The Battle of Restaking Platforms & Alt L1s

Vance Spencer

Be it the team, the resources, or like the construction of the protocol, Uniswap is by far the best shot. These are bullish lawsuits, in a way. The thing that happens, you know, be it the ETF denial for ETH if it comes, and the subsequent legal fight, or the Uniswap legal fight is like, you just get a lot more press coverage. ETH is in the headlines every day. Uniswap's in the headlines every day.

Like, I don't think this is the gotcha that the federal government thinks it is. It's just going to make these things more popular. Hey, everyone wanted to give a quick shout out to the wormhole foundation. If you are a bell curve listener, you know that transferring across chains can be a massive pain. I certainly do.

Mike Ippolito

I complain about it on this program all the time. That's why we are super pumped to have partnered with the Wormhole foundation, the stewards of the wormhole protocol. The wormhole protocol connects over 30 blockchains and six different runtimes, including Solana, Sui, Ethereum, layer twos, and more. And the coolest part about this particular partnership is that they have made custom Bell curve nfts, which you can get and mint for free. You can claim that by just going down into the show notes and clicking on the link.

All right guys. Hey everyone wanted to give a quick shout out to this episode's sponsor, Fludd protocol, the optimal Dex aggregator. Now, if you are a listener of Bell Curve, you know that Mev is a massive problem, which is why we are so pumped to partner up with Fludd on this season. Fludd is the only gasless and mev free aggregator that not only gets you the best execution, but also gives you back all the extra surplus that you create every single time you swap. Now this is relevant for both swappers and developers, but you're going to be hearing all about them later in the program.

So for now, thank you flood, and back to the show. Hey everyone, this episode is brought to you by uniswap delivering the best on chain trading experience in crypto, period, bar none. One thing I want to call out is the Uniswap extension, so say goodbye. These days are these annoying as our pop up wallet extensions? You lose your place trading, you have to open it back up.

Uniswap now has a nice, sleek Sidebar that persists no matter where you are on the web. It's more much easier to use if you click the link at the bottom of this episode. You can join the waiting list and I'll see what I can do to get you moved up that waiting list. But definitely go click the link, check it out. All right, everyone, welcome back to another.

Michael Anderson

Episode of Bell Curve. Before we jump in, quick disclaimer. The views expressed by my co host. Today are their personal views, and they do not represent the views of any organization with which the co hosts are associated with. Nothing in the episode is construed or relied upon as financial, technical, tax, legal, or other advice.

You know the deal. Now let's jump into the episode.

All right, everyone, welcome back to another Bell curve roundup. You got Michael's one and two and Vance. Fellas, how are we doing? Doing wow. Doing well, I think.

Yeah, we're all at full warp speed today. Full warp, dude. Full warp. You boys move a little slow. We had some drinks last night.

Vance Spencer

Okay. Yeah, and we're mourning the, we're in a state of mourning this morning for. Got a pour one out. I don't know if you pour one out for this guy. I don't really know what the public said.

Michael Anderson

Morning is on OJ. OJ Simpson is deceased, though. Pretty wild. Man. If he did it, he wrote that you wrote.

Vance Spencer

If he did it, this is how he would have done it. But I didn't do it. Yeah, rip to him. I don't know why people think the government killed him. I think they're done with OJ.

I think they got their man. They did. Yeah. That's just, that is such a wild idea to think about. That just sounds like the highest idea of all time.

Michael Anderson

It's like, well, here I could write this book about if I did it, this is how I would have done it. But it's incredible that that made it to print. That's why. I mean, it's because he had gambling issues and he was like, how do I make money? Oh, really?

Oh, that's kind of sad. Strapped tower. Yeah. Well, there's a feel good story of the week to. To counter that, which is I'm going to tell my own feel good story, which is I have my back.

You guys know, has been so bad for like two years. Haven't been able to run. Dude, I'm like a 95 year old. You guys know this story, but this is how pathetic is this story? I actually threw my back out for two months.

Like, couldn't move off the couch because I got food poisoning. And I threw up so badly, I threw my back out. But yesterday I went on a run for the first time. So I was a wow, I'm a happy camper. Health as well, yeah, it is, dude.

It made me feel. Yeah. So I'm very. That will feel good. Well, there's.

Vance Spencer

There's the guy at the masters who threw out his shoulder celebrating a birdie putt, so you're in good company. No, that's terrible. That's Brad. Yeah, I was watching that. At all.

Michael Anderson

Yeah. Masters. We. Best week of the year. Is that this week?

Yeah. Starts to. I mean, apparently, weather delays. We're recording this Thursday morning. We'll see when they officially tee off, but begins today.

Yeah, I went to Augusta once. My college roommate had tickets somehow. And. Yeah, it's pretty wild. You can get.

You can get a pimento cheese sandwich there for a dollar 50. Yeah, it's a dollar 50. Yeah. Yeah. That's what it is.

It's like the Costco hot dog or whatever. It just stays. Stays pat. And it's not fans. It's patrons.

Oh, yeah. Patrons. It is very. It's like real southern. It's almost like antebellum south.

It's like the last vestige of, like, antebellum southern culture. I mean, they literally got greenskeepers, pre. Pre tournament out there with scissors, flipping grass. Yeah, it's absurd. Yeah, there's.

You know what it kind of has is a little bit of, like, get out energy. You know, like, if get out was actually happening in any place in the country, probably Augusta's is where that would be. Yeah, they don't. They don't have the greatest history with that, but is what it is. I guess the funniest part, I think about Augusta is you've got this oasis of the golf course right there, but the nickname for the town is Disgusta.

Is it really? Yeah, I guess I didn't spend that much time. It's too bad. All right, we should get into. We got actually a bunch of stories this week.

Maybe we just start with the one that is undeniably the headline here, which is that Uniswap has received a wells notice from the SEC. So that typically precedes an enforcement action. Coinbase got a wells notice a little while ago. And, yeah, basically, Hayden, the CEO of Uniswap Labs, took to Twitter to announce this, and we can get into some of the details. It doesn't seem like the SEC is actually elaborated on or anyone from the Uniswap team has said what exactly the enforcement action is going to be.

