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The Chopping Block: Perps, Privacy & Prediction: Aster vs. Hyperliquid, Zcash Pops, Polymarket Soars, Galaxy One Debut - Ep. 921
01:01:55
Polymarket scales with Wall Street’s blessing, Kalshi fires up KOLs, and BNB chain melts down as fast as it ran. We dissect Aster’s data drama, the new privacy wave lifting Zcash, and Galaxy One’s glossy yields—what’s smart strategy vs. old mistakes in new clothes?
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Transcript200 lines
- [00:00]
Tarun
We spent, we spent multiple years basically saying privacy is useless and meme coins are better than privacy. Right? Like so it's like there is this like feel good element to the old people in crypto.
- [00:11]
Robert
Like not a dividend.
- [00:12]
Tarun
It's a tale of two kwan.
- [00:13]
Aseeb
Now your losses are on someone else's balance.
- [00:16]
Tom
Generally speaking, airdrops are kind of pointless anyways.
- [00:19]
Aseeb
I named trading firms who were very involved.
- [00:22]
Tarun
Alec Eth is the ultimate defi.
- [00:24]
Robert
Protocols are the antidote to this problem.
- [00:28]
Aseeb
Hello everybody. Welcome to the chopping block. Every couple weeks the four of us get together and give the industry insiders perspective on the crypto topics of the day. So quick intros. First we got Tom the defi maven and master of memes.
- [00:37]
Tarun
Hello everyone.
- [00:39]
Aseeb
Next we got Robert the crypto connoisseur and czar of Superstate.
- [00:42]
Robert
Good evening.
- [00:44]
Aseeb
Joining us to guest, joining us today we've got special guest, the ghost of Tarun the Gigabrain and Grand Poobah at Gauntlet.
- [00:51]
Robert
He'll be here at some point.
- [00:53]
Aseeb
Oh, he'll be, he'll arrive at some point. I have no doubt. Tarun is perpetually on time. 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 chopping blocked at XYZ for more disclosures. So it is the week after token 2049. There's been a lot of craziness in the news and a lot of price action going on. But the big news this week has been around polymarket which full disclosure, all of us are investors in. So Polymarket raised $2 billion at a $9 billion valuation, one of the largest fundraisers in crypto history and as well one of the fastest valuation run ups that we've seen in crypto history because it was just very recently in August, they announced their $1.2 billion valuation round led by Founders Fund. Now this round, notably beyond just the dollar amount, it was led by ice. Now this is not immigration, ice. This is ice, the parent company of the New York Stock Exchange. No relation to immigration. So it's the parent company of the New York Stock Exchange, of course, one of the largest exchanges in the world. And the other part of the story that's so notable is that this officially makes Shane the youngest self made billionaire in the world. So Shane, I believe he's 26, 46, right? 46.
- [02:11]
Robert
27.
- [02:12]
Aseeb
27, I think. 27. There's so Shane, 27 years old. He started the company in 2020. You know, I, I remember the seed round of, of polymarket. He was, what was he. He was like 22. In the seed round? Yeah, yeah, he was just a little baby. He had almost no experience. He dropped out of NYU and he was just like, I, I read this paper about prediction market, we should make one. And he went from very, very humble beginnings, raising just a few million dollars in the seed round. Robert, I believe you were an angel investor in the seed or.
- [02:46]
Robert
No, that's incorrect. There was actually circulating on Twitter, there was these screenshots of early crunch based, like, who invested when type things. So Robot Ventures invested in the seed round in 2020, but it was wrongly attributed to myself as an angel and Tarun as an angel, even though it was our firm that invested at the time.
- [03:06]
Aseeb
Got it, got it. Okay, so Robot. Robot is an investor from the seed round. We invested up at the. Which, which round was it? I think like the, the. The 2024 round. Very early 2024 round.
- [03:18]
Robert
Yeah, before was that like 100 million valuation.
- [03:21]
Aseeb
It was a little bit over 100 million. A little bit over 100 million valuation. And the, I mean, the, the, the funny thing so that we, we have a lot of history with Shane. Funny enough, we were actually the first term sheet that Shane ever received. So this is one of the really dagger in the heart memories that we have is so Shane was in the seed round. He was striking out with everybody. Because Shane at that time, he didn't.
- [03:43]
Robert
Strike out with Robot Ventures.
- [03:45]
Aseeb
He didn't strike out with Robot Ventures. That is true. So Shane was striking out with almost everybody. And Shane at that time was totally unpolished. He was kind of just a wild man. I remember he was taking a lot of these deal meetings and just like a tank top, like, he was just.
- [03:59]
Tom
Like in a couch on like a roof deck. And like. Yeah, he was.
- [04:01]
Aseeb
That's right. That's right. I remember. It was. He's. He's just a wild man. And at that time, he, I think he just had no, he had no polish compared to what he has today. And he, he, he pitched us and we were just like, okay, this guy's kind of insane, but he's just an animal. He just has an energy level and a seeming just like sharpness that is extremely rare in founders. And so we gave him his first term sheet. And I can't remember the price. It must have been at like 8 million or 9 million or something. It was like, okay, you lowballed him. To be clear, we were the only term sheet that he got. He struck out with everybody else and eventually Polychain came in. So he was very grateful because he was like, oh, my God, I can't believe you guys believe in me. Thank you so much. Because he was also dead broke at that time. So that was the other thing. He was like taking pitch meetings with absolutely nothing to his name. And Polychain ended up coming in. I think it was at like 15 or 16 million.
- [05:00]
Robert
I think it was like a 12 pre.
- [05:03]
Aseeb
Was it a 12?
- [05:04]
Tom
It was a 12 pre. So it was like, oh, it was 16 posts.
