TLDR

In this episode of BidCast, host Jason Kam speaks with Cindy Leow, co-founder of Drift Protocol, about the current state and future of the Drift platform. They discuss Drift's impressive daily trading volume, unique DAO structure, and revenue model, which includes trading fees from perpetuals and borrow-lend services. Cindy shares insights on the opportunities for growth within the perpetual DEX landscape, the importance of Solana as a foundational layer, and the upcoming performance improvements. The conversation also touches on Drift's market strategy, challenges in user retention, and the exciting innovations in asset tokenization and institutional partnerships.

Chapters / Timeline

• 00:00 Opening

• 00:50 Introduction to Drift Protocol and Trading Volume

• 03:57 Revenue Structure and Token Holder Dynamics

• 06:54 Future Opportunities and Business Growth

• 12:44 Performance Improvements and Competitive Landscape

• 18:46 Technological Innovations and User Experience

• 24:39 Market Strategy and Future Projections

• 27:56 Understanding Drift Volume and Market Dynamics

• 30:03 Challenges in Liquidity and User Retention

• 31:32 Innovations in Trading Instruments and Features

• 35:34 Institutional Products and Future Roadmap

• 40:15 Tokenization and Asset Management in DeFi

• 47:26 Token Incentives and Growth Strategies

Transcript

<< Jason Kam (00:51) >>:

All right, we're live welcome to another episode of BidCast I'm your host Jason cam @MapleLeafCap today is July 1st 2025 4 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 Cindy the co-founder of Drift Protocol Cindy. Welcome

<< Cindy Leow (01:13) >>:

Hey, Jason. Hey, everyone. Good to be here today.

<< Jason Kam (01:15) >>:

⁓

Thanks for coming. We've known each other for a long time. I think people watching this probably know this already, but just to start, can you just give me a breakdown of the whole Drift business in terms of its trading volume today and how it kind of annualizes and bridges to revenue?

<< Cindy Leow (01:36) >>:

Absolutely. So Drift today does anywhere between 150 to 400 mil in daily trading volume. And to go even a step back, we're leading perpetuals exchange built on Solana L1 with full cross margin capabilities, multiple L1 native matching algorithm. We have over a billion dollars in TVL.

And  one kind of lesser known fact is that we not only make trading fees on trading volume, on perps, we also offer spot. We offer borrow lend. We're currently the second biggest borrow lend.  And as a result, the revenue of the platform is composed of perps trading fees, spot trading fees, as  well as borrow lend fees. We take a percentage of interest rates.

Right now as an aggregate, we're annualizing about 25 to 35 million in annualized revenue.

<< Jason Kam (02:40) >>:

And then a tick rate on the volume is like 3 bips, 4 bips, something like that.

<< Cindy Leow (02:46) >>:

On the major markets, it ranges from 0 to 10 BIPs. So BTC currently, we're offering a 0 BIPs trading campaign. For the long tail, they are about a 10 % sorry, 10 BIPs tick rate. And large percentage of our trading volume is within the majors. So it's ETH and BTC right now.

<< Jason Kam (03:12) >>:

Got it. So I'm guessing it's like a 20 million type of run rate business with the perp. And then the five to 10 additional is from everything else.

<< Cindy Leow (03:21) >>:

Yep, that's right.

<< Jason Kam (03:22) >>:

Got it. OK, cool. And is there any expenses in achieving this kind of revenue that we should think of?

<< Cindy Leow (03:30) >>:

So we don't offer direct token incentives. We did just launch  wrap up our fuel trading campaign, which was an eight month long  trading campaign, kind of our second airdrop  unofficially. We wrapped that up yesterday and emitted about 2 % of total token supply within the last year.

Unless you caught an airdrop as  a  cost, we don't really consider it as such. We don't have ongoing  trading programs right now.  But yeah, this could change.

<< Jason Kam (04:11) >>:

Got it. So aside from like labor costs, like that dollar 25 to 30 million falls straight to the bottom line. Got it. then does it fall to token holders or is there like equity entity kind of walk me through kind of after you get that 25 million? Where does it go?

<< Cindy Leow (04:28) >>:

So we have a pretty unique structure where we do not have any equity holders whatsoever. So every single person invested in or working with Drift  are all token holders. And  that creates a much simpler incentive structure than structures where you have revenue flowing to equity. This also  presents a much cleaner legal case for

the cash flow flowing directly to the DAO The DAO actually holds  all the revenues at the moment. As of now, the revenues are  kept within the platform held by the DAO and used to provide liquidity for the platform.  So this  pot of capital is sitting there increasing liquidity in the platform through depositing into the AMM, which creates a positive flywheel effect.

