocol, this kind of long tail needs to offer bar lending markets. And is that the right way? And that's why you're gaining this share so rapidly. Is that the right way to think about it? Because you sort of hit on a market. Yeah, yeah. I wonder where else they could go. <Michael (23:27)>: Yeah, think that's partly true. mean, some of the Euler is biggest markets are in majors though. It's not like it's just a sea of sort long tail projects. I would say there's actually more long tail markets on Morpho perhaps than there is on Euler. So Euler has... <Michael (23:52)>: It has a kind of, you know, often when people curate the market, they recreate something that's a bit like an Aave and inevitably that tends to consist of major type assets. So yeah, we have two DAO control markets that are governed by Gautner and Objective, two risk curators on Euler and they're governed by the DAO much like, you know, Aave has its model with Chaos and Llama Risk and others. <Michael (24:22)>: And yeah, they're very much consistent majors of premium tier blue chip assets, I would say. yeah, it's not just long tail. would say there's probably less long tail, really long tail than there is on Morpho where they have these ungoverned. Ultimately, most curators on Euler tend to retain governance control. On Morpho, there's obviously the lower level markets, the Morpho blue markets are. <Michael (24:50)>: of all ungoverned, they're sort of permissionless. And that brings with it its own unique risks and reputational risks. When people build and curate markets in order, they have the option to deploy those ungoverned, isolated pairs, but most of them prefer to, it seems to us, prefer to create their own governed markets where they have greater control, access controls, and an ability to, for instance, pause a market or take action in the event that the... <Michael (25:19)>: know, interest rate model needs changing or the economic environment shifts and so on. And so when you govern markets, you tend to, I think they tend to, those curators tend to take on board more reputational challenges, right? And so they don't necessarily want to go out and just deploy markets for absolutely anything. And so the really long tail stuff, I think is still, not really on order, I would say. <Jason Kam (25:33)>: Yeah. <Jason Kam (25:44)>: . Do you have any plans to incentivize the quality on majors, like BTC and all the other major coins, or is that not a priority? <Michael (25:55)>: We have done that. mean, on Euler Prime, which is the kind of DAO government market I mentioned, there's incentives on liquidity there on things like on some of the major Bitcoin mappers, CbBTC, we've done CbETH, USDC, Tether incentives and so on. So some of the majors have definitely been incentivized on that kind of Euler Prime based market and on other networks as well. <Jason Kam (26:10)>: . <Michael (26:24)>: You know, we've got a big market on base, for example. Yeah, the thing I would say is that incentives, you know, if you're a shiny new project and you've got some low float high FDV coin to distribute, you can kind of incentivize USDC markets. You can maybe grow 100 million USDC market just by distributing tokens. Euler hasn't had that. if it can't like, there's only so much you can incentivize a hundred million dollar USDC market or 200 million dollar market, right? You, you if you want to boost the APY by five, five percent, let's say, and you want to get a $200 million market, you're looking at $10 million in incentives alone. Well, that's three times the total amount of incentives, more than three times the total amount of incentives we've done in, you know, however long, seven, seven months now, whatever it's been. <Michael (27:22)>: across every single network, across every single market, right? So it just wouldn't be sustainable for Euler to grow massive markets using incentives alone. It's just not feasible. But what we do do is find that they're successful using incentives in the first few months of a new market. When a market is born, people need a reason to deposit. If there's no depositors, there's no... <Michael (27:51)>: people can't borrow and so on. you can, you can actually, I think incentivize deposits of USDC up to maybe a five or 10 million or maybe even 20 million sort of size, just using incentives alone. And then that gives the opportunity to kind of see like seeds, the market gives the opportunity to grow organically from there. If it can't find a reason to grow organically from that 10, $20 million starting point by itself, then is it really worth bootstrapping and paying for anyway? I would say probably not. <Michael (28:21)>: There might be some cases where it needs to get bigger before it's more useful, but yeah, that's generally the philosophy, I think, for us and our strategy for growing things with incentives. <Jason Kam (28:30)>: So that's not the major plan at the moment. Okay. just off the math, usually it's a spread model that you clip a fee and the sort of bar and lending that occurs, especially on the borrowing and there's a tick rate. On a billion TVL, is it roughly $3,000 to $4,000 a day and roughly like a million dollars a year of revenue to the protocol? Is that roughly right? <Michael (28:33)>: We couldn't even do it if we wanted to. Yeah, so no. I mean, yeah. <Michael (28:58)>: Um, I think, , I think it's a little higher. Um, it depends on the, it depends on the fees. So yeah, the, the, way that the fees are set on order is, , it's essentially the, the, curator chooses the fee. Whatever fee they choose, they, , the protocol gets half. So they set a 10 % fee, 5 % of that will go to their, you know, half of it will go to the curator half that will come back to the protocol. Um, <Michael (29:26)>: Some curators set higher fees on some of the markets, so that I've seen fees as high as 15 or 20 % on some markets. So obviously all we get 10 % there and it depends what the interest rates are. So some of the interest rates are way higher than a 5%, right? When Ethena was yielding crazy amounts, it was much, higher. So yeah, I think what we've seen is it's probably closer to two and a half million. <Jason Kam (29:36)>: huh. <Jason Kam (29:45)>: Yeah. <Michael (29:55)>: revenue across the billion TVL annualized yeah and then the thing to say as well is that on the Euler-Derivative markets which are some of the biggest markets on Euler there's obviously no there's no there's no curator to pay there however much like Morpho which is obviously has a fee switch turned off at the moment they would take 10 % on all their markets if they turn their fee switch on <Michael (30:22)>: Our strategy essentially was to turn the fee switch on for anything that's long tail, just by default. So the fees were already being charged today and the revenue's coming in. So Euler's already generating more revenue than Morpho today. You know, it's probably on track to generate several million dollars, I think, over the course of a year already, but it's switched off for the majors. And that's because just like Morpho, we're trying to grow and it makes sense to subsidize the growth. You know, you could either do that with token incentives, which we've discussed a very... <Michael (30:52)>: hard for a little bit, but rather than do it with incentives, then you just say, well, we'll take no fee on USDC or Tether or WETH or like, know, Wrapped Bitcoin, or cbBTC. So some of the majors just are just completely switched off to kind of incentivize growth. <Jason Kam (31:01)>: Yeah. <Jason Kam (31:07)>: And that fee is auctioned, and you can bid on those fees based on with Euler. that's how if, and that sort of Euler that gets bid sort of get burned, I'm guessing. That's how you sort of execute it. Okay. Makes sense. <Michael (31:20)>: Yeah, so the, yeah, they exactly. So fees, no matter what, what currency they would get bought in on a kind of auctioned off using this module called fee flow. And the way you buy the way you bid on the fees is through, through Euler tokens. if someone, someone auctions, let's say if there's a $5,000 auction, then typically around $5,000 of Euler token will be sent in to bid and purchase that. It's obviously there's a little spread there because people want to profit. So. <Michael (31:47)>: Yeah, it's a heavily bought option at this point, I would say, though, and we tend to see it's quite efficient. So, yeah. <Jason Kam (31:52)>: . And how is the team funded at the moment? Like you raised dollars historically, I'm guessing that's still a run rate that you're burning through and you can sell tokens to fund your operation. <Michael (32:03)>: Yeah, it's we have we have I think we're a runway if we take takes it if there's zero revenue, zero sales or anything. Obviously none of that would be true. I think is currently takes us to at least the end of December next year, 2026. I suspect that might be a little might be pushing into 2027. And yeah, most of the most of the funding we <Jason Kam (32:21)>: Mm. Yeah. <Jason Kam (32:29)>: huh. <Michael (32:32)>: We've raised three rounds of funding, right? Historically, our last funding round was back in 2022. That was led by Horn Ventures. Before that, we had a Series A with Paradigm in 2021. And before that, a Seed round with Lemnis Gap. Yeah. <Jason Kam (32:35)>: Uh-huh. <Jason Kam (32:50)>: Yep. But sorry, just so I'm aware, all the fees being generated by Euler and protocol gets auctioned and then directly goes to burn. So allegedly, the equity box should have no revenue going into it. . <Michael (33:06)>: I see, yeah, I mean, some of the fees don't go into auction. For instance, the ones on the usual stability loan don't go into auction, so they could be used to fund protocol operations. it's governed and it depends on the individual market. But yeah, most of them currently are, the ones that are being generated currently are being used to buy back the token. So in principle, if that were the case forever, you know, in every market, then indeed you would have a model where... you bought back the token and then you would effectively sell the tokens in order to fund operations. That's how the DAO would have to operate. So I don't think there's a free lunch there. You either have to, you either take the fees and use those directly to fund operations or you take the fees and then sell tokens to fund operations. think it's, yeah. <Jason Kam (33:54)>: Yeah, and roughly off that two to three, how much is directed towards buyback versus going to the equity? <Michael (34:01)>: Currently, when you say equity, mean... <Jason Kam (34:04)>: I mean going directly towards paying the team and salaries and whatnot. <Michael (34:07)>: Hey, and the team. Well, at the moment, think, yeah, I think essentially all of it would have to, you know, if we, we assume that it was all just coming, there was no buyback, right? It would, yeah, I think our, burn rate means that we would, yeah, we wouldn't be profitable at the moment at the current, current situation. I think we had a A DAO proposal recently, there was requesting somewhere between five and seven million for another year of operations. So that's how much we cost. That's inclusive of absolutely everything. it's all, it's the cost of Gauntlet and Objective, all the audits, all the legal, like it's absolutely everything associated with the