- [05:07]
Aseeb
16 posts? Yeah, it was 16 posts. And I remember we. I mean, this was like so, you know, it was like 2020. We had. It was our first fund. We had almost no money either. And we were just like, oh, my God, you know, we were never going to double the valuation. It's crazy. And we just told Che like, look, congratulations, we love you, you know, but we just like, we can't pay 16 for a prediction market. Prediction markets are not even a real thing. And. And Shane was just such a grinder, you know, he like, prediction, it's important to understand in 2020, like, we invested in Augur super early, right? And like, we were longtime believers in prediction markets. And Augur was just, you know, it was the first prediction market, like 2017. It was like Augur and Gnosis and both of them were just pieces of shit. They were awful products. Nobody used them. There was no demand, there was no volume, there was nothing. It was all just, we believe, you know, we want this to be true, but no one's using any of these things right now. And Shane just kept grinding. There was. There was a little bit of volume in the 2020 election. There's a little bit of volume in like the. The World Cup. But other than that, it was just a ghost town. And Shane just kept building. And if you remember, in 2022, CFTC came after them and there was a settlement. They had to pay a fine of like a couple million dollars, leave the US market. And Shane was constantly doing this on just a shoestring budget. He had almost no money. Guy was dead broke. And eventually, finally around like 23:24, things started working. And the UX got good enough and the onramps got good enough, and, you know, they were using Polygon and Polygon finally had the users and the throughput. And eventually 2024 election, things started really growing rapidly. And we were, I think we looked at the deal again like very beginning of 24 where the volumes just started to ramp and we ended up putting in a big check and we're now one of the biggest investors on the cap table because we invested along the way in that round. There was another subsequent round and then the Founders fund round. And, and it's just been incredible to see how Shane as a founder has just willed this category into existence. Like prediction markets are in the Ethereum white paper. Everybody in crypto has wanted prediction markets to work for a very, very long time. Shane was the one who made it work just out of, out of sheer determination and, and now today, it's just an incredible testament to the company and what he's built.
- [07:29]
Robert
Well, if we're, if we're telling Shane stories, like everyone on crypto Twitter is, and like sheer determination. Polymarket was the third company of Shane's that I looked at.
- [07:40]
Aseeb
Really. Wait, what?
- [07:42]
Robert
Did not know this Cosmos thing or something? So I, I met Shane in 2017 because he posted some ridiculous product to like product hunt. And I, like, I was in the comments like, hey man, you should rethink this.
- [07:54]
Aseeb
Like, what?
- [07:54]
Robert
You know, like, this is not the right product. Like, what do you, like, I don't know, like, what's your plan here? That was the first. At that second one, he like, brother Robert. Yeah, like, I, I was like, you know, I was like starting to build a defi too. I was like, big brother Robert. I was like, hey, like I, you know, let's rethink what you're doing here. He came and pitched me like a year or two later, right? And he's like, oh, I'm going to build this like, staking product. Like on. Yeah, like on like Cosmos. And like, because there was very few like crypto assets with staking or yield at that point. Adam was one of them. And so he was like, I'm starting like a delegated staking system. And there was a few things like this at the time. And I was like, interesting. Like, don't really know if like you're the right guy to do that versus, like how much competition there is. And if you look back, like there wasn't that much competition. You know, it didn't really go anywhere. And then, you know, when he came to with Polymarket, you know, I was like, well, prediction markets, I mean, this is a tested category. Nothing is working. There's been a few people trying it. Like, I've been pitched a few times on prediction markets in the last couple months. I'm like, but man, this guy has grit. So I Was like, okay, third time I see Shane, I'm like, I have to write a check. So, I mean, that guy's got tenacity. I love it.
- [09:14]
Aseeb
He has an incredible amount of tenacity. So there's obviously been a lot of excitement around what this means with respect to the integration between ICE and their properties and Polymarket. And Shane was also on Twitter teasing a potential polymarket token. Um, so I think his tweet was something like, you know, btc, eth, bnb, sol, poly question mark, and then like a, you know, emoji. And so there's a lot of, there's, there's a lot of energy now around, oh, Polymarket is going to be the crypto native one. And the, you know, between Polymarket and Kalshi and their, their prospects for a token, not totally clear what the token's going to represent and how it's going to work because of course they're now, they've got the CFTC license, they're planning to go to market and reopen in the US and presumably that's going to be in concert in some way with, you know, ICE or New York Stock Exchange, given, given the strategic investment that, that ICE has made into polymarket. So tbd, watch the space. We'll be talking about it. The other story relevant to prediction markets is these new, what are called the KOL wars between Kolshi and polymarket. So KOL is the term in crypto for a, an influencer. KOL is the Asian term which stands for a key opinion leader. Robert, what's the thumbs down for?
- [10:32]
Robert
Oh, I was just saying I hate to see KOL led marketing efforts and especially a battle.
- [10:38]
Aseeb
You hate it. Why do you hate it?
- [10:40]
Robert
I mean, all right, there's a few reasons why I hate it. Okay, One is.
- [10:45]
Aseeb
Walk us through it.
- [10:46]
Robert
Yeah, there's a few reasons. I think there's a negative and slightly sullied history in crypto of projects paying influencers to promote a product very. Either transparently or opaquely. You know, there's a litany of historical examples of like, people getting paid to post some ridiculous tweet or to tweet and then delete it, or to just like shill a project. And I think it's, you know, one of the lowest common denominator forms of marketing. I think, I don't think, I don't think it's a great advertising channel, frankly.
- [11:19]
Aseeb
I think it doesn't work. Or that it's just low integrity.
- [11:23]
Robert
I don't think it's very high integrity.
- [11:27]
Aseeb
I Think it, what if it's disclosed? Because I think in this case, these are all disclosed. These are all Kols who are putting on the Twitter badges for these respective agreement.
- [11:39]
Robert
Disclosing it does elevate it up. I just think the concept has a slightly, slightly tarnished past.
- [11:46]
Aseeb
And I just. All right, Tom, Tom, what's your, what's your, what's he talking.
- [11:50]
Robert
I'm the boomer here.
