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The Chopping Block: Tokens vs Equity, Lighter's Robinhood Perps Deal, and Trump's $2.4B Crypto Windfall
00:58:58
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- [00:00]
Aseeb
Robert, what's your reaction to the Trump financial disclosures?
- [00:03]
Robert
That's a lot of money.
- [00:04]
Aseeb
That's a lot of money.
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Robert
That's a lot of money. Not a dividend.
- [00:08]
Vlad
It's a tale of two kwan.
- [00:09]
Aseeb
Now your losses are on someone else's balance sheet.
- [00:12]
Tom
Generally speaking, airdrops are kind of pointless anyways.
- [00:15]
Aseeb
Unnamed trading firms who are very involved.
- [00:17]
Robert
Alec Eth is the ultimate defi Protocols are the antidote to this problem.
- [00:23]
Aseeb
Hello, everybody. Welcome to the chopping block. Every couple of weeks, four of us get together and give the industry insiders perspective on the crypto topics of the day. So, quick intros. First you got Tom the defi maven and master of memes.
- [00:33]
Tom
Hello, everyone.
- [00:34]
Aseeb
Next you got Robert the crypto connoisseur and czar of Superstate. Good morning. Joining us again, we've got special guest Vlad Leverage, legend and leader of Lighter. Welcome back, Vlad.
- [00:46]
Vlad
Hey, guys, good to be back.
- [00:48]
Aseeb
And I am Aseeb, the head hype man at Dragonfly. We are early stage investors in crypto. But I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see chopinblock XYZ for more disclosures. So, gentlemen, we have once again, one of these classic debates that has recently surfaced on crypto Twitter. And that debate is about this perennial conversation about tokens, equity and what is worth what. So a lot of this conversation was galvanized by a fundraising announcement that we recently led at Dragonfly, recently led a fundraising round into Venice. So Venice, for those of you who don't know, It's a crypto AI project. They're, they're pretty large. They have like 70 million run rate. We led around at $65 million into them at a billion dollar equity valuation. Now Venice has a token called vvv, Venice's token. They launched like roughly a year after the product existed in an airdrop. They gave 50% of the supply for free to their community. And they stated very clearly when they made the airdrop that this is not equity in Venice. This is like, you know, here's specifically what this thing does. It gives you the right to compute over time. And so when we did this investment into Venice, a bunch of people got really upset. And part of the reason why they got upset is that they were like, hey, this thing now has tokens and it has equity. And the equity holders, presumably they have, you know, they're senior in some sense to the token holders or something like this. And there's a perception that, okay, well, if you have A token then probably like that's supposed to be like equity. It's supposed to be where the value of this business is accruing. And so, you know, this is of course not the only example of this. There's been a lot of conversations before about the progenitor of this conversation, Uniswap Labs. So famously, this was like probably four years ago, Uniswap had a token, sold the token to investors represented. This is the governance token of Uniswap, and then later raised money for Uniswap Labs, a for profit corporation that was initially supposed to be the development corporation behind Uniswap. They raised venture capital separately and that caused them to eventually have their own wallet, have their own monetization strategy on top of Uniswap. And this is perceived by many people to be one of the original sins behind this, having two masters, a protocol that has both token holders and equity holders. And okay, maybe it's zero sum between the two. Now I made the argument and had this video clip that went viral that I don't think actually Venice is like this. Venice is very different because Venice is a company. Venice is not a protocol. This token was never meant to be a governance token or have control over Venice. But this has raised the question broadly, not just about Venice, but in general across the industry of how do we think about when tokens and equity coexist? First of all, of course it's worth talking about why they coexist. And Vlad, we brought you on. Obviously, lidar's been the center of attention for some of the stuff about Robinhood that we'll talk about shortly. But one of the things that people bring up is that, well know Lighter also raised money into lighter Labs also has lit token. Talk to us as a founder, how you think about the dichotomy between equity and tokens.
- [03:42]
Vlad
I'll talk about how we approached it at Lighter. You know, I think we have enough stuff going on that I, you know, I haven't really had the chance to think about, like how other projects would go about it. So I'll just talk about, you know, our perspective. But you know, for us, we were always US C Corp, you know, building in the US from day one. And that's the only entity that exists, right, is the U.S. c Corp. There is no separate foundation, there's no separate labs. The C Corp is the entity and so the token was issued out of that. I think there are three things to say about this, right? One, and this is something we've said a number of times since the tg, but worth repeating. Like all value kind of generated by later is accruing to the token holders. And the exact mechanic for that is programmatic buybacks. We've been running those buybacks since the tge. Like the algorithm for the buybacks has been published. We publish on the website. You can see exactly how much has been bought back. We update the community. I don't know why some people are still confused about this, but like these buybacks have been going on for six months now and nothing's changed there. So that's just kind of like based on it. Second thing is that I think this is not something we really talked about publicly as much, which is that, so equity we did raise a number of months back before the TG and prior to that kind of equity rounds. I mean the understanding since we started working on LiDAR was always that the equity is kind of capital to build out the core tech. But once that's done and once there's a token, all value will accrue to the token. So all the equity holders even before the TG were aware that that's the plan. And in fact the last round was like 5x oversubscribed. And we told all the existing folks on the cap table, what's going to happen going forward is that the equity will give you token allocation and that's going forward. That's the only way you're going to accrue value. So if that's doesn't vibe with you, you can get out of this round. And only 1% of the cap table took us up on that and the rest stayed in. Right? So basically, not only have we been doing the programmatic buybacks, we've also been very consistent in how we've talked to the equity holders like there's not going to be another equity round.
- [06:13]
Aseeb
So one of the points, many of the, many of the people who are saying, like, look, this is a fundamental problem, one of the things that many of them say, if I can sort of play the devil's advocate, is that, okay, a C corp, it's a for profit corporation, right? That means that you have a fiduciary obligation to your shareholders. Now I should also disclose Dragonfly Robot, we're all actually shareholders in lighter labs. We also have the token, or we have vesting whatever token claims. And so technically under Delaware law, assuming it's a Delaware C corp, you have a fiduciary obligation to maximize shareholder value. And so somebody might look at that and say, okay, well, yeah, okay, you're kind of saying that you're going to move money in the token, but legally, under the law of Delaware, you're supposed to maximize shareholder value and your shareholders might not hold the token or they might have sold it or whatever. I don't know, blah, blah, blah. Obviously you can construct many situations in which like this is not maximizing shareholder value. What's your response to that? What would give somebody comfort that you're not going to, you know, go do that?
