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- [00:00]
Laura Shin
Heads up everyone. We've got exciting news Bits and Bips Our Macro Meets Crypto show is officially spinning off into its own podcast feed, YouTube channel and X account. If you've been enjoying the deep dives into interest rates, monetary policy and how they intersect with the crypto markets, make sure to follow Bits and Bits wherever you get your podcasts on YouTube and on X. You'll find the links to YouTube X and other podcast platforms in the Show Notes. We'll be posting here for a few more weeks, but starting in September, Bits and Bits will launch on its own feed. For now, we will publish longer clips from the show on those accounts. Remember, go to the Show Notes now and subscribe to Bits and Bips. That's Bits plus sign Bips spelled B I P S on YouTube X and wherever you get your podcasts.
- [00:49]
Jesse Pollack
I think a lot of this is downstream of what I would classify as a level of cultural toxicity that exists on crypto Twitter, which is that you have to conform. And if you do something that's outside of that conformed sense of what is right or what some group thinks is right, people will attack you. And my job as a leader is to make it so that there's psychological safety for people on base to do new things and to experiment.
- [01:23]
Laura Shin
Hi everyone, welcome to Unchained, your no hype resource for all things crypto. I'm your host Laura Shin. We are now featuring quotes from listeners on the show. Today we have comments responding to my interview with Bitwise's Matt Hogan and Falcon X's Matthew Sheffield about the market turmoil and its impact on Bitcoin. On X, Frigg says strong fundamentals always take time to shine. Feels like the long term play is still very much alive. Also on X, Amin Kad writes, the real question is when does Ethereum begin to fulfill its potential to have your comment featured, write a review of the podcast overall or leave a comment. Our video on YouTube x or farcaster this is the April 18, 2025 episode of Unchained. Bitkey is the Bitcoin wallet from the team behind Square and Cash app. It's the first two of three multisig hardware wallet with recovery tools that replace the need for a seed phrase. Get 20% off with Code Unchained, an AI that speaks crypto and does the work of a team of analysts Introducing Focal by Falcon X bringing clarity to a world of no visit ask focal.com Mantle is building the future of on chain finance experience its enhanced index fund Mantle Banking and Mantle X Visit Group Mantle XYZ to learn more, today's guest is Jesse Pollack, head of BASE and Coinbase Wallet. Welcome, Jesse.
- [02:51]
Jesse Pollack
Thanks. Glad to be here.
- [02:53]
Laura Shin
On Wednesday, Base became the center of crypto's attention when the Base X account tweeted base is for everyone. And in a reply wrote, coined it, and Poised posted a link to a coin on Zora. The price pumped up to about, I think it was 17 million market cap within an hour and then it immediately dumped down to less than $2 million. Users were crying foul, saying that what happened here was a rug pull. Coinbase later issued a statement saying base posted on Zora, which automatically tokenizes content, yet you had also tweeted that you had greenlit the token launch. So what happened there? Was this intentional? Was it mistake or just explain the behind the scenes?
- [03:35]
Jesse Pollack
Yeah, absolutely. So one of the biggest priorities for BASE right now is figuring out how we can give creators better tools for being creative online. Because when we look at the last 20 years of the Internet history, one of the biggest things that has driven the growth of the Internet is creators. They're the ones creating all the content on Twitter, on TikTok and Instagram. When you look at the reality of those creators, they're kind of getting left out to dry. Those platforms are making massive amounts of money off of the creativity, but the creators aren't earning. And so one of our beliefs about On Chain is that's an opportunity for us to build a new creative economy where creators can actually earn from their creativity. Instead of platforms taking 90% of the value, the creators can take 90% of the value. And so that's something we've been iterating on for the last while. We've been using Zora and other creative platforms for the last two years, since the beginning of Base, to figure out what's a model both for brands and individual creators that actually works. You might remember when BASE launched the testnet, we did the BASE introduced nft. At the time, that was the biggest NFT that ever had been on chain. 400,000 people collected it. And so it's been two years of iterating and experimenting and trying to figure out how to this system is actually going to work for creators. And through that iteration and experimentation, what we've seen is that the systems that we've been iterating through haven't been perfect and there's always opportunity to improve them. And one of the big learnings has been that coins, you know, the simplest form of tokenizing something On Chain is actually a really, really powerful tool for capturing the value of content and capturing the value of creativity and letting creators own that. And this has been led by Pump, it's been led by zora. And over the last six weeks, ZORA actually shifted their entire platform. So instead of creating an NFT every time you post, you create a coin every time you post. And we think that's good, we think that's normal. We think that there's a big stigma around coins because people have done bad things with them historically, but that really it's just another piece of technology that can help creators earn more money. And so over the last five weeks, I've been creating on zora, I've created a ton of different content. All of them have been coins. I've been sharing all of my thinking about why I'm doing that, about what that looks like, about what the impact is for me and for other creators. And yesterday we took the next step, which is that if I'm going to lead the way and kind of break that seal, we also need brands to do it. And Base is the biggest crypto native brand that's doing on chain native marketing. And so that's exactly what we're going to do. We, we're going to coin content because we believe that every brand should be coining their content, every creator should be coining their content because that's the best way for creators to get their value, creativity valued in the open market and then actually capture that creativity and let them earn more so that they can have a better livelihood.
- [06:30]
Laura Shin
And so then it does sound like it was intentional. So then just square that with the Coinbase statement about Base posted on Zorro, which automatically tokenizes content.
- [06:42]
Jesse Pollack
Every time you post on Zora, it turns into a coin. That's the ZORA protocol. We're going to put content on ZORA that's going to turn it into a coin, Base is going to keep posting on zora and we're going to keep creating coins for all of our content.
- [06:54]
Laura Shin
Oh, interesting. And so then, just like, if I'm going to walk through what this future looks like, then is it a situation where we could expect that Coinbase would ever list bases for everyone? Coin?
- [07:09]
Jesse Pollack
Well, I think if you look at what Brian and other Coinbase leaders have said, and I've said as well, our goal with Coinbase is to list everything. We don't want Coinbase to be playing this role of picking and choosing, because when we're thinking about building an open global economy and we're thinking about increasing economic freedom, what that means, it means giving Everyone access to this global market that's being formed and then giving them the tools and information so that they can make decisions for themselves. And so the next big thing that Brian's been talking about is actually integrating Dexs directly into Coinbase so that all assets will be directly available to our customers on Coinbase. And so there's, you know, no news on that today, but again, the North Star for Coinbase is list everything and give our customers access to the entire global economy.
- [07:53]
Laura Shin
Okay, well, I guess we'll have to see when or if this gets listed. I did want to mention something that a lot of people talked about, which was that looks on chain reported that three wallets bought large amounts of Base is for Everyone token before the base account posted about it, and those accounts all quickly cashed out. And I wondered if Coinbase has looked into who was in control of those wallets or if you plan to try to investigate that, because it seems like either they had some insider knowledge, like potentially they could be Coinbase employees, or they just got very lucky. Or what do you think happened there and what do you plan to do about that?
- [08:34]
Jesse Pollack
Absolutely not Coinbase employees or anyone affiliated with Coinbase or affiliated with Base. Coinbase has very strict trading policies that we enforce. We are constantly monitoring all of the employee behavior, and there is absolutely nothing connected to Coinbase about people who are buying bases for everyone. So I just wanted to be really.
- [08:52]
Laura Shin
Clear about that and just understand the certainty around that, because there was that incident with the two brothers or the two relatives, one of whom worked at Coinbase. I'm just forgetting the exact details. But so, like, so now.