- [11:51]
Tom
No, no, I remember this. Right. It was like, well, I feel like specifically it used to be that people would make these tweets not disclose that they were paid and insinuate something or post a price target about a token and get people to buy it. And so there's clearly like, it was financial advice. I think with kind of the current KOL setup, it's more actually like kind of traditional Web2 marketing, right? In that I'm sharing a product, you disclose that you're being paid to endorse the product, but you don't want to use the product. You don't have to. It's not like I'm encouraging you to make an investment or something like that. And I actually think, and there's obviously all this sort of back and forth around what constitutes a disclosure. Do you have to put an actual disclosure at the bottom? Can you do hashtag ad? A lot of systems have their own or a lot of social media platforms, their own sort of sponsored content labeling and badging and things like that. And I think the Twitter sort of affiliate model works decently well. But then you just go around Twitter and you also see all these different accounts that have an affiliate and it's like, wait, I know this person. They make memes. And now do they work for this company or they're just getting paid by this company? And so, yeah, I, I don't even know what constitutes as a KOL anymore because I do see people with like a thousand followers and they're like, I'm, I'm a Kalshee kol. I'm like, what, like, what's, Can I be a, can I be a kol?
- [13:03]
Robert
I mean, yes, you could, Tom, if you, if you raised your very much.
- [13:08]
Aseeb
In the negative valence, you were a Kalshee kol. Yeah. So I, I, I think I agree with you, Tom, that I think there's a big difference between you are, you are an influencer for a ticker or for a financial asset versus you're an influencer for a product. Right. So for call she and for polymarket, there's nothing you can buy. It's Just use the product, you know, come, come on this thing and trade. To me, I think that's definitely totally okay. Same thing. You've got influencers hawking beauty products and, you know, whatever. This kind of thing seems like, okay, this is how. This is how advertising is done in the 21st century.
- [13:43]
Robert
So to use an analogy, if someone's like, okay, use my exchange or use that exchange, that's cool. But if they were like, buy BNB or base token bad, Yeah, I would.
- [13:55]
Aseeb
Say it's much dicier to be like, buy this financial asset than it is to use this product. And I think product marketing is the oldest thing in the universe. And having celebrities or influencers or whatever, advertised products is as old as history. So I think that is totally fine. Unless you're doing it again with subterfuge or it's not disclosed or whatever. Then more sus.
- [14:19]
Robert
What about.
- [14:20]
Aseeb
Interesting discussion.
- [14:21]
Robert
Okay, so what's in the middle? Shilling a ticker? Bad. Shilling a platform? Fine. What if it's shilling a specific market? Like, oh, bet on will so and so win this baseball game. Right?
- [14:34]
Aseeb
Like, I think that's fine. I think that's fine. I think that's totally fine. If you are telling people, bet alongside me, I'm betting this way, which I can't imagine you would advertise to, like, bet in this market without telling them which way you're betting. Like, that does seem more dicey because it sort of looks like maybe you're manipulating the market or pushing the market a certain direction or whatever. Although, you know, with a prediction market, the idea is, I mean, unless you're, I guess, if you're trading in and out of it, like, the whole idea of the prediction market is that it doesn't really matter.
- [15:01]
Robert
The outcome is independent market.
- [15:03]
Aseeb
Right. The real world resolves to the correct outcome. Exactly, exactly. So it's not like, in a way, it's more dicey, for a token, because it is very much the school of fish pushing the price toward something that maybe isn't tied to a fundamental outcome. Whereas a prediction market that seems to be the most neutral way that you could do it is because there is just a source of truth, which is who will win the baseball game or win the election.
- [15:27]
Robert
But in a black mirror, like tail wags the dog type scenario, it is possible, and I think we've talked about this like, like years ago on the show, that the prediction market itself could influence the actual outcome, depending on the market. So you might, you know, just use a crazy example right now. You know, we're like a day or two away from the Nobel Prize being awarded. It's possible if, like, if everyone's paying attention to a prediction market and the odds of like Trump winning go to like, you know, 99%, it could change the thought process of the actual decision makers and actually skew the outcome. Just like, and this is a classic example, expectations about Fed movements in rates actually does influence the Fed's decision making. If the market is saying it's going to be 50 basis points, it almost always is. And the Fed almost always follows where the market is pricing things.
- [16:15]
Aseeb
Right.
- [16:16]
Robert
Potentially reactions.
- [16:18]
Aseeb
To be clear, that's not been true over the last year. Over the last year, CME has been terrible at predicting interest rate cuts, right?
- [16:26]
Robert
Yeah, but you could see last year.
- [16:27]
Aseeb
It was pricing in like seven rate cuts.
- [16:29]
Robert
You can see scenarios where the market itself does influence the outcome.
- [16:33]
Tarun
Yes.
- [16:34]
Tom
I mean people talk about this with respect to like, I think this is kind of conspiratorial, but like election markets, hey, if you, you know, see the some kind of trading at 90%, that's maybe a little bit of subconsciously voter suppression. Like, well, I'm not going to turn out and vote because this person's definitely going to win. I think the thing that maybe we've seen like flavors of this is the market basically turning into a bounty. Right. You see this already with like mentioned markets of will this person tweet this thing or will this person say this thing in the speech? And then it's like, oh, well, I can get compensated for doing that. I don't think we have any kind of smoking guns of the person in the market basically taking the other side and then getting paid for it. But I wouldn't be surprised if we see something like that in the next year. You can even imagine with the WNBA dildo thing, someone who wants to, I don't know, commit a crime and get a buck and get paid for that.
- [17:26]
Aseeb
Yes. But here's the thing about that story, right? So sort of the multi causal thing of like, oh, the thing causes this, which causes the outcome to be different. What that should imply, if that's true, let's assume that's true. Right now I think it's mostly not true because most people don't use prediction markets at all. So it's a small minority of people who are reading these as opposed to reading Fox News and New York Times or whatever. But let's assume that we're in a world where everyone's reading the prediction market and that means that If. If it's ever true that, you know, let's say in the next election, J.D. vance is 99% to win. And you think, oh, well, that's going to lead to voter suppression. People aren't going to vote, and that means J.D. vance is going to lose. What that means is that JD Vance will never hit 99%, because the moment the prediction market moves past a certain point, it can't go to 80. If it goes to 80, 80 is going to cause him to lose the market. And so it equilibriates at like, 75, 77. Right. The MO. Like, it'll never go to 99, because if it goes that high, people will start selling it because they'll realize, like, oh, obviously it's no longer 99 when the market says it's 99. So it's been overbought. Right. So what that means is that if, like, that happens in real time, it's not like, oh, well, it's 99, and now it's going to cause this. And we sit around while the market's still sitting at 99, it will immediately sell down to the point where it's never anywhere near 99. And that causal mechanism doesn't happen. Same thing, I think, for these. These mentioned markets. Right? So mentioned markets where it's like, oh, well, will, blah, blah, blah say this in a speech? Will they say the word, you know, I don't know, transgender in a speech? These kinds of markets will just never get that big because if they ever.
