How to Value L1s, L2s, and Crypto Assets

Jason Yanowitz

This episode is brought to you by Se. Say's v two upgrade introduces the first high performance parallelized EVM already live on public Devnet. Mainnet comes later in Q two. You can follow along with the SAE journey on X A network. Se is spelled S E I go follow SAE on x say network.

This episode is brought to you by Mon ed, which has not only the highest performance EvM L one architecture ever built, but also the wildest and craziest community in crypto. Monad's internal devnet is live and public. Testnet comes out soon, so make sure you join the Monad community today at discord GG Monad. M O N a D, Monad. Hey, everyone.

Santee and I have been talking about Solana a lot recently, and we're excited to have a Solana sponsor of Empire Marinade. Marinade is a staking protocol on Solana and the only stake pool that delivers auto rebalancing, Mev rewards, and automatic downside protection with their new protected staking rewards. Optimize your sole stake with Marinade by hitting the link in the show notes. Big thanks to Marinade. We'll talk more about them later in the show.

This episode is brought to you by Mantle. Mantle is an l two backed by over a $4 billion treasury, obviously one of the largest in the industry. They recently launched their airdrop program called the Reward station, to distribute both presale token allocations or listed tokens to MNT holders who stake their MNT. Mantle has nailed their rewards program recently. Would highly encourage folks to check out the Mantle Rewards program at Mantle XYZ Rewards station.

Although our guest this week is a managing partner of a registered investment advisor, nothing in this podcast should be considered an offer of multicoins investment advisory services or should otherwise be confused for investment tax, legal, or other financial advice.

All right, everyone, welcome back. We got the roundup. We got special guest Kyle Simone from Multicorn. Kyle, welcome to the show, man. Chase and Santi, good to be back.

Kyle Samani

Good to see all boys. Yeah, repeat. I mean, you guys have been four or five times now on Empire. Something like that. Regular in the block.

Jason Yanowitz

Kyle, you're looking very tan. Is it all the biking or. Uh, a little bit of cycling. I was in Hawaii for my birthday a couple weeks ago. Uh, I was just in Portugal with my mom, walking, so just been.

Kyle Samani

Been outside a lot. Nice, nice. Touching grass, as they say. Yeah, I'm looking very pale. I gotta get outside.

I was about to say something, and I was like, that's not appropriate. He's hosting the podcast. I'm looking at myself next to you. It's awesome. First of all, I don't think you've ever held back on the appropriateness of, like, come on.

Jason Yanowitz

Well, Santi's got a face for radio over here, so, you know.

All right, guys, well, I'm. The reason we wanted to do this is I made this comment on the roundup, like, a week or two ago, where I said. We were talking about how Santi and I were talking about how to value these crypto assets. And I said, look, maybe for these l one s and l two s, you should really just value them like a commodity. Like, everyone's talking about revenues and expenses for l one s.

And I think that might be the wrong way to look at it. I think you should probably just value these things like, their commodities. And if you look at how commodities trade, so whether it's wheat or gold or whatever it is, it's just a supply and demand game. So, like, the price of wheat will really move when there's, like, a drought in a place where that produces wheat, and there's, like, a supply shock in the, quote, l one asset, basically in the commodity. And I said, maybe these things should just trade like that.

And, Kyle, you dm me and said. Hey, look, I think you're thinking about. It in kind of the right way, but also kind of the wrong way. Like, you're missing a few things here. So, Kyle, I'd love to just hear, like, maybe you can just lead us into this conversation.

Like, how do you think about valuing these l one and l two, these protocol assets? Yeah, thanks for queuing up the question, Jason, with some good context. So, actually, we have a full presentation on this. Tushar gave a keynote at the multicoin summit a couple of years ago, 2022, covering. Covering this.

Kyle Samani

So encourage you. Hopefully we can get that added to the show notes or whatever. Sure. But for those that don't want to watch that, the way that we at multicoin think about valuing asset ledgers, and that means l one s, l two s, l three s. Pick your number of layers.

But if the purpose of the system is to keep track of who has how many tokens, and presumably people are trading tokens back and forth on the system, then in our view, the primary way you should think about value accrual is MeV. For those systems, MEV will always exist in financial markets for all kinds of structural reasons. There's obviously good forms of MEV, there's bad forms of I should say there's malicious and benign forms we can get into, malicious versus benign, but we can maybe skip that for now and just understand that this MEV exists. And then, therefore, if you are a holder of an l one asset, like, for example, sol or ETH, you are entitled to some of those rewards, mev fees, both as a function of return yield via staking from your staking provider. So you can directly profit from that.

I will note that there are some asset ledgers that do not share Mev back to their token holders, probably the most notable of which is op. I think arbitrum does. Theoretically. Maybe. Maybe I'm wrong on that one.

Santiago Roel Santos

If you're running the sequencer, then you're keeping all of the mev to yourself, right? Yeah. The arbitrum dow collects some fees somewhere, and it is accruing in there. I don't remember the source of those fees, but obviously, theoretically, it's like uniswap. Like, they'll.

Kyle Samani

They'll. The fees are there. They're not distributing them, but, like, you know, it's accruing. Well, in uniswap, the fees aren't being accrued at all. In the case of arbitrum, there are fees accruing somewhere.

I don't remember the source of the fees, but, yeah, I think most of the l two s and perhaps all of the l two s, although they could theoretically accrue tokens to respective token holders, they do not, in practice today, l one s, like Solana, ethereum, Aptos, we, et cetera, all do have that direct value attribution. Kyle, how do you think about the evolution of how these things will start to get valued? And what I mean by that is, right now, we can say they are valued on Mev, but they're not really. All these things are trading on just narratives. Right now, they're trading on mainly speculation and narratives, I would argue.

Jason Yanowitz

Maybe you disagree with me, and then maybe there's an evolution to valuing these things on Mev, and then maybe it evolves into valuing them on something else. Yeah, I mean, how do you think about that? Hard to. So I agree. There's a lot of narrative component to it, for sure, and I don't.

Kyle Samani

Well, let me take a step back. So I think Mev is the primary thing we think about. And I think as the ecosystem matures, that will become more prevalent and more industry observers will also generally come to that agreement, because it maps to generally how people think about finance. And I think that's kind of first order. Correct?

The weird thing about l one assets in particular, and or l two or l three, but I'm gonna call them asset ledger assets, is they do tend to exhibit this premium. Some people call it the monetary premia. I'm not sure I like that term. Um, I would more call it like the non sovereign store value premia. I think that's maybe a better term for it.

They do tend to exhibit that, and that, at least empirically, seems to add some value to the which it trades, which all that does in terms of MeV is reduce the yield, basically, that you earn for holding the asset.

Over time, I generally think you move more from speculation towards fundamentals. I think, you know, I've been doing this for six and a half years. And six and a half years ago, there was zero discourse at all about fundamentals. Um, and today there's a whole bunch of people who at least attempts to have productive discourse about fundamentals. Obviously, we got all the dune dashboards and token terminal dashboards and all that stuff now.