In terms of value accrual, our community put up  a governance proposal just about a month ago that is pushing smart buybacks where instead of regular buybacks that have improved extremely successful within crypto, the proposal that passed has a unique mechanism where  it buys

$DRIFT from the open market using protocol owned treasury when it falls below a certain PE ratio. So it's always acquiring it at undervalued prices. This is actually what we would consider a much more sustainable mechanism to keep tokens being purchased back. And as of yesterday, it started to run in the open market.

<< Jason Kam (06:23) >>:

is that right? what's the, I guess the PE ratio is FDV on AR, annualized. Okay. What's that ratio, if I may ask?

<< Cindy Leow (06:28) >>:

Yeah. Yeah.

I will have to look more closely at the governance proposal. I'm also not on the foundation side, but happy to link it and have you take a look at what that proposal looks like.

<< Jason Kam (06:43) >>:

Got it. Yeah.

If it started yesterday, it's probably like 10, 15 times probably or something like that.  Interesting. Interesting. And it obviously passed, I'm guessing, a month ago, you said. OK. very cool. And just for our interest, how big is the DAO treasure today from your history of all of the fees?

<< Cindy Leow (06:54) >>:

 It passed, yep.

The DAO treasury is sitting at about 37 million today.

<< Jason Kam (07:11) >>:

Got it.

Got it. OK. OK. Very cool.  That's very cool. So moving on, guess,  historically, the perp decks went through many iterations. I don't have to count all the perp decks. And now we're standing at this stage ⁓ with the future being quite exciting. There are shares coming in. There's a bunch of what-to companies coming in. are people saying L2 rollup is the future.

I guess I want to break this into a couple parts. first question would be standing at where you are today as the largest perp dex on Solana mainnet itself, what excites you the most in the next 12 to 18 months in terms of business opportunity to grow and whatnot?

<< Cindy Leow (08:00) >>:

So I think the interesting thing is thinking about perp dex within a broader landscape. think Robin Hood has actually done a really good job at being able to contextualize  what derivatives and margin trading looks like within a broader fintech business.  And we've structured our business today with obviously perps as the front and center, but on the back end.

The fact that we are built on the L1 represents the biggest opportunity of all. And the reason that we say this and have always stuck to Solana as the home ground is that we believe that Solana will be the home of many off-chain assets and real world assets, you know, with the likes of equities, bonds, money markets,  many forms of stable coins, even native Bitcoin coming on chain and  having composability.

with those assets coming on chain offers very interesting and unique business cases. one example for that for us is the growth of our vaults and spot products. Being built on the L1 itself means that we don't have to build a native bridge. We can rely on the full security of the L1 and we have composability opportunities with the spot assets  coming on chain.

Imagine having a Bitcoin perp that's collateralized by a tokenized version of Tesla or even  tokenized private credit that's yielding 10 % annually. That's a true opportunity we see being built on Solana itself because all these assets are already coming online on Solana. Unlike the isolated roll-up situation, isolated L1s,

⁓ They may have higher flexibility when it comes to their matching engines and what performance benefits that gives, but they lose out on a lot of the natural  network effects that come from already being integrated within the L1. ⁓ So, you know, it's almost like inheriting a broader BD team and broader BD strategy versus going out and building all those cornerstones yourself.

That said, the other part of the business and growth that I'm very excited about is one of the biggest complaints about Drift and about Solana is that it is slower than our competitors like Hyperliquid owing to the fact that we have been built on the Solana L1 and we've stayed very true to that thesis of we believe that L1 is the best way to go because of composability benefits.

The criticism has been that it's a lot slower because we haven't had the flexibility that these isolated environments have had. I think this is changing  very, very rapidly and in a way that the market doesn't realize yet with a couple of things. One is that the realization that liquidity on CLOBs is not the final form of liquidity in crypto.

We're seeing the emergence of many different types of liquidity emerge. For instance,  dark AMMs, where you have semi-opaque pools resembling dark pools  in TradFi where market makers are able to  quote without being picked off ⁓ as they would in a fully on-chain CLOB And things like just-in-time liquidity, where you can actually put in a Dutch auction to resemble

resting liquidity on chain. So  I guess the summary of what I'm excited about is that we have chosen to be on the L1 for composability reasons. In the past, we've actually suffered in terms of performance trade-offs, but the performance trade-offs are now actually becoming more irrelevant as new innovations are coming up. And Solana.

L1 as a whole is improving to be able to meet this decentralized aspect vision. So we actually see a lot of the stars aligning for perp dex on L1 making sense.

<< Jason Kam (12:31) >>:

 When you say perp dex on L1 making sense, you mean Solana itself is  adding a lot of the speed and priority features that the roll-ups themselves are building. But is that anytime soon? Because if we have a year before this gets implemented, we could see a case where the perp volume will shift further towards the perp dexs that have their own L2s or L1s.