- [18:56]
Robert
Get big, they could be.
- [18:57]
Aseeb
They immediately start breaking.
- [18:58]
Tarun
Yeah.
- [18:58]
Tom
Yes, I agree with that. I don't think we're ever going to get, hey, even, you know, a few thousand dollars. Like, for some people, maybe that's sufficiently large bounty. And who knows? You know, these things have not a ton of eyeballs right now. You know, you get big enough and people chuck in a few bucks.
- [19:10]
Tarun
Who knows?
- [19:10]
Robert
Totally. This is not that researched because I'm just going off of what I saw, like, one or two tweets of, like, a few weeks ago. But, like, I think there was some small fringe market where it was like, can this guy, some influencer, can he go camping in the Sahara desert and survive 30 days? Like, camping in the Sahara desert? Or, you know, some ridiculous market that like, who knows?
- [19:30]
Tom
Lord Miles.
- [19:31]
Robert
Yes. And some folks on Twitter, you know, dug it up. They're like, oh, he gave up. And he placed bets saying that he was going to give up. Like, it's manipulated, right? And I guess it was like a controllable enough outcome that supposedly some guy who was supposed to be camping in the desert shorted himself and like pulled out of the desert. Camping.
- [19:53]
Aseeb
Yeah. So these kinds of markets, especially with this type of behavior. So I, I don't know how Polymarket is going to address stuff like this. Certainly at some point they're going to have to. But these kinds of markets will never get that big relative to the big objective markets. You know, when's the government shutdown going to end? Maybe there, you know, some senators are in a room somewhere and they have some alpha about when the shutdown is going to end. And I think the understanding with those markets is that we're mostly okay with those being insider traded. Right. If the senators in the smoky room are, are going and betting on the market, then now the rest of the world knows when the government shutdown is going to end.
- [20:26]
Robert
And that's futarchy. That's like actually sort of what people think is a good thing, which is like, oh, the prediction markets. Should you. The actual odds of things occurring, including all the information that's not public. The world might be better off if like we know for sure that the shutdown is going to last like two days and 12 hours more.
- [20:43]
Aseeb
Exactly. So I think there's like kind of two categories of markets. One where there really is no useful externality. So like, is, is this guy going to keep camping in the desert? Like kind of who gives a shit other than the people betting on this market? Or maybe his fans, I don't know, maybe they care. But yeah, for things like the government shutdown or like, you know, are we going to war with Iran? Or like, when is a peace settlement going to be brokered in Gaza? These questions. I want insiders trading. I want whoever knows the most about this market to price it in asap.
- [21:12]
Tom
Yeah. I think Matt Levine has a good kind of bit on the SEC's theory of insider trading being around theft.
- [21:20]
Tarun
Right.
- [21:20]
Tom
Hey, this gain should have gone to other people and instead one individual is sort of stealing it from people. And that can kind of manifest in different ways. But to your point, this doesn't feel like there's no theft, like no one is owed, you know, some gain on like the accuracy of the market of the government shut down and so nothing's being stolen, just information being, you know, it's sharp, basically.
- [21:38]
Aseeb
Yeah, exactly. And I think it's also just like the balance of the interests of the people in the market and the interests of everybody else outside that market for the government shutdown. I don't know how much is being bet on that market. But like, the interests of people outside that market are way bigger than the people in the market. Whereas for, you know, is this guy going camping in the Sahara desert, that the interest of the people in the market and the interest of people outside the market is just nobody outside the market cares. So I think in a way, I just have a very different intuition morally about if an insider or somebody with control over the outcome is trading, how should we feel about that as a category? I think that's how I draw that line between those two. But coming back to this KOL thing, the KOL wars. So we're seeing right now Kalshi is really going on the offensive in hiring a lot of crypto kols to be team Kalshi. So they of course hired John Wang, who is a big prediction market influencer. They recently brought on ICO beast. They've also brought on a lot of sports influencers because now overwhelming majority of Kalshi's volume is sports betting. And there's a lot of talk now about, oh, is every KOL in crypto going to be drafted into the poly market Kalshi wars. Tom, given your closeness to the Call she team and you're the influencer history you have with them. Yeah, yeah. You are obviously the prediction market influencer. Where are you going?
- [23:00]
Tom
Well, I mean, I feel like it's an open secret now that Kalshi's imminently going to launch a crypto product to compete head to head with polymarket. And so I think it's sort of interesting, like I kind of comp it to crypto exchanges where you have these big sort of non US exchanges. Now, looking down to the US I don't think we've seen, you know, a ton of US exchanges have a ton of success internationally. I mean, there's Coinbase International, but who knows, maybe prediction markets will play out kind of differently. But I also find it interesting that they also again, see crypto as like this very huge treasure to kind of go after and it's like worth fighting for. And I think certainly polymarket, you could say it's a crypto product, but by and large I think it's actually not a crypto product. Like, it has a dedicated crypto fan base, but most of the people I think, who know about it often don't even know that it's a crypto product under the hood that is on chain, it's cited on the news and it's a mainstream topic. So I'd be kind of curious to see how it plays out on both sides, I guess both teams kind of going in the opposite direction.