So, you know, people are generally trying to quantify these things. Um, and I think if you go forward another six years, I think, you know, that will continue to. To mature. So I'd say it's been slower than I would have expected. If you asked me from six and a half years ago, like, hey, is there going to be confusion about how to value ether slow?

I would have expected less confusion, but we're moving in the right direction. Can we double click on MeV itself? You hear a lot of people in the ETH community say, well, fees are extremely low in Solana. Therefore, you need orders of magnitude more activity to justify what are high fees in the l one and then l two and ethereum. My counterargument to that is, well, there's still Mev in Solana, but I generally think of valuing these things of like, well, where do you think most of the activity is going to happen?

Santiago Roel Santos

In which network? And then you kind of discount that back. But what would you say to that criticism when you're thinking about MeV in context of the fees that are being generated by networks? Yeah, fairly strongly held views here. I'll answer this both from the perspective you asked it and from the inverse perspective.

Kyle Samani

I'll start with the inverse perspective. Blockchains are supposed to be maximally permissionless. Everything boils down to cost of compute or cost of hardware. That's the long run endgame for a lot of these things. This is why Uniswap has existed for four years without a fee switch is because it turns out the fee switch is entirely optional for making the system work.

We have empirical proof that it works without a fee switch. I think if you take that, it's fairly easy to reason about what is zero fee defi look like. It's harder to envision what zero fee l one looks like, but the answer would be, what is the cost of signature verification and memory and storage and bandwidth to computer transaction? And then you need to obviously amortize that across the hardware and, like, for electricity costs. Right.

But, like, my general, I have an old tweet. I'll find it and send it to you guys. You can put in the show notes that, like, tries to ballpark this within four orders of magnitude. Like, I'm not trying to be super precise here, but, like, it's pretty obvious when you think of, like, what is the cost of electricity to do that kind of a thing, it's like, on the order of a trillionth of a penny. Like, it's kind of in that price range is, like, the actual cogs.

And so then I look at, like, ethereum, and they're like, hey, it's a dollar or $10 or whatever, and I'm like, I don't know, man. You're overpricing the cogs by a factor of a trillion. Like, that just seems like a little fat to me. And so I have this, like, fairly deeply held belief that the cost of using the l one should be approaching the cogs. This is generally true in capitalism, across all industries, obviously.

Generally, things get cheaper and cogs go down and margins compress and all that stuff. I assume that in the long run, the profit margins will approach zero. So, meaning the cost of signature verification and executing a transaction should be even several orders of magnitude lower than it is now. I think even on Solana today, it's a few orders of magnitude too high. And so, yeah, I don't think that that fee stream.

Come back to your question, Tanti. I don't think that fee stream is relevant at all, because it should go to zero. The history of software is the history of zero marginal cost. I mean, this is, like, the defining feature of software for the last 40 years. We're not there in crypto, but, like, we should be approaching that.

To me, the only revenue stream that matters is MEV. And the beauty of MeV is MeV has nothing to do with the cost of signature verification and updating your memory and your bandwidth. MEV is a function of what are the state of financial markets and producing arbitrages and whatever else that come naturally from the inherent heterogeneity and entropy in financial markets. And that's crystal clear to us that the value of MEV is substantial today on the order of single digit billions across all of the ecosystems. And I see a pretty clear path for that to grow 100 x to 1000 x over the next five to ten years.

That, again, from my vantage point, is not a terribly controversial perspective. So I was going to say so just for solicitor to understand what you talk about, because me being Solana is spiked up pretty substantially. And the reason is, as there are more meme coins, there are more things to trade, there's more usage in the chain and or demand, then there's going to be certain types of transactions where it becomes someone out there is going to pay a substantial premium. Block inclusion. Correct.

Santiago Roel Santos

Now, can you maybe just double click on when you talk about the sharing mechanism? So if, for instance, you're a sole holder, you're validating that through geeto or marinade or some other validator, how much of that is actually shared back to versus kept? What is that distribution? And does it vary? Because maybe if you could just.

Kyle Samani

Yeah, so the vast majority of MEV is going back to stakers, validators, whenever they run. If you are running a salon, a validator, you set your commission rate. That is actually a number you commit to and is on chain. Fun fact, Cheeto, actually, they have this thing called stake net that will actually show you the history of every validator and what their historical commission rates have been over time and stuff. Pretty sure it's live on their website.

You can go check it out and you can see how people have fluctuated and stuff. So anywho, so validator, set a commission rate. I believe the median commission rate is something like 5%. So that means 5% of the MEV profits, so to speak, would be going to the validator and 95% would be going to the staker. There are a handful of validators that recently have gone to 0% commission rates.

Most notably, Helios announced this like a week or two ago. They went to a 0% commission rate. What are the economics there for that? For instance, Helios, if you're running zero commission, then what is their viable business model at that point? Yeah.

So implicitly that means that they look at validation as a loss leader, which I generally think is a reasonable assumption. And I think what that probably means is they. I don't know what Helios specific business plan is. I have not asked Myrt. I am an angel investor in Helios, but I do not know the answer.

But I will speculate. And there's two fairly obvious speculative answers. One is they want to improve their own as a lot of moves just take away the quality of service. They want to maximize the amount of stake they have to maximize transaction inclusion guarantees so they can offer a better RPC service to application developers. That seems fairly intuitive.

And then the other way that you could monetize running a validator with a 0% commission, which is via order flow auctions. So those two things make the most sense to me. I don't know. I suspect over time, all validators will generally move in this direction. I think it's inevitable that commission rates, if they don't go to zero, as the equilibria, it will be like 0.5%, 1%.

I don't think. I don't think the median commission rate is going to be 5% in five. Years is a proper analogy. Like Robin Hood, like, when they obviously don't charge fees, but they make a lot of money on order flow, like Citadel is printing. Yes, okay.

That's correct. Got it. Can you just, for our listeners, you mentioned this transition to stake weighted for Solana. Can you just make the distinction? People might not be aware of it.

Yeah, so this is an idea that Solana rolled out. Actually, they put out the code into Mainnet in 2022. It has, I think, not been turned on or basically not been used, and certainly not been hardened over the last couple of years, but it is turning on now. The core idea in stakeholder quality service is a, there's a validator has open RPC connection. Anyone in the world can send them a transaction anytime.

And by definition, you cannot know what the contents of the transaction are prior to receiving the contents of the transaction. So if people are sending you garbage, like it costs, forget even about compute or memory, it costs you bandwidth as a validator to just receive the content when the cost of sending transactions is very close to zero. A lot of arbitrage bots are incentivized to just spam validators. And so the vast majority of Solana network traffic is arbitrage bots, just spamming validators. The problem here is that, like, there's no way to run a market over bandwidth based on discriminating what the content is, because you can't know what the content is.

The whole notion of parallel fee markets, for example, is predicated on understanding this thing goes in lane a, this thing goes in lane b, and this thing goes in lane c. Right, but that means you have to be able to know a, b, and c are separate, but if you don't know what a or b or C is, then you can't even really run a functional market. So stake away to quality of service is a way to create a market for bandwidth to reach the leader. And the way they do it is they say, hey, look, if you own 1% of the, if 1% of soul is staked to your validator, then all of the other validators need to respect that 1% of their, they need to allocate up to 1% of their incoming bandwidth to you. And so this is basically a way to introduce Sybil resistance for the network layer of Solana, and in doing so, it implicitly creates a market for bandwidth to reach the validator.