- [09:07]
Jesse Pollack
Yeah, and in that case, Coinbase had monitoring. Coinbase detected that. Coinbase reported it to the government and we supported the case against those folks. And so again, Coinbase has probably the most rigorous employee trading surveillance of anyone in the industry and can give you 100% certainty that there was not, you know, insider Coinbase activity. Absolutely not. Now, in terms of how do people find out about it, we always post our content first on chain. We posted it on Zora before we put it on X, we posted it on Zora and shocker, there's a lot of people who are on zora. There's people who are scrolling the ZORA feed constantly because they're using on chain products. I think that might seem crazy at times to people. It's like, oh, my God, they're using on chain products. They're not just talking about stuff on Twitter. But yes, there are people using on chain products. And you Know, when we're thinking about content and putting content on chain, you know that content is going to be variable in how much it's valuable. And people are going to make decisions about do I think this content is more valuable or less valuable in that case, Some people thought it was valuable. They saw a base post it, they bought it, and then they later sold it. And you know, you mentioned that the price went up and then the price went down. And I think it's also really important to note that the price also went back up. I think I was looking. The price is $11 million right now. Who knows if that's the right valuation for this piece of content?
- [10:28]
Laura Shin
Yeah, the market cap. Yeah.
- [10:29]
Jesse Pollack
There was so much hysteria yesterday about, oh my God, base, rugged base did not rug. There was no insider trading. The market is a free market where people are valuing this content. People decided to buy it, some people decided to sell it, then some people decided to buy it. And when we're thinking about the global crypto economy, this is what a free market is. And the most important thing is creating a culture and then creating technology systems where we're creating long term positive sum outcomes for creators. And that's what ZORA is doing. That's what Base is focused on. We're not always going to be perfect, but we think the best way to figure it out and the best way to pave the road for, hopefully people like you one day to actually earn more money from your content is to be out there in the trenches creating content, putting it on chain, listening, learning, seeing what happens and then making it better. And so that's what we're doing. We're going to keep coining things, and we think that it's going to have a really positive impact on the ecosystem. And if you look at the last 24 hours, there have been more creators creating on ZORA than ever before. Because people are realizing, oh my God, if instead of me creating content and Facebook decides how much it's worth and then Facebook monetizes it through ads, and then Facebook takes all of that value, I can create content, the market can decide how much it's worth, and then I can capture the value, that's actually a pretty good thing. And so I actually think that there was a lot of kind of furor yesterday about this, but I kind of see this as a turning point where people are realizing, okay, the only way to the other side was through a little bit of chaos. But now that I'm coining every day and base is coining every day and there's lots of people coining every day. There's no stigma here. Coin your content. If you coin your content, you'll make more money, you'll have more direct connection with your fan, you have more direct connection with your fans and you're safe. It's a safe thing to do.
- [12:29]
Laura Shin
Yeah, well, we'll see if they take that lesson away. Considering how you were, you were criticized on all sides, but, you know, you are either prepped very well by somebody or you just manage to somehow hit a certain soft spot. I have, which is this notion that I do think that Web3 has the potential to help creators, which, you know, they were, they were not served well by Web2. And you know, I saw you talking a little bit about how basis for everyone coin is not a meme coin. You were calling it a content coin. But how do you differentiate between those two things? And then how do you also square that? And maybe this is just a different category entirely. But, you know, there are ideas like story protocol where, you know, you could use that to pay royalties to anybody who contributes on an artistic project. So, like, what's your vision for, you know, how this would all work?
- [13:25]
Jesse Pollack
Yeah. So first, let me talk about this meme coin versus content coin thing. And really where this has come from is I've been creating on chain. I've been creating on chain for, I mean, I've been building on chain for 12 years. I've been creating on chain for as long as people have been creating on chain. I did it with one of ones. I did it when Zora was, you know, open editions and now I've been doing coins for the last six weeks. Created a bunch of different coins. I've learned a bunch of things from it. And the biggest single thing that I learned is the first time I created a coin on Zora, everyone instantly mapped their mental model of meme coins. And people were, in my replies, they were like, when are you going to like tweet about this specific piece of content again? And like, when are you going to create the telegram group for this specific piece of content? And like, whoa, whoa, whoa, whoa, whoa, you guys, like, never. It's a piece of content. Treat it like a piece of content. The second time I created a piece of content on Zora that got coined, people were like, Jesse's rugging because they were mapping that expectation of this is a long term project. That's a meme that Jesse's running with to this thing that's actually just a piece of content that should be valued like A piece of content. The fifth time I created a piece of content, no one was talking about it anymore. They were just like, oh, this is just a piece of content. And if I think it's a cool piece of content, I can collect it. If I think that other people think it's a cool piece of content, I might speculate on it increasing in value, but I'm going to treat it like a piece of content. And so I think sometimes when I'm talking about this, like content coin versus meme coin, people are like, what's the technical difference? Like, you know, how, how do you segment these things? How do you know? And really my perspective is this is really a cultural and an expectations difference, right? If I'm telling people this is a piece of content, value it like a piece of content. If you think it's cool, collect it because you can spend 10 cents and support me as a creator. And if you think other people think it's going to be cool, you can speculate on that. That's really, really different than me saying, I'm launching a meme. I'm going to create a telegram group for that meme. I'm going to create all this different content around that meme, almost like an aggregated series of content. And so what I've been trying to do with this kind of language around content coins and meme coins is really just help people kind of segment their thinking about what's happening on Chain right now. Because a coin is at the end of the day, just a piece of technology. It's a financial primitive that we can map into a bunch of different use cases. We can map into a bunch of different contexts. And I believe that mapping it onto a content context is going to be a huge, huge unlock because it's going to let all of that content be valued in a way where we can then redirect that value to creators. So that's the first thing. Now, the second thing on your question around story and ip, I think a lot of this goes to the question of in this future, then let's just imagine for a second where all content is tokenized. What does the value accrual system look like? And is it built on the historical model of value accrual, which is really IP driven and kind of legal driven, where it's like, you know, I have a right to use this content and that right gives me access to revenue, or is it something new? I think my hypothesis, and a lot of this is informed through conversations with Jacob Horn, who's the creator of Zora is that it's going to be something new. And he has this phrase which is free but valuable, which is basically in this new era of on chain, because we have the ability to have the content tokenized on chain in the form of a coin, and have that provenance directly connected to the creator and then have it valued by the free market. We can actually have this world where the content is valued in and of itself, and that drives kind of this value accrual to the creator, whether it's through trading fees or ownership of that content. And, and because that's happening, because the attention is kind of manifested in that coin, then you can also make it totally free. So that's something that just is valuable in and of itself, and then everyone else can benefit from it, and it's kind of turning the world on its head. But if you look at the history of crypto, you know, you look at CCO like Creative Commons, like, that's been at the core of crypto. There's always been this idea that if we let things be free, they will proliferate more, and as a result of them proliferating more, the value will accrue back in some way. And I think what we're realizing with coins and content and all stuff is the way it accrues is through attention. And when there's attention, there's some segment of people who think it's cool to own a small part of it, just because. And that is a economic engine that can then drive value and can drive value capture for a creator.
- [17:56]
Laura Shin
Yeah, it's super interesting what you're saying. That bit right there made me think, oh, if this comes to fruition, then it would spell the end of certain middlemen. Like, I was just thinking about, if you're a visual artist and you basically reach your market through a dealer, then this type of software would allow you to pass by that. But I did want to say the one thing about the meme coins and content coins description that you gave me. It was interesting because actually it felt to me like the differences that you are making between meme coins and content coins are the exact same differences that people used to make between NFT coins and meme coins because you were saying, like, oh, the meme coin comes with, you know, this, like, roadmap and this group and, you know, whatever. But to me, that's more like NFTs. And then the way you were talking about content coins, I was like, that. That, to me, sounds like a meme coin.