- [07:14]
Vlad
Yeah, I mean, we've committed as a management team both to the buybacks, but also to like not doing any other equity rounds going forward. I think all of our investors have committed to that as well because they were told that this is the plan and they had the opportunity to get out of the cap table if they disagree with that plan. So, I mean, I'm not an expert on Delaware law. I mean, I don't know if this has actually ever been challenged in Delaware or if there's an actual precedent.
- [07:46]
Aseeb
Are you an expert on Delaware law?
- [07:48]
Robert
I'm not an expert at Delaware law either. But I guess I'll ask a simpler question, right? The company has ample financial resources, right? You're at the company, you're going to build out lighter as a system for many years. I guess the question is, what happens when the capital that you previously fundraised runs out? Do you raise money again, sort of like pro bono, for the benefit of token holders? Do you come up with a new funding mechanism? Or does the plan have to change out of necessity if the capital that you have eventually runs out? I guess how do you reconcile those things?
- [08:27]
Vlad
Right. Well, I mean, right now the buybacks are 100% of revenue. We want to maximize that. I mean, I think in the current state, we want to have that buyback program be as strong as possible. And as you pointed out, we have capital that we raised that can be used for operations for many years, and we're optimizing our costs. I don't know if you guys saw we have all these prover machines we use and we're really optimizing our costs on that. But I guess the point being at some point the buyback program would need to shift to go from revenue to profit. That's not going to come for a number of years where that's going to be needed. Also, I think by then we'll have things like Clarity act, we'll have other SEC and other folks in D.C. will have thought through more on how this should look like. I think the end state is going to be something where it's more about profit and not just revenue and then that'll be sustainable.
- [09:36]
Aseeb
Yeah, I think another way to think about it is that think about zcash for example. Zcash is probably a good example because it's such an old protocol. It's been around for a decade plus in zcash there's a portion of the zcash revenue or inflation or whatever that goes toward paying the underlying team to make sure that there's some sustainability. So there's a dev reward effectively. If you think about MakerDAO, you think about AAVE, there's a portion of the DAO treasury that goes toward compensating the team, compensating the developers, compensating the BG efforts. And this eventually has to get drawn down from somewhere. And so I assume that in the limit that's probably what Lightr looks like. Is that okay. Lit token is the governance token for lighter. LIDR Labs is a contractor effectively to the DAO and it goes and says hey, this is roughly what I think my costs are. If you're good with this, then pay me and then obviously you keep the surplus within the LIDAR treasury.
- [10:27]
Vlad
Yeah, I mean I think that's how things used to work. I mean I think we, we have maybe more ambitious goals for it which is to actually be one of the first companies where essentially like merging of traditional crypto tokens and tokenized stocks as a single type of asset because we are listing tokenized stocks online or obviously not for ourselves for companies like SpaceX. But I think the end state, again assuming that we make good progress on clarity and this is kind of going to be process with SEC others but like the end state, I think that would be really cool is if there's actually, you know, you can own shares of the C Corp directly as a token and vice versa. So there's actually kind of a direct one to one mapping that isn't just a commitment by the management team but actually in the smart contracts and in the regulations and in the law.
- [11:24]
Aseeb
Right.
- [11:24]
Vlad
Like I think that's the end state. We want to know if that doesn't happen. Yeah.
- [11:29]
Robert
In that world would the lighter tokens become the lighter company equity and vice versa and then you just have one instrument and it's fully aligned.
- [11:38]
Vlad
I mean I think that's, that's the future where. And again and this feature doesn't. This is not unique to lighter. I mean I think this would be a pretty cool way to structure things for any, any company of the future. And this is kind of like what Defi Rails? When Defi and Stratify merge, I think it'll look something like this, kind of for all companies. And if we don't quite get there on this, go around with the regulations, it's not going to be. I think some people are concerned about this. Oh, if clarity doesn't pass, things are only going to be as good as they are now and then some. Right. No matter kind of what happens going forward. But I think I'm optimistic that this is the end state we're working towards where actually Defi and Tradfi Rails merge and tokenized stocks and tokens for crypto projects become one and the same over the next few years.
- [12:36]
Robert
So how do we apply that idea to VVV and how we started this conversation?
- [12:43]
Aseeb
Okay, so let me maybe also sharpen the distinction, I think, between something like VVV and something like lighter. So most crypto projects that launch tokens, the token is a financing mechanism, you know, so they, they, they say, hey, I'm going to create this token, I'm going to sell it to investors, I'm going to sell it to retail maybe and I'm going to use it in order to go build the product. And that's a big part of the reason why I think there's an expectation from the market that like, hey, this thing is going to represent the value of the thing that you create. If you are financing yourself by selling this token, it's important to distinguish, even though people think of like, okay, VVV is the Venice token. If you actually just look at the history of vvv, Venice existed for like a year before they launched the VVV token. Venice was self financed by Eric Voorhees, the founder of Venice. He put in millions of dollars of his own money. VVV was airdropped. It was not sold to investors, it was not sold to retail, it was not sold to anybody. It was literally airdropped in its entirety or the 50% of it was airdropped to early users of the platform. And if you go read the launch announcement of vvv, it is extremely clear that VVV entitles you to a portion of the compute on the Venice platform. And they say very clearly Venice is owned entirely by its team. It's not owned by. VVV is not a governance token. There's no forums, there's no voting, there's no fucking anything. We don't give a shit what VV holders say in a forum. You don't own Venice. We own Venice. This is A asset that we are committing to honor. And you can use VVV to mint diem, which is a liability of the company. So that's the idea. Now, Venice has made very clear that they intend to use their subscription revenue to buy back vvv. And their goal is to buy back all of the VVV supply over time. And if they do that successfully, then basically they're just a company with no crypto cap table whatsoever. If they successfully do that, then they are entirely just an equity cap table left. But it was equity before they launched a token. The equity preceded the token. There's now 9% of the cap table held by investors. But most of their customers are not crypto users. Right. They're a normal company that decided to create a token for a specific reason, a specific purpose. But it's really not like Uniswap or lidar or really anything else in this conversation.