There's a bunch of discourse happening now on like, should we actually formalize that market in the protocol somehow, or should we not? Unclear exactly where those discussions will let out. But zooming out what stakeholder quality service does is it basically dramatically increases the probability that a given piece of content from a known validator will in fact reach the leader. Kyle, I want to get back to this idea of the valuation side of things.

Jason Yanowitz

Do you think an l one token. Needs mev to be valuable? Yes. Okay, so the other side of this argument, if I were maybe arguing another camp, would say that an l one token can simply, can basically just accrue value from two things. From increased demand from the l one block space and from the monetary.

Kyle Samani

If I'm in, like, ETH land, like. ETH is money that this whole narrative like plus, so it can, it'll get value from increased demand from the l one block space, and the monetary premium from being like, ETH is money from being a de facto money across this entire ecosystem. What would you say to that side of the argument? I think ETH is money is total nonsense. It's just this.

Look, to be the litmus test for being money is you need to price assets in it, and people need to conduct commerce in that pair. The only real assets that are priced in ETH or in solar nfts, there are a handful of pairs that are ETH denominated trading pairs for fungible tokens. But, like, if you just look at amm pools, the substantial majority of quote pairs are USDC and USDT, not ETH. So, like, just the empirical evidence suggests that that statement's false. So it's just like a fun thing people say because they have bags.

I don't think Sol is money at all. I think it is a non sovereign store of wealth, but it is very volatile. It is not money. I think certainly you need to be clear in that designation. That was the other half.

Jason Yanowitz

No, it was actually a leading question to get to. One thing that you actually had a really good call on was talking about the price action of ETH in this cycle. I remember we had a conversation at the first permissionless back in May 2022, and you were explaining to me how your belief that roll ups were going to be and l two s were going to be very parasitic to the price of ETH, basically, because the l two tokens end up capturing a lot of the MEV, which therefore does not accrue back to the l one token, aka ETH. So it was your comments combined with that comment that you made to me a couple of years ago at permissionless. Was just thinking about that.

Kyle Samani

Yeah. I mean, we still continue to believe that, but either way, the l two tokens are generally not capturing it. It's the l two sequencers. So I. My theory was directionally correct but mechanically incorrect, right?

Yeah. Kyle, I want to get your updated thesis on Solana. I've seen you also, as a firm, invested in other ecosystems in this context of Mev, and just. I mean, it's a bundle question, right? Because there's been, you know, people may look recently at the spam issue in Solana and say, oh, this is why we need Monad, or we need other ecosystems, or sui, say, aptos or whatever.

Santiago Roel Santos

As a firm, how do you think about investing? Like, if you were to redraw the. Portfolio from scratch today? Like, are you still as excited about Solana versus everything else? How do you think about other ecosystems that are kind of getting attention?

Kyle Samani

Yeah, I think Solana is the fastest horse, I think is either in the lead or pretty close to being in the lead on most of the metrics that matter. And in my opinion, the two most important metrics are trading volumes and meV, and those two are very directly correlated with one another. I think that high degree of probability by the end of this calendar year, Solana, is like blowing all other ecosystems out of the water on trading volume and meV. Kyle, what are the other metrics that matter? Just out of curiosity?

Jason Yanowitz

Mev trading volume, what are other ones that you care about? I mean, like, amount of interest being paid by borrowers is, like, interesting, but trading volumes is, like, far and away the most important.

Kyle Samani

But, yeah, those are the main ones in terms of redrawing the portfolio from scratch and thinking about what I'm excited about. I'd say our general conviction in the integrated approach has increased over the last couple of years as we've seen the modular stuff start to play out. And so that means we are pretty bullish. Solana and Aptos, we are investors in both, and say we're obviously following Monad, we're following sweat. Those are probably the other two kind of like major contenders in that thesis.

But generally, we are increasingly convinced that's the right approach. And I think a lot of what, again, I'll answer that from two perspectives. One, from the challenges with a modular thing, and the second from the strengths of the integrated thing. On the strengths of the integrated thing. What all of the network spam stuff in Solana has shown in the last three months is as you grow, demand to use these systems, transaction volumes increase.

That's kind of topological and, like, things break, and you can't know ahead of time all of the things that are going to break. By definition, no company has ever scaled a software system without things breaking. And as a general statement, every ten x like, things break in meaningful ways that you can't expect. This is pretty common knowledge in software engineering. And so I look at the challenges the Solana teams have faced starting back in 2022, when they introduced QWik and stakeholder quality service.

And now looking at the scheduler problems they're having, and now they're redoing Qwik. Cause, like, whatever. Qwik had some problems in it, and there's a bug in it. Whatever. All these things that they're dealing with, we thought that they addressed the core problems in 2022, and they partially addressed them, but they didn't completely address them.

And then, like, new problems surfaced later as demand load increased. The more modular your system is, and specifically, the more there are different teams who do not, are not, like, bound to coordinate with one another and in some cases, who are directly competitive with one another and who have diverging economic incentives, because those people, their net worths are denominated primarily in different tokens. Like, it's going to be harder to coordinate, to implement the fixes. And the fixes are never singular in nature. The problems span some combination of networking, software engineering, and economics.

And maybe there's a problem that does, in fact, isolate to one of those domains collectively. Thinking about, like, the entirety of the system requires you to be thinking across all of those domains. And so splitting up, like the decision making between different teams with diverging economics, seems like you're effectively guaranteed to a suboptimal outcome, and you want the system to be aligned right around a single set of integrated economics, so to speak. So that's one vantage point to your question of why we've become, you know, watching Solana's growing pains has made us more convicted in that approach, because I don't know how you deal with this problem in, uh, in the context of, of Ethereum, and I can give some interesting counterfactuals on that if you're curious. Um, the, the other side of this is like, what have we learned about the modular stuff in the last, call it 1218 months, um, 18 months ago, we were pretty skeptical that there was like a, what I would call an a solution.

There are like lots of b to b plus solutions. I'm pretty confident an a solution is intractable at this point. And in my mind, a plus means zero slippage to end users. So, meaning, you know, your $10 on this, the starting chain is $10 on the receiving chain, and you don't get 9.9. That's damn near impossible for anything that's not a potentially issued stable coin.

Obviously, latency is a huge problem on all of these, and then gas costs and then getting all of the wallets to integrate and support it and all these other compounding things. What we've generally seen in that space is more iq has shown up to tackle it. Kind of the most interesting recent batch of that's been, I think, probably the chain abstraction stuff led by the near folks, which I actually find to be quite architecturally elegant. The problem is just like, it's another standard. And the meta problem with all of the modularity stuff is that there is no standard.