<< Cindy Leow (12:44) >>:

That's right.

Yeah, I even think if you look at the rate of performance changes a year ago, even six months ago to now, and if you're an active user of these platforms, you would have noticed an exponential increase in the performance on the L1 itself. There's also teams like Jito that we are working with to build  trusted environments within the L1 itself to help with the

to help with transaction ordering, for instance. the Solana Core team is working very closely on application-specific sequencing that enables apps to enforce certain types of ordering.  For instance, cancels first versus takers, which enables market makers to have more confidence of being able to, to quote on the L1, these changes are in the order

<< Jason Kam (13:36) >>:

Hmm.

<< Cindy Leow (13:55) >>:

in terms of timeline in order of magnitude of months, not a year. And that's why we feel very bullish that  this is probably the most confident that I've been in the underlying L1 technology.

<< Jason Kam (13:59) >>:

Okay.

Interesting, so we should see it before year-end, basically. I think there are a bunch of them, like lighter and you know, like they're all coming live during around that time. So I think Sol needs to be ready. Okay. And this is coming from Sol Foundation and Anatoly himself. Okay, that's very important. And when you say that, it's just like effectively feature parity when it comes to latency, as well as kind of order priority and those kind of things.

<< Cindy Leow (14:38) >>:

Yep. And there's a lot of things that we're doing as well on the app to make sure that this all comes together well, which includes, you know, and we can talk about this in a bit, but launching our own version of JLP and HLP, DLP,  all wrapped together in a big upgrade coming in August. So, you know, a big timeline for us is like, we understand competition is heating up.

<< Jason Kam (14:42) >>:

Hmm.

Yeah.

Hmm.

<< Cindy Leow (15:05) >>:

We're not kidding ourselves when it's like every single day there's a new perp dex popping up.  But if anything, the graveyard of perp dexes out there will show is that it's very easy for mercenary liquidity to come and go, right? And for the platforms that have continued to survive and continue to actually grow in this time period, we believe that there's a big spot for them to continue existing post this.

<< Jason Kam (15:35) >>:

And if I'm not mistaken excuse me the RFQ is currently the main Volume driver for your 150 to 400 million dollar today. Is that correct? Go ahead

<< Cindy Leow (15:46) >>:

So actually the AMM has grown a lot in the past few months. ⁓ As the AMM has improved in its tightening and coating mechanism, we're starting to see AMM be up to 40 to 50 % of the fills. At the same time, liquidity has grown substantially on the resting order book, as well as just-in-time RFQ side as well. So the majority used to be, yeah, it's a pretty even mix today.

<< Jason Kam (16:02) >>:

Yeah.

wow, so it's an even mix.

Oh wow. And I guess when these updates come online, the peers are like sub 200 milliseconds sometimes, there's like a priority, like cancel is priority, there's just like a bunch of stuff they're talking about, after the upgrades that Totally Promise comes online, do you expect the mix that you have to be materially different?

<< Cindy Leow (16:39) >>:

That's a good question. I do think that there will be an increase in active liquidity, so just in time and in order book. But this is hard to say at the end of the day because with DLP coming alive, which is adding more liquidity to the AMM side as well, if DLP has reached a substantial TVL, which we believe with the yields coming from the platform, can.

<< Jason Kam (16:52) >>:

Hmm.

<< Cindy Leow (17:08) >>:

AMM could actually see growing traction too. we're kind of, and the reason that we built a system with multiple liquidity providers initially was, okay, we understood that CLOBs as a whole and as a standalone cannot be as competitive on the L1, at least in the way that it was designed before, historically.  But what we've also seen with spot markets on Ethereum and even Ethereum L2s is that

<< Jason Kam (17:12) >>:

Hmm.

Historically, yeah.

<< Cindy Leow (17:36) >>:

AMMs still continue to dominate on many markets, right? We haven't really seen a full CLOB spot exchange yet.  That's why we believe that we haven't really seen the final form of what an exchange on chain looks like yet, which is why  we're making the bet that it could be multiple things. It could be a really, really strong AMM that has great  matching engine and logic.

It could be a really smart  market maker that knows how to RFQ  with full precision, or it could be a market making team that is able to quote the best on chain once the L1 technology improves. One mental model to think about it is the better Solana underlying technology gets,  the better the acts of liquidity gets. But even without, the AMM logic itself should continue to improve over time, whether or not

the underlying infrastructure is there. So we were kind of future-proofing our business to be able to win in any of these situations.

<< Jason Kam (18:46) >>:

 Do you feel like once the upgrades do come to you, would...  I don't know how technically feasible it is, but also having CLOB be a part of the liquidity offer, like, are you planning that? Is that something you have in mind?