- [18:49]
Jesse Pollack
Yeah, yeah. Well, I think the reality is all of this is very gray and we're kind of figuring out as we go. But I think what. What naturally happens is if you think about kind of NFTs as a prototype of meme coins, we've basically gone expanding the aperture of what can be brought on chain. Right. With NFTs, it was like you have to bring on this whole collection. You have to make it all. With meme coins, it's like you have to actually just bring on this idea and then everyone else can create content around that and that can drive the attention. And then with content, it's not even an idea anymore, it's just a piece of content. And that content could ladder up to an idea. And I actually think we're going to get to a future where you might have a meme coin. And this is actually happening on base already. You have a meme coin, and then that meme coin is creating tons of content about their meme. And every single one of those sub pieces of content actually has an economic relationship back to the meme coin. So it creates this kind of driver of attention and value accrual back to the meme coin. And that's going to give us this world where we kind of have layered value that's letting creators capture value at every single point of the life cycle. And maybe just to bring this back to kind of you personally, my bet would be that if you decide to coin your videos, just every video that you posted, you would make money because those videos are worth something.
- [20:04]
Laura Shin
Yeah, I mean, we are doing like pods and yeah, we're in a. But we're on fountain. We're on a bunch of. I think we're on like Dracula. We're on a bunch of these. Yeah. But really remember them all.
- [20:17]
Jesse Pollack
You're already experimenting, right. And I think the funny thing is, if you look back at the history of, you know, based on posts on Zora and my posts on Zora before Zora actually went full coins, they had this kind of hybrid model where it started out as an NFT and then it turned into a coin and basically posted a ton of those before. And so there already been economic assets that looked like this. It's just that there's this really funny cultural stigma right now around coins that I think is kind of well placed because there's all this history that we need to work through as we're building out kind of new models. But again, my feeling is like we have to work through it to get to the other side. And as we do that work, we're going to find better and better models for how to monetize with creators. And I actually think that, you know, we'll see platforms potentially like pods and others say, hey, what we're seeing on Zora is really interesting. It's actually accruing value better for creators than our current model and then they might adopt it. And so again, our attitude on all of this is we want to be at the forefront because that's the only way you can learn. We're going to do it in public because building in public is how we normalize experimentation and it's how we create space for everyone else to feel safe. And we're going to do things on chain because if we're not doing things on chain, if we're not using the apps, how can we expect anyone else to? And so sometimes that's going to be a little bit messy. But this is the part, this is what it takes to build a new Internet. It's what it takes to build a new social network, what it takes to build a new global economy.
- [21:45]
Laura Shin
Yeah, I like what I hear in this sense that there's a certain amount of open mindedness and not feeling like you have to do things the way it's been done before. And I just saw this exchange, which I'm sure a lot of people saw, where Alon of Pump Fund tweeted, quote, I think there's a reality where what base did is normal in a few years time, but it definitely isn't today. I'm a huge advocate for the vision of tokenizing everything, but you can't change current market realities. If you launch a coin and have social influence that comes with responsibility, namely the responsibility to stick to the space's social standards to a T, don't launch or shill other coins, don't set high expectations, don't talk about price, et cetera. And you respond, and he also said these standards aren't dictated by him or Pump Fund or by Coinbase or anybody, but by the users. And then you responded, next time I will definitely make sure to conform to the prescribed Pump Fund trench standards for how to correctly use Internet capital markets. And so you know that that reflects this attitude you talked about. But I did want to ask because, you know, as we mentioned, so this moment in time where you have been the punching bag on a crypto Twitter for the last 24 hours, it feels like, you know, we've seen this before. There has been other times when the crypto community has derided, for instance, your videos where you ask people if they'd like to make money to get on Chain. And I just wondered if what people are picking up on there is that it feels more top down or it feels more like you're trying to create activity. Whereas crypto historically has been more of like a grassroots phenomenon, more decentralized. And so I wonder just like how you think about how a more centralized entity like Base or Coinbase participates in this world that's trying to move toward a more decentralized world.
- [23:41]
Jesse Pollack
Yeah, and first off, let me just address the Alon tweet in my reply. I just think it's kind of funny. Like if you, if you would have asked six months ago, Allan, how do you feel about, you know, people in Ethereum or somewhere else telling you that Pump Fun is wrong? He would have been like, that's the most ridiculous thing in the world. And now here he is and I'm saying, hey, we can do something slightly different. He's like, no, no, no. You have to follow the rules that are set by the Pump Fund trenches. Or else, I mean, like, come on, we talk about Internet capital markets, we're talking about free markets, we're talking about open global economy, and we're talking about a reality where there's less than 1% of the world on chain. Do we really think that if we follow the rules that the Pump Fun user base has set, we're going to bring a billion people on Chain? I'm sorry, like, I don't, I don't buy it. Like, I'm going to keep experimenting. I'm going to keep pushing boundaries. I'm going to keep trying new things because trying new things, embracing new products, being unafraid, even when there's cultural backlash to push those new things. That's how greatness happens. And I don't know whether we're there right now, but I'm not gonna stop experimenting. So that's the first thing. Now the second thing is, do I think that the reaction that people have to me is as a result of some centralization or some top down? I don't think so. I think that some of the stuff I'm doing is genuinely like somewhat transgressive. Right. Like, have you seen other people out on the street trying to bring people on change before I did it? No. No, Right. Yeah. Because it's freaking weird and hard and super painful and have you seen other people trying to be normal?
- [25:22]
Laura Shin
Well, actually, I will say yeah, there, I mean, bitcoin meetups, maybe back in the day, but anyway, back in the.
- [25:27]
Jesse Pollack
Day, yeah, yeah, yeah. Have you seen other people trying to normalize, enabling creators to value and monetize their content with coins? No, because it's super hard. And because when I did it, who, like, you know, people love, you know, like me in a lot of ways, I got shit on for 24 hours. How could an everyday creator do it? There's no psychological safety there. I think a lot of this is downstream of what I would classify as a level of cultural toxicity that exists on crypto Twitter, which is that you have to conform. And if you do something that's outside of that conformed sense of what is right or, you know, what some group thinks is right, people will attack you. And my job as a leader is to make it so that there is psychological safety for people on base to do new things and to experiment. Because if people do not have psychological safety to do new things and experiment, even if I disagree with it, even if crypto disagrees with it, we. We are not going to make any progress. And so I'm happy to get shit on for 24 hours. I'm happy to be the punching bag. That's the best thing ever. Because if me being the punching bag makes it so there's one or five or ten or a hundred more creators who feel the safety to do something new, it's all worth it. And when you look at the data and people will look at the data from the last 24 hours, what you will see is that as a result of me coining some stuff on Twitter and posting about it and the crypto Twitter attacking me, hundreds and thousands of new creators have experimented with a new economic primitive and a new platform, and some of them will not like it. But my guess is that a lot of them will like it, and a lot of them will realize, oh, my God, this lets me earn more money, this lets me feel more valued, this lets me connect more directly with my fans and my community, and then they're going to stick around and they're going to be the ones who get to benefit from this new global economy that we're building. So I don't think it's about centralization. I think it's about we need to get comfortable with trying new things. And that's a little bit of a process that all of us need to work through.
- [27:31]
Laura Shin
Yeah, yeah, I totally get it. Trying to change people can be challenging. Well, Jesse, I so appreciate that you came on the show, especially at a time when people were throwing eggs and whatnot at you online.
- [27:45]
Jesse Pollack
Yeah, of course.
- [27:46]
Laura Shin
Yeah. Otherwise, it's been such a Pleasure having you on Unchained.
- [27:49]
Jesse Pollack
Awesome. Thanks so much Laura. Appreciate you.
- [27:51]
Laura Shin
We have a double header today. Next up is my interview with Guy Young of Athena and Carlos Dominko of Securitize about converge. Stay tuned. BitKey is the only Bitcoin wallet on Time magazine's Best Inventions list of 2024. Built by the team behind Square and Cash App, BitKey is a 2 of 3 multi signature wallet and the first hardware wallet with an innovative recovery suite that eliminates the need for seed phrases in self custody. Their new inheritance feature means BitKey's not just the easiest way to self custody your bitcoin, it's the easiest way to ensure it ends up in the hands of loved ones when it's time for it to leave yours. Learn more@bitkey world bit use code unchained for 20% off the crypto market just got wrecked by billions in liquidations. You need to figure out what happened and what's next. But where do you even start? Meet Focal by FalconX, your AI powered crypto analyst. It's like having a legion of experts at your fingertips ready to break down market moving events, Chart DeFi protocol, TVL or explain why Solana Mindshare is rising. Get clarity in a world of noise with Focal. Learn more@askfocal.com we have another listener comment, this one responding to Matthew Sheffield's remarks on some of ETH's problems on X. Uncle Sam of Afrinix says ETH isn't just some yield machine, it's infrastructure. If you're only in it for coupons, you're missing the entire innovation stack at stake. Powering again. If you want to hear your comment featured on the show, please write a review or leave a comment on an episode on YouTube, X or Foraster.