Like, it's explicitly a standards problem. You've got whatever op stack, Arb stack, espresso and astria. Now, I don't know how those impact. You've got Monad, you've got sweet, say, you've got starkware, you've got ZK sync, you've got scroll, you have all these different things. All of these things have very subtle, unique subtlety, oh, polygon to their respective systems.

None of them are sitting down in a room together. And, like, trying to create a common standard between all of them. And so everything within their ecosystems, they promise, theoretically will be magical and will be a look. None of them have delivered that yet. We'll see if any of them do.

But it seems somewhere between distant and impossible to get all of these teams that have built their own standards to then also build kind of like a meta standard. That seems really hard. So our conviction has increased generally that the fragmentation of standards is effectively guaranteed to produce a worse user experience. When you say that you're mostly looking at through the lens of composability or user experience or all the above is just pretty fragmented. Yeah, this is really ux for users.

And there's a couple of items that to me, probably the single most important item is if I make a $100 transfer, do I get $100 on the other side? Or do. If I make, whatever, two ETH transfer, do I get two ETH on the other side? You can complain about how shitty tradfi is all you want, but I can move my Apple stock from Morgan Stanley to robinhood, and I don't lose Apple shares along the way. Now, it's slow, the paperwork is terrible about.

I don't reset my tax basis, there's no question about that. And all of the shares transfer and like, crypto today is like, it doesn't even seem like the teams building these systems care about preserving that property. And I think given the prevalence of Venmo and other basic consumer financial services, it's very hard to me to see large scale acceptance. When your hundred dollars turns into 99.5. It just, like, rubs people the wrong way.

They're like, what do you mean? Where did my, you know, just. Yeah, so, yeah, you guys, I think recently did announce a big round of wormhole, I believe, right? That's correct. What was the thesis there?

Santiago Roel Santos

Is it just more flow into ecosystems, away from ethereum, into Solana, and then capturing that some way, or. Yeah, I mean, like, the world is clearly multi chain. It's clearly going to be multi chain. There's a tremendous amount of inertia in the EVM. Specifically, I think the amount of inertia is generally growing in the SVM, and you need to connect all these systems.

Kyle Samani

I spent the last ten minutes complaining about connecting all of these systems, and I stand by the fact that I believe it's fundamentally intractable to build a connective layer that is equivalent to intra asset ledger movements. But look, the world is not homogenous. And so just for sheer political reasons and other weird historical path dependency reasons, there will be multiple ecosystems. I'm not saying, like, everyone will agree on Solana or Aptos or say, or whatever. So I just recognize, like, yeah, there's going to be multiple of these things.

And wormhole is certainly the most kind of robust product package today in offering the connectivity tools for multiple different kinds of interop. Not just pegged assets, but a bunch of other cool things you can do. Cross chain you've been in space for quite a long time. I remember perhaps talking to you in the early days. And how do you think about IBC when you look at wormhole?

Santiago Roel Santos

And is cosmos anything happening in the cosmos ecosystem, or does IBC in particular interesting to you? Or.

Kyle Samani

The more time that goes by, the more I appreciate the design goals of IBC and the fact that at least technically, they, like they did what they said they were going to do. IBC feels irrelevant, not for technology reasons, but for go to market reasons. It's just the amount of adoption of tendermint Cosmos chains is limited, and it doesn't seem like there's a super clear path for that to change in the foreseeable future. But generally, technically, it's pretty elegant. Wormhole and layer zero and axlr and across and all of these other things are all directly response to the fact.

Two things. One, that ethereum specifically has effectively eschewed any notion of an IBC equivalent standard for the EVM. I don't fully appreciate why that's been the case, but I mean, like, this hasn't even made it up into public discourse of a thing that should be considered in a serious way in the last seven years. And given Cosmos has been around for all that time, I suspect there's some pretty deep views. Good.

Held by some core folks at the foundation who basically pooh poohed on that. Anytime someone's tried to bring it up in ETH research forms or whatever, and then obviously the other major reason, wormholen Axlr and layer zero and these guys exist is to then deal with the lack of a standard between EVM SVM move and then all of the EVM flavors. So there's always going to be a market there for that stuff. Just given the inherent lack of standards. This episode is brought to you by, say, Sei's belief about the world, I think is a good one.

Jason Yanowitz

They believe that the EVM is here to stay. Agree with that. They believe that the EVM is going to look kind of like what JavaScript ended up looking like in the web two world. Agree with that. They also believe that the EVM in its current iteration lacks a lot of the performance and scalability that developers need.

So what Sei has done with their v two upgrade is they just introduced the first high performance, parallelized EVM into the market. Today they've got lightning fast block times and finality of just 390 milliseconds. What this does is it unlocks an entirely new design space with 100 x the throughput of even some of the fastest EVM l two s on the market market today save e two is now live on public Devnet, with mainnet scheduled for Q two, you can stay up to date with say on X at say Network Sei Network. Big things to say. This episode is brought to you by Monad Monad's thesis is simple.

The EVM is here to stay, similar to JavaScript and web two. But unfortunately, today's EVM lacks the high performance and the scalability that developers developers need to make certain applications possible. Monad addresses these concerns in these bottlenecks while preserving seamless EVM composability for application developers. There's a seamless transition to Monad as the Ethereum RPC API allows for really easy portability. And for developers, Monad can support 10,000 real transactions per second with their unique parallel execution environment.

And of course, there's full compatibility with EVM bytecode. Monad's internal devnet is live public testnet comes out soon. You can join Monad's journey in two ways. One, go follow them. They're on Twitter on a D XYZ, and also join the Monad Discord it's discord GG Monad big thanks to Monad for sponsoring Empire.

Hey everyone, Santi and I have been talking about Solana a lot recently and we're excited to have a Solana sponsor of Empire. Marinade is a staking protocol in Solana. I remember when they launched, I think it was back at a Solana hackathon and they were funded with this 80K grant. It's super cool to see how far they've come. They're the only stake pool today that delivers auto rebalancing, mev rewards and automatic downside protection.

With their new protected staking rewards. You can stake natively or liquid steak with marinade and get the same high performance delegation strategy that thousands are using already to stake your soul to over 100 of the best Solana validators. Marinade has been live for over two years and they have audits completed by four of the top security firms in crypto. The delegation strategy is a first of its kind. So if you're staking your Solana, if you want to start staking your Solana, if you want to get some yield from your soul, start staking today with Marinade.

Go hit the link in the show notes. Big thanks to Marinade for everything that they've done in Solana staking land. Go check them out. Go stake your Solana with Marinade today. This episode is brought to you by Mantle.

Mantle is an l two backed by one of the industry's largest treasuries. At the time of recording, it's valued at $4.4 billion. The mantle ecosystem engages in a lot of early stage exciting projects such as Athena and Eigen Lair, and they give out, actually the rewards to the mantle community. There are two airdrops I want to tell you about. The first one, it was with Athena.

They offered 2.5 billion Athena shards to holders of their native token MNT. So the reward station program distributes these pre sale token allocations to MNT holders who stake the tokens. The second one they have going on is with Myso Myso. That gives out over 90,000 Myso tokens worth about $50,000 today. That starts on April 25, runs through May 2.