<< Cindy Leow (18:55) >>:

Mmm.

So we launched an upgrade  to our system in about February this year. It was called Swift Protocol.  What Swift Protocol  is is a way for traders to connect directly with market makers  using a technology called Sign Transaction on Solana. So it bypasses the need for the transaction to place the order to be fully confirmed on the L1.

 Now what this means is it cuts down the latency of you placing an order direct to the market makers, where the market makers can actually read your order from the server, bundle the order together with their approval for putting the liquidity and then have that as a single transaction on chain. So what this means for the user is that it's completely gasless because you're just signing a transaction saying that you allow a market maker to fill you at this price within a certain slippage band.

<< Jason Kam (19:40) >>:

funny.

<< Cindy Leow (19:59) >>:

And for the market maker, they get instant access to the user  order flow.  And this is happening on what we call a market maker channel that almost exists on top of the blockchain. doesn't need, and the market maker is the one that bundles this and puts it back on chain. So everything is still fully on chain. Users still have to sign the transaction. But we've seen that this actually cuts down the transaction time by

by over two, three X because now you've cut down the layer where user needs to place an order on chain, market maker needs to place an order on chain, and then the keeper needs to match those orders together. So  this Swift protocol can be extended to actually build a CLOB itself as well, because then you can insert CLOB logic where thinking about it as like a, I don't wanna use the word,

roll up, it's a channel that exists  on top. Right now it's for Dutch auctions, but that concept can easily be extended to be applicable to CLOBs as well.  Yeah, that is going to be a longer term play,  more medium term. And we're confident that we want to see how this DLP, AMM, and as well as JIT version rolls out as well. But the market continues to show its hand that

CLOBs are the way to go. We do have the infrastructure in place to ship and launch them.

<< Jason Kam (21:31) >>:

Got it. But that's like, I guess it'll be like a, it's not a roll up. It's like a centralized layer on top that the users kind of choose to, although they kind of choose to trust the other exchange because the end result is the same. It's extremely fast latency confirm on the user end, but the logic doesn't get implemented. The user choose to trust exchange or execute, kind of.

<< Cindy Leow (21:54) >>:

Well, the user would specify their own parameters for order filling.  So the order would fail if it surpasses the user,  you executions So because the user signs the transaction initially, you couldn't like, you know, rub the user and say, I'm going to fill you like $10 like above where you had specified your order to be. So there's still the security inherently baked within this protocol that is contained within that order.

So you could still see everything that goes through. The only thing is we're cutting down the parts where it doesn't have to be fully on chain, which is the parts that create latency.

<< Jason Kam (22:37) >>:

So you're not launching L2 anytime soon, you may implement club logic, you're to centralize design later on, but for now you're relying on the Solana mainnet upgrade alongside with your sort of hybrid model to provide liquidity for both perps and spot. Do you feel like that's why your volume kind of lags the few guys that really ramped up historically? Do you feel like the market share situation would reverse  once you're at feature parity?

in some of the key products.

<< Cindy Leow (23:09) >>:

I think so. And I think the reality is a couple of things. One is that in the last year,  after launching V2 and after seeing  good growth post our token launch, we started to build out our product stack, which is our earned product, our vault product, even prediction markets. And we spent a lot of time building out  tendential orthogonal products.

that serve to grow the pie. And the reason that we did this was one, these products still make a lot of sense from a growth perspective. And we saw ourselves filling the gap of being a super protocol where you could do anything within a single execution environment. That's it. Because of our focus on these new products, we spent less time

 honing and fine tuning and being laser focused on perps itself. And ⁓ I would say that, you know, this focus internally has shifted back to perps.  As these other products  have already started to mature, have reached a level of PMF,  we see prudent to actually go back to the main perps product now. And that started with our Swift launch earlier this year, which pushed trading at the

at the top of our minds. And so I would say yes, the product has suffered when it comes to these new entrants. A lot of our product suite was built at a time where some of these optimized user experience tools were not live yet, for instance. Privy was in a thing when we built Drift back in 2022, right?

And we had to figure out a lot of the building blocks ourselves back in 2022 when today a lot of things exist to optimize things like further. So we're working on a big product overhaul, which we will be launching in August that essentially modernizes a lot of the drift functionalities to match feature parity in terms of onboarding speeds, in terms of time to trading.

in terms of social logins  to match what's out there in the market. So TLDR is, you know, we've been live for a very long time. A lot of our infrastructure still comes from a time where, yeah, these optimizations didn't exist. And now we're wrapping all of these upgrades together alongside DLP, the work that we're doing with JITO to improve execution times on chain, as well as Solana Foundation.

and wrapping that into a revamped product in August. even from now until then, you should continue to see a lot of  huge upgrades. And we see that to be a strong inflection point for volume coming back to our platform and, you know, winning back traders who might have been frustrated with liquidity before.