- [14:58]
Robert
What was the reason then? Can you summarize in Europe, opinion is
- [15:02]
Aseeb
their leader, why they launched a token?
- [15:03]
Robert
Yeah, why launch a token at all?
- [15:04]
Aseeb
Yeah, I mean, so the answer was that they wanted to give early users a right to continue using the product. Right. Like VVV gives you the ability to mint diem, which allows you to keep using the product basically for free. It gives you a certain compute budget that you have available in perpetuity. And the idea in the very beginning was that we should give this to users. Obviously it was a very small product back then. They were pre pmf. And if we give this to users, then more people will use the product, the users will remain sticky, they'll be part of an early community. And the strategy worked. Right now they're a large company, they have millions of users, they have 70 million revenue run rate, they're doing really well, they're growing really fast. But there was no, I think it's important to underscore that they were using a token for a different reason. And they were very clear the entire time what the token was for, what it was. It was not like a winky winky. Hey, this is a governance token. Maybe eventually we'll buy and burn it, but you know, maybe eventually it'll give you the right to everything, but, you know, we'll see. And so I think the, the conversation around it, I feel like, is collapsing. Some of the nuance of, I think what's obviously been a very good faith team, they haven't sold any token, they've only bought back more token over time. But I've been very public, I think, on the show, I'VE talked about the Uniswap Labs and Uniswap protocol dichotomy as being really, really bad and the same thing happening. We've had portfolio companies that have thought about doing the same thing because they saw that Uniswap did it. They said, okay, why can't I do it? And I told them, look, I think this is really bad because your shareholders and your token holders are supposed to be subservient to the same asset and now there's a divergence in those two cap tables and that's going to result in pain, in conflicts of interest, because it's all supposed to be working toward the same thing in Venice. That's very clearly not what happened. That's not the history, that's not what the token was framed as. It's not how the mechanics were, it's not how the fundraising happened. They put their own money in the project, not the token holders money.
- [17:02]
Robert
Totally. Can I ask a couple clarifying questions just to better understand that dynamic?
- [17:06]
Aseeb
Yeah.
- [17:07]
Robert
So if they airdropped 50% of the tokens to the community and their early user base, does the company still hold 50% of the tokens?
- [17:18]
Aseeb
Do they sold any? Have they 30 something? 40%? No, they haven't sold any. They've only bought back tokens. So they own more of the tokens than they started with at the original distribution.
- [17:29]
Robert
Right. Is there a plan for those tokens to go to the investors that invested in the company? Are they just going to destroy them? If the goal is just to buy back the float of the tokens.
- [17:39]
Tom
Right.
- [17:39]
Aseeb
So once you got exposure to vvv, like the investors in this round got exposure to VVV via options. Somewhat complicated structure, but basically we have to exercise the options in order to get them, which means we have to pay the company for the right to get the tokens.
- [17:53]
Robert
So by investing in the company, you also got exposure to the.
- [17:56]
Aseeb
We got exposure to the tokens on the company's balance sheet, correct? Well, no, no, no. So we got exposure to directly received tokens as well as the 38 or something. I'm going from memory, like some very large portion of the tokens that are sitting on the balance sheet of the company. So we got exposure to both. So the answer for us is that, look, we obviously think that VVV is valuable. That's why originally when we came to them, they just wanted us to invest in equity. And we were like, well, no, we want both. We want exposure to VV directly as well as the pass through exposure and the underlying company economics, we want the whole thing. And so I think it's very compelling, this idea of tokenizing compute specifically on the Venice platform. I think it's very original and an interesting kind of capital innovation. But I think it's unfortunate that people are clearly misinterpreting it by looking from a thousand yard view and saying, oh, there's a Venice token, therefore it should be like a uniswap token without really having done the research of what it is, what it was represented as and what the history of the company is with respect to this token.
- [19:01]
Vlad
Totally.
- [19:01]
Aseeb
I think that's where a lot of the.
- [19:02]
Robert
But it's fair for the Venice token holders out there on crypto Twitter, in the community to see the value in the token. Because you see the value in the token too.
- [19:12]
Aseeb
Yeah, correct, correct.
- [19:14]
Robert
But just not for having access to.
- [19:18]
Aseeb
Clearly the token is valuable.
- [19:19]
Tom
I think it's, I mean there are other assets in the world that have utility and have some maybe upside if sort of the issuer does well. Like I think of like famously American Airlines issued like these like lifetime flight coupons or like country clubs will have these kind of products too. And so it's like, yeah, you can use it, but obviously the, the value of it's going to go up if the club does well or the airline does well, but you don't buy it. Assuming that, oh, this is giving me ownership in American Airlines. It's sort of this other third thing. And so you can sort of ask questions around, okay, well where does this liability sit in the pref stack? And maybe you can wish that it's equity, but ultimately I think to Seib's point, if people are transparent about what this thing is and what it's supposed to do, I don't know, that's kind of what the market is about and that's what the market's saying. I think the other thing too is I agree it's I think tough to do equity plus token value capture and generally there's some cannibalism between the two. But I do feel like I've seen this less these days just because we haven't seen any really breakout successes of any of these labs. Yeah, I've been some teams, I've sort of raised in them. But it's not like these token teams are saying, oh if only I could do an equity raise for my labs co and then we'd be like a multi billionaire. Doesn't really sort of panned out. I think generally when people have been at least recently kind of upset about this. It's because the Labs entity got sold for parts or got acquired somewhere. And, yeah, that's unfortunate for token holders, but it's also unfortunate for equity holders and for everyone. You're not even really covering the pref there. And so I think ultimately everyone wants some sort of path forward to I think, at least have a path towards uniting these two. Maybe Clarity. And it's like we have Mr. Superstate on the pod today, too, but I don't know, it feels like no one's doing this out of some scheme. It's almost just like this was sort of a byproduct of what the market was able to support at the time.