- [23:57]
Aseeb
So what do you guys think about the sports betting side? So now Kalshi, we can see the vast majority of their volume is sports betting. Of course a lot of that is coming in through their Robinhood integration. So sports betting in the US enormous market, obviously very, very profitable. Interestingly. So when the polymarket deal was announced that they were taking strategic investment from ICE, I think DraftKings and FanDuel like their stocks just lagged down like 5%. So clearly they're very afraid of competition. On the sports betting side, Kalshi's regulated US business doing a ton of volume on sports betting. And apparently now the sports betting lobby is very upset about this because they see this as a runaround sports betting loss. And from Kalshi's book it's like, well no, this is not sports betting. This is a prediction market just making predictions different from sports betting. But if you look on call she, they also have what just straightforwardly you would think of as parlays. So a parlay is, you know, normally you just bet on, okay, is this guy going to win or is that guy going to win? A parlay is like a, almost you can think of it as like leverage where you're betting on multiple things at the same time. So it's like, are these three teams all going to win their matches today? And if it pays out, it pays out really big. But you know the absolute likelihood is low. So they, they even have parlays effectively by just like stapling together, you know, will A, B and C all win their games today? What do you guys think happens here on the prediction market side and with respect to sports betting, any you guys have a view here?
- [25:19]
Robert
Here's my extremely macro like 200,000 foot view of prediction markets in general and what they're good for and what they're bad for. What they're good for is what traditional futures markets and derivative markets are bad at. And like, I don't know, you know, the exact game plan between ICE and Poly Market, but I actually see them being an incredible compliment because traditional markets are good. At Evergreen markets, you want S and P futures every single month going for the next hundred years. It's never going to change. You always want S and P futures, right? Prediction markets are incredible at disposable markets. Things that are happening and then they're done and then they go away and they may not be around for that long, right? There's like how many baseball games there's how many football games, there's how many boxing matches, there's how many soccer games, there's how many crazy political events, there's how many, whatever. It's like all these things that are like slightly different, they're here and then they're gone forever. And you really can't anticipate all these things. You need a dynamic system of like user generated content that's like the long tail and infinitely large. And what prediction markets are great at are things that like will come and go. And you might have hundreds of thousands of these events that people want to speculate or hedge on. And I think they're phenomenal at sports, right? I think as prediction markets grow, like sports are like perfect for disposable events that come and go and no one's going to think about again. And it's, you know, you don't always need like, you know, Cincinnati Reds versus the Yankees. That's not a thing that happens every week. It's the thing that happens once or maybe once a year. Right. And so prediction market's awesome for sports. Prediction markets, honestly it could be awesome for finance. Like things that don't need evergreen things. It's like, oh, like, you know, what are Google's earnings going to be? You know, bet specifically on their earnings, not the impact of the stock price, but like the earnings themselves. Do they beat? Do they like not beat? There's a lot of things that like come and go that prediction markets are just a really good fit for. Right. And so I think prediction markets are going to find a home in all of them and will complement the evergreen like always on markets that like ne should never go away. There should always be liquidity. It should always like be there where it should roll. And you know, I think they will eat sports gambling over time. I think they will eat a lot of like financial speculation and hedging over time. And I think they'll find their way into all of these crevices because like at the end of the day, if you can build a framework for users to generate the content of markets, the users will be able to generate everything that needs to be speculated or hedged on, you know, even if it's only around for days, like, oh, like, you know, there's a ship stuck in the Suez Canal. Like that's extremely important from a macro perspective to a lot of people. And like everyone's talking about it like you need the market to be spun up right now and then like it goes away in two days when the problem's Over. And so it's hard to predict like how far this long tail goes, but I think it like covers everything. In an era of like AI and automated trading and 247 and robotics, like you want there to be like a somewhat infinite long tail. Even if it's an infinite long tail of tiny markets, you're going to see this like extreme growth of prediction markets.
- [28:46]
Aseeb
That's very well said. Well, Tarun has just risen from the grave.
- [28:50]
Robert
Who could have predicted that against all odds?
- [28:52]
Aseeb
I know. Unbelievable.
- [28:54]
Tarun
I am very sorry. My, my jet lag really got to me. I like slept through my alarm.
- [29:00]
Aseeb
So you were sleeping. That's your. Yeah, yeah, yeah. That's why you're late.
- [29:03]
Tarun
I think my, I don't know what time zone my body thinks I'm in, so. Sorry.
- [29:08]
Aseeb
Okay.
- [29:09]
Robert
Are you in Eastern?
- [29:09]
Aseeb
All right.
- [29:11]
Tarun
I mean I am physically in Eastern time zone right now, but my body mentally is like somewhere else.
- [29:19]
Aseeb
Okay. All right, well, just in time for you, Tarun. We're going to be moving over to Asia. So there's a BNB renaissance going on right now that may have just recently ended a little bit unclear, but for those of you who are following at home, there was a big BNB bull run that seems to have coincided with the rise of asteroid Aster, of course is the perp Dex Challenger that's doing insane amounts of volume right now. The number one perp Dex by volume. And with the rise of Aster seemed to have also arisen this gigantic meme coin run on BNB chain. BNB alongside it had a huge run up, hit an all time high of 1250. So if you remember, BNB way, way back in the day was at like 50 cents. One of the best performing assets in history blew through its position now in the top five. And CZ himself was personally getting much more active on Twitter, pumping the BNB ecosystem. And so we saw Binance BNB chain briefly overtake Ethereum for the top chain By Dex volume did 6 billion in 24 hour volume on chain, most of which was facilitated by pancake swap, a lot of which was meme coins. And then as all these crazy meme coin BNB chain tokens were running up, all of a sudden yesterday it all came crumbling down. I believe it started with CZ tweeting that, hey, just so you know, tweets aren't endorsements. This seems to have spooked the market for some reason. And within 12 hours most BNB meme coins were down 90 plus percent. Just a complete pancaking of the BNB chain ecosystem. It's now the case that most of these meme coins dropped 90 plus percent. The top coin was a Chinese. A coin of four Chinese characters, which translates to binance life. That that token was down like 95%. And apparently 94% of traders who had bridged into BNB chain from Solana are now down and now sitting on losses. So many of those people licking their wounds have come back. BNB chain has retraced a bit. Volumes in BNB Chain are down quite a lot. So we had this BNB Chain super cycle that lasted about two days. Any thoughts, any experiences? I assume you guys were not in the BNB chain trenches.
- [31:30]
Robert
I don't follow Tarun if you closely.