<< Jason Kam (26:24) >>:

That's very cool. I didn't know that. And you mean it's live in August. And at that point, what we should be seeing is an HLP equivalent type deposit experience that provides depth, but also  basically you're segmenting the execution versus the transaction kind of placing of order. So it's extremely fast UI, UX, Ys. But the fill should actually get tighter also based on all your designs. That's cool.

So it's great that you're reaching feature parity on the perp side.  And as extension to that,  the users kind of, they kind of already trading somewhere.  What kind of go-to-market steps have you done to like basically grab them and say stop trading on XYZ, lighter or whatever and come to us? What are the incentives? What have you done? And then second part to that is after August into year end, do you have like a...

kind of a monthly volume, daily volume target for yourself with this revamp.

<< Cindy Leow (27:28) >>:

Absolutely. We're looking at anywhere from the 500 to a billion daily by like in this quarter towards year end. We're already starting to see significant growth, especially on volatile days. The other factor that we see is that a lot of the risk protocols that we baked into V2 itself

has actually been, you know, very preventing forces like arbitrageurs from trading on our platform. So what you're seeing today with Drift Volume is almost pure 100 % retail versus retail plus arbitrageur volume. And that is actually the source of a lot of the discrepancy that we see between our exchange and others. If you compare DAUs and like actual retail volume from smaller accounts,

 you would see that the organic volume is actually very similar to our competitors.  The only thing is that we've dialed up a lot of the risk on the platform,  risk controls on the platform, preventing arbitrage or type of trades that could increase the risk of unnecessary liquidations or bad debt on the platform.  So this is something that was kind of like baked into the initial risk considerations.

 But obviously, this is something to consider as well in terms of with the launch of DLP, we actually make the exchange safer by having external sources of liquidity being plugged in, which allows it then to be able to take larger risk instead of being purely on unprotocolated AMMs. So this helps to both increase the yield on DLP as well as allows the platform to take bigger risk enabling

arbitrageurs and more high frequency takers to come in.  I think this is going to be a big unlock for us too.

<< Jason Kam (29:32) >>:

And that means you have your target set on maybe like 80 to 90 if and a hundred million it like you'll basically be on par with troop and maybe even above them Is that the right math that I'm doing in my mind?

<< Cindy Leow (29:46) >>:

Yeah, that's right.

<< Jason Kam (29:47) >>:

That's cool. mean the token should obviously reflect it  if you do achieve it. What's the biggest hurdle you think in this kind of outreach journey of getting people to trade back on your platform? The feedback and those kind of things?

<< Cindy Leow (30:03) >>:

Yeah, I think that  owing to us having been live for so long, ⁓ we've been constantly reinventing ourselves  when it comes to keeping up with market demand and ⁓ obviously doing this fine balance of,  we have a problem of achieving certain types of liquidity on chain because of the design decisions that we've made.

 fixing that and then kind of like having secondary issues come up from that, whether it comes from like a risk perspective or,  you know, any sort of like design perspective. So I think a lot of the challenge has actually been battling these trade-offs  over the past like couple of years. And we've made a lot of progress on many different fronts, but it's been difficult to send the message of like, hey,  come back as we've made these like iterative changes.

The reality is that building on an L1 is just infinitely more challenging than building an L2 or building a new environment on our own.  I think it's a long game and it's the right game to play, which is why we're still in the trenches and we're still continuing to go at full force with what we're doing with full conviction.  But it is more challenging. There are a lot of things that are not necessarily within our control.

<< Jason Kam (31:14) >>:

Hmm.

<< Cindy Leow (31:32) >>:

But we do believe that a large majority of users want to keep their assets in a place where, in an L1 that they trust. And that's why we are the highest TVL perp dex right? Like people trust  open source Solana smart contracts. People trust the L1 that it's built on. And that's the design philosophy that we're going to keep on insuracing with. The difficulty of course, it's like as we're making these iterative changes, we might lose users over time.

 But I do believe that we're at a turning point now where these changes are slowly all going to be reflected in performance and in future parity.  you know, this is the most confident I've been in the last few years of running Drift that I think that the stars are finally aligning.

<< Jason Kam (32:21) >>:

wow. OK. So the network finally got good enough, basically. You're solving all these onboarding issues. That's cool.  I mean, the market's pretty noisy with all of these crazy things that's happening. Maybe they can trade crypto now on iPhone. You can trade stocks. You can offer perps on stocks. People are going really aggressively into RWA. I guess in terms of the instruments, or

<< Cindy Leow (32:25) >>:

 Yep.