There is speculation that it's going to be operating as an unregistered broker dealer, but I've just never seen the amount of outpouring of support for Uniswap. And I think there's a bunch of different angles that we could talk about. But what was your guys high level take on this? So, I mean, high level. I think Paul Grewal Greywall had the best take on it, specifically on the broker point, which was related to the case of the Coinbase SEC case that just, I guess the motion for dismissal was partially denied, but the part that was denied was the definition of Coinbase wallet acting as a broker for users.

And it very clearly states that if you are not facilitating, custodying, or like, basically making transactions on behalf of your users, you are not considered to be a broker. And so I would imagine that the SEC is smarter than trying to go after that exact angle because, let's be serious, that's basically what uniswap is in a lot of ways. It's a front end with a decentralized protocol on the back end. Users are making actions on their own, they custody their own assets. It doesn't fit cleanly into the definition of a broker.

I know the SEC has tried to change this definition, but it seems like the courts have. Yeah, if I want to pull it. Up, seems like the courts have been kind of clarifying this particular point. I would imagine that the Wells notice, and just as context, Wells notice for Coinbase, I think, went out in March of last year, and then in July is when they were officially sued. And so we probably have a few months before we actually know what the lawsuit is or anybody knows what the lawsuit specifically is.

The Wells notice will have information in there saying, hey, can you identify this or that? Or, hey, do you have responses to this point or that point? But we won't know about that until we actually see it. I would imagine that it's probably not going to be broker services, or maybe it's a part of it, but it's not something that they're going to be. There will be other things featured in it as well.

Vance Spencer

Yeah, the only thing I have to add to that is that this is going to take years. And Hayden said that in his post. And if you remember the Jay Clayton on the way out suing ripple, you probably sued a couple other people. Like, you know, those cases were filed in late 2016 and we caught verdicts on them. No, no, 2020 or late 2020.

We got verdicts on them in 2022, 2023. So these things take a long, long time. And I think if anybody is going to have this fight, you know, be it the team, the resources, or, like, the construction of the protocol, Uniswap is by far the best shot. You know, like, Gary Gensler is going after either x times y equals k or a designation as a broker dealer that's already been thrown out, per what Michael said earlier. I don't think it changes much.

I think generally these are bullish lawsuits. In a way. The thing that happens, be it the ETF denial for ETH if it comes, and the subsequent legal fight, or the Uniswap legal fight, is you just get a lot more press coverage. ETH is in the headlines every day. Uniswap's in the headlines every day.

Like, I don't think this is the gotcha that the federal government thinks it is. It's just going to make these things. More popular and ultimately leads to discovery. So this is a, you're going to have to look at all the facts and circumstances. They're going to have to put forward internal documents, internal analysis.

Michael Anderson

They're going to have to represent their perspectives, and we're ultimately going to get to clarity. And I think that's probably the best part of all of this. Whether it's Coinbase or uniswap or where ETF, you know, ETF denial is, we're going to get to a point of clarity, and there's not going to be this, you know, gray video that's hanging over our heads. Yeah. You know what's funny is I feel like the SEC suit of XRP changed ripple from this kind of industry pariah.

You know, you had guys like Celkis back in 2017 going on podcasts, you know, and now it was like, those guys are all right. Actually, it unified everyone bond by ripple. And I feel like it's going to actually be. It's going to be really shitty for Uniswap to be dealing with this. I'm sure.

I can't even imagine the headaches. You know, long conversations with lawyers feels like a distraction from the mission. But if there's one team, I think, that was equipped to fight this on the defi side of things, it is uniswap. I had a question for you guys. Like, obviously, none of us are lawyers here, but this feels like sort of an interesting strategy, a strategic move from the SEC here, because I don't know, on the one hand, it seems like they're going after Uniswap to send a message, but also Uniswap is well funded enough to fight them.

And if they were to lose on this, it could ultimately set really damaging precedent for them in the United States. Do you know what I mean? It's kind of a head scratching move. Honestly, it doesn't seem like the smartest move I've ever seen from them. This case will be decided in years, and there will be multiple appeals.

Vance Spencer

If there's a laws on the Uniswap side, there will also be significant costs. That's the thing you didn't mention. I think Coinbase has probably spent 100 million on legal fees for their fight against the SEC. So they picked the right team to go after. But this is also political calculation.

You had the treasury asking for numerous things, crypto and non crypto, but on the crypto side, they want more regulation or more power to go after overseas stablecoin issuers. They're talking about Elizabeth Warren and Wally Adiamo, the undersecretary of the treasury, in congressional hearings. They're talking about kycing all validators. So this is a political operation that's manifesting in many different ways, not just the Uniswap case, but these things will all be decided way after Gary Gensler's tenure. Political theater, in some senses.

Michael Anderson

So I was literally just about to say this. This, I thought, was one of the best tweets following up, and this is the CEO, Virtu, one of the largest market making companies. One of the largest market making companies in the world. And we're not talking about crypto. We're talking about all of the financial assets all over the world.

And, you know, for those that are listening, Doug says, best of luck to you. Dari is a politician, not a regulator, as the head of enforcement. And I think, you know, really what this message is saying is they're going after the big ones because it's a political move. It's not something that they think or maybe even care as much about winning, but to Vance's point, because this will be finally adjudicated in years, it's about getting the political win of starting the process, not necessarily finishing it. Keep in mind, I think the betting markets had it right for the presidential election, that Trump is the favorite.

Vance Spencer

We think he will win, but in the case that he doesn't, all these people are jockeying for new appointments, new positions, new narratives, and so the long knives are coming out for not just crypto people like Elon Musk. It's kind of like people are just trying to make a show and get their name out there while they can, ahead of this potential, you know, reappointment of powerful positions, et cetera. I took on the biggest exchange, and I took on the biggest decentralized exchange. Yeah, right. And even the Trump stuff, you know, Alvin Bragg suing him in New York, Letitia James, like, what do you think their next jobs are going to be and what do you think they're going to their, put on their resume?