project. It's probably a <Jason Kam (34:51)>: So there's a treasury got it. there's a treasury basically and then the two to three million dollar goes in but you're requesting five to seven million a year that is going out. So how much go so how much goes towards to burn? <Michael (35:00)>: Exactly. Well, right now the tokens go when they're in the fee flow auction that's happening right now, I think that basically the tokens aren't being burned. They're just deposited back in the treasury. So the DAO can choose what it wants to do with those tokens. They could be burned. If the DAO votes for it, I mean, we could just switch that on and just burn whatever's been accumulated today if it wanted. Alternatively, there's some... <Michael (35:32)>: alternative views on this, right? mean, one view is that you would just burn it. Another view is that you can kind of buy back and redistribute. One thing I would say is that when rewards are distributed on Euler through this reward Euler contract, anybody that breaks vesting, they can break vesting at any point and they can claim what's due to them through vesting at that point. But any remainder, the term that it's a six month term basically and any remainder that's not claimed is then burnt. So there is some token being burnt at the moment through early claimants essentially. I'm not sure. think, yeah, last I checked is about $150,000 have already been burned through just early claimants essentially just unlocking. But that's the only real burn that's happening today unless the DAO votes to burn some of the buybacks that are being brought back in. <Jason Kam (36:25)>: Right. And just to be very clear, when you say there's $2 $3 million of revenue from the fees being generated based on the tick rate of the curators, not all of that is burned. In fact, goes into a treasury which you have claims to. And you do propose DAO proposals so that those fees actually go to you to company the equity. <Michael (36:46)>: Yeah, to well, not just to us, but to all service providers, right? Yeah. But yeah, yeah. So right now, yeah. So clearly right now we're not the project isn't profitable yet. It's not too far away, but like, if you just look at the amount out versus the amount in, there's probably still a two to three million dollar gap there that needs filling. So Euler is still needs to grow. And once it grows a bit more or it cuts costs a little, let's say, then it would become profitable. <Michael (37:16)>: Maybe it would become profitable if it either doubled TVL let's say, or was to half its costs. <Jason Kam (37:23)>: Yep. And it's fair to assume that after you have sort of started breaking even, then the additional fees that come to the Treasury will be sort of aggressively burned. Or that will be approval. OK. <Michael (37:37)>: I think so. mean, yeah, it's up to the DAO really. mean, like there's, there's, differences of opinions on these things. One way is to burn. So you just give, that's one way to give value back to token holders is to just pure, to do pure burns. I mean, a lot of the best companies in the world that don't, don't give value to shareholders that way. Right. If like Amazon had just been burning, buying back and burning Amazon stock years ago, that probably wouldn't be Amazon today. Right. So they've, they've, buy back and grow. So. <Michael (38:06)>: There are opportunities to do that, I would say, with protocols. So you can, you don't always have to burn, but certainly that will be on the table and up to the DAO. <Jason Kam (38:12)>: Yeah. Tell me more about Euler Swap and Euler Earn, the timeline of those things, like what they can do to the protocol in terms of revenue and the product itself. <Michael (38:24)>: Yeah, so EulerSwap is a DEX that's built on top of Euler. It's been coming for some time. We've been building it for many years, in fact. But yeah, it's heavily dependent on the base Euler lending protocol working well, first and foremost. And I'd say I don't want to give too much away on this call, but. <Jason Kam (38:47)>: <Michael (38:49)>: What it does is it allows people to turn their accounts on Euler. So somebody with an ordinary lending and borrowing account allows them to turn those individual accounts into essentially a discrete AMM. And the AMM itself then allows swapping to take place against the account. And uniquely, this provides a way for people to provide just-in-time liquidity for swaps. And we think... The mechanism here essentially allows somebody with, let's say, a professional market maker with, let's say, one million dollars margin collateral in Euler could facilitate the same depth of liquidity that you would get on, let's say, a 40 to 50 million dollar curve pool or Uniswap pool. So you see remarkable increases in capital efficiency. The other big gain I would say is that the way the swap accounts work <Michael (39:48)>: they take advantage of the cross-collateralization of Euler markets, you know, on more for things for only pairs, fluid that, you know, deal with pairs. On Aave and Euler, we have cross-collateralized markets. That means that a USDC pool on Euler that's cross-collateralized, that we have one in a market called Euler Yield, where it's essentially USDC that's cross-collateralized against 10 plus other stablecoin type assets. <Michael (40:15)>: Essentially people will be able to build AMMs that function a little bit like say a curve 10 pool or something, you know, if people are familiar with a curve three pool where they connect like USDC, USDT and die, imagine that but for, but for curve yeah, 10 pools or whatever, all built on top of the Euler and yield market. So yeah, it's a, there's, there's no decks out there that's quite like it today. It's extremely novel. I'd say the closest thing is probably Fluid <Jason Kam (40:22)>: Yeah. <Michael (40:44)>: people be familiar with the success they've had. On Fluid, they came up with this concept where people's collateral and debt could be used to swap liquidity. So for instance, you had USDT debt and I had USDT and wanted USDC, I would send the USDT to you, repay your debt, and then I would borrow on your behalf some USDC and send that back to myself. <Michael (41:11)>: And that's how liquidity inside lending markets can operate as just-in-time liquidity for swappers, essentially. yeah, Euler uses relies on a similar principle there, but it operates in quite a different way, I'd say, overall to Fluid. <Jason Kam (41:30)>: I suppose if it operates in similar ways and because of the TVL there can start generating swap fees effectively. Do you expect most of the volume to come through aggregators or would you sort of push a lot of effort to the front end and the marketing group? <Michael (41:48)>: 100 % through aggregators, I think. I mean, we will probably ship a front end for this, I think they were very, yeah, it's very hard to compete by providing a bespoke, unique front end experience. A lot of the volumes on swaps generally goes through aggregators these days. So we've been working really closely with a lot of the major solvers and a lot of the big aggregators out there. We've also been working with another large <Michael (42:17)>: well-known DEX and collaborating with them on something. yeah, our go-to-market here is dependent on people not even knowing that they're effectively not even knowing that they're routing trades through what we're calling Euler swaps. It will mostly be aggregator flows. And one thing it does is it not only generates fees for the swappers but. <Michael (42:42)>: It also increases the borrowing demand on markets. so in some ways drives up the capital efficiency of the underlying lending markets because the borrowed demand will be higher, meaning obviously higher yields for lenders. Yeah. <Jason Kam (42:46)>: Yep. Interesting. <Jason Kam (42:59)>: Heuristically, on the same bill in TVL, let's assume there's no additional TVL that came through this. Obviously, there's dependency on how active people are swapping for you. Heuristically, how should we think about this effort bringing to the impacting of revenue? I mean, it should be higher, but is there a scale that would make you satisfied? <Michael (43:23)>: Honestly, no, think I don't know how much other teams think about this, but what we think of as the primary objective is growth and flows. I, yeah, I'm sort of anti-fee. think Euler's barely, you know, nowhere close to being even a year old now. And I think my, my emphasis would be on growth and flows and user activity. the main metrics we care about, I would say is. <Jason Kam (43:37)>: Mm-. <Jason Kam (43:42)>: interesting. <Michael (43:51)>: Are, do we have users that really like, do we have loyal users? Do we have sticky liquidity? Do the vault curators come and make things that are meaningful or are they just creating markets that are kind of transient? They exist for people to leap for little bit and then disappear. Like we don't want any of that. want the, the, the KPIs here are real users. Once you, once you capture flows and real users, then you can think about like revenues later. So it's not the main. <Jason Kam (43:56)>: . <Michael (44:18)>: I wouldn't say it's the main objective for us is to focus on revenues, but naturally I would expect there will be an increase in revenues if it's successful. It's very new, so we don't know, but hopefully it's successful and that will naturally lead to growth and revenue growth. <Jason Kam (44:25)>: Got it so so Yeah <Jason Kam (44:34)>: So I guess, as opposed to the 0.1%, 50 bits, 1%, 3 % fee of Uniswap, one, it seems like you will not have additional fee on the swaps. You will not charge 0.35%. And secondly, is it fair to say that the fees that you charge, as if Uniswap would charge one, it will be significantly lower in day one? <Michael (45:01)>: I would, mean, ultimately it will be up to the LPs themselves, you know, the people running these swap accounts, what kind of fees they're setting. There won't be any protocol fee on by default, you know, similar to Uniswap. So it'll be up to them and that they will have to find a balance and figure out what works. It's a little bit unknown, frankly, how, what swap fee they should set on this because they haven't, as an LP here, on the one hand you have, we have much... <Jason Kam (45:09)>: Mmm... Mmm... I see, that's cool. <Michael (45:29)>: lower capital requirements for LPing and other other DEXs. know, Euler Swap will be instantly liquid on day one, as long as we have a handful of people running swap accounts. It's not like we need to do massive liquidity mining campaigns or anything, or like private deals to bring in huge amounts of LP capital like you'd see on other DEXs. Because there's already TVL in Euler that can be can be used, right? There's liquidity there that can be can be utilized. <Jason Kam (45:43)>:  that's cool. Because they're just TVLs already. <Michael (45:58)>: And, but yeah, then it's up to people to kind of balance the costs of running these accounts and they're not cost free to run. There's all sorts of things like permanent loss and like borrowing costs and things that they have to factor in additional risk perhaps on the new protocol and so on. So we'll see what they create. I think that EulerDAO should maybe run itself some swap accounts, perhaps even at a loss as a kind of loss leader. <Jason