If you want to check that out, you got to stake your MNT and you can check out the reward station at Mantle XYZ rewardstation. Big thanks to mantle for sponsoring Empire. I want to get just your take generally on fee markets. Just going back to that feels like really suboptimal across. It feels like the area where more innovation is going to be required.

Santiago Roel Santos

You're all basically pricing it in a suboptimal way to your point around. It's really hard to price these things when you have to constantly update them as you grow ten x. We've had anatolian Ben talk about it, and it's something that Solana Foundation's focused on. When you compare fee markets across ecosystems, is there one design that you really like or just teams that you think are thinking about it the right way? I'm not an expert in, especially the economics side of these, and thinking about designing fee systems or auctions and all that kind of stuff.

Kyle Samani

There's people who study that professionally. I've never studied it at all. So I definitely want to say I'm an expert here. And I'll say, like, having observed the ecosystem over the last six years, the thing I've come to appreciate is there are more layers to the system. I should say there are more sub markets within the system than I originally appreciated.

The best example of that would be the stake weighted quality of service thing that I just talked about a few minutes ago. I never thought about a market for bandwidth to reach the leader, but if you think about it in the extreme that does. It may not need to be a market explicitly with like bids and asks, but there is some problem you have to deal with there some civil resistance problem, and one way to deal with civil resistance problems is to meter it with the market. Another example would be parallel fees markets. When we first invested in Solana, yeah, Anatolia was clear parallelism of execution.

And I was like, cool. Like, I understood Moore's law and scaling horizontally in silicon. So that's why we got all excited in 2018. We didn't actually go a few steps forward, though, and say, let's think about the fee markets and, like, localizing that, the hotspots and, like, that kind of a thing. And actually, I don't even think Anatoly did either.

I think they built parallel fee markets after mainnet went live. But, like. And so it was just kind of an emergent property that, like, because of the design of the system and the fact that the transaction headers all include all of the state upfront that you could. It was fairly trivial to build. Yeah.

To build parallel few markets, localized few markets later. So, you know, I look, obviously, the blob storage now on Ethereum in the last couple months. So, um, I think coming back to your original question of, like, what's the correct way to design fee markets? I have no idea. I think as you continue to grow demand in these systems and things break in weird and funny ways, you wouldn't have thought about them ahead of time.

And so you need to kind of be, like, adjusting the fee systems over time. Um, yeah, that's the generic answer. The other thing I would say that I generally find to be interesting. Uh, Tarun Chitra gave a talk at breakpoint last year about multidimensional fee markets. Generally pretty good talk.

I think he also wrote a paper on it. But perhaps the most interesting thing that he highlighted in that paper that is getting some discourse today and kind of Solana research forums is introducing a 1559 like fee system per unit of state in Solana. So this would be like combining local fee market in Solana with 1559. It's an interesting idea. I know there's some people in Solana community who don't like it.

There are some people who really do like it. But we can clearly see that few markers are just becoming inherently more multidimensional. And I think we're probably three to five years away from getting to some equilibria state on this. I don't think we're close to the end of the iteration cycle around fees in these systems.

Santiago Roel Santos

Maybe last question on mev and how you think about expressing that view. You can perhaps invest in stuff like Jitto. I know you guys are investors in Jito. You can invest in flashbots of the world. When you think about the relative outperformance, if you have $10, would you rather invest in something like Jito?

Obviously depends on the valuation whatnot versus the l one. What do you think has perhaps a more interesting investment potential? Yeah. So assets like LDO or JTo should be thought of. They should be priced against Ethan Sol, respectively.

Kyle Samani

And so, like, we only look at those two assets internally, specifically against ETH and against LDO. I'm obviously more familiar with the Jito roadmap than I am with the lido roadmap. The lido. So I can't really comment on, like, what I think is happening in Lidoland. Also, like, all the rest, taking stuff is just weird and still too early to really know how it's going to play out.

I can tell you in g to land, the team is not done shipping. They're going to continue to do stuff, and I think that probably the stuff they will do will, in general, be accretive to accruing, justifying a higher JTO sole price. The jiro guys know what they're doing, and they're in a position to continue to figure out how to get more Sol distributions to JTO holders.

Jason Yanowitz

Guys, maybe we can move into the next part of the convo about this token terminal tweet that kind of sparked some conversations over the weekend, so I can share it here. So this basically said the token terminal tweeted out the income statements, as they put it, for base and Solana. And what it showed was that Solana, I'll put quotes around this, lost $796 million, um, in q one, and base made $15 million. So, yeah, I mean, ignoring the fact that we're kind of comparing an l one with a token to an l two without a token. Um, it.

It brought up a conversation around, like, issuance as an expense, basically, or, like, what should the. How should you categorize the cost of a token and cod, actually, I mean, both you guys would love to hear. Would love to hear how both you guys think about this. And just maybe, like, the flaws in this token terminal tweet that obviously a lot of people pointed out. Yeah.

Kyle Samani

Sandhya, you want to go first year? You want me to take it? I'll lead the way, sir.

Yeah. So a lot of problems with this methodology. One is it's showing emissions of Solana as 100% a cost to all soul holders. That's what's implied in the statement. Uh, and that's just wrong, because, like, 85% of soul is staked 80% to 85%.

It's in that range. So, like, if you're staking your soul, then you're not eating that cost because you're accruing the inflationary soul there. Um, so, uh, that. That's, like, just incorrect for. For that reason, what.

What you are eating as a cost is the commission rate that you're paying to the validator, which, by the way, helios and others now offer zero. Right. So, um, that doesn't really capture, like, the economic reality of how people experience, you know, it as a sole holder. The second. Wait, so on that note, Kyle, just to make sure I understand that, so is the.

Jason Yanowitz

Is your idea that, like, at some point, based on the amount of supply that staked, uh, issuance should or should not be treated as an expense? So, like, let's say, like, if over 50% is of the supply is staked, maybe new issuance should not be treated as an expense since it, like, what is your. No, no, sir. That's not what I'm saying. I'm not saying that, like, there's some threshold you should use to account.

Kyle Samani

I'm just saying it, like, you can build these, like, aggregate network metric dashboards, which is what that kind of is. But. But, like, fails to capture the reality that, like, if you are an individual soul holder, you can choose to stake your soul. Yeah. If you're sticking out, getting diluted.

If you're. Yeah, exactly. In fact, you're being reverse diluted because there are some percentage of people who aren't staking. Exactly. No network has ever achieved 100% stake utilization, and no network ever will for a bunch of reasons.

So, like, it's just, like, it just, it ignores, like, this is the funny thing that, like, all the bitcoiners are like, 21 million hard cap. Yeah. No inflation. And that. That's actually economically stupid to say, because in any proof of stake network, if you stake your tokens, you are guaranteed to beat the rate of inflation.

So, actually, proof of stakes networks in 100% of cases offer you better guarantees about your percentage ownership of the money supply. All right, sorry I interrupted. Go. All right, so you're getting on to point number two. Yeah.