- [21:22]
Aseeb
Yeah. And it's also worth pointing out, Venice is genuinely weird, right? VVV is genuinely weird. Not just because, okay, Venice is like a traditional company. It's not on chain, it's not a dao, it's whatever. So that's one of the reasons why VVV is we. Because it is an asset in the capital stack of a traditional company. But the other thing about it that's weird is that it's kind of like a overloaded asset financially in that it's not just like airline miles of, like, okay, you can use this product. You get the compute. It's also that, okay, it gives you some benefits on top of Venice. It gives you access to Venice Pro. But then also they're buying it back with their subscription revenue, which means that, okay, there is. It's kind of like. It's a little bit like bnb. I think BNB is probably the closest analogy to this. We're like, what is bnb? BNB is clearly not equity in Binance. I don't think anyone's confused of, like, why isn't BNB voting on the fee rates or the fee schedule on Binance? Okay, we all understand BNB is not equity in Binance, right? BNB is kind of this overloaded asset. It's got, okay, Binance is burning stuff. There's also BNB chain. There's also, okay, they give you discounts. You get access to whatever it's called, the early access projects and the airdrops and all this stuff. So it's like kind of this weird sum of parts valuation thing to figure out what this is. And clearly Binance's success matters for bnb. But also, clearly, this is not equity in Binance. This is some other thing. Now, I agree with everybody here that, look, clarity is going to give a lot more room for maneuverability in these kinds Of I don't know what the word is. These sort of protean assets that don't quite resemble any one thing. It's not a governance token. It's not equity. It's something else.
- [23:02]
Robert
Right.
- [23:02]
Aseeb
And it's not even pure commodity. It's really genuinely something else. And ultimately, like, the innovation in capital stacks is, like, a big part of the reason why we're here. It's why we invented tokens, why we're so excited about all the things they can do. If the answer was that, well, tokens are just a fancy way to, like, issue equity through the back door, I don't know, I mean, that's fine, but that's actually just not that interesting, you know, like, we already have equity. We could have already done that. So that's. That's a little bit why I chafed so much with this conversation. But clearly it's gotten a lot of people animated about, hey, what is a solution space to this look like? And I think this conversation is ultimately healthy because it means that everybody's now thinking. I mean, I know the Venice team is thinking about it. I'm sure Lighter is also having the same conversations internally of like, okay, people care about this. They care about what are the guarantees that this token actually gives me and what goes wrong if they don't even like the C Corp thing. Right. Like having a Labs entity and then having an overseas foundation, that was a hack. That is not like, that's obviously not what Delaware. That's even Chancery designed C Corps for. Right.
- [24:04]
Robert
Adds even more things in the middle between the users, the investors and the outcome.
- [24:10]
Aseeb
Right, exactly, exactly. So, like, everything in crypto is hacks on hacks on hacks. Go ahead, Vlad.
- [24:15]
Vlad
I mean, I think to me, like, kind of like, you know, zooming out. If we think about, like, merging DEFI and Traffi over the coming months and years. Right. Like, the point I would make is, yeah, there are a lot of messy structures. I mean, some structures are simpler, some structures are more complicated in digital assets, but there are a lot of complicated structures in Stratfi too. Right? Like, look at OpenAI and their corporate structure, or even my old firm, Citadel. Their Citadel, the hedge fund, their Citadel Securities. If you bring all those things together and put them on chain, there are going to be a lot of novel structures there. I think you're right. For something like lidr, it's actually relatively simple. For other projects that may not be. That doesn't mean. I think two examples I gave both created a lot of value for Every stakeholder involved. So I think that there's a lot of the discussion online, I think assumes that complexity of structure is due to some malicious intent on somebody's part. And I think that a lot of times complexity of structure is just necessary for a particular type of business. On Defi Rails or on Tradfi Rails.
- [25:29]
Aseeb
Yeah, that's well said. Or sometimes it's an answer to a bad regulatory environment. So I think historically in crypto we've had these just horrendous Byzantine structures and that's largely the reason why that many of these things get saddled. But I think Tommy made a good point that usually when these things go badly, nobody's happy. So some of these M and A. Okay, Labs code got acquired. Nobody's fist bump, even if you're an investor in the Labs code, you're like, well, that sucked because I, I mostly invested in the token and this labs is this tiny little nothing compared to my token investment. So yeah, usually bad outcomes are bad outcomes for everybody involved. But let's talk a little bit about speaking of the intersection of CEFI and Defi. Let's talk about what happened with LIDAR over the last week. So there was an event in London by Robinhood on July 1 called the World is Flat. I didn't totally get why that was the theme. But Vlad, I was there with you in London in this old church thing where they did this, I don't know, a bunch of skits about nautical themed skits where they introduced a bunch of new launches by Robinhood. So first Robinhood launched their robinhood chain. Their L2 is now live. Of course, they're built on the arbitrum Nitro stack. They have now 24, seven tradable stock tokens that are going to be issued directly on Robinhood chain. These are kind of StockX. Is that the company Stockx style. And they also have USDG. I'm sorry, X stocks. What am I saying? StockX X stocks. It's X stock style tokens. These are sort of debt tokens, but that are supposed to kind of mimic the, the value of the underlying stock. And then you have USDG lending via morpho directly on the platform. Also Athena partnered with them. And then lastly, and kind of one of the biggest things that was pretty explosive was lighter is going to be the native perps integration in Robinhood wallet. So this is now opening up lighter trading as the perps platform for Robinhood chain for, you know, something like, however tens of millions of customers that Robinhood has available now. Interestingly you guys are offering incentives. So there's like 11 million worth of lit that is being offered to Robinhood users via points. So if you trade on this, you also get free gas and zero per fees for 90 days. So it's not available in the US, UK, Canada, Switzerland and a few other jurisdictions. Lit did very well on the news and there's a lot of excitement now seemingly around lighters go to market around this Robinhood integration. But one of the things I was seeing a lot of questions about was about the fact that this is apparently a separate instance of lighter compared to the original Ethereum instance, which presumably means that you're fragmenting the order book, fragmenting liquidity. So Vlad, talk about this deal and also talk about mechanically how you're thinking about if this is a separate instance of lighter, what does that do to the liquidity of the platform?