Kam (46:12)>: Mmm. Interesting. <Michael (46:26)>: to stimulate growth. But yeah, that's on my view. <Jason Kam (46:29)>: But I guess, yeah, sorry to cut you off. Basically, on the fees that they set, you would not be taking a part of it. Like, it will be a zero-tick rate business. And for a while, I guess how it benefits you would just be more TVL, potentially, if people like this, or increased solidization, driving more tick rate through the back end. <Michael (46:50)>: Yeah, exactly. Exactly. I mean, there will be a fee, will be a fee switch and there'll be more about that. I think when, when some of the collaborations we've got become apparent, like more to say about that. but, but yeah, the fee switch, I would say the, the, the initial driver's say, you know, if you imagine, you said, you just never, you said there's no fee on this thing, no fee whatsoever. Then effectively all the money would go to the LPs, right. <Jason Kam (47:01)>: Gotcha. <Michael (47:18)>: then the LPs will be the ones in competition. So how would they better compete? They'd probably try to lower their fees. And as they lower their fees, that drives more swap volume through them, which then brings more volumes and flow through the lending protocol, which should bring on board more TVL, which in principle then should mean that the benefits of swapping through Euler are even higher because there's deeper liquidity, which then should mean more swap volume. so there's a potential here for quite a strong positive feedback leap, I would say, given the capital efficiency. <Michael (47:47)>: gain, potential gains of capital efficiency. But it's all of them needs to be seen. <Jason Kam (47:50)>: And Yeah, and what's the timing on this? <Michael (47:57)>: well, it's, it's, it's, it's going into audit. yeah. as we speak, it's already had a couple of audits. It's been, yeah, a couple of changes we've had to, make not because of audits, just because, yeah, I've go to market plans. which yeah, again, will be become more obvious as we, as we launch, but I, I'm, we're not talking sort of months and months. think we're, yeah, maybe weeks or months or maybe another month or so. <Jason Kam (48:11)>: . <Jason Kam (48:15)>: Got it. <Jason Kam (48:27)>: I think that's as much as I can get from you on this call. And I guess this will be a pretty market maker heavy effort. Any LPs would have to deal with both the IP as well as any swap that occurs. They're effectively being forced to borrow or lend, if I'm not mistaken. So it seems like a complex formula if you're managing a lot of positions. <Michael (48:29)>: Yep. <Jason Kam (48:53)>: I guess, is that right? market makers mostly dealing with this? And secondly, I guess the BDF for there is you and your team actively talking to the winter means of the world. Is that fair to say? OK. OK. <Michael (49:04)>: Yeah, I think that's fair to say. When does this go live? Like it's live now, isn't it? But yeah, there's, I don't know, there's some things that... Okay. <Jason Kam (49:10)>: Well, it's only live to members. And I guess you can pick an embargo time. <Michael (49:16)>: I went and pick an embargo time, maybe give it a couple of days.  I think we're going to a couple of, yeah, 17th. I think we'll, we'll have a, yeah, an announcement there to make about some of the market, a market maker that you might have mentioned. Um, yeah. So yeah, we'll be, , well, we will, yeah, I mean, as you said, it's, it's not for, this is not a retail LP product. wouldn't say this is not for, for people to come in a couple days. <Jason Kam (49:23)>: Okay, we could do that. We could do that. okay. Interesting. <Michael (49:46)>: not understand what they're doing. It's definitely a sophisticated, sophisticated tool and people need, will need to understand the risks and fortunately they have, they have the ability to adjust the fees, right? To, to, to hopefully factor in these costs. And so there will probably be some experimentation as they work out how much does it cost me on aggregate across all the different costs I might face to run these things. And I want to position my fee accordingly. And hopefully that fee is still leaves. <Michael (50:12)>: a lot on the table and then that makes it competitive in the market. If ultimately the costs weren't too high, then it will have failed as a product, I suppose. But we're hopeful that won't be the case. Yeah. Do you have a, I mean, this is the cooler part of the thesis. How would you define success by your end if this worked? You know, like, I guess, is there a benchmark in your mind that you want this protocol to get to? Like, boy, if the swap had worked and then the flywheel really started spinning, like going from 1 billion to X would make me happy. <Michael (50:51)>: I think, yeah, think if the, just purely on the swap, I think it's about market share. So I'd like to see it doing similar, having a similar impact to Fluid on the market share of Dex's. I mean, yeah, hats off to that team because they've done exceptionally well and managed to take market share in a very, very difficult market to take market share from people. It's been, yeah. <Jason Kam (51:17)>: Yeah. And what would that mean for the TVL if you get there? Sorry to cut you off. <Michael (51:23)>: Yeah, I mean, in purely TVL terms, maybe double doubling or tripling the, the, markets on which these accounts run. So that wouldn't be, that wouldn't be total TVL I would guess I'd like, yeah, it could, it's very, very hard to, hard for us to say. So we're not trying to set, you know, we're not trying to set the expectations too high on our side. And so we see it's just such a novel, like experiment, I suppose, but <Michael (51:52)>: My guess is it could really have quite a big impact if you turn a single USDC pool into now the main go-to place where people are swapping and lending and borrowing. It could be significant, but it could, yeah, it's unpredictable. It's hard for us to do tests on this thing. So we've had a few people trying to. <Jason Kam (52:04)>: Swap is huge. Yeah. <Michael (52:20)>: run small tests in production, until you go live and really see how well it's, how well it's, it picks up volume, I would say, yeah, the, it's a little more gas expensive than other exchanges. And how, how, how important is that these days? I mean, it used to be the be all and end all when we first started building a DEX we're like, how do we get swaps down below a hundred K gas? Because yeah, that it's the main, the main competitive edge you would have. <Michael (52:47)>: These days, I don't know if that's necessarily true, especially as we move more liquidity to L2s. It's less important there. Even on main net, gas costs have come down dramatically and that gas costs just a fixed absolute cost on every swap, right? So if that's smaller, then the capital efficiency and the fee start to weigh more heavily on the swap volume you get. <Jason Kam (53:11)>: Are you going to Solana anytime soon? Sticking with you, yeah, OK. So we talked about the swap. Is there anything else that really excites you on the horizon in the next three or six months? <Michael (53:14)>: enough.Yeah. <Michael (53:28)>: So we've got Euler-Earn coming, which works a little bit similar to the way that, well, it's essentially like Euler's version of metamorpho. I think these kind of models are quite important actually for the way things work. for comparison, on morpho you have individual markets or individual pairs essentially. then, you might, means you might have, I think as they do like 50 or 60 plus different USDC. markets where you can borrow USDC. Now, obviously alone, that's very capital efficient, but the key insight, I guess, with Morpho is that you could have an aggregator that sits above that and rather than people depositing liquidity into individually each of the 60 markets, they have somebody like a Gortner or a Stakehouse or whoever that essentially manages this asset map. aggregator asset management vault at the top and retail LPs into the asset management vault. And then the asset manager allocates capital to these lower level markets. And that helps reduce the capital inefficiency of pairs. So it's quite important. I think it also helps the velocity of capital and finding a place where it's needed in a <Michael (54:52)>: time efficient manner. If you just run the pairs, then technically the free market, if some new market comes up where there's clearly demand to borrow USDC, technically the market should find that. But I think historically we saw that didn't happen. There was a protocol years ago called CASHI that was almost identical to Morpho Blue in many ways. It had reactive interest rates and it was permissional pairs, immutable permissionless pairs, very, very similar at its core. <Jason Kam (55:13)>: Ugh. <Michael (55:21)>: it didn't do very well and that's because there was no capital allocation layer, there was no asset management layer above on which, you know, where capital could find new opportunities more efficiently. I think that's why those types of vaults work well. Euler currently doesn't have those because it's still, we've had a lot of the innovation on more of that base layer, whereas, you know, we've said instead of pairs, we have more capital efficient sort of clusters of markets. <Michael (55:51)>: But still there are, you know, there are still obvious opportunities for growth there. So Euler & Earn is an asset management layer that can sits on top of all the different lower level markets on Euler. And it works quite similarly to Metamorpho. One of the main innovations though is that we've decided to make it more of a free market model on, you know, Metamorpho is a little bit protectionist, if you would. It sort of only allows you to deploy into Morpho Vault. <Jason Kam (56:03)>: Yeah. <Michael (56:21)>: and so, the Euler earned product will allow you to allocate to Euler or God forbid Morpho or Maker or, know, or whoever really. And, yeah, exactly. Yeah. So we, we, might end up helping some, you know, caps to go to other, other competitors, but at the same time, it's more useful product and it should be strictly better because in the worst case scenario, you could just have all the set, you know, <Jason Kam (56:30)>: It's cool. No curse. You just get more users on your platform. That's cool. <Michael (56:48)>: It could exactly match like the asset management, like going into the Morpho Vaults. But if there is, does happen to be a better opportunity today on, on Euler or Maker, then you could also allocate to that. So yeah. <Jason Kam (56:55)>: Yeah, that's cool. <Jason Kam (57:01)>:  I might have some interest for you because I think a lot of these, there are these credit card companies or crypto native debit cards that are popping up and they're occurring TVL. Those TVL are spendable. They just spend with card and they almost invariably deposit those TVL into say Morpho to like earn yield. Yours seems like a better way to deploy USDC and USDT in that regards. Just like we'll touch base on the offline. <Michael (57:27)>: Yeah, hopefully. Yeah, sounds great. <Jason Kam (57:31)>: Any questions from the group? Give it three seconds. I don't think so. Michael, thank you so much for your time. This is really helpful. <Michael (57:44)>: Yeah, thank you very much. Yeah, it's been great to chat. Happy to answer any more questions offline. People feel free to reach out, get in touch with me if they have any. Great, thanks. <Jason Kam (57:53)>: Perfect. Thanks guys.