- [29:39]
Guy Young
I think the large thesis that we have here is if we really think about what our blockchains being used for today, there are really two core use cases. One is facilitating the settlement of speculation that is Meme coins on Solana or derivatives on Hyper Liquid. It's just really settlement for casino type activity. And I think the second one is actually settlement for stablecoins, digital dollars and tokenization. And if you really believe the thesis of crypto, which is we're going to start to bring all of these financial assets on chain and finance moves on chain more broadly, you have to think that that second bucket that I just described there is going to be an order of magnitude bigger than this sort of circular speculative casino type of use case that we have today.
- [30:21]
Laura Shin
Today's Guests are Carlos Domingo, co founder and CEO of Securitize, and Guy Young, founder and CEO of Athena Labs. Welcome, Carlos and Guy.
- [30:29]
Carlos Domingo
Hi Laura. Thanks for having me again.
- [30:32]
Laura Shin
Athena and Securitize have both been very successful in defi securitizing, getting institutions like BlackRock to build new products on chain Athena and creating this synthetic dollar with high yields that has garnered about $5 billion in total value locked together. Both of your projects have about $10 billion in total value locked. A month ago you2 announced that you were launching Converge, which will be built with the Arbitrum tech stack with Celestia as data. I cannot say this data availability layer. However, we just had an interesting moment here on the podcast which we cut for editing purposes. I had in my initial intro that it was going to be a layer one blockchain because there was a lot of talk about that and Guy and Carlos just informed me, no, it is actually a layer 2. Ethereum will be used as the settlement layer. So go ahead and just explain this setup and also why you think there was so much confusion around this.
- [31:34]
Carlos Domingo
The first thing I want to say is that from a user perspective, most people don't care whether it's an L1 or an L2, because there's really don't know the difference. Right. You're using a blockchain and you rely on some underlying security for securing that network. And that could be done with an L1 creating your own set of validators, or it could be with a tech stack like Arbitrum that rolls into Ethereum and you rely on the Ethereum validation. When you use an additional stack to settle on Ethereum, you also have to have to secure that stack. And as you know, some of the L2s out there are not really decentralized. They have centralized sequencers. Our purpose is to build something which will look and feel like an L1 and it has its own security for the sequencer and then rolls into Ethereum for further additional security. And it's an EVM part of the Ethereum ecosystem.
- [32:24]
Guy Young
Yeah, I think maybe just to touch on that in terms of how we sort of went through the decision process. And I think, I agree with Carlos, the lines or I think sentiment towards like L1s versus L2s is going to shift quite a bit from now into the. Into the next few months, as I do believe that a lot of these like technology decisions are going to become somewhat commoditized for businesses or applications in terms of choosing where they want to go. I think the interesting piece of an L2, despite I think some of the negative sentiment that you've seen around them as it relates to like the way it interacts with eth, the value accrual for ETH and all these different pieces, is that as a business I think it still makes the most sense to be launching an L2 just because of the a, the cost savings that you're making in terms of not having to manage a security budget for an entire L1, but then also the performance that you can actually get out of them because you're not having to reach consensus at the L1 there is obviously helpful if you're trying to run performing applications that sit on top of it. So yeah, I think the decision that we made might have been actually slightly against the current sentiment that you see within the market now, where I think a lot of projects or different teams are sort of trying to chase this L1 premium that people perceive to exist within the market. But I think it's quite. We have a pretty firm view that if you're going to try build a business and have like product led tech decisions to support that business, this made the most sense for the path we're going down.
- [33:47]
Laura Shin
Okay, so now let's just talk about your full vision of what activity on this chain will look like when Converge is up and running. Because what you're creating is sort of a really interesting hybrid, you know, trying to bring these two worlds together. So yeah, like, at least to me, I don't feel like there's anything that's been successful so far in bridging those two worlds. So what would be your ideal of how this would look like?
- [34:13]
Carlos Domingo
So maybe I can start with that question first. We just want to make something clear that this is a public blockchain that is permissionless. I listen to the interview you did with Arthur Heis where you guys talking about this is like an R3 type of thing. It is not like that. It is a crypto network that is completely public and open and permissionless. That said, you know, rws, by nature they are permission assets because they represent securities and they're regulated tokens. And then you know, if you want to then those assets to interact with DeFi, you also have to put some sort of permissioning around the DEFI protocols that today does not exist today. DEFI protocols are largely permissionless and anonymous. And this also, this prevents the institutional adoption because you know, you have to think that maybe if you have an asset and you post it as collateral and you're borrowing usdc, you don't know who you're borrowing from, right? So if you are a large, you know, financial institution and you're borrowing USDC and it turns out that that USDC has been deposited in a pool by somebody in North Korea, then you run into all sorts of problems.
- [35:18]
Jesse Pollack
Right?
- [35:19]
Carlos Domingo
So I think that adding, and by the way, all the, you know, DEFI protocols, they understand that to go from the 100 billion or whatever is DEFI stack now to like a trillion dollars, they need to bring more capital and that capital needs to come from, from traditional institutions participating in this space. So at the same time, I think there is a lot of advantages on the permissionless and anonymous nature of some of the DEFI protocols in terms of getting things quickly done and a lot of people do not care. So what we're trying to bring is both things. There will be apps that are permissionless and completely anonymous, like the Defi operates today, and then versions of those apps like let's say Horizon, that AAVE is working on, that introduce some degree of permissioning to be able to interact with permission assets like RWAs as well as for institutions to participate in a safe way.
- [36:08]
Guy Young
Yeah, maybe just to add to Carlos's comments and I think the super high level thesis, I guess, that we both came together with was I think a bit of frustration actually on my side in terms of the way that the cycle had progressed or the way that crypto had progressed since four years ago in 2021. If we just take a step back and think about what are the real sources of inflows that we've seen into the space this cycle, it's really been only two sources. It's like BTC ETFs and then stablecoin supply has gone up a bit for USDC and USDT. But if you look at DeFi TVL, it's actually down in percentage terms versus where we were four years ago. And to me that's actually pretty indicative of the fact that we haven't actually done a very good job of actually positioning the space and the products that we're building for this amazing thematic tailwind that we have behind the whole of crypto, which is institutions are actually here and trying to use these products and deploy capital into the space. So to me that was just like a very strong indication that we had basically been shuffling around the same chips between Ethereum to Solana to Barachain or the same apps. We're just moving the same money around and we hadn't actually stopped to think what can we do differently to actually get real Institutional size, flows of inflows into the space more broadly. So that's something that we at Athena have been thinking about a lot and had been working with Securitize in terms of how do we institutionalize the product that we have. And I know this is something that we discussed on the last podcast that we had, Laura, and thinking about how do we wrap up what we do in a format that can actually be consumed by TradFi. I think the large thesis that we have here is if we really think about what our blockchains being used for today, there are really two core use cases. One is facilitating the settlement of speculation I. E. Meme coins on Solana or derivatives on Hyper Liquid. It's just really like settlement for casino type activity. And I think the second one is actually settlement for stablecoins, digital dollars and tokenization. And if you really believe the thesis of crypto, which is we're going to start to bring all of these financial assets on chain and finance moves on chain more broadly, you have to think that that second bucket that I just described there is going to be an order of magnitude bigger than this sort of circular speculative casino type of use case that we have today. And I think the view that we had was that Athena and Securitize are really uniquely positioned to go and capture that second piece that I mentioned because you have Athena, one of the fastest growing dollar assets in the space and one of the most vibrant, I think defi ecosystems that exist within the evm, at least today. And then you had Securitizers, the chosen tokenization partner for, for some of the largest financial institutions on earth and the partner that they're actually going to be working with to bring more assets and more activity on chain from Tradfi. And so really it's like a meeting of the two, what we view as leaders of different ends of the spectrum and trying to bring them together to create products in the middle to really benefit from those flows from Tradfi.