Michael Anderson

You know, not to. Republicans do this too, by the way. Like, oh, yeah, nature of the beast. Not to detour us too much here, but I was, I read this thread on Palmer Lucky. I, like, know who Palmer Lucky is, but I haven't deeply followed his career or whatever.

And this thread, the guy who put this thread together, you know, highlighted, you know, after Oculus got acquired by Facebook, it was basically. Then it got revealed, it got reported on by the Daily Beast or something, that he contributed like $10,000 to a republican cause and there was basically a groundswell riot to get rid of this guy and then they got rid of him. And I just. That is so ridiculous to me. That is, that is beyond nuts.

That is old school. Like shame. Like the, the mob that just blew my mind. Free speech for me, but not for the seriously. And I guess he then founded Andorail, which is now it's bigger than Oculus.

Was when Facebook, I mean, valued at nine, I think eight or nine. I mean, Andrew is also like going after defense tech, like a very different market. American dynamism, baby. Palmer. Palmer lucky is nothing short of a polite math.

Like, he is extremely capable at whatever he chose to do. Um, but yeah, it's pretty insane, the full arc of that trajectory at Facebook. Nice. Um, I didn't mean to derail us too much. There any closing words on.

Actually, just one more on the uniswap thing. It feels like to me, to my uneducated, non legal mind, it just feels like the SEC is pursuing all these different tactics for trying to take down crypto companies. So initially they went after the issuers, right, in the form of ripple. They're not really doing that anymore. Then they went after exchanges and they actually tried to expand the definition of what an exchange is, even though we were showing on the screen before it.

Clearly, for something like a decentralized exchange like Uniswap or a wallet like Coinbase, it doesn't fit any of the 16 different definitions that they have. Just kind of feels like they're ticking these things off one by one, but they just keep walking down these routes and losing. So I would, I would expect more. Of these generally on the different ecosystem actors. But, like, I remember when the ripple suit first came out, it was like Armageddon because it was the first one.

Vance Spencer

Now it's just kind of like, yep, just, just part of the job. Also, keep in mind they didn't sue, but they definitely worked against the ETF issuers. Like, this is a multi pronged approach to try and stamp out an industry. Through regulation by enforcement. I mean, I think the craziest thing is you've got, I think it's 13 or 15 assets in the Coinbase suit that are listed as securities that Coinbase traded.

Michael Anderson

But you have zero of the people who actually created those assets or issued those assets or like worked on building those assets that are able to represent themselves in port. So now coinbase has to go out there, represent all of these different assets on behalf of. I mean, the tactics are kind of like not altruistic. In my mind. They decided like, oh, we're not going to go after the issues.

We're trying to choke off the point of economic vitality of these different issuers, which is the exchanges, and we'll see how that goes. But I'm with ants. I think the proof is in the putting. And there has been much success so far. Yeah.

And that Doug quote says it all. That Doug CP. Yeah. Head of one of the largest market makers in the world. It's not because sometimes we live in our own little bubble and is this just a crypto thing?

But it's not. Tons of other people feel like this. Large financial players, politicians and policymakers on both sides of the aisle. Everyone's just looking at the ACC and saying, what are you doing? So I guess, yeah.

I do not wish you good luck, sirs. So there you go. All right, let's talk about. You guys have. There's a little bit of news coming out of the framework land.

You guys, you guys go let a very big round. I don't want to steal the spotlight here. Do you guys want to talk about the news on your side of the fence? Maybe some semi pseudonymous founders as a hint drawn there? Yep.

Vance Spencer

I mean, yeah, we're co leading $100 million round into Barachain. Thank you. Thank you, thank you. I mean, the first time we had bear chain, we were like, what is going on here with these anonymous cartoon bears building a blockchain? The meme is that the chain was literally not real.

It was never going to launch. But I think once we dug in more and more a just how talented and smart these guys are.

They're pseudonymous. You can figure out who they are just like googling if you really want to, but extremely, extremely talented team from very large tech companies in the traditional world. A very thoughtful approach to the actual architecture of the chain. They're calling it like an ethereum adjacent chain with a proof of liquidity powered staking mechanism. What proof of liquidity is?

You're obviously staking the tokens to secure the chain, but you're also staking them on the different primitives in the chain to bootstrap them and keep them liquid. You can think of this as bootstrapping the defi ecosystem. Bootstrapping probably different meme coins. It's a continuous grant program that is meant to accelerate the adoption of the actual underlying primitives. I think that's one thing that we noticed working with folks like Op, where the grant programs are subject to this meat space intervention, where it becomes this political thing.

And so all of that, the construction of the chain, the talent of the team, the proof of liquidity safety mechanism, and then just the bears too. I think over the long, long term, where our thesis is increasingly going is that basically all underlying tech and financial primitives will be commoditized. The only thing that will matter in the end for blockchains is branding, is the use case of the underlying asset is money and then community. And if you went to Barrapalooza at East Denver, they blew the thing out. Packed wall to wall.

They're doing talks in there. They all have the fucking bareheads on. And then there's people paying super close attention at the front, and then there's people drinking beers in the back and talking to each other. It feels like a very, just like it's an awesome community. We really like the guys and we're proud to be investors.

Very excited. I feel like you can feel that community thing when it feels like organic and real and fun and exciting. It's so noticeable when it's there versus when it's not. And it's hard to create and it's really hard to also maintain. Yeah.

Michael Anderson

And if you've been able to do both, it is a huge, huge defensible moat. Nice. So what, uh, I don't know if you guys can, uh, you know, talk about, talk about any specifics here, but what should folks be looking for on the horizon for bear chain related stuff this year? Or these trade secrets? There's no trade secrets.

There's no trade secrets. There's no mnbi here. But I mean, it's going to be a big couple quarters for, for launches for them. Um, can't get too far into it just because it's not public. But you think about what are going to be the alt l one s of this cycle.

Vance Spencer

And kind of the ones that we're looking at right now. This should be on coingecko. It's like avalanche and Solana and maybe, who knows? But these are all older cycle projects. Kind of need a fresh face, new approach, new community.