TLDR In this episode, Maghnus talked about  the major restructuring of the Interchain Foundation and its shift from a $40M+ burn to a lean $10M operation. The team now focuses entirely on boosting $ATOM’s value through real utility and strategic product development. They dive into Eureka, a new IBC design that helps connect Cosmos Hub to any chain at 100x cheaper and 60x faster than existing solutions – with the hopes to accrue >200 mm USD of value to $ATOM itself per annum. More topics discussed include Cosmos Hub’s transformation into a multi-chain marketplace, the upcoming launch of a permissionless VM, and how new chains are being encouraged to buy and burn ATOM as part of alignment.  The episode also touches on RWA chains, the acquisition of EVM OS, IBC’s dominance, and how Cosmos aims to become the go-to stack for serious world-building L1s. Chapters / Timeline 00:00 Introduction to BidCast and Interchain Labs 01:04 The Relationship Between Interchain Foundation and Interchain Labs 03:13 Corporate Restructuring and Leadership Changes 06:04 Transition of ICF Team and Budget Cuts 07:43 ICL's Purpose and Financial Sustainability 09:53 Revenue Generation and Atom Token Strategy 13:00 Interoperability Protocol: IBC and Its Impact 17:49 Eureka: Bridging Cosmos and Ethereum 20:48 Future Integrations and Market Strategy 25:13 Revenue Projections and Atom Deflation Strategy 32:51 Eureka's Financial Impact on Adam 34:41 Transforming the Cosmos Hub into a Marketplace 36:50 Competitive Advantages of Eureka 37:59 Projected Cross-Chain Volume and Revenue 43:06 Aligning New Chains with Atom 46:43 Acquisition of EVM OS and Future Plans 55:26 RWA Chains and Institutional Trust 59:58 Enhancing Atom's Liquidity Transcript <Jason Kam (00:21)>: OK, welcome to an episode of BidCast. I'm your host, Jason Kam, aka Mapleleafcap. Today is April 10th, 9 AM Hong Kong time. BidCast is being livestreamed to BidClub members. Questions are from the members and my own. We plan to only cover liquid tokens and web 3 related equities in this podcast, where participants may own the instruments discussed, all opinions on our own, and BidCast is not being compensated for the content produced. Nothing we discuss here is investment advice, nor do we believe there's any material non-public information in the episode. Today I'm speaking with Maghnus, the co-CEO of Interchain Labs. Maghnus, welcome. <Mag (01:02)>: Nice to be here. <Jason Kam (01:03)>: Yeah. Why don't you tell us a bit more about the relationship between the Interchain Foundation and Interchain Labs? I think there's a bit of a corporate restructuring that happened historically. <Mag (01:15)>: Yeah, happy to it. So the ICF or Interchain Labs was the original for all intents and purposes Cosmos Foundation. Though it was funded with a portion of the ICO proceeds of Atom back in 2017. That was diversified into Bitcoin, ETH, also still a lot of Atom. That grew substantially. And the ICF was essentially tasked with being a funding entity for open source development of the Cosmos stack and actually originally it was designed to do the same for Polkadot and that's actually in its charter is to support Cosmos and Polkadot. Obviously Polkadot developed its own foundations. Yeah, and so we haven't performed anything like that. But basically going back six months ago, or I guess nine months ago at this point, <Jason Kam (01:57)>: Yeah. Yeah, fuck that. Yep. <Mag (02:13)>: The ICF basically interrupted our series B. We were close to sort of closing a very large series B from investors to basically start our own ecosystem because we as SKIP, that was SKIP, yeah. And we were gonna start a new Cosmos ecosystem sort of in the dial that we thought was exciting because we were still excited about the idea of. <Jason Kam (02:29)>: That was SKIP. <Mag (02:42)>: Internet of blockchains, interconnected L1s, but we had no faith in the Cosmos leadership at the time that they would be able to grow the ecosystem themselves. at the time we just threw up our hands. We said, we'll raise that up, one bill evaluation or something like that to basically launch our own. During that process, the ICF came to us and basically said, how about you don't do that and you do that here for Cosmos. drove a pretty hard bargain at the time. We sort of demanded a couple major changes. One of which is that Ethan Buckman, who is the co-founder of Cosmos, stepped down and sort of pass off the reins to new leadership. And the other was that we would have substantial basically like ability to independently execute on how we wanted to grow Cosmos in the way that we wanted to. And yeah, so the legal structure is basically that the ICL or Interchain Labs, which is what Skip turned into, is the labs entity that is fully funded and owned by the ICF. <Jason Kam (03:59)>: And they acquired it throughout, like, with all cash from the treasury? Or they sort of paid you with Atom also, where you're locked up over time? <Mag (04:07)>: It was an all cash acquisition. <Jason Kam (04:09)>: wow, nice. And you guys just took the cash, or do you kind of yourself go out there and bought a bunch of Cosmos? ATOM, yourself. Hard to say. Got it. Got it. And I guess the ICF, your independent entity stat, god. Yikes. <Mag (04:16)>: I personally went out and purchased a lot of that. Yeah, we all did. And by the way, sorry, I purchased it way higher than $4.50 Yeah. At the time when the acquisition happened, ATOM was like $10 or $11. <Jason Kam (04:35)>: Got it. Well, bullish. It has to go back there before you can dump your bags. I guess, so acquired for full cash, it's a fully owned subsidiary. And then what happens to the ICF afterwards? Because you guys were shipping and maybe developing code for Cosmos Hub. But what happened to the people that were at ICF before? They were like, it’s a pretty substantial burn, if I’m not mistaken, before this. <Mag (04:40)>: Yeah, so to answer that question fully requires a little bit of explanation about how the ICF was working. So the ICF roughly had a team of 20-ish folks at the time. It had also council members, so it has council of three members. And for the folks from the ICF, basically the option was to either join the ICL if they passed their interview process, or the ICF let them go, essentially, for the vast majority of people. And so the actual headcount of the ICF reduced some 90 % during that process. very few folks made it into the ICL. Some notable call-outs here, though, that the IBC team, which was inside the ICF, which was excellent and mostly joined, or for a large part joined the ICF, they’re the same folks that are shipping IBC or Eureka, which I’m sure we’re going to chat about today. <Jason Kam (06:00)>: Yeah. Yeah. <Mag (06:02)>: And then our CMO, Nico, came from the ICF. He’s excellent. And some other marketing folks. the vast majority did not transition. Yeah, I was going to say one other thing, which is the actual internal team of the ICF represented a very small percentage of their spend. The vast majority of their spend was to external development teams. And so that included things like informal. It was building Comet. <Jason Kam (06:13)>: Yeah, then, yeah, go ahead. <Mag (06:31)>: binary builders who was building Cosmos SDK, not strange love who’s building IBC. They were spending upwards of $35 million a year on all of those teams. And we basically after we came in, what we did was we brought all of that development in-house and had it be run by the SKIP engineers. And so at a high level, the ICF has gone from spending over $40 million a year to spending just a little over 10. So our goal is to cut the, to basically cut the, the budget by, you know, 70 % or more. <Jason Kam (07:05)>: And then ICF now is basically a box of treasury that has today a treasury value of about $250 million, something like that. OK. <Mag (07:13)>: Yeah, higher Bitcoin was high. It’s heavily indexed on Bitcoin and ETH and today it’s roughly about $250 billion. That’s right. <Jason Kam (07:21)>: got it and then the burn of 10 million comes from that as well. <Mag (07:25)>: Yes. Yeah. <Jason Kam (07:26)>: OK. And then SKIP. sorry. ICL is its own entity now. Harbors all of the top engineers that you brought on from there. And ICL currently today, what’s the financials there? <Mag (07:41)>: So the ICL’s purpose is not to generate revenue. That was never the ICF’s purpose. The purpose of the ICL is to essentially build products that further the ICF’s mission of building open and permissionless blockchains and building internet blockchains, which is Cosmos. And then also to ensure and help with the financial sustainability of the ICF. If the ICF survives, the ICL will always survive. <Mag (08:10)>: because it’s fully funded by the ICF. <Jason Kam (08:10)>: I see. I see. So that’s what a 10 million burn goes to. It’s like it expenses 10 million. It goes into ICL basically. <Mag (08:19)>: That’s correct. Exactly. Yeah. We have a budget. Yeah. <Jason Kam (08:20)>: Got it. And I guess in the future, with all the efforts that you’re building, like Eureka, we’re talking in a second, like the Cosmos SDK, EVMOs, all of those things you monetize, if there’s any revenue generated at all, maybe before we go to those efforts initially, those revenue that’s being generated, how does that flow to eventually ATOM? it? go through ICL first, it go through ICF, does it go through a treasury, how would that flow look like? <Mag (08:54)>: Yeah, at SKIP we had significant ARR because we would charge for the various services that we offer around SKIP go and around any of these services and around the Oracle that we thought that was used by Celestia and in D Y D X and many others. I think that know the revenue fluctuated between 2 to 8 million ARR or sorry like 5 to 5 to 8 million ARR. <Mag (09:22)>: at sort of the end. And we have basically made a lot of choices to not pursue revenue generating products, because at end of the day, that amount of revenue is immaterial relative to changes in basically the price of the underlying assets inside the ICF treasury. And there’s only one asset in that treasury that we have the ability to basically build out and provide more utility for, which is atoms. And so the overwhelming strategy for the ICL is to one, accumulate more atom for the ICF or to encourage things that do that. And two, to accrue value to the atom token and to basically create increased amounts of utility and tie the atom token to the growth of the Cosmos ecosystem, which itself is extremely successful. Cosmos is a top three ecosystem by Basically every metric, TVL, it’s a top two by total number. If you added the market caps together and the different chains inside of it, it’s up there in terms of number of developers. It’s a very well-trusted stack. And so in many ways, you’d expect any kind of growth like that to be associated with an extremely powerful top five token. Atom is not that. And so a large part of yet, right? And a large part of what we’re doing is the very basic work of tying ATOM to the success of the wider ecosystem. <Jason Kam (10:54)>: And so just to summarize, there are a couple of pieces there. So previously, SKIP itself was $8 to $10 