Second problem with that claim or that dashboard thing is it's only looking at fee revenue, meaning, like, gas, it's not including MeV, which, like we talked about earlier, my expectation is that gas revenue should go to effectively zero. You should we underwrite it as zero internally? Like, we don't care how much money people are spending on gas as far as aggregate network valuation is concerned. Obviously you care about it as an individual user of like, what's the user experience? But it's just, it just doesn't matter.

MEV is what matters. And the MEV number is like something like ten or 20 or 30 x the gas number. So you're missing the biggest revenue item prior. And then obviously the third. The third is you're comparing a system with a centralized sequencer against the system with 3000 nodes around.

Like, is it apples to orange? Apples to oranges comparison. You know, like you are getting a fundamentally different set of trust guarantees between those two things. Yeah. Just to reiterate that, like, if you look at on the right side, I don't know if you have it pulled open, but on the right side, like you have for Solana, transaction fees, like, where are the priority fees?

Santiago Roel Santos

You're not including those. So, you know, fundamentally flawed. So revenue under fees, revenue understated. Um, then on the expense side, yeah. Again, like, issuance is not an expense.

Like a whole line of that. People don't. We keep coming back this like, and it's kind of like idiotic at some point. It just tells you how unsophisticated people are in crypto. It's like if you're staking, you're not being diluted.

In fact, to your Kyle's point, because there's not 100% issuance, you're actually benefiting from that. This analysis doesn't factor that in. So it's kind of irrelevant. It makes me more bullish on like, investing behind Solana. It's just like, yeah, great, okay, fine.

People don't understand this. And we're like, how many times do we have to bring it up again and again and again? But, you know, Santi, would you say this changes in proof of, in a proof of work model? So you could say in a proof of work model that issuance is absolutely an expense because the network is paying an external service provider, aka the miners, for a service, which is the security.

Kyle Samani

So does that change in proof of work? I believe so. I don't know if you'd agree with that, Kyle. In that case, yes, because the miner, you're not benefiting from that. And not only that, the issue that I have a proof of work, moreover, is it has a constant.

Santiago Roel Santos

Like you have an actor in the system that has a clear incentive to dump that token to recoup the capex, which is electricity, which is really, really high relative to proof of stake. People should go listen to the episode, the latest episode that we recorded with Anatoly and Ben, where Anatoly goes back to, like, really, like, simplifies the P and L of Solana. Like, here's the revenue and here are the different cogs. Like, what are the cogs to college point? Like, bandwidth storage and something else.

And just thinking about that today and going forward, like, the hardware requirements of Solana and the actual costs here, I don't know how they're, like, actually coming to that. I think they're the. Again, it's like, I don't have the analysis fully, like, the detail of it, but it's a common criticism of people looking at Solana. At one point, I was very stuck on higher hardware requirements. But, like, that episode with anatoly, really, I think, crystallizes the p and l of Solana in a very, very useful way.

People want to go listen how they should. It's far more interesting than this analysis. I'm going to go into dangerous territory for myself here and try to play the other side against you guys here. So just in proof of work, if bitcoin is. If issuance is an expense in proof of work with bitcoin, right, you've got the network is paying an external service provider, aka the miners, for a service, which is security, maybe technically.

Jason Yanowitz

So technically, yeah. Issuance is not an expense in proof of service. Or. Yeah, with salon it's not. But maybe if you modeled out a proof of stake, I mean, you can model out a blockchain as an equivalent business, like Anatoly was mentioning, Santi, like.

Kyle Samani

The business sells block space, pays the. Validators to maintain the chain. And in that model, if you're trying to, like, map this out on a spreadsheet, the issuance to the validators, I think, would be an expense to the business. And the fees are burnt. The fees that are burnt, plus the MeV, as Kyle's arguing, would be income to the business.

Jason Yanowitz

Is it? What? Tell me. Tell me one more time why that's wrong. The commission rate is what you're paying to the validators to literally, physically host the network.

Kyle Samani

That is correct. So that is a real. And that's an expense that sole holders are paying. Like, if you are. Yeah.

A holder of soul, you are paying someone to run hardware to keep the network moving forward. So that's real. Where I disagree is saying all inflation is a cost to sole holders because you can just trivially opt in to staking your soul. The relationship I think you have to look at is the commission that you're paying the actual meV. Like the amount, right?

Santiago Roel Santos

Like, what is the profitability for a staker if you're staking to Jito or staking helios different, right? Based on the commission. And also, like, you're getting those rewards and, you know, part of those rewards, that emission that inflation back to you. Plus also some of this other, like the other fee item, which is far more interesting, as Kyle was mentioning, which is meV. So, like, I think you, it's on a case by case basis, but generally speaking, like, if you're a sole holder, you should probably just think about, okay, you're probably holding solely because you believe the network you know is interesting, because it's getting a lot of activity.

Therefore a lot of MeV. Therefore you stand to, you're not going to be diluted because you're staking. Plus you stand a benefit by getting Jito awards or part of the MVV shared over to you. What do you think, Kyle, if you were designing, so we've actually done this exercise, a bunch of blockworks research. Maybe we're trying to shove a square peg in a round hole here.

Jason Yanowitz

Maybe we're trying to put these things into crypto terminology, into equities, terminology with revenue and expenses. If you were designing, someone said, Kyle, we're trying to standardize how we value these crypto assets. We know MeV plays a role here, but what are the equivalent revenue and expenses? Maybe it's fees and emissions, or how would you. Basically, at some point, we're going to have to create these standards of metrics for these crypto assets.

How do you think about that, beyond just MeV? MeV is the only revenue driver that I care about. I don't care about any other revenue driver.

Kyle Samani

Then I think the other source of confusion here is doing it at a network level versus at an EPs level or per token level. That kind of accounts for the second discrepancy in communication. Kyle, what's the best way to think about the evolution of MeV?

Santiago Roel Santos

Like, how do you think, there's clearly a lot of MeV happening, increasingly so in Solana, but you talk about transaction fees, kind of like going to the marginal cost and compressing really aggressively. How do you think about Mev in that context? Like as a percentage, like the amount of profitability over time?

Kyle Samani

I say. There'S always going to be arbitrage. Two trends that I think will hold true indefinitely. One is amount of heterogeneity in the market. Excuse me.

Amount of entropy in the market will increase over time. I think this. What's the third law of thermodynamics? Or whatever, like, you know, entropy increases in the universe. I generally think that is also true in financial markets.

There's more venues, there's more unsophisticated participants, there's more sophisticated participants. In the case of Solana, there's like literally more leader like, more validators joined, so there's more leaders rotating through the system. That's obviously not a law of physics in the way that the thermodynamics law is. But my empirical observation is that the total amount of entropy in these systems is increasing over time, and I think that will be true. And that entropy explicitly produces meV.

And then the second, I think, general thing that I expect to hold true indefinitely is application developers will work to minimize malicious meV, which I think is great. I think there's a very weird view that is held more in the Ethereum community that getting rid of MeV is the job of the l one or the l two. Whatever the asset ledger. There are ways you can design the asset ledger to minimize meV, the most aggressive of which is what osmosis and others do where they encrypt the manpool ahead of time in the transactions and randomly order them in a block, which, by the way, has its own serious problems in terms of guarantees you offer for users as well as performance on the system. But I'm ignoring that.