And that's kind of what Barachain is. I think this will be the l one of this cycle. Then Monad, I think, is the other one that will launch at some point. We have a lot of respect for the Monad team and Kion and all the people there, but these feel like the two approaches. And what's cool about them is that they're both EVM.

They play nicely with ETH and it's accretive to the overall ethesis. And ETH is money. We're just excited about Bara chain. And I think them and Monad are going to be the two that have the resources, the community. And just like one last note of the community.

I think I passed on Barachain at like four or 500 million. And then Michael picked it back up at whatever valuation we did it at. And I was like, why should we take another look at this? And he's like, the community is just absolutely bonkers. They've got community podcasts, they've got community websites.

It is the closest thing to the chainlink community that I've seen in almost eight years. It's, it's pretty interesting. I think people should go hang out in their discord. It's pretty, pretty funny what, what they're doing there. It's a long place, dude.

Michael Anderson

We should do an episode with one of the bear chain guys in Keone. That'd be a really good one. Also shout out to Monad. They did. They announced their race as well.

225 million led by paradigm. As a disclosure, I am a very small bag. Bag holder and Monad also. So happy to see that, that all. But yeah, I agree.

Like the, you know, the monad team is great. I'd love to get to know the bear chain guys also. I just don't know them particularly well, but should get them on the pod. Yep. It's.

Vance Spencer

Sometimes it feels like it's like bear chain against the world because like, you know, you, like many other kols, have, have monad bags. That's totally fine. Like we think it's going to do well, but the communities are kind of like, you know, top down versus bottom up. That's one way to think about it. Would.

Michael Anderson

If we got the bear chain guys, would they come in their bear suits for the podcast? I would. I would assume so. I mean, like, it does kind of seem like a joke when they wear the heads, but, like, if you have seen a picture of them on stage, it looks really cyberpunk. You know, it looks really kind of like this is what crypto, the Sci-Fi vision, used to be about.

Vance Spencer

And they're definitely bringing that wild and crazy part of the Persona back with it. Yeah, I got to dig a little bit into the proof of liquidity thing. That sounds super interesting. It's something that I'm starting to think a little bit about with restaking. If you look over at Cosmos Land, how they do shared security, there's like, hey, you can use our validator set from the hub will validate your consumer chain.

Michael Anderson

But there's also an element of protocol and liquidity that sometimes the hub will dish out. And that second element is pretty interesting. So the idea of kind of as a value prop, it's almost like liquidity as a service protocol and liquidity, whatever it is, I think that's a super interesting area. Might pop up more around restaking. So it fits with the thesis of, like, at the end of the day, like, I guess fees do matter.

Vance Spencer

Like, underlying fees occurring to the blockchain. But the most important thing is that people actually use the assets. It's that they use them as money. It's that they're transacting with them. Like the buy and hold thing that probably only works for bitcoin.

Everyone else, they're going to need to figure out their own angle to make these things money. That's by far the biggest market. And so that's kind of part of the thesis as well. It's funny you say that. One of the.

Michael Anderson

So we have been experimenting with a bunch of different metrics to look at for l one s as something critical. And it's really difficult to measure this, but we were looking at the depth of ETH trading pairs, basically as a critical metric for ETH, because we had the same thought as you. It's just like, people just need to use ETH as money, and if they're using. If that's the most liquid cross, then that's super bullish ETH, basically. So I don't know.

It's hard to measure that, though. That was the challenge for this probably. Dovetails into, you can use it as a dex pair, you can use it as a borrow pair, and you can use it in re staking. Yeah, actually, the other kind of thing that we had this week. Yeah, that's a big week for framework.

Should we all right. Let's talk about a taraq before we talk about it. So sometimes when you announce projects, nothing happens. People are like, that's cool. Interesting.

Vance Spencer

Less frequently is like, the knives come out and Michael, I don't know if you, I don't know if you saw this, but. But one of the, I assume Eigen lair investors, Evans, added us to a list of people that would sell their mothers for twelve basis points. Basis points. Yeah, I saw that. Like people are just coming, coming after us.

Yeah, you know, it's. The knives are out. I challenge Evan to show me your bags. I think that's a little silly. There was obviously going to be other restaking platforms.

Michael Anderson

Always listen, I can name. I won't, but I can name at least two others. Hey, everyone wanted to give a quick shout out to the title sponsor of this season of Bell Curve, the wormhole foundation. Now, if you are an on chain user, which I bet you are, if you're listening to Bell curve, you know that the cross chain experience in crypto still sucks. Let's just call a spade a spade.

Mike Ippolito

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First of all, this is a fun team. They did something really cool with us. You can actually go and click the link at the bottom of the screen, which is going to send you to a landing page where you can claim your own unique wormhole NFT. So we're doing this with me and we're doing this with Jason, my co founder. So help a brother out.

It's a super cool NFT, I promise. Go click the link at the bottom bottom of this episode and fill out your Po app. Get your free NFT. And if you're a dev, head over to wormhole and check out to see what cool cross chain stuff you can build. Hey, everyone wanted to give a quick shout out to this episode sponsor, Fludd Protocol, the optimal Dex aggregator.

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Michael Anderson

Curious about Carx decision to so restaking platform. It seems like the strategic differentiation, you guys would know much better than me, but is to be more asset agnostic. So it's not just restaked ethically. They're going to accept all different types of assets. I actually thought people were one that didn't get enough interest was USDC like, that is a pretty interesting restaked asset, especially in a bear market.

I don't know anything that you could speak to the strategy pros and cons of doing all assets versus being specific to ETH or Solana or TIA or something like that. I mean, I think that's exactly it. Each asset will, number one, garner interest from that community. Number two, provide a different security model depending on what the asset is and how it trades. And if you're ETH based, I think that there is a lot of just like concentration risk where you're not going to be able to have the connections to other communities, or the potential risk of, let's say, ETH goes down whatever, 20, 30%.