million. You’re intentionally reducing it and directing all the effort of revenue generation to ATOM value accrual. That was, in my opinion, huge change because the running joke was you use the Cosmos tech, you never fucking buy ATOM because ATOM will never accrue any value. It would seem like now with the management change, is Really pivoted 180 like the singular focus now is to build good tech, also like accure value if I’m not mistaken. <Mag (11:29)>: Yeah, I mean, this was the crux of what we convinced the ICF of was that their time is limited, that they were spending way too much and that Cosmos would not just the ICF would not survive without a strong central token, but that the Cosmos would not survive without a strong central token. At the end of the day, every ecosystem has a strong central token that has a story that is symbiotic with the growth of the ecosystem. And there’s a very <Mag (11:59)>: defined reason for that, right? As the token goes up, basically attracts more developers to the chain or to the ecosystem. Those developers building more things makes the token go up if there’s some kind of value pool mechanism. And that cycle can loop on itself extremely quickly. And part of why you can see things like the meteoric rise of Solana in 2024. We were missing the links on both sides, meaning <Jason Kam (12:22)>: Yep. <Mag (12:28)>: When ATOM went up, it did not attract people to build more app chains or building Cosmos. People built those regardless without any thought of ATOM. In fact, probably ATOM was impediment in many ways to that happening. And then the other side is also not true, which is as chains were building that it would drive some value to ATOM. So what we committed to doing in the first 90 days in office, so to speak, or after the acquisition, now that we’re at the ICL, <Jason Kam (12:41)>: That’s right. <Mag (12:58)>: is to build a extremely well adopted, highly differentiated, and highly utilized and demanded product that did tie the link directly. So that the growth of that product was linked to the wider ecosystem and also had a valuable mechanism to add. And that’s why we built IBC or Eureka. <Jason Kam (13:19)>: Yeah, and tell us more about IBC, Eureka <Mag (13:23)>: Yeah. So for folks who don’t know, IBC is the interoperability protocol of Cosmos. It was created a while ago. It is, I think, widely regarded as one of the most groundbreaking innovations in crypto. It’s done more volume than any other bridge ever. And it has never been hacked. And it regularly does now like two to three billion dollars a volume a month. And it basically is, it’s not really a bridge. It’s basically a way of connecting two blockchains that both have light client security and fast finality, which basically means that the validators of one set can quickly attest to the fact that the validators of the other chain have done something. For example, lock a token so that you can mint it like a normal bridge would. It also can do message passing and all this really good stuff. It could never scale to a Ethereum was the problem. and it can never scale beyond Cosmos. And the reason for that is because chains were too slow, right? Ethereum was too slow. And then also to have the light client security model, which I believe is behind the fact that it’s just like such a bulletproof bridging protocol. It’s never been hacked and so much money has gone through it and powered all of Terras, for example, bridging. To have that, you would have to basically spend an inordinate amount of gas to basically prove the Protobuf encoded as signatures from the light client on the Cosmos side. And so we all thought that was impossible, right? Wherever IBC was in Cosmos, it dominated, you know, even for, <Jason Kam (15:03)>: Yep. And sorry, and just for the audience, like $2 to $3 billion, where does that mostly go to? Is Atom from Atom Hub to Osmosis? What is it exactly? <Mag (15:14)>: Yeah, a lot of it is Atom. Atom is still probably the most liquid, or it is the most liquid token in the ecosystem. A lot of it is USDC transfer. For example, there’s a lot of USDC that goes to and from DYDX which is the Cosmos chain. There’s a lot of USDC that goes into Noble and then into the SEI ecosystem. And yeah, and there’s many other things too. <Jason Kam (15:29)>: And I guess, does anybody charge anything for it, or is it just free? <Mag (15:49)>: Yeah, be charged. So I think like, or our partners do it and we do alongside them. So the primary way that, and part of the reason we got acquired is that the primary way that people interact with IBC is over a product that we built called SkipGo. Yeah, which is basically a, know, bridges don’t run themselves, right? And neither does IBC. <Jason Kam (15:51)>: Okay. I see, okay, makes sense. <Mag (16:19)>: correctly run IBC with high reliability, you need relayers, you need really good routing products. And we basically built a product that provided an easy to use API for developers to basically call IBC and perform cross-chain actions that I truly believe was 10x better than the existing experience and quickly sort of dominated the market to the point that we now process over like between 50 to 80 % of all the IBC volume in Cosmos. <Jason Kam (16:33)>: Got it. that’s where the $5 to $8 million comes from. So you’re charging like 25 to 50 bips, almost like that, maybe a little higher. <Mag (16:56)>: We don’t charge on the transfers. We charge on the swaps. So what I mean by that is the way that a lot of people use SKIP go, and you can try it now if you want to. It’s domain is ibc.fun. We have a front end. They oftentimes want to end on a different token than they started with. So for example, they may want to start with Osmosis on the Cosmos up, and they want to end with Ethereum on ETH. They don’t want to think about having to bridge and then swap. We do all of that in one transaction. And so when we find the best liquidity for them across all the different routes, and then we take a fee on that if our affiliate takes a fee. <Jason Kam (17:28)>: okay. OK, sorry to cut you off. so that was the history that you couldn’t bridge to Solana Ethereum. And what now? <Mag (17:47)>: Now we can. So basically, ZK technology got good enough and we had, Eureka was basically the result of banging our heads against the wall for two and a half years to build basically a truly incredible, in my opinion, light client security model that works with Ethereum and works with Solana and works with any EVM. And that is unbelievably affordable. So just for reference, right? And we have the transactions. posted to prove this and tomorrow when it goes live, you’ll be able to try this yourself. The best bridge right now to go between Cosmos and Ethereum costs about $30 to $60 per transfer, usually $50 to $60, $30 only on very good days. Eureka costs about $0.45. It’s what, 60 times improvement or more in terms of the costs. And the speed because of the fast transfer network that we built on top of it is less than 15 seconds versus 15 minutes. So it literally makes it as cheap as an Ethereum transaction to go to bridge between Cosmos and Ethereum. And we’re gonna extend that to anywhere. And so, yeah, when we sort of came on board and we started working on this, it made a lot of sense to build it because one, It’s an incredible UX that we think we’ll get and we’ll get, you know, watch the news tomorrow, an incredible adoption. Two, it is something that fits with our product suite that we already had since we already did have the front end distribution and the rails to use IBC. It fit perfectly into that product. And then three, it was a perfect opportunity to leverage the Cosmos Hub and Atom as a participant. in the pipeline for all those transactions in a way that actually made the product better. So most of the time when chains look for use cases, they insert themselves in something that could have been a centralized process easily. That’s not the case for Eureka. The reason for that is because Cosmos Hub is able to accumulate all of the requested proofs because it’s a CK bridge. That’s how it’s so cheap. And then lower the cost by an additional 40%. <Mag (20:14)>: on top of the reduced cost, as well as providing sort of a common denominator inflow and outflow into the Cosmos ecosystem so you don’t end up with like 50 versions of ETH. So it captures atom fees per transaction and does so in a way that actually saves money for the user. <Jason Kam (20:36)>: Only when there’s a swap or when there’s actually just a bridge. OK. And this is only to Ethereum now. What about the L2s and Solana and all the other chains? <Mag (20:47)>: Yeah, we’re adding those relatively soon. Ethereum was the primary target because our initial launch customers needed Ethereum mainnet since it’s still where the most TVL is and a lot of that’s getting moved through Eureka. And eventually, think our next step is going to be to add Solana and the major Ethereum L2s like base. <Jason Kam (20:49)>: Okay. OK, so for example, when I bridge from base to Ethereum, there is an official bridge. Or when I bridge from base to Solana, usually it’s like layer zero wormhole. There are services that do that. I usually look them up. And sometimes you would use things like Bungie. You use things like if the front end is linked up with Lifi, you use that. Sometimes you get charger fees. Sometimes you don’t. I guess once you hook once you hook Eureka up with, let’s say, base or Solana, let’s say in a couple of months from now, you can do that. Should I think of it such that maybe there are bridge aggregators that would also have Eureka as an option when they execute the bridge and they will automatically route the orders to you? Is that the right way to think about it? <Mag (22:00)>: Yeah, so the bold case for Eureka’s adoption in non-Cosmos use cases entirely, so for example, Solana to base or base to Arbitrum or whatever, is that as time goes on, more people are going to use bridge aggregators instead of bridges directly. And people are going to use solver networks instead of bridges at all, because it’s so much faster, like a cross, for example. <Jason Kam (22:12)>: Arbitrum, yeah. Yep. Yep. <Mag (22:30)>: That’s the bull case. If you believe that people are going to be stuck on the layers or front end, then it’s bearish for Eureka. The reason why that’s the bull case is because Eureka is just astoundingly cheaper than those other options by a factor that’s going to take years for other folks to catch up with. because of that, when folks do something like a solver-made transfer, the solvers don’t care what they’re using underneath. They just want the cheapest settlement. <Jason Kam (22:36)>: Yeah, I don’t. Yep. <Mag (23:00)>: because their margin is between the margin that they charge the user and ultimately what they need to pay to settle. And so they will choose the cheapest option. It doesn’t matter how fast it is because they were the fast transfer. And the same thing for the bridge aggregators. So I personally see the world going in that direction. And so it’s definitely our intention to hook it up into as many bridging aggregators and solver networks as possible. <Jason Kam (23:00)>: That’s right. And this has started or would they only have a conversation with you once you have enabled most of the L2s? <Mag (23:34)>: We haven’t started it yet. I