- [38:54]
Laura Shin
Yeah, I love that description. I do really feel like that criticism is spot on and kind of the vision that you have is like probably a really good direction to go, especially at this moment in time. And I was just curious, you kind of mentioned that it seemed like you were hearing from institutions about what they would be interested in using DEFI for or just in general how they would want to participate on chain. So what are they saying to you?
- [39:24]
Carlos Domingo
So I hear two things from institutions and as Guy mentioned, we are probably the only company in the space that actually does tokenization for Large institutions, because if you look at some other of the, you know, RWA players, they actually have their own products. So they're not, they're kind of playing to be asset managers. Our position is very different. We are a regulated entity that has a ton of licenses that can serve a large stratified institution and bring it on chain. So we do have, I think, a better understanding anybody else in the space about what those institutions are thinking. And there, there's two things that are interested in. One, they are interested in how can they access some of the crypto native yields that are sometimes better or higher than DeFi. And I think USD is a really good example of that. But it will not be on the shape and form that is today because for an institution to access it, you would probably have to have a regulator wrapper, some sort of intermediary like us facilitating transactions, et cetera. That's what we're working with, Athena. But they're also interested about some of the things they could do with their assets that DEFI will enable. And I'll just give you a very simple example. USD has been very successful because it's an asset that when it was yielding much higher than the USDC borrowing rates, people could actually leverage it, right? You could post it on DEFI in a very simple way. You could, you know, borrow with that as collateral and then you can buy more and borrow more and then you can go from like a 10% yield into like a 20% yield. This is what they call the loop, right? So why not do that with, let's say a private credit fund? A private credit fund today yields higher, let's say, like the ones we have with Hamilton, Leonard Apollo. It yields higher than the, the borrowing rate for dollars, for, you know, dollars on chain stable coins. So, so you could think of the same experience, right? Like I posted as a collateral, I buy like let's say $10 million of this and then I borrow 8 million, and then I buy 8 million more, I borrow 6 and then you loop it and then you go from like the 10% yield into higher. And the entire process of the, the borrowing as well as controlling the liquidation process for the collateral is all on chain automated. This is literally impossible to do with capital markets infrastructure. I mean, go try with your JP Morgan account and tell them, oh, I $100,000 credit fund, can you, can you lend me dollars against it? And then can I buy more and then lend me again and like this, forget about it. This is not going to happen. So I think they're very Interested about how the value of their assets when they tokenize them and they put them on chain, it's not just that they have a better ledger, but it's actually they can do more things with the assets than they could do before. And I think that's one of the reasons why tokenization is now a very exciting industry as opposed to like when I started seven years ago where you couldn't do anything with the assets, there was no stable coins, defi didn't exist. Yes, your tokenize, you put in a token format, it's a better ledger, but that's it. And then today I think the reason tokenization and RWS are growing so much is because people for the first time see that it's not only a better ledger, it's actually the asset itself becomes a better asset because you can actually do things with it that you couldn't do before.
- [42:26]
Guy Young
Yeah, I think that's exactly right. And I think from our perspective, one of the things that I think is going to be most unique about this chain and the way that we're actually approaching the application level was something that Carlos touched on now around really thinking about taking the areas that Athena has found product market fit building on USD already. So applications like aave, Morpho, Pendle, there's a long list of them. We already know that different applications sitting on USDE have found enormous product market fit for different use cases. But as just one example here, so I think Carlos gave the one with leveraging on aave. I think another very good one here is let's say you're taking this IUSDE product that I described and you're trying to approach these pools of capital within TradFi and you say here's a volatile interest rate that's moving up and down quite a bit, roughly averages around 18% but can go as low as zero. Some pools of capital would actually just rather have a fixed rate that you can provide on that product, which is essentially what Pendle is providing, saying we'll take a floating rate of interest and swap it into fixed. That would be an amazing product with a huge amount of demand. But the problem is when you're doing this in a non kyc environment, you don't know who the buyers are on the other side. And so these big institutions can't basically take funds from someone who could be a North Korean on the other side. So I think the really interesting feature of this chain is that you're going to have applications which will be permissionless in the same way that they exist. Within DEFI now, but they'll have just a button that sits on the top right hand corner that says normal or institutional. And if you've signed up to actually be able to be involved within the institutional one or have all of the guardrails that these entities need to face off on the other side and then you already have things that you know, make sense and have found product market fit around your core assets that you can then start to sort of export out in the right way into TradFi. So that's just really like the things that we're trying to think through at the moment, which is, you know, not trying to create net new things that don't exist, that we're just taking a shot in the dark. We're saying what really works already with the core products that we have and how can we deliver it in a format that actually makes sense for these people, you know, and meet them where they are.
- [44:22]
Laura Shin
Yeah, yeah. This definitely, like I said before, just seems like a really an obvious opportunity and the right time for it. So in a moment we'll talk about your most recent announcement which is about the tech stack that you're using. But first a quick word from the sponsors who make this show possible. Mantle is revolutionizing its on chain financial hub. Powered by a $4 billion treasury and proven products like Mantle network and meth protocol, Mantle is launching three Innovation Enhanced Index Fund for optimized crypto exposure, Mantle Banking for blockchain powered banking and Mantle X for AI driven innovation. Experience the future of finance with Mantle and follow Mantle on X to stay tuned. Back to my conversation with Carlos and Guy. As we just mentioned, you guys have picked Arbitrum for your tech stack with Celestia's data availability layer. I was wondering when you set about searching for your tech stack, what tech specs were you searching for or what problems were you were you trying to solve with that?
- [45:24]
Guy Young
Yeah, I can jump in and Carlos obviously add anything that you think. Yeah, I think for us it's really trying to think about. We already have an enormous asset base sitting with Athena at the moment and with securitized. So I think you mentioned in the beginning cumulatively between ourselves is around $10 billion and being able to take the existing critical mass that we have into a new environment in a very easy way for users to be able to come across without a huge amount of technical debt was like a big consideration for us. So going to a new vm, anything else that was pushing the boundaries outside of the EVM was something that we couldn't consider in the beginning, just because of where the bulk and the majority of our existing assets and applications actually sat. I think the second piece for us was just trying to get towards the tech stack that we felt A worked out of the box now and was actually at the level of performance that we would require to run the applications that we needed right now, but B was also able to be customized going forward for some of the needs that we required. And I think the main piece of innovation that we're adding on top of the existing stack that exists now with Arbitrum outside of performance improvements is basically this idea of validating the network that sits on top of it. The idea here is that you can sort of think about a sequencer that's running on an L2 at the moment as almost the most centralized or permissioned version of any execution environment that you could have, right? So single sequences sitting with base and Coinbase ultimately is deciding are those transactions going through and that's a single entity that's sitting on the other side. One piece, I think in the conversations that Carlos and I have had with institutions is that there is some benefit in having some guardrails around something that looks like an isolated island outside of Ethereum, where if something were to go wrong with a hack, you know, the wrong type of user is coming in who's doing something malicious within the chain. The real point of weakness is actually when you're trying to bridge out of the chain to say we need to get our assets out of here and swapping into ETH to then launder it somewhere else. Being able to have a small validated network that actually sits at the bridge level. So in the case of like Athena's assets that would be sitting within a DVN on layer 0 actually gives them more assurances that if something were to go wrong on the chain, large institutions are actually using the chain, have an ability to actually step in post the fact of something going wrong before it's fully finalized on Ethereum. And so that's just one piece that we've sort of added on top, which is additional guardrails that these institutions can participate in by sort of like stepping towards this validator network.