Does that mean your entire security model for everything that's built on top of you goes down 20% to 30%? You need to have the, the diversity to be able to be able to have that security model. I mean, I do think that that is an important variable here. I think the other one is just like, how much security is actually needed, like how much economic value is needed to provide the right amount of security for these ecosystems. It seems like we've kind of blown the lid off in terms of where, you know, that $14 billion amount is trending relative to what will actually be needed when these things launch.

And so the other approach here is starting smaller and frankly, limiting on the way up and finding reasonable growth vectors versus just unlimited no cap TvL growth. The other thing that is important to understand about Keric is that the Eigen layer approach is to draw all the liquidity onto ETH L one. And that does work for ETH based assets, for all the other chains in the world. The Carec proposition is like, we're going to bring liquidity to you. We are going to bring a robust LRT based Defi ecosystem to you, versus trying to suck the liquidity away from your chain.

Vance Spencer

This is still ETH aligned, this is still going to be predominantly ETH focused, but this is just a different approach to the problem.

No matter what nasty stuff is said about us, I think selling our mother for twelve basis points is a little offensive. But it's mostly funny. But you had that for the care team, too. We're just not going to stoop to that level. We still really like Eigen Lair.

We're large depositors. You can't make us hate you, even though it might be not the same. Vice versa. But we should be allowing competition in this space. If there is no product live.

And frankly, even if there is, like, there is no rules that say that there can only be one approach. And so I think Kerek is the dark horse right now. And that's kind of the position that you want to be in in these fights. Like, you definitely don't want to be Goliath, you want to be David. And the last thing I'll say is, like, when you activate the immuno response, which doesn't happen frequently, when you just have, like, you know, the host seize on the illness or whatever they deem it to be, it's like you've done something right.

So I think Kerik is just gonna keep winning. And we support those guys, and they're high quality founders. And despite what's being put on the timeline, they're not, they're not scammers. That's like, can it. Can't understand that.

Michael Anderson

Well, they were the, this is the founding team behind risk harbor, right? Is that. Yep. Yeah. Yeah.

I don't understand. I feel like they're getting some shade right now. They're getting some shade because I think there's some sleuths that are maybe aligned, uh, with idean that are trying to figure out, you know, the trajectory of events. The trajectory of events is really simple. They pivoted from risk harbor, realizing that collateral pools as risk models aren't as strong as building security models with restateing assets, which basically is, you know, what keric is.

And I think risk harbor as a brand is not aligned. It's more on the insurance collateral pool branding, whereas Keric is something that's brand new. It's not like this big, you know, crazy roundabout, anything. It's, it's really a simple pivot. Last thing I'll say on this, and then we can move on because we don't want to just like, talk about our bags the entire time.

Vance Spencer

But number one, the two founders are killers. If you write them off, I mean, like, they were at the epicenter of the UsT explosion. Like, don't, don't write them off is the first one and the second one is the caps were hit. There's more demand than there is supply for their services at the moment, and they're going to be raising the caps in the near term. So definitely check it out.

Michael Anderson

Yeah, definitely check it out. As a non bag holder in any of these things, Eigen Lair or Carrick or whatever, the thing that was interesting to me is, so I've been a supporter of the idea that I think there's going to be restaking on other ecosystems. There's going to be restake Tia and Sol and some other l ones, maybe. And one thing that I think Karak might be, although I know that there are a couple of protocols launching soon, if Kerek is the first one that launches, and they could weirdly end up winning the market for Solana or Tia or something like that. And I was actually thinking about so magic Eden, I don't know if you saw, so they've been crushing it over in bitcoin ordinal land, but they're actually starting to win back Solana market share as well.

And the reason I think that that's happening is because so many people are trading warden also like, ah, I might as well trade my Solana nfts here as well, although I am biased. Shout out to tensor. Those guys did their airdrop this week. Love that team. They're great.

But yeah, I think so. I could see Kerek winning that, like that being a massive, you know, it's like, oh, if I'm going to restake my soul here, then I might as well do my ETH as well. Just a convenience sort of play. But one thing that's been challenging for some of these infrastructure protocols is to do the cross chain thing. Lido tried to expand onto Solana, onto Polkadot, and it just didn't really work because they just didn't have the.

There's a focus thing, but then there's a squishy cultural alignment sort of thing. And actually incentives ended up. We did an interview with some of the guys from Solana talk, or course one talking about this, and they said it was just very difficult. Basically, Lido spent all of its early incentives winning the ETH market, and then they couldnt compete with Marinade, who was entirely focused on Solana. So what do you guys think about some of the challenges of the cross ecosystem?

Squishy alignment, strategic stuff? I dont know. I guess those are the pros and cons. I think if you wind back the clock, Lido was actually very successful on Solana. Just the price of Solana was so low that it didnt make sense to keep the services going.

Vance Spencer

And that was a strategic misstep on their part. But that opened up the window for Jitto to really become the dominant LST on there. And I think the bridges and bridge security has improved by a factor of ten x since basically all this stuff was tried in the bear market. And then again, I think it comes down to, can the top 1% of founders pull this stuff off. And Carrick is an EVM based L two.

If they succeed in winning the multi asset staking landscape, that's a win for ETH as well. And they have an incredibly secure method to basically take in different assets on different protocols. And that's just because they're talented. If you have the best people, the rules don't really apply to you in the same way that the middle 80% of the field has them applied to them. And the way to measure that is speed of execution.

That's the thing with Kerich. Look for them to like push the pace. Like kind of like blur push the pace. That's like kind of what we think is going to happen. It's like they're just going to move fast and they don't have tech debt.

Michael Anderson

That matters so much. Founders that are just like push, push, push the ball up the hill. And I think it was one of the all in guys that said this. It's like even more so than the quality of decision making, it's the frequency of making decisions that's a really big predictor of success in startups. I totally see that.

So there are really good people who are operators who should not be founders, but are founders. They're the ones that need to get to like 70, 80, 90% resolution before they make decisions. Whereas the best founders can make res, can make decisions with 51% resolution. That's a really good way of framing it. Yeah, I mean, you need both, right?