mean, we’re just launching the first integration now. And most folks that are going to be using Eureka in the beginning are going to be over our front end, which does more traffic than a lot of those folks anyway. <Jason Kam (23:49)>: How do you mean? It’s the SKIP front end, I’m guessing. OK, understood. Got it. Got it. OK. <Mag (23:53)>: Yeah, yeah, the SKIP front end and the SKIP API. So for example, we’re partnering with a decent number of five to seven issuers of Bitcoin. They’re integrating the SKIP API directly into their frontend. <Jason Kam (24:07)>: Yep. I mean, would seem like you’re sort of capturing the initial group that is within COSMOS, right? Like, people want to play and participate in the wealth effect that is within your COSMOS ecosystem, this seems to be the... You just reduce the cost for them to do so very, very quickly. But before you turn on all the L2s and Solana and the rest of the world, it is still a very siloed sort of business development effort. It would seem like the value accrual to ATOM will only have a step function up after you have done all the integration and have this Eureka hooked everywhere. And then slowly or rapidly have the solvers sort of directly route the orders through you. Because at that point, the fee accrual was just that function up, unless there is significant ATOM development. if I’m thinking by the right way. <Mag (25:12)>: I think we should revisit this question around this same time tomorrow. And I think that you will have a different perspective. <Jason Kam (25:21)>: And just to say, OK. How soon do you think, like there’s Ethereum, there’s internal. How soon do you think the Solanas at the base, like the most sort of chains would be integrated with you in the future? <Mag (25:36)>: Well, I can only speak to Ethereum for now. Basically, hooking something up does not mean you’re going to get any volume over it. Creating a new connection between two chains doesn’t drive anything in and of itself. It is, you have the basically committed massive amount of day one and month one liquidity? that needs that bridge and is exclusively using that bridge to do something that they have to do. They have to transfer a huge amount of volume over it. That is how you get volume on a bridge. And that is how you get the added value cruel in this case. And so we would never, and we haven’t before, shipped a product that we didn’t believe had, or we didn’t know would have a massive demand very quickly. <Jason Kam (26:09)>: Yeah. <Mag (26:33)>: with pre-built use cases for assets on both sides. <Jason Kam (26:38)>: understood. Can you share a bit more about what those might look like? Is it like new product launches like Babylon farming and people dumped a bunch of Bitcoin to there? Is that is that something along the lines of what you’re thinking about? <Mag (26:56)>: So generally, one thing I can speak to in general, can’t talk about specific things here. You’re going find out literally in less than 12 hours. <Jason Kam (27:07)>: Okay, okay fine. <Mag (27:11)>: So one thing that we’ve seen is a very common trend is that chains are launching their tokens in places that are not their chain. This is quite common. Or they are doing some kind of large distribution event to a place where it is not their chain. So for example, a million, which is a blind privacy based on one that is built on Cosmos. <Mag (27:36)>: is launching their token as deep liquidity for their token on Ethereum. Because at end of the day, Ethereum liquidity trumps all the L2s, even combined. And we’ve seen things like this quite common. And so the need for a very fast, very easy bridge between Ethereum and between Cosmos chains happened to be way more apparent than we ever thought it would be by this point, but it seems to be a big trend among a lot of the newer chains that are very exciting that are launching basically around this time. Allora, Nelion, Ondo, another great example there, which announced their Cosmos chain. Celestia, obviously Babylon. Yeah. <Jason Kam (28:16)>: I see. So the asset creation happens on both chains. But I guess since it’s both on Cosmos EVM standards, like the bridge from the ETH-based wraps asset to the Cosmos chain that they launched would be native and seamless. OK. Interesting. <Mag (28:42)>: Yeah, exactly. The desire for native interoperability between the two places in a way that feels extremely cheap and does not introduce any kind of noticeable like UX hurdle is very high right now. <Jason Kam (28:58)>: And how much revenue would that mean for, let’s say this launch goes as planned and you maintain that $2 billion $3 billion per week or is it per month? Per month. you step forward and maybe increase that. What would that mean for ATOM? <Mag (29:18)>: So it’s hard to know exactly what it would mean. But what it does mean in terms of what we plan to do and what will be implemented is that the fees generated by Eureka as a product will go towards deflating Atom. So essentially towards burning the token supply in large quantities. And like the first real deflationary <Jason Kam (29:24)>: Yep. <Mag (29:48)>: pressure on the token itself. The problem though is that most of our fees will probably be generated in non-ATOM assets. And so what we are evaluating doing now and what our preferred option is now is taking the many millions of dollars in those fees and just swapping that into ATOM and then burning it automatically. <Jason Kam (30:11)>: Yeah, and for the heuristics, let’s say I bridge $100 of Nillion from Ethereum to their mainnet on Cosmos. How should I think about the size of that fee if they sort of go through Eureka? <Mag (30:28)>: So if it’s just a transfer, the fee will be very low. The fees that you would be charged right now on day zero would be the gas fees on the Cosmos hub for that transaction scaled by a little bit, which is why it’s so competitive, right? The thing that is possible is that we charge a volume-based fee, meaning it’s something that it’s proportional to the size of the swap in the future. <Jason Kam (30:40)>: Yep. <Mag (30:57)>: This would make sense for lot of reasons and, you know, it’s something that we can do. But it is not something that we are going to do on day zero, mostly because we haven’t figured out what we want those to be and we just want to see the adoption flow. But that is absolutely something that we could add. <Jason Kam (31:17)>: Sorry, and this is from Nillion to USDC on Cosmos. That you would charge your phone. <Mag (31:21)>: okay. Well, yeah, and then it’s a different story. In that case, we would charge a fee. And no matter what decks that goes through, right, it doesn’t matter if it goes through Osmosis or the Hub decks that will be launched in the future. Although it most likely will go through the Hub decks because it’s built around Eureka assets. And then there would be a fee to the decks. The decks itself will actually take a large portion of their fees and use it to buy and burn Atom . <Jason Kam (31:31)>: Okay. <Mag (31:50)>: And then on top of that, there’s this, there is a Eureka fee, which is a percentage of the total amount swapped like any DEX is, which would also go towards added value equals. <Jason Kam (32:00)>: Got it. Got it. So then the fees to Eureka would be twofold. Well, if it’s a small amount, one off, it’s tiny, inconsequential. But if you do sizeable volume, amount to be determined, you have a volume-based addition. And then if there’s a swap at all in your enshrined hub decks, you also take a part of it from the hub decks. Is that right, we think about this? <Mag (32:21)>: Yeah, so to give you a statistic, 90 % of the IBC transactions are sub $200. So it’s a quantity game. It’s not a size game unless you’re swapping in size, in which case it is. <Jason Kam (32:38)>: Yeah. And we’ve skipped today, there is also significant volume that is not swapped, but it is kind of just transferred over. Is that correct? <Mag (32:47)>: That’s correct, yes. And we do charge fees on that by essentially upcharging on the gas, which we need to do, especially for Ethereum to Cosmos because gas prices are very variable. <Jason Kam (32:49)>: Got it. And then because of the $2 to $3 billion of transactional volume that is on per month basis, 50 to 80 % of it is SKIP, and it is making like $5 to $8 million, is it roughly the right heuristic that we should think about what Eureka could bring to ATOM? <Mag (33:17)>: So first of all, the five to eight million was done. That was a while ago. Skip has grown significantly since then, though we don’t charge fees like we used to right now on the front end itself. the second thing is the amount of money that the SkipGo and Eureka product generates on <Jason Kam (33:18)>: Okay. <Mag (33:45)>: cosmos to Ethereum transactions is like a massive multiple on the amount that is generated for cosmos to cosmos chains, which essentially have zero gas, these simple signs. It’s sort of why the Bay sequencer makes so much money. And so we are anticipating it being significantly larger. I wanted to essentially invest time and focus into a product that I thought that <Jason Kam (33:56)>: I see. <Mag (34:12)>: very realistically could eclipse the entire inflation of ATOM over time, like within a two year timeframe. And that’s something that like I personally think is like very doable if we scale this correctly. <Jason Kam (34:17)>: Yeah. Yeah. Yeah, and just for the audience, inflation is 10 % per annum. Staking yield of 15%, so about $200 million per annum. Is that right? <Mag (34:33)>: Yeah, that’s that’s probably correct. <Jason Kam (34:35)>: and just from Eureka alone. Nothing else. <Mag (34:39)>: Eureka and the products that are building around it, right? Because Eureka is not the end at all. It’s actually the very beginning. And the real story, right, and what we’re actually trying to build towards is turning the hub, the Cosmos hub, into a place that is a two-sided marketplace between app chains that we service in Cosmos and elsewhere and applications that are built on the hub for multi-chain distribution. The hub sits at the center. And Eureka is a programmable way for any future applications built on the Cosmos Hub directly to basically access natively any state and distribute fully and cheap basically for free to every other ecosystem over Eureka and call those natively from their smart contracts. So for example, you can have a, like we’re actually designing and building right now, not ourselves with a really good team, folks from MakerDAO. <Mag (35:37)>: Basically a next generation lending protocol that can get like 20 % higher LTVs on the amount that you collateralize with because it can access the native liquidity on any ecosystem to do liquidations, right? Not just local liquidity. Like these things like we’ve talked about these things, but like they’re literally now possible with Eureka because it’s that good. It’s that fast. It’s that cheap and you can program it in. <Jason Kam (35:51)>: Interesting. <Mag (36:07)>: And so that’s really the focus. It’s like Eureka is like the distribution rails and a lot of the flow and a lot of the value capture is going to be built around the products that are going to basically sit in the middle of all this flow going through the hub from Ethereum to Solana to base to, you know, Cosmos and basically create these like