- [31:32]
Aseeb
But you don't follow BNB chain.
- [31:34]
Robert
I should maybe.
- [31:35]
Aseeb
Tarun, tell us about, tell us about your experiences in the BNB chain trenches.
- [31:39]
Tarun
I just saw a lot of group chats where everyone was like, google translating Chinese characters and text and being like, I'm an expert on this random BNB coin. And then 10 hours later, tons of memes about why did I trade based on Google Translate. So that was my entire experience with this was just like, obviously, because I'm reading these at weird times, flying back. So I didn't have great plain Internet. So I read something and it was like, everyone loves bnb. And then by the time I landed, everyone was in horror at their investment decisions. Investment decisions.
- [32:17]
Aseeb
Tom, any reflections on the BNB trenches?
- [32:20]
Tom
I mean, I just think the whole image of it is quite funny. People bridge in from Solana to go trade a bunch of Chinese name tickers, and then three days later they lose all their money and they bridge out. And I tweeted up that in the diff log for the Binance API, they added support for Chinese characters for perps, because I think they launched perps for some of these. And that was basically the top. And then after that, you know, all the coins just crashed. And like, I don't know, it's just kind of a beautiful little story when you, when you zoom out. You know, it's like a very frackish 72 hours.
- [32:51]
Aseeb
Yeah, it's a little bit like that. What is it like, never invade Poland in the winter or something like that? It's like, I feel like every time people try to, like, create this big narrative around, okay, BNB chain memes, it always lasts like three days and then it all comes crashing down again. And people just don't seem to learn their lesson. Because I remember, wasn't there this thing about, like, broccoli cz's dog and there was all this stuff that happened. I think it was last year. And it all similarly seemed like a flash in the pan.
- [33:18]
Tarun
I don't know why Talking about this L2 founder dog coin and Chain Founder Dog Coin narrative just makes me feel so old. I'm like, that was only a year ago. It feels like that was so many seasons of airdrops ago that I can't even count. Time just has flowed in some way I don't understand.
- [33:40]
Aseeb
Well, I think that might be more of a Tarun thing that you're just. I assume that's why you perpetually late to all of our podcasts because you're. You're time for you is just a river in which you're slowly wading through.
- [33:51]
Tarun
There you go. That's it.
- [33:53]
Aseeb
Okay. Yeah, makes sense. All right, well, if there's no more reflections on the BNB Micro Wars.
- [34:00]
Tarun
Well, actually, didn't it happen right after Aster was like delisted from Defi Llama? I did think that was kind of funny. It was like Aster.
- [34:07]
Aseeb
It wasn't right after, but it was also part of the storyline. So maybe, maybe also worth bringing that up. So Aster, of course, the BNB chain affiliated perp Dex. So Aster. It was posted by 0x NGMI, who is the founder of Defi Llama, that Astro perps seem to have extremely tight correlations with Binance volumes. Which doesn't makes it like Binance the exchange, not BNB Chain Binance the Exchange. Its volumes and Astro's reported volumes seem to be almost one for one, which nobody really understands. What that could possibly mean is. Is Aster claiming that their volumes are actually Binance volumes? Is Binance claiming that they're running their perps through Aster? Is. Is it that people are hedging on Astro the positions they enter on? But what. How could you possibly explain this? No response from Binance about like, what exactly is supposed to be. And in response to that, Defi Llama just delisted Aster. Now people say delisted. It's not an exchange. It's not like people are trading Aster on Defi Llama. It's a data aggregator and so it's no longer on their data aggregator. But it's the. It's the leaderboard that most people look look to to understand how much volume is each of these perpetual swaps exchanges doing. So they delisted Aster and. And the thing is Aster also unclear what's on Chain, what's off Chain what's actually getting what. What's actually actually settled on chain. So everything right now with Aster very, very unclear. And there hasn't been a lot of disclosure as of this moment. So that happened, I think, a few days before. I think the whole BNB chain run up happened after the astro delisting from. From Defi Lava. So I don't think it was causal. I don't think that had anything to do with it. I think in a way people were like, at least the people who are farming this are like, fuck, yeah, he's the man. Like, you know, you can just do what you want. So there is a little bit of like, you know, you can just do things from the whole BNB chain run up.
- [36:00]
Tom
Yeah. I do also find it like, I think one of the kind of. There was this whole sort of discussion around hyperliquid being kind of a lit order book and then that being bad with the whole James Wynn thing. And then CZ chiming in saying, oh, it should be private. And then part of the defi llama delisting was like, well, we can't actually see who's making or taking the orders because it's private, so we don't know if it's washing or not. So it's kind of somewhat poetic in that the privacy is also the thing that is maybe getting the. Getting the data removed.
- [36:29]
Aseeb
Too private. Yeah, maybe a little too private. But that being said, like, clearly their TVL is very large. That's not. You can't fake tvl. They have very, very large tvl. I think last I saw before the delisting, it was like something like 5 billion. So the TVL got very significant. But of course, it looks very much like this thing is being farmed. And if you hear just people on Twitter talking about it, they're like, yeah, this thing is being farmed to hell. So. And the fact they're incentivizing volume, which generally most perp Dexs are a little more mindful about. Hey, if you incentivize volume, you're just getting a lot of wash trading. This is not really organic activity. Okay, let's switch gears a little bit and talk about the other super cycle going on in Crypto, which is the privacy super cycle. It seems like privacy is now on Meta. There was some very large tweets that we mentioned in our previous show that were from Mert and Naval that seemed to have. And then later from Arthur Hayes that seemed to have kicked off a zcash crazy bull run. So zcash was sitting somewhere around 30, 40 bucks maybe just six months ago. It's now sitting at 170. So it has had an enormous rally over this week. Privacy coins in general have all been rallying and there's a lot of talk from people of, okay, it's the comeback of the cypherpunk movement. Privacy is this eternal Meta. I think the tweet from Naval was, bitcoin is insurance against fiat. Zcash is insurance against bitcoin. There's a lot of excitement right now around privacy. Curious for you guys. How do you guys read this privacy meta? You know, markets have been a little bit sluggish the last couple days. Zcash is up again another like 20% in the last day. So in. In a sea of red, privacy seems to be the standout. How are you guys reading this moment?