<< Jason Kam (32:49) >>:

A lot of the perp that you have talked about is blocking and tackling, like growth, is there anything on the feature side that... One second. Is there anything on the feature side that really excites you or the instruments you can trade that you feel could push you to the next leg of growth, maybe even beyond half a billion to a billion?

<< Cindy Leow (33:04) >>:

Mmm.

Yeah, so I do think that  real assets are a big part of this. I think that  stocks coming on chain and even having equity perps,  you know, we've seen some of this start to take off in other ecosystems. We haven't really seen that in Solana yet.  I do think that this is a big  way for us to increase our volume.

even going as far as adding commodities or effects on chain. I think that's a big market to trade these things during obviously the wartime period. Everyone is a macro expert and they want to crude oil. They want to trade equity indexes. So I do think that having these things coexist within one platform where you can trade  stock perps alongside Bitcoin, alongside SOL

is a very good environment for bringing that new volume in.  The other thing and the other growth lever we see is really vaults. Having a trusted fund manager be able to manage your risk on behalf of you  represents a very big source of alpha because it means that anybody can now deposit into professionally run hedge funds that

You don't need to meet a certain like 100k minimum.  And so, and these, these vaults are all doing volume, they're all running strategies that  regular people, they don't have that, you know, trading or prop trading experience, like would be able to run on their own. So  I do think that there's a big opportunity for, for these type of, for these vaults. we're currently already the largest structure product on, on Solana.

to see more iterations of these type of strategy balls.

<< Jason Kam (35:08) >>:

Aside from what we've talked about, I guess we touched on the sort of potential growth of the exchange with  reaching future parity and grabbing the folks that left Solana to come back. Is there anything else that, I guess after you push August, there are some additional blocks and tackles you have to do. what's the roadmap for next year? Or what's the next  big thing for you once you have solved this?

<< Cindy Leow (35:34) >>:

So one of the launches that we did during Drift DeFi Day about a month ago was Drift Institutional. So we launched a institutional product with  Apollo and securitize where you can use Apollo's, you can now trade Apollo's private credit fund  on chain directly. You can also run levered looping strategies using Apollo's private credit fund as collateral.

This is pretty net new in terms of what has been, like what DeFi is capable of. And that actually makes me very, very excited for where this could go. Obviously there's a lot of blockers today with  actually acquiring this token itself. It's similar to stablecoin minting where you need to be KYC to mint and then you basically get a staked version of it that you can trade freely on chain.

Now I don't think the market appreciates how crazy it is that you can hold on to a tokenized share  of a previously fully illiquid asset  that didn't have a representation anywhere illiquid, borrow stable coins against it, and use that to mint even more and run that trade again. That basically increases your  total yield.

<< Jason Kam (36:46) >>:

you

<< Cindy Leow (36:55) >>:

when you do the loop and  costs from like 8 % to 14, 15%. And this is just one example of a type of rule asset that's been enabled, given utility by DeFi core mechanisms. And these are the sort of, you know, longer term, medium term innovations that I see us continuing to draw on as we become a, you know, full suite DeFi.

prime brokerage type of service. yeah, I do think there's a bigger vision there with more and more of these types of assets coming on chain. Obviously, medium term focus is we want to win the perps market first. And in the meantime, build up all of these 10 orthogonal businesses to continue to capture growth, even though that is more of an experiment, given that these are like largely

<< Jason Kam (37:25) >>:

Hmm.

<< Cindy Leow (37:52) >>:

that year.

<< Jason Kam (37:54) >>:

Should we expect more of those kind of products come online as part of your collateral? I guess that can be traded and borrowed against.

<< Cindy Leow (38:04) >>:

Yep. Where we're continuing to work with a lot of the larger financial institutions that want to tokenize fund products. And very interesting thing is that crypto is a pretty sizable industry in terms of total wealth and total GDP. And to the point where these financial institutions see it as a very viable place to bring their assets to, it's almost as if

It's like wealth management businesses finally see the crypto market as something serious to go after and attracting like stable coin flows, attracting these markets. so we're kind of seeing the reverse of what's been happening. It's like TradFi is offering its products to crypto native users, to crypto native foundations, high net worth individuals today. And those users have a very unique risk profile of not caring

or well, being very aware of smart contract risk in DeFi in a way that, you know, a person who's never interacted with crypto before just doesn't understand. So I do think that those confluences coming together means that all of financial institutions are clamoring to bring products like this on chain because you can actually see huge growth.

<< Jason Kam (39:28) >>:

Do they have to deal with you? I'm curious how you won that deal because it sounds like something that would be on, I don't know, like Plume or on. That's what they talk about. But  what's the revenue contribution for that product to Drift today? How did you win it?