incredible high distribution applications to leverage that. <Jason Kam (36:21)>: And anybody else can, can anybody else fork the code and do exactly the same thing? Or they can’t because your validators are of ATOM is being compensated by ATOM inflation and no one will be able to pay them enough to execute this kind of service. <Mag (36:48)>: Yeah, I guess like anyone could fork layer zero, right? I think the tricky thing about bridges for competition and the reason why they’re so sticky is that when a bridge issues an asset, it’s the bridges asset, right? It is non-fungible with versions from other assets. And so there is a massive liquidity advantage that entrenched bridges have over new bridges. <Jason Kam (36:51)>: Fair enough. <Mag (37:17)>: And to basically unentrench competitors, you have to be 10x better. Eureka is, in terms of dollars, 100x better, like literally, in terms of pure gas costs. And so we believe they will switch. But as we do that, there will be a significant amount of liquidity built up in Eureka, bridged assets, that other folks would have to replicate with their own capital to unentrench. <Jason Kam (37:23)>: Yeah, fair enough. for you to achieve actually $200 million of atom bought and burned, how much cross-chain volume do you have to achieve to get that number? <Mag (37:58)>: I did all the calculations for a different liquid fund that I think I was probably listening on right now. But I don’t know if Cody’s OK. yeah, I mean, do you want me to pull up the numbers or? <Jason Kam (38:05)>: Possibly. Very likely. <Mag (38:24)>: yeah. Well, I was actually just going to try to find it. And then let me see if I can find it. If it takes too long, I’ll just give you my best guess or my best. Yeah, so <Jason Kam (38:39)>: Yeah. <Mag (38:45)>: 20 to 30 billion dollars of volume per year. So actually current levels. If basically all of the current levels of IBC volume went through the hub without any expansion, we believe that <Jason Kam (38:59)>: You’ll be charged. You’ve charged a 1 % if that’s the case. That’s a lot. <Mag (39:06)>: So first of all, that’s not actually extremely high for cross-chain swaps. And the amount on the actual transfers is significantly lower. And that also doesn’t take into account any of the fact that probably the majority of that volume is going to go through multiple hub applications, which will themselves add additional fees on top of that that will accrue to add them. <Jason Kam (39:31)>: I mean, I see your point. At the same time, there’s absolutely no way me as a fund would transfer anything at 1%. <Mag (39:41)>: You wouldn’t be charged 1%. Would you swap for 1 %? If you ever use Uniswap, you probably have. <Jason Kam (39:49)>: I think the most we would pay in fees is 15 bips to 50 bips, unless it’s a meme coin. And even then we haggle. I think it’s just untenable to be paying 1 % for transactions. I think that’s right. I think that’s right. I suppose to use case there, they will be happy to pay 1%. A, they don’t know about it. <Mag (40:01)>: That’s fair, but also you’re not the audience we’re going for. I’m talking about volume that is not yours, that already exists, that is from retail. <Jason Kam (40:17)>: Or two, they just have to get it bridged over there. Or three, because something is pumping, they got to get the money on. Then this is fast. <Mag (40:26)>: I don’t think it’s that. I actually think they’ll pay 1 % because it’s 10x cheaper than any other option to do the same flow. That is literally what I’m saying. If you wanted to swap Ethereum into Atom today, you’re going to be paying a minimum 10x more on any other solution with the best liquidity, the best anything, if you want to do it on chain. What I’m saying is it is going to be significantly cheaper than every option out there. <Jason Kam (40:41)>: For sure. <Mag (40:55)>: it already will be on day zero, which is why people I think will want to pay that because it will be the cheapest option by a massive margin. <Jason Kam (41:04)>: I think this becomes very interesting if the bridge from Solana to BSC becomes incredibly cheap. I doubt you can charge 1 % for it. I think the most likely case is what people would do is they swap into a native asset, USDC or something, that has almost no bridging fees. then they do the bridge. That’s important. <Mag (41:19)>: Yeah, but, you’re thinking of us like a bridge, right? You’re, you’re thinking we’re a bridge. We’re not a bridge. We’re not, we’re, we’re not like use IBC fund right now. Right. We’re not bridging. We’re swapping, right? It’s, it’s a token a to token B on a different destination. People pay for a swap and a cross chain, multiple cross chain route, because you have to pay for the relays. The bridges today costs, you know, 20 X more than Eureka will cost. <Jason Kam (41:31)>: I see. Yep. Yep. <Mag (41:49)>: And then you have to pay the DEX costs on top of that in some place. And that is what people pay for. People don’t think, I’m paying 1 % to bridge funds from a place to place. Of course they don’t do that. And they won’t on Eureka either. <Jason Kam (41:49)>: That’s very important distinction. Then I think the heuristic would become the swap plus bridge volume across different chains. And that’s a little harder number to go to, but your market share there is quite small today, if I run the math that way. It could seem like it would ramp meaningfully. That’s very interesting. That’s very helpful. I guess, so that’s one line of, yeah. <Mag (42:31)>: Wait, hold on, hold on, hold hold on, hold on. We have multiple billions of dollars of Swap volume, go over, SKIP, go, in the depths of the bear of Cosmos. We are going to be expanding this all to other ecosystems in a way that is going to be massively more cheap and deeply integrating it with live five, with front ends. I don’t think there’s any reason to believe that this would not be like a serious competitor on the market. <Mag (43:04)>: in a way that accrues value to ATOM at the same time. I don’t really see an argument that you can make it. At the same time, we have $250 million of liquidity that we are going to be using to seed the liquidity for these assets ourselves. No funds are necessary. 0 % interest on that liquidity. It’s ours, right? There is a very strong possibility, in my opinion, which is why we built it, that this could be a significant source of swap. flow throughout the Ethereum ecosystem and between different ecosystems. <Jason Kam (43:40)>: Very helpful. Aside from the 200 million that could come from this, is there any other source of atom veil accrual that you can think of that could be really meaningful? <Mag (43:52)>: Yeah, so Eureka was an asset that was a product that was designed to align what we viewed as the largest chains in Cosmos, the Ondo’s, Mantra’s top 25 token projects. For chains that are not that large, that don’t have, for example, all their own distribution, and oftentimes who left other ecosystems like like Ondo, for example, like leaving the Ethereum ecosystem. For other folks, we actually have a much more direct revenue capture story. So for a large number of new chains, a large number of the smaller chains, the desire to be close to ATOM right now at this point in time and Cosmos is so great that most of them are basically doing something where they are committing, and we’re encouraging them to do this, committing 15 to 20%. of all of their protocol revenue and using that to structurally purchase Atom off the open market and to basically store that inside their protocol. So for example, Ellis Sentinel Protocol is going to be a couple more announced side protocols discuss this. Folks are basically encoding Atom alignment themselves and it’s actually a very good deal because in turn what they get is basically <Mag (45:19)>: One, they get our support and they get sort of the alignment and the closeness with the ATOM community, which is still the last, it’s one of the greatest retail communities. It was built in 2017. It’s held by every single liquid fund or in some kind of like vintage thing that they have, that goes way back into the early days of crypto. Some of my family offices, it’s something that has a huge community and getting access to that community, which is now sort of waking up for the first time in a long time. <Jason Kam (45:33)>: Yeah. <Mag (45:48)>: is really exciting to them. And then also, we’ve been supporting them with liquidity and things like that for protocols that are deeply atom-aligned in that way. this is sort of a, I was going to say, this is a little bit of a holdover until basically we have a permissionless VM on the Cosmos Hub, which is coming very soon. It’s sort of the focus of this next quarter. <Jason Kam (45:50)>: it. it’s it yeah go ahead sorry. Yeah. <Mag (46:16)>: And then we can actually build truly very understandably atom-aligned products that are built on the Cosmos Hubs VM that have all the traditional ways of aligning value between an L1 and smart contracts like priority fees, gas fees, all those things. <Jason Kam (46:34)>: Tell us more about that because that seems quite exciting. You acquired EVM OS, is that right? <Mag (46:41)>: Yes, so yeah, basically at most, know, rest in peace, what was not super successful. And the one thing that they did build up that I give them huge props for is they built this incredible code base for basically launching a equivalent EVM on top of the Cosmos SDK. And we purchased that from them as they were closing down. And so what we did was we, was, Business source license before it was licensed by the ripple to build their Cosmos chain, which is their official side chain. At build violet pierces and they licensed a bunch of other folks and we basically cancel those licenses made it fully open source and now we maintain it as a core part of the stack. People asked why I think for two reasons. The first one is because everyone wanted EVM and at the of the day, no one really wanted to cause him awesome and. We just didn’t see the reason why we would fight that fight and give the people sort of what they wanted. And the second thing is we want to have more options for what we choose as the VM for the Cosmos Hub. <Jason Kam (47:57)>: Got it. And just so I understand, on the two things you mentioned, one is effectively the ecosystem projects that are building a chain using Cosmos SDK would voluntarily purchase Atom in the open market in hopes for your community going to them, and two, having your, I’m guessing, technical support and your liquidity, your war chest going into their ecosystem. Is that a handshake agreement, or do you have something that’s written down that they have to purchase that amount? And do they use that atom to do anything? <Mag (48:33)>: It’s not a legal agreement. is usually people come to us and say, hey, for example, like Shade Protocol, which is the largest DEX on Secret Network and basically built out their whole DeFi. I think they use their entire or basically their entire revenue to just purchase Atom on the open market. We never even talked about this. Now they have, I think it’s like 1 % of the entire atom supply on their protocol. That’s how effective that was as a marketing strategy and as a strategy to attract more liquidity and to also get our attention. And we’re now big supporters of them, obviously, they’re going to have a big