- [47:45]
Carlos Domingo
I want to add something about, you know, moving, you know, certified products on chain because I think there's something people are missing which is called transaction finality. So in finance there is a concept that a transaction hasn't finalized until everything has moved right. And of course a blockchain actually tremendously improves that because you can do, you know, swaps of Two assets with counterparty risk, instant settlement and all that stuff. But, but the finality happens when you record it on the chain, right? So if you have an L2 that is completely centralized, that only settles the, the transaction when it writes on Ethereum, that only happens every 15 minutes. So, so at what point do you record a transaction on the books and the books and records of the actual financial institution doing? When it's, when it settles on the L2 or it goes to the L1. Ethereum. And of course everybody will tell you the L2, right, because that's when people assume that the transaction is finalized and the tokens just move. But that actually maybe is not actually truly secure yet because it hasn't actually gone through the additional security. So being able to secure the, let's say, converts on top of the security of then writing back into Ethereum, I think is a very important concept for providing peace of mind to financial institutions that there's finality in the financial services transactions.
- [49:07]
Laura Shin
Okay, yeah. This whole thing about just the ways that this is structured, it's sort of like there's kind of a spectrum of centralization and decentralization that's on offer within the chain itself, which I find really interesting. And before we talk about the validator bit, which I definitely want to get to, I did want to just circle back to this part about the different apps, some of them being permissioned and some of them permissionless. And you know, Guy mentioned something like there was a button where so like, let's say that you're in one of the permissionless apps and you decide that you want to interact with one of the permissioned ones. He said there's a button or something where I guess maybe that's where either you go through KYC or if you've already offered your, your information then, then you know, you can, you can. Or if you've like uploaded it somewhere, then you can give it to this app. Is it something where each app is deciding like what information it wants? And then is it literally the same as like when you deal with the financial institution where you are handing over personally identifying information? Or is there any aspect of this that is more futuristic, you know, that kind of uses ZK proofs or something where you don't have to give up the information but you can still participate?
- [50:23]
Carlos Domingo
I just want to clarify one thing in terms of, of KYC and personal identifiable information, which maybe answers to some extent. Your question is first, we, we do KYC on, on people as a financial institution. We, we are a broker, dealer, And a transfer agent. But we never keep the personal identifiable information on chain on chain. We only basically wireless wallets to make sure that they're known to be safe and keep enough information to be able to determine the legality of the transaction. So in other words, if you own, you know, shares of Apple and you want to send them to guy, as far as you know, both of you are approved market participants, you hold the shares and the other one can actually receive them, etc, you can just transact and there's no need for anything to happen off chain. Everything happened on chain with smart contracts and it's completely decentralized. There's no. But securities have constraints, right? Like maybe that you are, I don't know, like you have a lockup period for a year before you can sell the shares or you. There's a flowback restriction that shares sold to somebody in this country kind of flow back to somebody in another country. So you need to have some information about the characteristics of the investor but not the actual personal identifiable information. So that's, that is never on chain for security purposes. So you're not handing over your data and it shows up on chain and they know who you are, a copy of your passport is there or things like that, that doesn't happen. I think this concept can evolve to create a better if you want on chain attestation network that actually works for institutions. There is a lot of people chasing this concept that oh, I do KYC here and then I attest that this wallet is valid. The problem is that if you interact with that wallet, assuming that has been KYC by somebody else, you're taking counterparty risk towards that company because you're relying on the kyc. So if that company is not a regulated entity then that is completely useless. I can 100% guarantee you that our customers will not want us that we take kyc. That's been done by, I don't know, some unregulated entity that is dealing with that. And many of these RW chains do that. They just oh, we do kyc. Well you don't. You just have a tool to pass KYC that doesn't know what KYC means.
- [52:36]
Laura Shin
And so then basically for these permits permissioned and permissionless apps on Converge, each permissioned app will have its own way of verifying whether or not you can transact on their app. Is that it?
- [52:48]
Carlos Domingo
We want to make it uniform to converge that once wallets are whitelisted there is enough information on chain for each app to determine whether they want to interact or not with our wallet. So not. Not that every app is different. And then sometimes it's not the problem. It's not the app. The problem is the asset. That's what people don't understand. You can design an app that will take an RWA as collateral and then borrow against it. And then whether you can actually move or not the RWA or the RWA is something you can liquidate against another entity or not, it depends on the restrictions of the RWA itself. So the apps can actually be built in a generic way. And that's how we're working with some of the protocols that we're kind of helping them on the design phase of how to make their products, their protocols, compatible with RWAs. And then we, outside of the app, take care of the rest of the restrictions for the asset itself. So the restrictions are more in the asset level. And the apps, naturally, because it's on chain, will inherit the restrictions or lack of restrictions of each asset.
- [53:50]
Laura Shin
Okay, so essentially it sounds like from the user perspective, it seems like there will be a lot of friction because there won't be predictability around a number of things. First of all, whether or not any individual wallet can transact in these different apps. And then second, whether or not any asset that they would want to use, it sort of seems like they're kind of constantly going to be trying to figure out like, will this work or will it not?
- [54:14]
Carlos Domingo
It doesn't have to have friction. Right. So in defi, you also have pools with different assets, right? And you have the DEFI protocol is the same, but then each pool behaves maybe differently depending on the asset asset. So, so this will be the same thing. And then you know, if, if you are the holder of the asset, you actually know already what restrictions you have in terms of transferability or not of the, of the asset. So I don't think that this will add friction. And by the way, the KYC part.
- [54:40]
Laura Shin
But then the user has to have an awareness of. Of what all the restrictions they have to keep it in their head.
- [54:46]
Carlos Domingo
But they do today as well when they buy rws, because that already exists. So rws, because of the nature of BIN securities and BIN securities with different characteristics, some of them are private, some of them are registered, some of them have different exemptions, some of them are different RWs for QP, some of them for accredited investors, they already have those restrictions in place. So that doesn't change from what we have today. And the KYC piece, which is another criticism I always hear is like, oh, people like defi because you don't need to do kyc. I just, you know, because I've been long enough in the industry, in 2015, 16, you could open accounts on centralized exchanges without KYC. Yeah, it's true. I do, I do remember and I did.
- [55:30]
Laura Shin
That was nine years ago.
- [55:32]
Carlos Domingo
Fine, nine years ago. And then all the centralized exchanges impose kyc, some of them faster than others. But today it's literally impossible for you to open an account in Binance, in Kraken, in Coinbase, whatever, without kyc. Right. And what has happened with the volume has gone up or down? It has gone up, yeah. So this perception that oh, KYC introduces friction and then nobody's going to use it because customers have to kyc. I think that's actually not true. You can also look at what happens in threadfi. To open a Robinhood account, you need to have KYC and how many users they have.
- [56:04]
Laura Shin
Yeah, my question was more around like user experience rather than saying like this isn't going to work more just. I'm wondering what will it be like for a user who wants to just move back and forth but like, you know, like, like an everyday retail person? Like. Yeah, that's, that's the part that I'm wondering.
- [56:25]
Carlos Domingo
I'll tell you how we solve it in securitized today, because this problem is a problem that we already have because each asset that we have behaves differently. So if you come to our account and you have, let's say you create a securitized id, let's say in the case of Converge, let's say you connect your wallet to the chain. So you're connected to the wallet because that wallet has been whitelisted. The chain knows your characteristics as an investor. They know if you're retail or not, they know if you're a US or not. They know if you're an institution or an individual investors because that's the non personal identifiable information that we inject on chain. Right. Then you can actually have a UI that will only show you the products that you can interact with. And today if you go to securitize, that's actually what happens. Like if you go there and if you're an individual investor, you're not going to see the BlackRock product Biddle because it's only for institutions. So, so it's a very simple filtering of. You're going to have a, a range of protocols and the protocols by the way will work across all the assets. As I mentioned, they issue the assets. So this, some assets are. You will be eligible for some assets or for some other ones. But because that the, the, the eligibility or not depends on your characteristics as an investor, those things are, are visible to the chain. So it will not be, it will not create friction in the sense that it's not that you're going to go and see, oh, this is, I'm an individual investor and I see the BlackRock product and I want to buy it and then I cannot buy it because we will not let you see it anyway. This is exactly what happens on, on our portal today. You only see the products that you're allowed to purchase because we know the characteristics of the investors.