<< Cindy Leow (39:46) >>:

So that's also part of the reason that we believe being on Solana L1 is superior, because that product came to Solana L1.  In terms of being tokenized, Solana already has all the token standards in place.  Apollo is not really getting tokenized on a random L2 somewhere from a native perspective. So by being on L1 itself, we're positioning ourselves to receive all of these tokens.

<< Jason Kam (39:55) >>:

Hmm.

Hmm.

<< Cindy Leow (40:15) >>:

 by nature of how we're designed. The X-Stocks that were just launched yesterday, all live on Solana.  So like I said, it's a layer of work that we benefit from just by being on this chain. So  with that, we're able to accept this as collateral, which is pretty mind blowing.

<< Jason Kam (40:37) >>:

and collateral for perp trading?

But the customer is already a KYC customer for perp trading, I'm guessing.

Got it. Or I guess if I'm not KYC/AML, I can purchase this. I can use this collateral. Okay. Interesting. How fast do you think this blows up into the next couple of months? Do you have like a massive pipeline of things to be tokenized?

<< Cindy Leow (41:06) >>:

 I think there's different styles of assets. I think  the slow assets are the ones that are like private credit. They're all kind of like yield games. There's going to be private credit that comes from different institutions,  different styles of like, how exotic do you want the private credit token to be? Are you willing to face a  liquidation or default risk?

if you take like 20 %  and then if you want to go even deeper into the granular parts, it's like, is there a style, is there like a portfolio of different private credit assets from different issuers  that you want to take and combine that together into one versus just having like a flagship one? So there's a lot of customization out there. Fundamentally, it just flows into two buckets, which are slow moving and then fast moving assets that have high velocity.

I think for slow moving, you're really just competing on yield.  And we're starting to see more and more exotic type of private credit coming on chain. And then on the fast moving side, we're starting to see a lot of different types of  tokenized equities coming on chain. I see, for instance, Robinhood launched private stocks yesterday.  Imagine being able to trade OpenAI

<< Jason Kam (42:05) >>:

Hmm.

<< Cindy Leow (42:34) >>:

 on chain, right? Based on an oracle that ties to its latest valuation or its latest secondary valuation that's weighted by liquidity somehow.  That to me is a very interesting opportunity to be able to bring both crypto native investors the opportunity to hold on to these types of assets. And then going even a step further, it's like

If you're really trying to build a decentralized NASDAQ, decentralized CME, I think all of these things have to exist on the same plane. So being able to trade OpenAI for Bitcoin or being able to trade that for Sol, even use that to build a CDP type of position and then launch your own stablecoin from OpenAI stock. That's the beauty of DeFi, ultimately.

<< Jason Kam (43:17) >>:

Interesting.

<< Cindy Leow (43:31) >>:

 I don't think it's from isolating yourself. It's from sharing in the broader  execution environment.

<< Jason Kam (43:41) >>:

Do you feel like a KYC AML is a big enough hurdle to prevent users from using these kind of innovation that happens on chain on Solana?

<< Cindy Leow (43:51) >>:

Is KYC a hurdle? Is that your question?

<< Jason Kam (43:54) >>:

Yeah, like I

get your point about being composable with all of these assets coming on chain. It's like pretty pretty exciting because you just don't know which one people want and if they do want it and you're the only value where they can use it as collateral, people are going to use it and you can't do that on hyper liquid, for example. Not yet. And therefore, if that's a really hot instrument, then you just that's the hook to suck up all the volume.

 But if the downside for that is one has to KYC/AML, then the dude that apes millions would just like pause for a second.  Do you feel like that's a hurdle or do you feel like there are kind of looser actors that kind of really just went at it and does not allow, does not need KYC/AML, can ape these kinds of things and you will still accept it as collateral.

<< Cindy Leow (44:35) >>:

Mm.

So the X-stocks that just launched yesterday ⁓ has the same mechanism in terms of KYC and AML as stablecoins, where you need to be KYC to mint and provide liquidity from them. And this is usually the role of MMs, who kind of take that  mint and redeem risk. And then from there, it actually is a permissionless asset. So you don't need to be KYC to touch them on chain.

<< Jason Kam (44:52) >>:

Hmm.

Yep.

<< Cindy Leow (45:12) >>:

you do need to be KYC to redeem them. So ultimately, you are relying on the KYC of  the liquidity provider on both sides. Just similar to stable coins, you're trusting that that bridge exists,  but you still have a very seamless experience. Yeah.