- [38:10]
Robert
It's always hard to say why is something popping off now? I mean, zcash was one of the first coins I ever bought, like in 2017 or like earlier. Right. Like, Zcash has been around for a really long time. It's not like their roadmap suddenly changed. It's not like there's any fundamental, like, oh, my goodness, this thing is worth like six times what it was.
- [38:31]
Aseeb
Well, so what the zcash people are saying is that the phase shift is two things. One, Zushi, which is the new zcash wallet, which is much more usable than previous zcash wallets. Previous zcash wallets were absolute dogshit, extremely unusable. No consumers would possibly touch them. So Zushi is actually a pretty good ux. And then near intense. So near has this intense protocol that allows you to basically interact with any chain using and trade on any chain using a single wallet. That's like abstracted over multiple chains. And apparently this is how a lot of people are interacting with Zack now, is actually not through Zushi, but through Near Intents. So that is the story there feels.
- [39:12]
Robert
Like rear view mirror justification for the fact that a coin has gone up massively. Like, massively. And this is crypto, right? Like, certain assets accumulate prices, like, incredibly rapidly. There's a crowd effect here. Like, I remember, like, the conversation around zcash has been going up as like, you know, it's been running up and more and more people like, oh my God, like, I've gonna chase this momentum. So, like, this is not a market where fundamentals are the only explanations. There's just a lot of capital flows moving into assets and trying to chase whatever narrative sort of exists.
- [39:47]
Aseeb
Robert doesn't Believe.
- [39:49]
Robert
I don't believe.
- [39:50]
Aseeb
Robert says his flows. Robert says his flows. Tarun, you got to take zcash super cycle.
- [39:56]
Tarun
I think zcash is probably one of the reasons I ended up being full time in this industry is like, I feel like they really pulled off something people didn't really think was true. I feel like you can go to Bitcoin Talk posts from 2010 to 2013 where Satoshi talks about ZK proofs, but doesn't believe that it's possible to ever get them into a blockchain. And then zero Coin and Aaron Trommer and stuff kind of somehow pulled the rabbit out of the hat and that sort of created the entire ZK ecosystem, I guess, in crypto, right? So, so, so, like, I think it brought like, for a lot of us, we have this kind of special warm place in our heart for, for, for zcash. And, and you know, I, I think it's also interesting because, like, there's a lot of people who hate zcash because they're like, oh, it has transparent mode, so it's fake privacy, whatever. But I, I think like, they've. They've done a lot for the space in general. That being said, I mean, this. That being said, that this doesn't seem like, exactly organic, right? Like the near intense stuff I could have done six months ago. And Zashi, it is better UX for sure. Like, I don't have to wait seven minutes to send a S to T or TDAS transaction, let alone S task. Is that enough to justify this? No. I mean, this feels like a. This feels like a. You know, this feels like a KOL BnB pump like this. And look, Zcash deserves that.
- [41:29]
Aseeb
Kolbnbpub.
- [41:30]
Tarun
Zcash deserves that. They've created much more. Many assets in this space extract much more value than they provide in terms of the technology they write, in terms of the things that build upon them. And you definitely cannot say that for zcash, right? Like, tons of stuff, like, literally relies on a lot of design decisions they made and improvements upon it that have been made. So look, I'm hoping, I'm happy for all the zcash people holding out.
- [41:57]
Aseeb
If I can summarize. You don't believe either, but they deserve it. That's the, that's the turntake.
- [42:03]
Tarun
Yeah. And I do, I will say I love the copy trades that are going on. Like railgun going up like 5,500% or whatever.
- [42:10]
Aseeb
I agree.
- [42:10]
Robert
That's the best part of this narrative.
- [42:12]
Tarun
Copy trades are the funniest thing here.
- [42:16]
Aseeb
Tom.
- [42:18]
Tom
People have a stark net and like, oh, it's like privacy. I mean, I agree this. It feels people want to sort of look back and find some sort of cause post hoc.
- [42:28]
Robert
But it's hard to believe, like, everyone wants to have a soft spot for zcash, you know.
- [42:33]
Tom
Yeah, but it's like, you know, okay, you look at intents and it's like not that much zcash and it's not even like listed really on many big exchanges. Like, Kraken is like one of the few big ones, maybe the only big ones that still has zcash. But I do wonder if there's like a kind of collective subconscious kind of thing going on because there's also like the EF put out this privacy cluster announcement on Monday about all these new privacy initiatives that they're funding. And I'm like, okay, clearly this was in the works for a while. It's not like they scrambled to put this together a week after zcash started pumping. And so it's just funny to me, like maybe there's also, there's like a hunger deep down in all of us for some new meta that we can go and, you know, invest into or trade. And people are like, oh, privacy, that's a good one. Let's bring it back.
- [43:13]
Tarun
This is like a meta that has like philosophical justifications from like the early days of crypto. Right?
- [43:19]
Aseeb
Yeah.
- [43:19]
Tarun
You think that we spent multiple years basically saying privacy is useless and meme coins are better than privacy. Right. So it's like there is this like feel good element to the old people in crypto. Like, and then also the fact that there is sort of there are some like people who are not over 30 shillings e cash is like the most bullish thing that for them that could ever happen because it's like it is kind of a boomer coin. Right. It's almost 10 year anniversary. I think it's next year. So it's like it is an old coin. And so like having you people who are younger and newer to crypto really feeling it, I don't know. That's hard. Dino coins. It's hard to 10 years later find new communities. I think it's because they have just solving a problem that's about a fundamental human right, not LOL's Entertainment.
- [44:13]
Aseeb
Yeah. So it wasn't that long ago that we were all talking about Roman Storm, the tornado cash case. So privacy, like, if anything, it does feel like a very delayed reaction to a lot of the anger and frustration and the backlash that that, you know, we were, we were really seeing in the community just, you know, three, four months ago when the trainer cash case was. Was ongoing. I think I agree with you guys. Also, zcash, one of the first coins that I bought. Also everybody I know who's been an OG in the space has a soft spot for zcash and they did invent so much that the industry has later built upon. At the same time, I don't even know if I'd call it a dyno coin. When I think dyno coins, I think like Iota or dash or Doge.