- [28:16]
Vlad
Sure. Well, I think to start it was a really fun event. You know, I think that definitely the other Vlad has a layer for theatrics that I think, you know, I do not. So, you know, they organize some really cool stuff there and we actually there was a real time demo of perps within Robinhood Wallet powered by lighter at that event. As it turned out, the trade that was demoed there, I think it was a SpaceX trade that was actually the first trade ever done on that instance. And had the demo been an hour before, it wouldn't have worked because one of the market makers wasn't ready. So it was a pretty high stakes demo, but turned out really well. And I think everybody was impressed with the speed and the UX of that. But yeah, we're really excited about the partnership. To your point, right now it's not available to every jurisdiction. With the work we're doing with CFTC, I think the Robinhood US instance can route order flow to registered DCMs in the US and so we're excited about also kind of expanding to that. But the, the, the current product is live right now. I mean you can trade many different assets there. You can use tokenized stocks as collateral. And lighter Core is on top of Ethereum Lighter Robinhood is also on top of Ethereum, kind of through the Robinhood chain, which gives definitely advantages to Robinhood customers. I think we're working on something called Lighter EVM as well. And so there's actually this interoperability between different chains on top of Ethereum. So when you talk about fragmentation of liquidity, these are different markets. Right. Like it's relative to a different stablecoin. There are going to be different forms of collateral going to be different assets that these customers want to trade. But the important thing is that moving capital around between the two instances with ZK is going to be pretty much instantaneous. So market makers who come in, it's not the same as like bridging from Ethereum to Solana or bridging from, you know, ethereum to another L1. So that, you know, I think fragmentation is there's. It's not just black and white either either, you know, because market makers have the same capital base. Yeah. I mean, if market makers can easily. Let's say you're market making BTC USDC on one instance and you're market making BTC USDG on the other instance, and you can move capital back and forth almost instantaneously, prove that that movement happened with ZK proofs. That's a lot more capital efficient for the market. It's almost the same as if they were running the same order book on one market. It's a little bit less efficient than that, but pretty close. Compare that to the market maker having to market make one instance on Ethereum, one instance on Solana. That's completely different. Compare it even further to market makers operating on Defi and then having to hedge and TradFi. That's really inefficient. So this is as efficient as it can get. Other than being the same instance. Now, why would you even want separate instances? I think there are actually reasons for that. Right. Because it's different customer base, different stablecoin, but also different regulations. I mean, I think in this case our regulatory strategy is very aligned with that of Robinhood. But you can imagine, like, let's say there's another integration down the road somewhere in South America or whatever. Right. That, you know, we've already done one with Telegram Wallet too, which has a different approach than Ramata. But down the road there can be different instances of lighter that for whatever reason, maybe there's an instance in some country that has very specific rules around leverage and very specific rules around adl. And actually it makes sense for that to be a separate instance there for those reasons alone. But again, if the balance sheet is essentially interoperable and very easily moving back and forth with ZK proofs, that is as close as you can get to having just like one big order book globally. Right.
- [32:54]
Aseeb
Tom, you want to jump in here about this Robinhood launch?
- [32:57]
Tom
I mean, I feel like we got the man himself chiming in. I mean, it's exciting. I think we've kind of been joking for the past year that this is like global purpification. And I think the Robinhood example is sort of like a demo. And I think it's also, I think, cool also to see this Defi Mullet thesis play out. I also think of Coinbase obviously really leaning into Morpho and these vault products and obviously Robinhood having their own vault products. And I think it's one of those things where you have these kind of industry leaders that are very well respected putting together the blueprint and sort of opening this window and then you have a million people kind of drafting behind them. And I think you kind of look at the ETF launches as being like an example where Bitcoin was this weird thing. No one really wanted to do it. Then I was like, all right, blackrock's in. And so, okay, now everything's in. Everyone's going to be offering ETF and we're legitimized the idea. I think we're basically on the cusp of this being the legitimization of the kind of Defi mullet play. And I think especially when people start to see the revenue numbers and just sort of the sense of having this model, I wouldn't be surprised if we see every other financial services provider copied this the same way. They've already kind of copying the stablecoin playbook.
- [34:12]
Vlad
Yeah, I mean, I remember when we first pitched later to you guys, like, I think it's been two and a half years. This is what we talked about at the time. It's like, Defi is going to be the Rails for not just the, like, fully decentralized front ends, but also for cefi and even Tradfi. And like, I think at the time, I mean, you guys got it right, but I think at the time the consensus was like, no, like, no one cares about the tech. It's all about distribution and marketing. But the reality is that Defi is better tech and it's much better for even centralized or somewhat centralized front ends to sit on top of Defi Rails. And we're seeing that. I mean, I think our launch with Robinhood has been fantastic. I should also kind of give credit to some of our competitors. Right. In the same week, hyperliquid had, I think, the largest exchange in Africa adopt them as back end. And I think extended etoro. These are all kind of part of the same thesis that I think we had from the beginning when we started building lidar of like Defi Tradfi and CFI merging.
- [35:14]
Aseeb
Yeah, I feel like it's very similar to also what you see in stablecoins is that a lot of these traditional fintechs or even banks starting to adopt stablecoins, they're like, it's just better. It's actually just a better way to accomplish our business goals as opposed to some oh, we love decentralization or we love crypto values and we're kind of virtue signaling something. It's that no, these are actually better products. Products. Robert, did you want to jump in here? I'm sure there's also a lot to talk about with respect to the tokenized stocks are allowed.
- [35:39]
Robert
Well, I just wanted to jump in and say that I agree the defi mullet is being reborn. I'm excited to see a mainstream consumer product built on top of something like lighter as a back end. I think that's exciting. My only concern is the fragmentation of liquidity. We brought this up before but you know, it kind of stinks to have to start from scratch in a sense and build liquidity in a whole new platform when you already have such a great base of liquidity in one market already.
- [36:11]
Aseeb
Yeah, I mean I take Vlad's point that especially because this is being launched in non US markets. Very plausible that actually this is kind of a interesting hack for them to allow a lot of their traders in non US markets to be like, hey, you want to get exposure to US stocks via perps?
- [36:27]
Vlad
There you go.
- [36:28]
Aseeb
This is the easiest way for you to do it. Or just other financial assets for which as long as you have an oracle and you have some market makers willing to provide liquidity, boom, you've got a market going. So I can see the claim that actually the fragmentation is like these people are mostly not trying to buy just the same old stuff that actually there's very different appetite for assets. Although I guess we'll see once the rollout is further along.
- [36:56]
Vlad
Yeah.
- [36:56]
Robert
But later Core is doing such a great job at building liquidity in these assets that should be attractive to X us.