story to play over the next 90 days. So usually it’s actually organic in this situation. <Jason Kam (49:21)>: I see. Got it. it’s in there. Go ahead, sorry. <Mag (49:31)>: I was going say quickly, I think in some cases people come to us and say, hey, we want to align with you. We want to align with the hub. We don’t know how. Should we do PSS, ICS? we launch on the hub VM in the future? What is the way? And usually in those situations is where we say, hey, why don’t you just start accumulating ATOM ? And because that’s ultimately the best marketing to the community. we view that as very aligned with what we’re trying to do. <Mag (50:01)>: which is basically create value capture stories for ATOM throughout the ecosystem. And they sort of do those organically. <Jason Kam (50:05)>: Got it. I guess in their mind, because you’re working on it, it’s likely there’s no downside to the Atom coin versus all the other coins they could be holding, or they could just hold USDC. And the benefit, it could go up in value, and they get your help. So I could see that being a good business decision. <Mag (50:27)>: Yeah. <Jason Kam (50:29)>: Would you have a chance to monetize the EVM OS or Cosmos SDK at all? I’m guessing it’s just offer free and you know it helps the ecosystem, but nobody pays you for those two products. <Mag (50:42)>: We could, but we generally have a policy that we build open source software. So I think actually this is a very short-sighted thing that I’ve seen other ecosystems do. So Avalanche, after they renamed the subnets to L1s, they have their hyper SDK. That is not open source. And we get so many customers from that. uh, you know, for folks who are like, we were looking around, you have the only, the of the best only open source stack. And we’re able to, to, to leverage that relationship for basically some kind of financial outcome for the ecosystem. Uh, versus like, just like having people say, I was stopping at the door and saying, I’m not signing a legal contract with you or I have to build on your ecosystem. And I have to give you some kind of value for all not because I don’t want to, and I don’t want to get value cruel, but because we’re in crypto and. Why the hell am I talking to a lawyer right now versus a developer? And so we get a lot of flow from all these folks who try to monetize their stacks. So don’t tell anyone that, because we enjoy it. It’s the same thing with the OP stack. <Jason Kam (51:45)>: And in the end, if a programmer does use the Cosmos SDK, in the world of Eureka, basically it’s hooked up immediately once they use the stack. They don’t have to do anything additional. Is that the right way to think about this? OK. So they immediately get a bridge. Well, not a bridge, sorry, like an atomic swap on a very basic level, because it’s <Mag (52:15)>: Yeah, that is the right way to think about it. <Jason Kam (52:24)>: natively enabled. And because they use it to get, they not only get the free will from you, they’ll get the liquidity from you. And they’ll make their business development hopefully a little easier. Because right now, if other chains that don’t use Cosmos SDK, it would seem like they will have to work at the circle relationship, USDT relationship, bridging relationship, and everything. And if they work with you, then it’s immediately enabled. Is that right? OK. <Mag (52:52)>: Yeah, so Eureka gives them superpowers because it gives them access to all of these assets in every ecosystem, basically for free in terms of like, they don’t pay anything, it’s their users, right? And it’s still cheaper than any other alternative. And it comes with our market makers, it comes with SkipGo and SkipGo Fast and the full front-end integration. So they just don’t even have to think about Interop and all that it takes from them. <Jason Kam (53:05)>: Yeah. <Mag (53:20)>: is a single normal IBC connection to the Cosmos Hub, over which flow all the Eureka assets in and out. And so it’s a very easy pitch, is the reality. And over time, we can add more things to that IBC connection. That is the conduit through which we can add or provide access to things like Oracle feeds, or access to things like cross-chain user flows, where people on the Hub can initiate things on their <Mag (53:49)>: on a foreign chain over IBC without even leaving the hub, or where we can have cross-chain session keys, where you can stay logged in between any different chain and your session can pass around. There’s many exciting things that we plan to do with that connection. <Jason Kam (54:06)>: How do normies use the cosmos enabled chains? do they hop onto... I don’t think they can do it through phantom. Maybe they can’t. I think that might have been one of the barriers for all my friends to use. <Mag (54:21)>: Yeah, definitely. So historically, it’s been Cosmos specific wallets, the largest of which is Kepler, which you might have heard of. There’s some smaller ones, Leap, et cetera. One of the goals that we had, and this ties a little bit into the EVM OS conversation, is to have native MetaMask support for all Cosmos chains, for not just the EVM transactions, but also the Cosmos transactions. This is something that is <Jason Kam (54:31)>: Yeah. <Mag (54:51)>: is going very well and we likely will be able to. <Jason Kam (54:53)>: How soon? Yeah. <Mag (54:56)>: very soon. <Jason Kam (54:57)>: Can’t tell us. OK, great. Very important. That’s very helpful. And then I guess one other question I have, and I think the audience might have some as well, like why do the RWA chains love you so much? Because I look at all of those, like, ondo, and why do you have such success with working with them? I would imagine Avalanche and all these other guys want to get them. <Mag (55:24)>: Yeah, they’re fun deals to win. I think with RWA specifically, there’s a couple of factors. The first is mantra. Mantra is probably one of the greatest token successes that some folks have heard of, some folks haven’t heard of over the past year. It rocketed from I think a $5 million market cap to what is now an $8 billion market cap in the course of a year and a half. They were an Ethereum project where they had a token that was worth $5 million market cap migrated to a Cosmos all one and now we’re an $8 billion project. And I think a lot of people see that they’re like, my God, right? Like what happened? a lot of actually, this is a really good bull case for app chains. I truly believe that part of the reason for or a big part of the reason for mantra success was becoming a sovereign L1. for two reasons. The first one is when you’re an L1 and it’s only possible on an L1, you can build your own validator set that essentially secures the chain. And what we’ve seen is that the RWA chains use that validator set to basically encode partners that they trust and that want to have some participation in the chain directly as validators. So for example, Ondo plans on making all of its asset issuers, validators on its L1. That’s something that’s uniquely possible on Cosmos. And that basically means when you’re evaluating as an institution, okay, well, should I issue a billion dollars of my asset as tokenized version on this chain? all the validators are one me, Wisdom Tree, Goldman, JP Morgan, Citibank, just folks that I recognize and I trust, not whatever like pump. to something and like all these random suspicious validators that ultimately are securing the Ethereum network and securing, you know, the different mining pools securing Bitcoin. And that’s only really possible on Cosmos where you can customize your validator set to an institutional use case to build institutional trust. That I think is the first reason. And that’s something that I’ve seen used to great effect. It’s also something, by the way, that Hedera does to great effect as well. <Mag (57:51)>: I think the second reason is there are some really interesting things that you can do with L1s when it comes to encoding off-chain data in a very verifiable and censorship resistant way that you can’t really do with L2s. So for example, there’s a concept called load extensions where basically validators normally vote on blocks, right? Once they achieved a two thirds consensus on a block, they basically progressed to the next one and they finalized the last one. In Cosmos, you have this very unique ability where you can actually encode additional metadata on top of the block data, which you can vote on. So what that means is a bunch of trusted validators can all go query the price of an asset and then all come to consensus, not just on the block, but also the price of that asset. <Jason Kam (58:26)>: Yep. <Mag (58:49)>: and then encode it as on-chain state. And because of fast finality, you can do it really quickly. And the really cool thing about that is that you vote on that and it has the same security as the block security itself, because it’s no different from the block data. And so it’s backed by two thirds of the consensus of the state weight of the entire chain. And so you have this amazing security property for basically encoding new on-chain data. And this is something that they were talking about a lot at the Ondo Summit. <Jason Kam (58:49)>: Yeah, that’s <Mag (59:18)>: about what they were excited to do with it. <Jason Kam (59:21)>: I guess for pretty serious financial applications, there’s a flag bearer effect, and there’s that. That could be really helpful for somebody’s films. <Mag (59:28)>: Yeah, I always say like Cosmos does really well with the, like what we call it the world builders. So these are the projects that, you know, they’re done with a theory of alignment. They’re done with being a smart contract. They developed huge PMF and massive distribution and they’re ready to become their own thing, right? Ready to become their own L1. And at end of the day, there’s only one L1 stack out there in crypto that is trusted and that’s Cosmos. <Mag (59:56)>: What we’ve seen is everything else ends as an L1 because that’s the biggest thing that you can be. you know, as long as Bitcoin and Ethereum are the top number two things and CoinGecko and they’re both L1s, people are going to want to try to be one. And Cosmos is the place that catches that. <Jason Kam (1:00:12)>: Very helpful. Last question I have is, it’s still not very easy to buy Atom. We had a TWAP through Falcon X and whatnot. Any thoughts on maybe allowing for wrapped Atom on Ethereum or Solana and all the other assets that would boost liquidity and add your LP and what not? OK, we caught you at the right time. Any other questions for? yeah. OK. OK. It would seem like all of the Cosmos ecosystem tokens to Eureka could also have wrapped assets in places where economic activities is aggressive, like in particular. And I’m guessing you’re. <Mag (1:00:36)>: Yeah, mean, Eureka is this is is exactly why you would have Eureka, right? I mean, Eureka allows for us to bridge assets basically for free over into Ethereum. second. There’ll be a lot of ATOM coming into Ethereum. <Jason Kam (1:01:01)>: Very cool. Very helpful. Members, any questions? Give it like three seconds. <Mag (1:01:11)>: I forgot we’re not alone. <Jason Kam (1:01:13)>: Yeah, no. Maghnus, really appreciate your time. Thank you for jumping on. This is really helpful. <Mag (1:01:20)>: Yeah, appreciate it. Thank you. <Jason Kam (1:01:22)>: Cool, thank you.