You need like the sort of visionary, I make the call executive decision. But you also need like a good operator to support those people, because usually those people aren't. Yeah. The time for operators is when you've, you know, solidified and ossified. Yes.

Vance Spencer

Like Karaka is twelve people and you meet these two, the two founders, and it's like, uh oh, match up nightmare. Love it. All right, well, we'll be rooting for you guys, and I think there's going to be a bunch of other restaking. Platforms that announce totally, we welcome competition. We think many approaches are better than just one.

Michael Anderson

Vance, maybe switching topics here. You had a great tweet about hedging alts. I just had some questions for you on. But this dynamic of, so basically we've talked a little bit about the sort of lockup dynamics and supply dynamics for especially some of these early stage tokens. But basically it seems like the game, from my understanding, is you make an investment, you get some extremely discounted tokens, and then when those are about to go live and you actually have a price or there's some sort of market or whatever, then you hedge out that exposure via perps.

The challenge for that sometimes is that the funding rate goes up an enormous amount. You can get squeezed on that. I think we probably saw that a little bit this week with Athena as an example. But could you maybe for folks who aren't as involved in that market or don't understand that dynamic, can you just shed some light on how that actually works in practice and what people are doing? Sure.

Vance Spencer

So the first thing I'll say is that there's a rule called rule 144. Right, Michael? Yep. And rule 144 basically says that people who buy tokens are not allowed to sell them for a year if they're locked up in part of like an offering of tokens. The one point of clarification is that if you sell them within 366 days, or if you're basically like, buying these things to resell them, or if that's sort of the intention, and that's how it looks like you're trying to transact in this deal, you could be considered what's called the statutory underwriter, which means that you have to be a broker dealer, which no one in crypto is.

Michael Anderson

Huh. Is this a security law? This is a US securities law. So this doesn't apply to people overseas. But even the hedging, I'm assuming that that would be not kosher with this rule.

Vance Spencer

And so I think kind of what you see is like, the less sophisticated overseas market participants hedge their bags, or maybe us people who just don't think this rule applies to them. What that means mechanically, is you buy tokens, you get a Saf or a safe plus a warrant. You don't actually get the tokens. Then an OTC desk will say they've set up to. We can hedge for six months ahead of time.

Say you're in month six of your unlock, and you decide that either this rule doesn't apply to you or you don't care. You enter into this agreement with this OTC desk, or it used to be with FTX directly in their trading desktop. And what they do is they say, well, you've got $100 of this alt you want to get out of it. We need $100 of collateral to put a one x short on the book, on the perps book. And so you've got dollar 100 of the alt.

You put dollar 100 of cash on the exchange, and you short the perp. When you short the perp, you have to pay a funding rate. And the funding rate can range from. If it gets really frothy. Like this week, Athena was 287% APY.

But it's usually more benign than that. It's maybe like 30, 40, 50%. Just for context, the cost to long bitcoin at the moment is about 17%. So that's kind of the baseline funding rate. And then you add just like a bunch based on the supply dynamics of the alt and the demand to short.

The problem with this is that if it goes up instead of down, you're required to post more collateral. So you can literally get blown out on this to the point where, say, the alt goes up ten x, you need ten x more collateral to keep that short on. And if you don't add enough collateral in time, it will blow past your collateral level, your price level, and liquidate you. There's this flat wheel where back in the day, SBF really popularized this, where it was like, you can get out of your alts as soon as you buy them. Just give us some cash to put on our exchange.

Oh, the price is going up. We need more cash. The price, like, you squeeze them, you blow them out, you keep the cash, and then you start the polycule, inevitably. And this is like the virtuous cycle that these are the real friends that we made along the way, the polycules that we started and the cash that we kept. So it's just dumb, I would say, like, don't do this.

It's all. It's obviously, like, in some ways, depending on where you're based, illegal. But also, like, it's completely obvious. Like, the other way to do this is options. When people, I'm not going to name any alts, but when they try to start selling you options on alts, it's like, what are we doing here?

These options don't trade on any real exchange. So there's clearly some sort of hedging flow behind this, but that's the explanation.

Michael Anderson

Yeah, don't try to hedge long venture positions, is the narrative here. The other thing that I'll say is, were now back in the phase of the cycle where portfolio companies that we have that are raising secondary or second, basically later stage rounds are talking with, in particular, asian funds who are requiring. Obviously, these deals aren't going through in the way that I'm describing, but that these asian funds are requiring a ten to 25% allocation of the tokens unlocked at token Genesis event to invest in this round. It's, you know, in typical format, you know, it's a three or a four year vest or unlocking. For anyone who invests in a private token, you get one third or one quarter of it at the end of one year and then invest literally after that, just as context.

But, you know, asian funds in particular, I've heard this three times now, are asking for unlocked tokens at the start. So you, you know, essentially they can dump. We're getting now to the point where liquidity is what people are really thinking about and how they're getting out of these positions is what we're thinking.

It's nefarious and it's definitely antithetical to the entire premise of a venture investment. And so if anybody's out there thinking about raising money, don't have these conversations, don't entertain these deals, don't give additional liquidity, because, you know, if, if it goes, if it turns the wrong way against you, or if you allow these things to happen, you could look like ICP and definity, just like it's done at the bottom of the ocean. Those are brutal charts. Those are brutal charts. Yeah.

Vance Spencer

A thousand screams crying out all at once. It's just bad practice. Also, you just don't, I mean, you also, when someone's on your cap table, it's like more than marriage, right? At least in marriage you can divorce. It's like you're with that person better or worse.

Michael Anderson

Oh, but that's not true. If you have an unlock schedule that happens at token Genesis event. Yeah. 25% of you can, can leave the relationship immediately. That's crazy.

Yeah, that just does not. Well, I guess lots of stupid deals end up getting done around this time, so. Yeah, founders don't do that. That's not good, actually. So one thing that just happened today, so I'm not even sure if we got it on the notes, but it was pretty interesting, is there's a USD circle and BlackRock are uniting for USDC smart contracts.