- [37:03]
Aseeb
Right? That makes sense. Okay, so let's switch gears a little bit. One of the interesting stories here has been in the many trials and travails of governance tokens. There was a somewhat hilarious, although I'm sure sad for the victims involved exploit of a token called Bonk. So for those of you who do not remember Bonk, Bonk was a meme coin on Solana, one of the OG meme coins and they have a governance process, I guess don't know why, I don't know what there is to govern with Bonk. But so basically there's this governance forum where, you know, mostly nothing was happening and nobody was ever looking at it. And so somebody came around and they proposed something on the governance forum. And the proposal on the governance forum was called Sowellian Bonkdao. I don't know what that is that referring to Thomas Sowell? I don't know what that means. And it was submitted a governance forum. And I think the governance, sorry, bip 76, which is calling to rebuild from the ashes, monetize their holdings, as well as reward all YES voters who are eligible for tokens by transferring bonk tokens out of the treasury. It's kind of sort of seemed like nonsense. I didn't understand what the governance token said, but it was very short, it was like roughly a paragraph. So they put it to a vote as they followed the governance process and seven people voted out of the 18,000 eligible votes. And there was roughly 1% voted no and 99% voted yes. Now, of that 99%, almost all of it was the attacker who bought $4 million worth of bonk in order to vote in this governance forum. And so basically after voting closed, they voted themselves $20 million worth of bonk tokens. So people freaked out. They were like, what happened? Threatens of law enforcement and whatnot. And kind of here we are now. Robert, you're the OG governance guy. I think it's pretty clear there were some very basic governance norms that could have solved this, like proposal alerting, time locks, higher quorum, voter turnout stuff, you know, like limitations on how much money can go out of the treasury. Tom, go ahead.
- [39:15]
Tom
This reminds me so much of who is that weird guy on the compound forums that similarly had some nonsense proposal to Humpy? Yes, Humpty.
- [39:25]
Aseeb
Oh yeah, yeah, yeah. Robert, do you want to summarize the Humpty saga?
- [39:29]
Robert
It's the same thing as Bonk in a nutshell. Just I think that one was more sophisticated. At the end of the day, there's a style of governance attack which is buy enough governance tokens to be able to influence governance. Right. In a community like Bonk that nobody even knows there is a governance process, it takes fewer tokens. In a system that has fewer checks, balances, safeguards like Bonk, where there basically are no safeguards, it takes fewer tokens. But this applies to pretty much any token based voting system where someone can buy enough tokens and then try to get what they want out of it. Same thing happens in any semi democracy, right? This happens. People complain about the influence of money in politics all the time. But the governance attack, so to speak, is you accumulate enough of the vote, you try to sway it. Bonk, it was successful. This is not the first time that there's been a successful governance attack in Defi. Years and years and years ago on the show we talked about Beanstalk or whatever it was, or someone Beanstalk. They bought the governance tokens and then they took over the Beanstalk Dao. And you might say, why did some weird algorithmic stablecoin have a governance process anyway? It just enables someone to steal all the assets. The same question applies here. Why would BONK have governance? There's nothing to govern. The whole thing is nonsensical. But this is not the first time it's been successful. There have been governance attacks that have failed, like the Humphy one. There have been governance attacks that succeeded. Bonk. They succeeded. It had all the ingredients for it to succeed. No safeguards, nobody paying attention, and a large war chest or treasury of assets to steal. Right. It had everything there for this to occur. I don't know how many other things match that pattern. If you run a project in the space and you have token based voting, you should take a serious look at how it works, why it's there and what safeguards exist. It's crazy that Bonk had so few safeguards. We pioneered some better implementations of governance that were basically open source standards for teams years and years and years and years ago. And I get that the Solana ecosystem doesn't have all of the governance tooling that the Ethereum ecosystem has.
- [41:45]
Aseeb
I don't think that's why BONK didn't have governance safeguards. But yes, I take your point, but
- [41:51]
Robert
it is what it is. It's just an embarrassing moment in the history of on chain voting.
- [41:55]
Aseeb
Yeah. I mean, this is the failure mode classically of democracy of 51% voting themselves, all the money, but it's not even 51%.
- [42:03]
Robert
It's 51% of those who show up. And in a community turnout where seven
- [42:07]
Aseeb
people voted, which to be clear, is also failure mode of democracy. Right? Like if there's not high voter turnout in democracy, the exact same thing happens.
- [42:14]
Robert
That's what happens in like small primaries where there's very low turnout and you get crazy candidates.
- [42:19]
Aseeb
Right, right, exactly. And so I think, funny enough, coming back to the tokens versus equity thing, right? Like this is one of those things that actually Delaware Court of Chancery has developed norms against this kind of thing, which is that if you are on the board and you're like, he, I'm going To vote that the board gets paid $50 million a year and like, we, you know, basically raid the corporate treasury, Delaware Board of Chancellor would be like, well, okay, maybe you have the votes for that, but sorry, we're not going to let you do that because it disenfranchises minority shareholders.
- [42:47]
Robert
That one might, that one might technically be legal.
- [42:50]
Aseeb
No, no, no, no. Like, basically the, you have a fiduciary obligation to Shareholders have to sue. If they don't sue, then, like, okay, they're not going.
- [42:58]
Robert
Right, but if the shareholders approve the package. Right, you said specifically that the shareholders approve it.
- [43:04]
Aseeb
No, no, no. I'm saying the board, if the board approves a, whatever, a resolution to start paying themselves a shitload of money and like, raid the corporate treasury or, you know, the, the, the, the, the preferred shareholders vote themselves all the money and screw over the common shareholders, like, these are all challengable in court. And the Delaware Court of Chancellor will say, nope, you can't do that. You have to protect minority shareholders as well, even if they don't have a voice at the table. Democracy doesn't work that way. Democracy does not work like Delaware Court of Chancery. There's nothing stopping you from saying, you know what, we're going to vote. You know, all the billionaires give all their money to everybody who's, you know, a college graduate.
- [43:39]
Robert
There's checks. Let's see if there's two houses of Congress, there's a president and there's courts.
- [43:43]
Aseeb
No, no, but. Right, but that's democracy. That is itself the democracy. If the democracy, if that apparatus agrees to it, there's nothing that stops you except in principle, Supreme Court, which says, oh, the Constitution. Anyway, whatever. I'm, I'm obviously approximating Vlad. What stops somebody showing up on the lighter forums and voting themselves all the money?