I've kind of come to the belief that application developer's job is the one to optimize for, specifically for minimizing malicious meV. Obviously, if you're being sandwiched, that's bad, but this is solvable at the UI layer and at the API layer. A bunch of people are working on this uniswap dflow, a bunch of others. Yeah, yeah. There's a lot of approaches to this, but I believe that the total amount of entropy is growing.

And good faith application developers are trying to minimize malicious forms of meV, which is great. And those two things will, well for an individual user that their UX will generally improve because of that, and that will obviously bring in more demand and should hopefully grow the entire pie for everybody. Maybe you've said it before, but just maybe stupid of me, but how do you like characterize bad evil meV? Like location malicious malicious meV? The most explicit form of this is sandwiching, where you are quite literally like abusing the market structure to take money from someone.

Sandwiching is there may be usually the swaps, right? You want to buy like a meme coin, whatever. So you want to buy with, and. Then someone front runs you, and then you end up paying a higher price. Correct.

That's explicitly like, malicious. The most of the other forms of Mev are, as far as I can understand, pretty benign. Um, so liquidations, I think benign. Like, hey, you're out to get liquidated. Fine.

Uh, back running an oracle again, fine. Like, once the oracle price is updated, like, someone needs to bring systems in line. Seems reasonable. Dex, Dex arbitrage, totally reasonable. Like, the LP's are the ones being stupid, quoting bad, bad pairs, and so great arbitrageurs, you know, need their job as they bring the price in line.

Sex. Dex arbitrage, again, same thing. So those all forms of Mev are, I consider to be somewhere between benign and even positive. Like, they actually make the system work better. And then obviously, like, anything involving front running is bad.

Santiago Roel Santos

Yeah, no, it makes sense.

Kyle Samani

When you. I guess most recently, people have been pretty critical of meme coins, particularly for this sandwiching kind of effect, and, you know, but you're still of the mind. Look, Mev in the aggregate continues to grow if there's more entropy heterogeneity in the system, but over time, maybe the user, this malicious MeV, goes down. When you're doing a swap on Jupiter, there's ways to minimize sandwiching, but there's still going to be a ton of mev in the aggregate. Yes, that's correct.

Santiago Roel Santos

What else should we talk about, Kyle? I want to get your take on this, actually, both of you guys take. I think I know the answer to this based on just this conversation that we just had. Always know the answer to everything. Here's the.

Jason Yanowitz

Here's the cost of these airdrops in on a Richard Chen Dune dashboard, which is like, if you basically just take the number of airdrops multiplied by the price of the token at the time of. At the time of issuance, or, like, the price of the token, like, including. Like the, you know, including price appreciation. So for anyone who's not watching on YouTube, arbitrum, cost of air drop, 1.4 billion. DydX, 1.45 billion.

Apecoin, 8.5 billion. Ens, 1.1 billion. Blur, 340 million. Uniswap, 658 million. If a portfolio company.

Kyle came to you and basically showed. Wait a minute, can we tell Richard to put it as a percentage of FTV? Because I think that would be far more interesting if you think about what is. So there's two ways to view this. One is, holy shit.

This is like the most expensive marketing campaign of all time. That's insane. That's a billion dollar marketing campaign. The other way to view it is like, wow, this is a great marketing campaign. It's basically free because the cost to create these tokens is essentially free.

How do you guys view this.

Kyle Samani

Elements of both? So I think one thing that is not captured in the discourse around this is you need to have float.

Anyone who does a one, two, 3% float is criticized. Low float, high FTV. Classic thing.

The primary reason most tokens launch with a small float is not because the teams want to have a low float. It's because all of the other tokens are locked, all of the investors are locked, and all of the employees are locked, and the foundation is obviously not like, not dumping on day one. So it's like, well, where, where the hell does the float come from? Like, and so I like, I really don't like the like statement of like, the marketing cost of the drop because that statement implies like, you could have cut the marketing costs in half. Like, there was some sort of discretion in like, you know, choosing to spend that much money on marketing.

Jason Yanowitz

Right. We, I really don't like, I think it is entirely possible to get 10% of tokens floating on day 120 percent is hard. It's not impossible, but it's hard. But I think any team, if they, if they care about, like, not distorting the market too much, sorry. If they care about, like, trying to help the asset find true price discovery as effectively as is possible for a new asset, then you, you should game for a minimum of 10%.

Kyle Samani

And if you can get to 20, that's spectacular. Very few people have gotten to 20, so that's common. A, like, I think the, the marketing framing implies too much discretion. B, for better or for worse, there's an expectation that, like, people in crypto participate in these things. I don't necessarily love that sense of entitlement, but like, I, it is clearly real and for certain protocols, justified and legitimate.

For many protocols, I believe it is not justified and legitimate. For example, like, if you're like, getting tokens for, like, you joined the discord. I don't know, man. Like, that seems pretty fucking weird, weak to me. But if you put your capital in margin and Camino are both expected to drop their tokens on Solana very soon.

They're both borrow lend protocols. They're comparable to compound the nave on ethereum with those systems. If you're the first money to deposit in those systems, you are taking smart contract risk explicitly. And there's no way around that fact. And like, yeah, you'll earn a market rate for borrow, lend, whatever in the early days, but, like, you're taking this risk that really you can't be compensated for by the lender or by the borrower, rather, if you're a lender.

And so it makes sense to me that, like, you should get tokens for taking that risk. Right? Like, fundamentally is justifiable. So my point is, like, in some sense, you want to reward people who genuinely contributed to your system, because someone has to be the first person to take the risk that your contracts don't blow up. Um, and, like, they should be compensated for that.

In the case of dpin, obviously, like, hey, if you help build the infrastructure, you should be compensated for that. You bought the hotspot, you laid out the cash, you put it in, you know, whatever you drove, you drove more miles in your car. And hivemapper, clearly, you should be compensated. So, um, I'm generally a fan of using airdrops to get tokens in the hands of people. I think that they have been overused by teams that, quite frankly, don't have good ideas of how to do some notion of value attribution, and then it's just wasteful, then it just feels stupid.

And any of these systems where people are clearly farming. I know Starcor and ZK Singh have gotten a bunch of shit for this. I don't know if it's true or not, but let's just assume that's true for a second. The rumors are true. The people who are, like, putting money in starkware and then, like, not doing anything, like, they're not really creating long term durable value for starkware.

You know, they're not making the. Probably the fraud proofs or, sorry, the, you know, the validity proofs function. They're not improving the probability that happens. They're not increasing liquidity in the system. So those kinds of things I don't like, but I love the permissionless capital formation that crypto offers.

And if you can airdrop things to people in a productive way, you absolutely should. Yeah. You actually heard, you say once there was a particular team in Solana in the very early days, that air drop a huge amount, and it was kind of like a vampire attack to get people to get interested in Solana at the time were, like, most networks to get them off the ground. Like, you have this, like, the activation energy that's required. And so I think I forget which particular project, but, like, the other component is in a parallel universe.