So circle, in collaboration with Blackrock, has introduced new smart contract functionality that enables holders of Biddle, BlackRock's USD institutional digital Liquidity fund, to transfer their shares to circle for USDC. So yeah, this is kind of just more of Blackrock actually leaning in. I think BlackRock is an investor in circle and it feels like they're strengthening their ties. It improves the value proposition for biddle. It's also probably good for circle.

It's also, it's a little. Some of our analysts were saying it's a little USDC ish. This arm of the fourth estate, right? I don't know. What do you guys think about this news.

I mean, it is powerful.

To be honest. I guess it just adds some amount of functionality for biddle. I haven't actually tried to hold any of these assets or do anything with them. So honestly, I'm not a user. I'm not 100% sure.

I mean, imagine the juxtaposition of, you've got the SEC coming out and trying to eviscerate this industry, DeFi and C five writ large with the backdrop of Larry Fink coming out saying tokenization is one of the biggest imperatives for our industry, for this company. Launching the biggest bitcoin, spot ETF, having applications in for spot ETF, and doing a tokenized fund on chain, like, it's pretty interesting. You know, the biggest asset manager in the world. It's basically like, okay, I understand what you're saying. I'm gonna go over here and do my own thing.

Vance Spencer

Yeah, it's also interesting, you can only sell build for USDC. You can't go into buildle for USDC. Which makes sense given the KYC AML requirements. Yeah, I'm not even saying like, this is the way that this whole thing will work. This is how tokenization, it's gonna be.

Michael Anderson

It's just another step in the process of a tokenized asset that can live on chain in a regulatory compliant way, but massive, massive narrative violation for what regulators are saying. Listeners, correct me if I'm wrong on this, but it seems like what this does, fans, to your question before, is it facilitates near instant 24/7 off ramp for biddle for people who are trying to get out. I guess that's the, that's the value proposition. Yeah, I mean, it's super cool to see this starting to take shape. Like, I love Bilbil.

Vance Spencer

And the fact that they're getting inflows to yield products on chain is there's always the question of like, okay, we're going to tokenize the assets, but who's actually going to tokenize them? Who actually gives a shit enough to put assets on chain and drive yield unironically? We are one of those people because we transact on chain a lot. Uh, but like, having these of big people doing it, it's just, it's a, it's a vision that's literally been like ten years in the making. So cool to see who, who do.

Michael Anderson

You guys think that natural customers are of? Uh, bondholder, like, on chain bondholders? Like, who, who in an on chain setting is like, could be dow treasuries, I suppose, but yeah, who do you think the natural customer is for this type of stuff. So I dinner with a guy who runs a very, very large credit fund this, this week, and he was telling me all this crazy stuff that they do to get like 8% yield. If you look at the corporate credit ETF, I think it's like a 7% yield at the moment.

Vance Spencer

And so you got to go pretty far out the risk curve to get to like eight or nine. And he was like, we buy these ships and we lease them out, and we earn interest on that, and then we take the, the collateral of the ship, we borrow more, we lend that out, and we can get 9% yield. And then you look at the DSR, and it's like 14% over collateralized loans that can be liquidated at an instant if it goes sideways. And I think the answer to who is going to consume these products are people who, even in a 5.5% fed funds rate world, are looking for more yields. And it's great that the fed funds rate is up to that level, but it's also like the Nasdaq was up 50% last year.

What's the real inflation rate when it comes to all the things that people want to buy? It's probably higher than the fed funds rate, but the DSR is probably an example of something that beats it. So I think there's just still a structural shortage of dollars, and as long as that persists, you're going to see inflows to products like these. Hmm. That makes a lot of sense to me.

Michael Anderson

Yeah, I mean, I think there'll be some people that are. I get the sort of allergic reaction some people have to blackrock, like, oh, is this crypto? This feels kind of centralized, but I just think that we, at the end of the day, we want people actually using these protocols for things, and this feels like part of the compromise that comes along with actual real institutional adoption. So I'm supportive of all this type of stuff. It's gonna start somewhere, and it's gonna have to start in the most, like, minute way possible.

If this is that, then totally welcome it. Totally pro. Totally pro. All right, next thing. I wanted to get your guys read on.

I almost. I'm hesitant to almost bring this up because it almost feels like dirty laundry, but there's a pretty spectacular implosion over at Marginfi this week, which is just, you know, it's tough because they, they had a huge, they've got a huge market, right. Their borrow lend on Solana. They were there throughout all the tough times. It seems like all they had to do is ride this out.

But I guess the. Maybe to set the context here is marginfy has been taking a little bit of heat recently because they were one of the early adopters of points as an ecosystem, but they kind of dangled the points. We don't know when there's going to be a token. And I think one of the founders kind of, like, hit back at people on Twitter being like, hey, stop asking. Basically.

And just wasn't super friendly to the community. Someone did this little. I think this was someone we were talking about from. I can't remember. There was another protocol that did this recently.

Just don't openly mock your community. That's a pretty good rule of thumb. But there was a. There was an exchange between this guy Taiki Maida because Edgar from Marginfi called satstarred dirt sack for asking for the token. And it just.

It really spiraled a lot and it led to Edgar posting. Yeah, I resigned from margin today from working on Margin fight, the research arm, all of it world class team. But I don't agree with the way things have been done internally or externally. It's a really long post, but, yeah, it feels a little bit like a good old fashioned rage quit, honestly. Wait, wait.

Vance Spencer

So a community member called the CEO dirt Sack and he resigned. The CEO, the one of the founders, Edgar, called Satsdaard a dirt sack for pressuring him about when the token was. Going to be live and that kicked a hornet's nest. Yeah, got it. Yeah.

I mean, first of all, if you've got thin skin, might not be the industry for you. I do understand that people asking you for when token 100 times and when moon gets annoying, but, you know, as Will Ferrell said in old school, everybody's got to keep their composure.

Michael Anderson

Well, there might have been also. This is where I am speculating here, and I don't know, but there are some pretty wild tweets that proceeded this as well. You know, maybe a little bit. A little bit of a TMI, personal stuff about, like, sexual preferences and orientation. I don't know if you saw any of this.

Yeah, we don't need to. What?