- [44:03]
Vlad
Well, you know, we don't do a lot of this, like, decentralization theater around governance. I mean, I think that's been something, you know, I guess we talked about kind of in the past ways that were needed, structures that were there because of, like, lack of clarity. And some of this led to this weird structures. But I mean, I think, like, zooming out, like, there are a lot of weird things that happen in defi. Right. Like we had something this week related to lighter where somebody used, Somebody was trying to buy lit with eth, and I think they used like one of the, the aggregators to do that instead. Like, they could have just moved the ETH to lighter and bought lit there, but instead they used one of the Aggregates I think they spent like 2 million worth of eth just to buy like 14k worth of lit and just the rest went to mev. So weird stuff like this happens in defi. But it's like, it's like Rails for the future of finance and as that gets built they're like weird corner cases that will emerge. It's like saying the Internet is like if you compare Internet to pre Internet there are a lot of weird things that happen on the Internet but it's still much better system netmap. So we still believe like DEFI is the future even though there's these weird corner cases that happen. I don't know the details about. I mean I think you just described it there. But so I mean that that particular situation wouldn't happen on LiDAR because there is no DAO, right? There is no structure like that. It's all just one entity as I mentioned. But, but again even, even in kind of the lighter ecosystem, weird things happen. If somebody like, like this.
- [45:50]
Aseeb
It sounds like that was a third party. Yeah, it sounds like that was like a aggregator that was kind of broken. If they allowed to make a trade with like 99 slippage, that sounds like the aggregator's fault.
- [46:01]
Vlad
Yes, for sure. But I, I mean I think like broadly speaking it's all you can say well like someone coming from traffic could say well that that's weird like that that should never happen like that that would not. Similar to your point about like Delaware, somebody can say well in stratify there'll be protections against that. But, but I think you know there, there are going to be these corner cases as DEFI grows and I think in, in, in a lot of cases there, there can be protections built in.
- [46:32]
Aseeb
Yeah, it's, it's worth like look, this is a, this is a meme coin. Obviously to the extent they had governance, it was kind of Mickey Mouse governance. So they're, they were larping a little bit at having a governance forum I guess and like unfortunately they actually governance and assets for which to govern most governance. Like this is not a problem of first impression let's say like we've, we already know how to solve this problem. So maybe a little bit unlike some of the other issues that we're talking about, like this is a solved problem. It's just kind of funny that this, I mean obviously sad for bondholders, but it is, it is kind of like come on guys, if you're going to govern tens of millions of dollars of an asset, you should do like even just the basics. So if nothing else, it's a worthwhile warning to people who are doing this kind of thing. Last story that I wanted to cover that's gotten a lot of play is the of course every president, they are legally mandated to make these filings annually of their earnings while they are in office. I believe that Obama, when he made these filings it was roughly eight pages. Biden's was 11 pages. Trump's disclosure was 927 pages. Now when people trawled through this gigantic disclosure of all of the financial assets and business dealings of Trump, what they found was that he has made roughly $1.4 billion in post tax income from crypto. In fact, he's made more from crypto than any other US listed crypto company. He made more than coinbase did personally. 636 million came from licensing Trump token, 594 million came from World Debrief Financial and 200 million came from equity sales. And I'm thinking this is like dat stuff. I assume his pre tax income was roughly 2.3 billion from all of the crypto ventures combined. This is roughly matched by people did some accounting of all the losses of the people who invested into Trump Token and world that we financial. That was roughly about 2.3 billion as well, seeming to imply that this was somehow a perfect kind of frictionless transfer between retail investors into Trump assets and the Trump family directly. He put up minimal capital into Worldly Financial and Trump Token. It was less than a million dollars in total. And nevertheless he obviously received enormous proceeds from the sales and the trading volume associated with these assets. So Trump made a lot of money from crypto. If you didn't know that now you know. I think this is already pretty obvious, but I think just seeing it kind of boggles the mind with respect to the scale of income that he made. Robert, what's your reaction to the Trump Financial disclosures?
- [49:11]
Robert
That's a lot of money.
- [49:12]
Aseeb
That's a lot of money.
- [49:13]
Robert
That's a lot of money.
- [49:15]
Aseeb
You know, clip that amazing reaction.
- [49:18]
Robert
That's a lot of money. You know, I think people are genuinely surprised by it. I think everyone assumed the numbers were lower. He's had a lot of ventures that everyone has known about, right? Everyone has known about the Trump family's involvement of World Liberty. Everyone has known about what was that publicly traded company.
- [49:36]
Aseeb
He had that Trump Media.
- [49:39]
Robert
Trump Media that then became a bitcoin digital asset treasury company as well. Bitcoin Miner or something. Everyone knows about that. His involvement in crypto has not been A secret. I just don't think people understood or appreciated the scale of how successful it's been. And so that was what surprised people. I assume the future earnings from crypto are significantly smaller, frankly. Like, you know, when he entered the market, it was much more of a bull market. The endeavors he had were much more successful. I think a lot of that's front loaded. If he had to do additional disclosures year over year, I would not expect him to be earning anywhere close to $1.2 billion a year in the year since and the years going forward, I think it's probably a much smaller number. And so it is truly a large haul. I doubt that future years are going to look anything like it.
- [50:34]
Aseeb
Yeah. Vlad, what's your reaction to Trump? Trump's take home?
- [50:40]
Vlad
Yeah, I mean, I think it is a lot of money. As Robert said. I don't know all the, you know, I didn't have a chance to read the. What is 600 pages of the disclosures?
- [50:52]
Aseeb
Sorry, 900 pages.
- [50:54]
Vlad
900. 900 pages. Okay. Yeah.
- [50:56]
Aseeb
I mean, I think War and Peace level treatise.
- [50:59]
Vlad
Right. You know, I lit holders get mad If I spend 30 seconds writing a tweet. I don't think they'd want me spending time reading all that stuff. But, you know, but I'll just say, you know, I think the President has always been involved in many different types of businesses. So I think it's no different when it comes to crypto. But. But the fact that the administration has embraced blockchain is. Is definitely not good for the industry. But all these different businesses, I'm sure it'll be interesting for folks who have the time to read the disclosures to understand how they work. But I think net net, it's like great for the administration to take such a positive view of this industry and actually be part of it.