Santiago Roel Santos

Like, what would have happened if you didn't have this incentive. Like, you're in many ways kind of growing the pie. It's a way to attract attention. Everything is. You're competing for attention in this space.

So I definitely agree with Kyle. Like, it's very easy to think about, like, how to airdrop in a defi protocol, difficult for other systems. What I really have liked, and there's also nuance, right? Like, the way Jupiter is doing it, I think is pretty clever. Same as blur.

Like, there's different campaigns. Uma was kind of the first one to introduce this concept of, you don't have to airdrop everything all at once. Like, you're blowing all your load. Like, you're going to probably regret that five years, ten years down the road. Like, how are you going to pay partners?

Like, Wifi was a perfect example of this. Andre being Andre, just, you know, all the Wi Fi was in circulation and then, oh, how are you going to incentivize apps to deposit into the vaults? How are you going to pay developers? How are you going to use these? So, like, I think, like, you know, I understand why bitcoin had a codify block emissions, but if you're a protocol, like, just, you know, the.

I think. I don't know what. How to solve it other than going back to maybe icos, where, like, you have just way more distribution. Meme coins don't have this problem, but, like, world coin, 2% of all the supplies out. Like, good luck, by the way, with.

Kyle Samani

With world coin. World coin is actually the one project that I think it is explicitly justified to have a tiny float. Because the whole point of the system is that, like, every person gets one token. Right? Yeah.

Over time. Yeah, yeah. So you can't control the high FTV, though. It's. Which is.

You can't. I'm just saying. That's the. Look again, disclosure. We're in vegetable world coin.

But, like, it's the one project where I'm like, no, no, no. That's the whole point of the system. You can't criticize it for that. But, yeah, it's bad for teams to play the low float, high f two game. You should generally aim for 10%.

If you don't want to airdrop all of that upfront, figure out how to do an LBP, figure out how to do an offering with coin list or with Jupyter or a bunch of people out there. It is generally better to have people buy into your vision than to be airdropped tokens for free. It does increase people's commitments if they have to put cash down to get engaged. I think curve was really good example. I'm not of the mind.

Santiago Roel Santos

So, like, if you're going to airdrop 20, there's going to be a lot of, you know, people that might sell out of the gate. Um, there are teams that come to me and say, should we lock it? Should it have some sort of lockup, uh, you know, vesting per block, whatever. I don't know. I feel like it sort of defeats the purpose of having, like, low float, uh, whereas you, the better, more elegant solution might be incentivize people to lock it.

Like a curve kind of, uh, mechanism where people can deposit that at earn, you know, if, you know, more fees or whatever, like blur. You know, you could do this, right? You. Instead of selling your airdrop, you can, like, stake it, maybe blast rewards or whatever. You know, there's just, like, better ways to do that, I think.

Kyle Samani

Yeah, I I mean, one way to think about lockups is lockups explicitly distort the price. I don't mean that's, like, malicious, but, like, there are people who are locked up who would otherwise not be holding, and conversely, there are people who will not buy until the lockups have expired. And so in both directions, like, when you have lockups, lock tokens, you are moving away from the organic price. Again, there is good reason to have lockups, but just recognize that they distort reality. And I generally think that, like, people need to try to, you know, get these systems to be getting closer to, you know, away from reality distortion as quickly as you can is roll out of token.

Santiago Roel Santos

If Richard or anyone else is listening, I'd love someone to, like, actually come up with cohort retention curves for these airdrops and campaigns because there's a lot of chatter, but, like, how expensive they are. Well, let's look at the retention. I remember talking to the badger team super early on, and they, I think, were pretty clever in, like, pioneering, like, the criteria for the airdrop. And they had, like, pretty decent retention, like, you know, 30, 60 days out of the, like, after the airdrop. Like, a lot of people actually held on to badger.

Um, then, of course, you know, there's a lot of noise, right? Because, you know, the markets can tank and there's volume and people that start getting liquidated where they want to sell the airdrop. Right. Thing that you get for free. Like, common psychology.

But, yeah, it'd be really nice to kind of look at, um, you know, all these airdrops, particularly in the Solana land, because you have, like, just more retail folks and just kind of serving that. Yeah, I just saw some breaking news from. From blockworks, which is, uh, stripe is bringing back crypto payments on Solana. Um. Oh, yeah.

Kyle Samani

So there we go. There you go. By the way, um, can I get you guys, like, I've been, like, uh, funding, obviously, more sole based projects, and, like, when I try to fund in us Sol USDC, like, is it me or, like, this coinbase not so easily support. Like, withdrawing Sol USDC. It does for me.

Coinbase prime. Yeah. Does not support. Yeah. Does not support.

No. So I withdraw from Coinbase prime to Coinbase consumer, and then I withdraw from when it's consumer and SPL. I have yelled at the prime team many times. I. No one has complained about this feature to the prime team more than I have.

Santiago Roel Santos

Okay, well, I'm publicly complaining. God damn it. Like, I need a bisol swap. Like, it's like, come on, guys. Get your shit together.

Kyle Samani

Yeah. Very annoying.

Anyways, Kyle, thanks for coming on, man. Anything else you want to talk? Pleasure for having me back on the show. I think next time I'm on, we can just complain. Every.

Every feature request we have for any product crypto, we can just complain for an hour and a half. Fun fact, Kyle, you've been cycling a lot. I love cycling. When's the next race? When's the next, you know, thing?

Oh, man. I think I decided that I'm done with endurance for a little while. I'm gonna. I'm not in the weight room for the, like, the summer at least. And I'm gonna.

I'm gonna kick in at all his ass in the waiter room. That's. That's my goal. Oh, wow. Okay.

Santiago Roel Santos

Totally lifting some pretty. Pretty heavy stuff, so. Totally. And. And keone, I think I'm gonna.

Kyle Samani

I'm gonna put both of them. Shame. Okay. All right. I will not.

Santiago Roel Santos

So I'll just be cycling anyways, Kyle, really nice coming on. We'll have to have you on sometime soon and keep the conversation going. Really treat. All right, guys. Santi, Jason, thanks so much.

Kyle Samani

Awesome. Awesome to check, guys. Thanks for having me on. Cheers. All right, you heard about say a couple times.

Jason Yanowitz

Just want to give them one last shout out. Big thanks to say, for sponsoring this episode of Empire. There are a ton of reasons to build on. Say, if you want to get in touch with them, you can reach out to me. I'll put you in touch directly with the team.

You can also get in touch with them on Twitter at saynetwork. You can follow the journey at saynetwork. They are currently live. They've got save you two on public Devnet today. Mainnet goes live later in Q two.

Really excited to have say, sponsoring and partnering with us on this episode of Empire.

How to Value L1s, L2s, and Crypto Assets | Kyle Samani

Primary Topic

Episode Summary

Main Takeaways

Episode Chapters

1: Introduction

2: Deep Dive into MEV

3: Economic and Technological Factors

Actionable Advice

About This Episode

People

Companies

Books

Guest Name(s):

Content Warnings:

Transcript