We don't need to get into it, then. I don't want to blow anyone spot up. But, yeah, I think, suffice to say, there was, like, a little bit of personal stress maybe bubbling over here, but yeah, and I know some of the guys from March and fire and my. I don't really know Edgar, but, yeah, I always wish everyone well in these scenarios. And, like, there is a great team there, so I hope they can pull it out.

But I've never. I've never. I can't really remember seeing an early stage founder like this just resign so publicly. So it just. Red is pretty bizarre to me.

It happens. I mean, like, remember the whole Sam Altman thing? Like, shit happens, right? Yeah. That's actually a complaint.

Founder stories, early stage startups. Late stage startups are fucking brutal. Like, there's. There's no denying it, but it is tough when you're doing it literally from, like, the Truman show where everybody is watching you and it's happening in real time and it's happening over social media. Like, I get that.

Vance Spencer

That's. That's brutal. I think, you know, one of the interesting things first, how everyone, particularly solend, literally just vampire attacked everything. Afterwards, they saw this happening. They're like, here's our opportunity.

Michael Anderson

Anyone who moves from margin fight a soul and gets double points. Dude, I was. I was reading Reuters tweets, their CEO, and I was just dying laughing last night. Yeah. I mean, knives are out across the board right now, like, everywhere.

Everyone just, like, has a knife in behind their backs, and they are ready to step. You know what it reminded me of a little bit? Those rooster tweets is when Dave Portnoy gets a win over someone on Business Insider or something. He's not the opposite of gracious. He pops the champagne, and it's like, ned took it house and stuff.

And it is pretty funny to see. So, yeah, I think there was some of that energy going on, for sure. I mean, just, like, if you feel things starting to domino accidentally, just, like, stop. You know, it feels like the margin five stuff could have been avoided. And that's probably the teachable moment here.

I gotta find this. There's a great tweet from nikita.

He's got some banger tweets. Nikita Fadiv, is it? Yeah. Let's see how I can find this. Might have to.

Anyways, I mean, the gist of it is basically, like, be. In times of PR crisis, there's a couple of options. One of them is to, like, hire a full fledged PR team, like, do some analysis, put out, like, a press release. The other one is. And that will cost you, like, I don't know, $50,000.

It'll take two years for this whole thing to settle down, because people will write about it. It'll create a PR cycle, and then there'll be this, like, this remaining thing that hangs over your head, and you'll have to do it. And it basically gets to, like, the other option is to say nothing and just keep working, and it'll go away in 48 hours, and it'll cost you $0. It's. Yeah, it's very true.

It is true. I remember listening to one of the, like, bar stool when my guilty pleasure podcasts, KFC radio. I just, like, when I need to just turn my brain off. I listen to that. I've listened to these guys for years.

I think they're funny. But the. He was described, like, he's like, I don't know. He's a celebrity in the sense he's got, like, 400,000 followers on Twitter. And, like, people know what Barstool is.

But he was describing when he went through his divorce what. What the comms pr experts were advising him. And it's just like, absolutely not, dude. Like, joint Instagram posts, like, ugh, get me away from, you know, just anything but that. So I'm with you.

If you respond, you give it oxygen. Yeah. You know, Yano's wife is a crisis comms expert. Actually, she's got a room firm. Thank God she's helped us over the years.

Yeah, can we get her contact information, maybe? Yeah, yeah. Honestly, I think she's done some work in crypto. There's people making fun of me on the Internet. I need immediate assistance.

What do I do? Please, sir, help. Also, let me just bring it back to Kara Gaigen Lair for a second. So I retweeted this with someone. Someone tweeted out a picture of Sidney Sweeney and Caroline Ellison and said, you know, on the Sidney Sweeney is Eigen Lair, Caroline Ellison is karak.

Vance Spencer

And I was like, this is not the gotcha that you think it is. One is a multi billion dollar grippy, spoke truth to power, took down one of the world's most powerful men, MIT graduate. The other is Sidney Sweeney, and she's kind of mid, so it's a hot. Take on Sidney Sweeney. But I agree.

Michael Anderson

I mean, that's just a ridiculous thing to tweet. If I never saw Sidney Sweeney again, I think that would be fine with me. Yeah, that'd be fine with me too. I'm not a. I'm not a stan.

Well, I think those are all the big things for the week. Were you guys eclipse. Enjoy yours this week, or. No? No.

Vance Spencer

If you were staring at the sun and you work at framework, you're fired.

It reminded me of, like, the dodo birds that stick their heads in the sand. It's like everyone in New York City is just, like, staring at the sun. Looking up there. I mean, if you're so, I saw that at 711, some of the, you know those little cardboard things that you do with the cutout, apparently they were defective. And if you had looked at the eclipse through those, you could have fucked your eyes bad.

Michael Anderson

Risk, reward. Imagine how salty you'd be. It's like, oh, hope you enjoyed that. 30 seconds of also, like, what's the. Difference between just, like, looking at it directly behind one of those uv shields versus just looking at a photo of it and being like, oh, cool.

That was interesting. It's the same thing. I think it's the same thing, too. A lot of people got photos in the eclipse. The best part is, like, people would look at it, then they would have their phones.

Vance Spencer

I hope you use those photos and give them to someone. Same. I also feel, I know that this isn't actually how it works, but didn't we just get an eclipse? And that was supposed to be the last eclipse in 40 years or something. Now we're 2017.

Michael Anderson

Yeah. So I'm good on the eclipse, but we're good enjoyers out there. Had fun, but. All right, fellas, I think we can leave it here. Good app.

See you next week. Later. Hey, everyone. Mike here. If you're a bell curve listener, you know that transferring assets across chains can be a massive pain.

Mike Ippolito

I certainly do. I complain about it on this program all the time. That is why we are incredibly excited to have teamed up with the wormhole foundation, the stewards of the wormhole protocol. And the coolest part about this particular partnership is that they have made custom bell curve nfts, which you can get and mint for free. Click the link at the bottom of this episode.

Take you get your free NFT.

The Battle of Restaking Platforms & Alt L1s | Roundup

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