- [51:47]
Aseeb
Tom, what's your take?
- [51:49]
Tom
I mean, I think this is kind of how everyone expected the meme coin thing to play out. It kind of sucks. And it's also like, what did you kind of expect? I am curious. I feel like people have sort of maybe jumped the gun on assuming the worst. And obviously the numbers, it's like, oh, it perfectly maps. It's like you sent the President 2.4 bill. When I think if you read it, it's like this royalty agreement with Celebration Coins, which started the meme coin. And the income is also listed for assets that you receive in kind. So he has like Ethereum staking. He lists the dollar value of the ether that he received from staking and so it wouldn't surprise me more if a lot of this were just the ownership of Trump tokens and the creation of it. That's income and therefore you owe taxes on that. And I don't really know the specifics of the royalty setup because again, it's not like he sold $600 million.
- [52:44]
Aseeb
Do you think he might be underwater post tax or what are you saying?
- [52:47]
Tom
No, no, I'm saying it's not as if, hey, literally people sent him $600 million in cash to purchase this meme coin and then he took them $600 million. It's more likely some blend of, hey, maybe some of these sales or LP rewards or wherever this royalty thing was structured. In addition to this in kind realization of Trump, I'm guessing he covered his taxes on that. But if you look through it, he's also apparently he's getting some yield on USDC on chain because it says it's kept in his cold wallet and he lists income on it. So I don't know if the President's yield farming somewhere, but.
- [53:22]
Aseeb
Shout out to Baron.
- [53:23]
Tom
Shout out to Baron. Yeah, Baron's his yield guy. But anyway, I mean the whole thing is, I think the unfortunate story is this thing again, crypto is becoming very politicized and I think this makes it such an easy target for coming elections and so independent of these weird, specific wonky details. The headline does not look great and I'm hoping we get more bipartisan movement as we saw with genius.
- [53:52]
Aseeb
Yeah, I think it's pretty obvious that this is right now. What's holding up clarity is this ethics provisions, which basically says, okay, president and or the executive branch of people in government can't do stuff like this. They can't issue coins. They can't get involved directly into the crypto industry for profit. And this is why this now is going to be animating Democrats for the next obviously going into the midterms and potentially even for the next two, three years. I think it won't be obvious until 2028 whether or not Trump's involvement in crypto ultimately was a liability or a boon to the industry. We sort of are getting the front half and the front half is the good half. Right? There's United Congress, the ability to get legislation passed. There's basically total control over the United States government at this point. Pretty soon is going to be a lame duck president and there's going to be much less focus on passing legislation so much as probably him defending himself when inevitably you're going to have a Democratic either Split Congress or fully Democratic Congress coming after.
- [54:57]
Vlad
What's the polling market on that right now?
- [55:00]
Aseeb
I believe it's 84% to win the House. And Senate is like, what, 50, 50, I think.
- [55:05]
Robert
But, yeah, it's leaning a little Republican,
- [55:07]
Aseeb
but, yeah, it's highly correlated. So if they do win the House, it's more likely that they also win the Senate. If they win the Senate, they'll def. They'll definitely win the House.
- [55:17]
Vlad
Right.
- [55:17]
Aseeb
Because obviously that means there's a gigantic blue wave. So the. Yeah, I think there's a, there's an unfortunate reality here, which is that we're going to kind of see, but there's. I, I suspect there's a lot of political pain coming because of this. Like, this is just, there's a lot of stuff in crypto that's hard to understand. This is easy to understand. President made $2 billion from crypto and everybody who invested in it lost money. That feels bad. And almost the perfect. Obviously, to your point, Tom, that money was not made by traders losing money or something. That obviously can't be the way in which Trump monetizes royalties or something. But that perfect equivalence between the two makes for just a really bad narrative for, for this whole ethics conversation, which is increasingly going to be animating the conversation around crypto. So we'll see. But, yeah, I think it's a bad portent of what's coming over the next couple years because we're going to hear a lot more about this coming soon.
- [56:17]
Robert
The one thing I'll add there is I think this could potentially be a positive for getting Clarity passed, because I think it gives the Democrats in the Senate an opportunity to get a win. Right. I think if they can negotiate an ethics compromise, if they can get something on paper, it really puts the ball in the Republican side to get this across the finish line. And so I know it's a high stakes game that Trump has created here, but I think it creates a path for everybody to find something to be happy with.
- [56:51]
Aseeb
I'm skeptical that this makes that easier. I feel like this makes that harder because it's now becoming so politicized and it's becoming such a powerful political point that before might have felt a little esoteric of like, oh, Trump made a lot of money and da, da, da, da. Now it's like, okay, this is really a Democratic talking point. Now. This plays. And I think the other element of it is that, I mean, I take your point, Rob. I think you're right, that probably Trump is not going to make anywhere near this kind of money over the next couple of disclosures. There's no more juice to squeeze. There's no more retail unless you're ansom. There's no more retail trading activity to squeeze. And so maybe that would give Trump more reason to say, okay, yeah, I'll give on ethics because I already made my money, I'm good. I don't think there's another billion in here for me to make. But knowing Trump, he obviously is very self confident, so maybe he's like, oh, no, no. Yeah, I got another one in me. Maybe we launch Baron Coin next.
- [57:48]
Robert
I hope not.
- [57:51]
Aseeb
All right, well, if we do, obviously chopping block, we will need our Barron Trump allocation. So if you're listening, Baron, hit us up. Robert doesn't want any.
- [58:01]
Robert
I don't even make those trips.
- [58:03]
Aseeb
I'll take Robert's allocation.
- [58:04]
Robert
He gets the whole thing.
- [58:06]
Aseeb
Okay. All right, thanks, Vlad. What should people check out? Where can they find you anything you want to direct them towards later?
- [58:12]
Vlad
Xyz, we have continuing to add assets to trade now. You can also go to the Robinhood instance. Definitely follow us on X lighterxyz. Lots of exciting stuff coming out. We're working on options next, so yeah, we're pumped. And yeah, maybe we'll add some exciting new perps in the coming week as well.
- [58:40]
Aseeb
Great. All right, thanks for joining us, Vlad. And we will see you all next week.
- [58:46]
Vlad
Thanks, guys.