<< Jason Kam (45:29) >>:

Yeah, that's fascinating because it's almost like a loophole because stablecoin is just dollars. It's not a security, but this is clearly a security that kind of is out of the ring fence. don't know. At some point, it's going to come on and just like, but not today, guess. Do you expect that to be a separate business line for you that contributes revenue or I guess it manifests itself in TVL and lending bar and volume?

<< Cindy Leow (45:55) >>:

Mmm.

<< Jason Kam (45:56) >>:

Because of that, you should be able to grow TVL faster. It seems like you've highlighted the institutional side and the asset RWA side of Solana being a key competitive advantage. I guess it just helps you grab the customers faster, but not necessarily as directly as a business line in and of itself.

<< Cindy Leow (46:14) >>:

Yeah, we will make money on the borrow land side of things. like a percentage of borrow  and supply spreads.  And then with the vault product, we've taken zero fees on that, for instance. given that we've helped many businesses start from scratch and avoid the operating costs of running like a hedge fund business,  that

<< Jason Kam (46:23) >>:

Mm.

<< Cindy Leow (46:40) >>:

that could take a percentage of the management fees charged per vault, for instance. So these things are zero fees today, but you could very easily imagine revenue being charged on this as a launch your own hedge fund business, launch your own  trading strategy business. We want to ensure that it grows first and see initial PMF on it before  charging on it.

I do think that there are simple ways to monetize on this flow. Of course, today we care more about growth than monetizing on those aspects.

<< Jason Kam (47:16) >>:

Got it. Last couple of questions for me. I guess, do you plan to give out a lot more token incentives on the pending August launch of your new features and products?

<< Cindy Leow (47:26) >>:

Yeah, the plan is to do token incentives then. ⁓ We're obviously having a broader conversation with our community on the best style.  That makes sense. I think that token incentives, at least ongoing token incentives from a trading perspective, is a problem that hasn't necessarily been cracked yet  in a sustainable way. So we do want to be careful with how it's done because you obviously want to avoid wash trading.

You want to make sure that  it's also seen as an exciting way for people to get rewarded. So yes, the short answer is yes. Long answer is  in terms of the how,  ongoing conversation on what fits our needs and the community wants in the best way.

<< Jason Kam (48:15) >>:

And then I guess the expenses of salaries and growth and all these other expenses comes out of the DAO treasury. The team doesn't have to sell tokens to fund itself.

<< Cindy Leow (48:26) >>:

So right now it's happening on the Labs entity,  which  did fund-raise in the past.  And then as an ongoing, you know, more and more of the business will be moved to the foundation side, where the foundation then can, you know, fund the expenses of that. But right now it's actually borne by the Labs entity.

<< Jason Kam (48:50) >>:

Got it. And the labs itself does not need to sell token to fund the expenses.

<< Cindy Leow (48:56) >>:

No, not right now.

<< Jason Kam (48:57) >>:

Okay, got it. sense. Let me see. Is there an inflation rate you target annually for token incentives to kind of grow your plot?

<< Cindy Leow (49:09) >>:

 There is no specific target right now.  We budgeted for something like 5 % annually  in the initial token launch. This is not a strict number, but that's the rough amount that we had in mind.

<< Jason Kam (49:23) >>:

Yep.

Got it. Got it. Got it. Very cool.  Let me see if the group has any other questions.

Is there anything we haven't covered yet? I think that GTM and  getting people back upon your future launches would be crucial. I mean, good luck with that. think it'll be a really kind of exciting time into the second half of the year just because there are a lot of features that will be added and a lot of products that could come online.  And if you hit your target, I mean, if you hit 90 million of AR  with a PE-based buyback, the token should do quite well versus what it is today. It's like a four times, five times earnings.

<< Cindy Leow (49:46) >>:

Mm.

<< Jason Kam (50:10) >>:

Is there anything we haven't covered you feel like we should cover on the back of this?

<< Cindy Leow (50:17) >>:

I think we've, I think we went through quite, quite a bit. yeah, I would just say, you know, we're, we're gonna, we're gonna spend a lot of time,  slowly revealing, DLP launch. so if there's any early feedback,  that, the market wants to give, or any, wants to test out DLP with us, very happy to, to give you guys a first look.  we also.

are going to be talking a lot about what we're doing on the Solana core side in more detail. Obviously, I didn't really go into super specifics there, but  more and more is going to come out on that in the coming month. Yeah.

<< Jason Kam (51:01) >>:

There's a lot of chorus, and you can talk

about it right now. Okay,  fair enough. Okay, great. Well, Cindy, thank you so much for your time. I really appreciate you coming on. This has quite helpful, learning about the future of roadmap.

<< Cindy Leow (51:04) >>:

Yeah, yeah, let's sort of know.

Thanks so much, Jason.

<< Jason Kam (51:18) >>:

Thank you.