- [57:53]
Laura Shin
Okay, yeah, so that sounds smoother. So let's talk about the converged validator network. You know, this is what guy was mentioning about how like if there's some kind of big hack or something, then you can keep the funds from leaving the system through these different bridges. So tell me about, you know, how many validators are there? Like how like where on the spectrum from decentralized to centralized does it sit?
- [58:17]
Guy Young
Yeah, it's not in the hundreds. It's like somewhere between 10 to 20 is where we'd originally like plan to roll it out again. This is just supposed to be for the largest institutions that actually hold capital on the chain to be a participant in that decision making if something were to go wrong. So yeah, it's not intended to be something that's in the thousands or replicate a validator network that you'd see on an L1.
- [58:39]
Carlos Domingo
Ethereum already has a very robust and large validator network. Right. You just need to create another one that provides some degree of security temporarily while things are not settling to Ethereum. Right.
- [58:53]
Laura Shin
And to understand, you know, when they would intervene, like are you guys kind of setting up different parameters for when it's appropriate to do that versus not like so you know, the one billion dollar hack by North Korea is like a very obvious one where most people would, would say, you know, this is why some of the places like Thor chain and I'm just blanking on the other one, but there were other chains that got criticism for not intervening there. But you know, are you kind of coming up with like a decision tree in advance or how, how do you think about when they should intervene versus not?
- [59:29]
Carlos Domingo
I just want to distinguish between digital assets that are better assets and rwas that are not better assets because there is a confusion in the industry about it. So if you buy eth, let's say then is a better asset. Right. So the moment you send it to somebody, it Leaves your wallet, it goes to the other wallet. There's nothing you can do. But other assets, like, let's say stablecoins, have a mechanism to freeze stablecoins in case it's needed. And for rws that represent securities, the smart contract that governs that, obviously, with all the controls, has the ability to actually freeze the asset or even burn the asset. So I think that the hacks, obviously something wrong can happen everywhere, but they can also hack your bank account and take some money. But in this world, it's a. It's a. Because the assets are not better assets, it's actually a much safer world. And this is why institutions interact with RWAs, because they did. The risks that they're taking are in a completely different level. So, so, so the degree of risk, and we've talked to regulators about this, like when you, when you are doing custody of digital assets, your risk is like, you know, 90%, like somebody, the custodian loses the keys, or if you. Somebody hacks you, then you can lose all the assets. When you're doing custody of RWAs, you don't have zero risk, obviously, because something can go wrong, but your level of risk has dropped, like to 10%.
- [60:53]
Laura Shin
Yeah. And Guy, you were going to add something there.
- [60:56]
Guy Young
Yeah, I was just going to mention that a lot of the L2s already in production today have these concepts of security councils that sit around them, which are quite prescriptive, as you mentioned, around where they might actually step in for something going wrong. But this is more like the social level rather than. Than something that's encoded into the chain. But yeah, it's a very similar concept here where we'd just be adding an additional piece specifically as it relates to, like, the bridging in and out of the chain, which would. Which would, you know, be different between the different assets on the Securitize and Athena side. But yeah, it would look something that's not too distant from what you see from Security Council pieces that exist today.
- [61:31]
Carlos Domingo
Yeah.
- [61:33]
Laura Shin
All right. I also wanted to mention another part of your announcement, which is Ethereal, your new dex. And I saw that you said to ensure Ethereal can maintain high levels of performance at all times, Ethereal will sit on top of its own block space, but post proofs down to Converge. So it sounds to me like it's an app chain within Converge. That was kind of my read on that. But yeah, I'd be interested to hear more if I misunderstood or how it works.
- [61:58]
Guy Young
Yeah, that's exactly correct. So I think perpetual exchanges are really one of the very few applications that make sense to really live as their own isolated app chains in my view, I think the reason for that is that they don't rely as much on composability with different applications, I. E. You don't need a uniswap pool there to support a dex because it's already dollar denominated and synthetic on the exchange itself. And so your requirement for composability is much less, but then also your requirement for isolated block space which is not being interrupted by the actions of other apps on the chain. It's quite important because what you tend to see is that when demand for block space is the highest is when things are melting down, there's chaos, people are getting liquidated. All these different pieces were in gas spike and that's the moment when people are trading the most and don't want to be interrupted the most while they're doing that. And so actually isolating an exchange and what is pretty heavy computational requirements from an exchange from the rest of the chain itself, I think is one of actually the very few examples of where isolated app chains make the most sense in terms of types of apps.
- [63:02]
Laura Shin
All right, so we're coming up on time. The last probably quick question I just want to ask is people often talk about how institutional investors want privacy and they didn't know if there was anything that you were offering in this regard or if that's further down the line.
- [63:18]
Carlos Domingo
That's a very good point. That's definitely on the roadmap, not for the mainnet that we're planning on doing Q2 because for obvious reasons this is more complex to build and that was also one of the things we like of the Arbitram stack. I think that institutions will want to have some degree today is fine, to be honest with you. Like it hasn't been a barrier for institutions participating in the space, but as this space grows, if you're going to take, let's say a tokenized treasury fund like Bidle and you are institution and you're going to post it as collateral using converts for derivatives tradings, etc, you don't want to see that, that people see that transaction once they've identified your wallet because then they know what you're doing in the markets.
- [64:00]
Jesse Pollack
Right.
- [64:01]
Carlos Domingo
So. So in introducing some degree of privacy for transactions, I think is going to be important for the growth of the the space overall. Do we need it today? I don't think so. I think today is growing very nicely and tokenized treasury is as an example, went from $500 million AUM in March last year when we launched with BlackRock to almost 6 billion now. So it's more like more than 10%. 10 times. Sorry, not 10%. 10 times growth over one year. So I think that definitely is there, but I think that that's an important feature for our roadmap in the future. 100%.
- [64:37]
Laura Shin
Okay, so as you mentioned, soon you'll be launching your testnet mainnet in the next few months. And at that point, just one last question. Will the activity that both of your protocols have on Ethereum itself be moving to Converge or will you leave the activity that you already have there and then just start building a new on Converge for Athena and Securitized products?
- [65:01]
Guy Young
Yeah, I think on our side we have no ambition to sort of leave or abandon the existing activity that we have. There's not very rational activity like reason for why we'd care about USD sitting in one place rather than the other. I, I do think though that we're looking at a slightly different user base. You know, this whole idea of tailoring some of these use cases towards institutions just might mean that it actually is opening up, you know, expanding the pie rather than actually just trying to fight for the same amount of dollars sitting on, on different chains. And so, yeah, I think it's slightly different user base that we're facing off to there. I'm sure, you know, some of the assets that we actually hold behind some of the Athena products, I think one example here is actually the Biddle product that we have with Securitize and Carlos. So like usdtb I think is the largest holder now of Biddle. And obviously as like a centralized stablecoin we can sort of decide where those assets actually sit. And so we would move if we have some of those assets that are actually in control of like a centralized stablecoin like usdtb. It might be that we house that on Converge rather than on Ethereum, but we still want like USD and most of our products to coexist on all chains. We just have a much more specific distribution channel and view we want to target on Converge. So I don't necessarily see them as like conflicting.
- [66:13]
Carlos Domingo
Yeah, I want to clarify one thing. Our assets are not our assets. So we, we are, we issue assets for our customers which are the asset managers. Right. So, and then they are investors that purchase those assets. So I kind of just go there and tell, you know, you need to move your assets from here to there. And we support 10 different chains and we're continuing supporting the other chains. They've been really good partners. You know we recently launched with Solana. We have a very long standing relationship with you know, Avalanche, Polygon and optimism and other people. That's not going to stop. I think perhaps Ethereum is the most like neutral place because you are there as a default but there's nobody in like behind that the decision of being there. And I think that the assets will move when people see more value of having in Converge because we've built these potential integrations or defi protocols where the asset can interact that might not necessarily be available in all the other chains. But as the guy said, I think that over time we will see natural demand of moving things over Converge or just the new aum and the new growth of the of the assets will accrue there alongside accruing in those places.
- [67:27]
Laura Shin
All right, perfect. Well thank you both so much for coming on Unchained.
- [67:31]
Carlos Domingo
All right, sounds good. Thank you very much.
- [67:33]
Laura Shin
Don't forget, next up is a weekly news recap today presented by WonderCraft AI. Stick around for this week in crypto after this short break.
- [67:42]
Unchained Weekly News Host
Welcome to this week's crypto roundup. In today's recap, a sudden 5 to 5 billion dollar token crash Rock's mantra movement labs investigates suspicious trading around its move Token and CZ rebuffs claims he cut a DOJ deal to testify against Justin's son. We'll also cover how a simple base social post sparked a frenzy, how the White House is eyeing tariffs to boost Bitcoin reserves, and what the SEC's latest ETF delays mean for staking and redemptions. Plus, Anchorage Digital faces scrutiny from Homeland Security, and over 12 million is drained in exploits on Zakaysync and Killox. Thanks for tuning in to the weekly news recap. Let's begin. OM token crash erases $5 billion the OM token native to real world asset blockchain Mantra experienced a devastating collapse on Sunday, plummeting over 90% in value and wiping out more than $5.5 billion in market capitalization within an hour. The Mantra team attributed the freefall to reckless forced liquidations by a major investor on centralized exchanges, which they say triggered cascading sell offs in a thin liquidity environment. However, onchain analysts raised suspicions of coordinated activity. Spotonchain reported that a wallet moved over 14 million OM tokens worth approximately 91 million to OkX just days before the crash. Adding to the controversy, pseudonymous researcher ZACXBT suggested links between the incident and Reef Finance founder Denko Mancheski alongside an individual using the alias Fukogo ryoshu. According to ZacxBT, the pair sought large loans backed by OM holdings ahead of the price collapse. Based on my findings, it was not Laser Digital or Shuruk, he clarified, rejecting speculation about two VC firms previously rumored to be involved. Facing mounting scrutiny and community backlash, Mantra CEO John Mullen took to social media on Tuesday, announcing plans to burn his entire share of team tokens. When we turn it around, the community and investors can decide if I have earned it back, he stated. Mantra confirmed that its team allocation of 300 million OM tokens, roughly 17% of total supply, is locked until April 2027. Mullen has yet to disclose how many of those tokens were specific specifically allocated to him. Movement Labs launches probe into MOVE token irregularities Movement Labs and the Movement Network foundation have launched internal and third party investigations into market maker abnormalities surrounding the recent performance of the Move token. The inquiry follows Binance's removal of an unnamed market maker, which allegedly sold 66 million move tokens shortly after launch, generating an estimated $38 million USDT profit while placing minimal buy orders. Movement Labs confirmed the ongoing probe in a statement to blockworks, calling it a standard transparency measure. It would be inappropriate to speculate on the outcome of the review or any actions that may or may not result, a spokesperson said. Meanwhile, co founder Rushi Manchi has taken what was described internally as a temporary leave of absence, as per blockworks, sources noted. His company's Slack account was deactivated last Friday, but appeared active again by Monday. CZD deal to testify against Justin Sun Former Binance CEO Changpeng Czcao has denied a Wall Street Journal report alleging he agreed to provide evidence against Tron founder Justin sun as part of his 2023 plea deal with the US Department of Justice. The report, citing unnamed sources, claimed this cooperation was an undisclosed element of Zhao's settlement related to anti money laundering violations. Zhao responded on X, calling it a baseless hit piece, and emphasized that he served a four month prison sentence. Unlike typical government witnesses, people who become govy witnesses don't go to prison, they are protected, he said. Justin sun also dismissed the rumors, writing, cz is both my mentor and a close friend. Only by standing together can we change everything. The DOJ has not commented publicly on the matter. Zhao has previously suggested that lobbying efforts may be targeting him and Binance as part of a broader campaign within US Regulatory circles. White House eyes tariffs to boost Bitcoin reserve says Advisor Bo Hines, digital assets advisor to President Donald Trump, said this week that the administration is concerned considering using tariff revenue to expand the US Bitcoin Strategic Reserve. We're looking at many creative ways, whether it be from tariffs or something else, heinz said during an interview with Anthony Pompliano. The initiative follows Trump's March executive order establishing the reserve and directing federal agencies to report their digital asset holdings. Heinz emphasized that the strategy must be budget neutral and not burden taxpayers. The US currently holds over 198,000 BTC, according to Arkham Data. Heinz also referenced legislation like Senator Cynthia Lummis Bitcoin act, which could unlock additional funding by revaluing federal gold reserves to reflect market prices, and was reintroduced in March. SEC delays key decisions on crypto ETF staking and redemptions the U.S. securities and Exchange Commission has postponed rulings on two significant crypto ETF proposals, extending its review into June. The regulator delayed a decision on Grayscale's request to enable staking for its Ethereum Trust and Mini Trust products, moving the deadline to June 1. It also pushed back determinations on in kind redemptions for ETFs from Bitwise, WisdomTree and VanEck to June 3. Staking would allow Grayscale to generate yield from Ethereum held in the trusts, while in kind redemptions let investors exchange ETF shares directly for crypto assets or rather than cash. Though similar features are permitted in other markets like Canada and Hong Kong, the SEC has never Approved staking in US ETFs. The delay follows the confirmation of Paul Atkins as SEC chair and comes amid broader agency efforts to develop a long term digital asset strategy. Homeland Security task force reportedly investigating Anchorage Digital Anchorage Digital bank is facing scrutiny from the U.S. department of Homeland Security's El Dorado Task Force, a unit dedicated to combating money laundering and financial crime, according to a report by Barrons. The unit, which focuses on transnational money laundering, has reportedly contacted former Anchorage employees to inquire about company practices and policies. The nature and scope of the probe remain unspecified. Anchorage is the only federally chartered crypto bank in the US and has previously drawn regulatory attention. In 2022, the Office of the Comptroller of the Currency issued a consent order citing weaknesses in its anti money laundering controls. A spokesperson for Anchorage refuted the report, telling Cointelegraph the Barron's piece on our company was based on speculation and had no information about the nature of the inquiry. Zksync and Kilox exploits drain over 12 million two major crypto exploits this week have shaken decentralized platforms Zksync and Kiloex, with combined losses exceeding 12 million on Monday. Decentralized exchange Kilox was hit by a $7.5 million attack, which blockchain security firms attributed to a Price Oracle vulnerability. The attacker reportedly manipulated ETH USD price data, opening a position at $100 and closing it at $10,000, netting $3.12 million in one transaction. Cyvers noted the exploiters wallets were funded via Tornado cash, while Peckshield highlighted weak access controls as a key failure point. CLO, the platform's native token, dropped 30% following the breach. A day later, Ethereum layer 2 protocol Zksync confirmed that an admin wallet linked to its airdrop contract had been compromised. The attacker used a contract function to mint one 11 million unclaimed ZK tokens valued at roughly $5 million. ZKsync stated that no user funds were affected and that necessary security measures are being taken. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to unchained crypto.com newsletter, that is unchained crypto.com newsletter and sign up for our free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin, with help from Matt Pilchard, Juan Aranovic, Megan Gaviss, Pam Majumdar, and Margaret Korea. The weekly recap was written by Juan Aronovitch and edited by Stephen Ehrlich. Thanks for listening.