- [45:01]
Tarun
No, but zcash might be older than Iota. I think it's older than.
- [45:07]
Aseeb
I'm sure. No, no, it's definitely older. But I think of it like zcash. I think of it as a cypherpunk coin. Right? Yeah, it's like the old guard of the true bitcoiners and the people who descended from that set of values, which is really quite different in the phylogenetic tree of crypto from a lot of the other dyno coins. Right. When I think dyno coins, I sort of think like this existed in a previous cycle and retail woke up and remembered like, oh yeah, I remember crypto. I'm going to go buy some stellar. That. That's where I think of what I think. Dyno coin. Actually, actually, actually nobody was buying zcash back then.
- [45:40]
Tarun
Wait, wait a minute. I oftentimes reference my, my friend on this, this show who is like a XRP bar owner and he sold a large stack of his XRP to buy zcash in this rally. So really. So I think the interesting thing about this is the, this rally is about both the highbrow and the lowbrow. You know, it's like the XRP rotators selling their XRP to buy zcash and then the KOL Led, you know, naval and Mert Led KOL Storm. So I think it's like kind of the barbell. The barbell must be true market.
- [46:19]
Aseeb
Totally. That must be true because like, I've always believed fundamentally that cypherpunks don't have money. Like, it's just if you're targeting cypherpunks, like, they're not going to be able to make a coin move. They're not going to buy this thing in size because they just don't have money. They have a lot of anger, but they're not the ones that are setting prices at the margin. So it does seem like all of a sudden retail's Gotten activated. There's this bigger narrative that has momentum and momentum is everything in crypto as we all know. So TBD where this is going to land in six months. If you look at the chart of transaction activity on zcash, I was just looking at this yesterday, it's basically like a sort of, it's kind of like flatlined over time. If you look over the last six months kind of it's not much and then all of a sudden like four days ago, boom. Not to all time highs, nowhere near all time highs but like a solid level and then it's like elevated. Now it's significantly less than Monero. Monero of course is the most used privacy coin and Monero still doing more volume than zcash in terms of transactions that are transaction count that's taking place on chain. But these rebrandings can often be really sticky. There's like a, there's like price levels almost are self justifying in crypto. It's like once something moves to a certain price level it's like well I guess that's where it's supposed to be. So I can kind of see zcash making a new home where it is. But right now the momentum like the volatility is so high that really hard to know where it's going to go. So I could see this thing going to like you know, 300 and just blasting through stuff. Because the other thing is that it's such an old coin that a lot of people have just forgotten about it. A lot of people hold it or just like oh it's there. So there's not that much trading hands any given day which just means that it's easier to move the asset than something that's, you know, something like Doge is just so widely circulated and there's so much market cap it's very difficult to move the price.
- [48:07]
Tarun
I would go as far as to say lots of marginal new user in crypto since 2022 would the probability of them knowing what Zcash was was like less than 1% for like net new users. Because yeah, yeah, honestly I would argue the MERT effect of this is probably more important almost than the naval effect because all the, all the kind of new Solana users from 2022 likely didn't, don't. Didn't know what Zcash is and I think his advocacy probably brought it to the attention of the gambling part of the world more so so to them.
- [48:41]
Aseeb
It'S a new coin.
- [48:42]
Tarun
Yeah, exactly.
- [48:44]
Tom
Zcash affiliate badge. You know that's Kol.
- [48:48]
Tarun
No, he's definitely, definitely clear Chief Kol for zcash.
- [48:52]
Aseeb
In my mind, I am now a zcash Kol. I've gotten tagged in a bunch of these tweets because I did this interview with Gen zcash, which is like their Gen Z marketing arm, and now I'm getting like these Korean influencers who are tagging me of like, haseeb is part of the zcash. Like, I didn't, I didn't do anything. I didn't, I didn't say anything about zcash. I was just like, yeah, that's cool.
- [49:12]
Robert
You're hosting a whole podcast about zcash.
- [49:14]
Tom
Yeah, we did.
- [49:14]
Tarun
We just spend.
- [49:15]
Aseeb
Now we are zcash influencers. Well, but you guys are shitting on it. You guys are like, oh, I don't think it's. I'm not.
- [49:20]
Tarun
No, no, no. I literally gave a fucking diatribe about how it like is a philosophically important. It was a philosophically important coin.
- [49:30]
Aseeb
We thought.
- [49:32]
Tarun
It's not going to be more than that.
- [49:33]
Aseeb
It's kind of the thing that. I heard you guys and I summarized your points. All right, all right, if you say so. Well, I, I believe I'm a believer, you guys. You guys said you don't believe. I believe. I believe.
- [49:45]
Tarun
Look, if 50% of the Zcash rise is from people rotating out of meme coins, is that a bad thing? Obviously not. It's a good rotation of that capital, hopefully in the sense that. Yeah.
- [49:59]
Aseeb
Well, now apparently people rotating out of BNB chain into zcash. So. All right, one more story that we want to run through is that apparently now blockfi has come back to life. So there's a new product launched by Galaxy, the public company today run by Mike Novogratz called Galaxy One. So Galaxy One is being run by. It's basically a retail facing finance app. Nope, no relation to Coinbase One. So Galaxy One is going to be launched as the retail facing finance app launched by Galaxy. Galaxy historically has been an institutional business, but this is their first, as far as I know, consumer product. Now Galaxy One is going to offer 4% APY FDAC insured up to 250k, 8% premium yield only for accrediteds, $1 million cap per investor. So obviously this is not sustainable. You can't just go park your corporate treasury into Galaxy One and get 8% that is not FDIC insured. They've got a bunch of assets you can buy deposits enabled in or whatever brokerage, zero commission trading. They got a Lot of stuff. So it's like a fully fledged finance app. The interesting thing about it is that this is being run by one of their recent talent acquisitions, Zach Prince. You might remember Zach Prince because Zach Prince was the founder of BlockFi, which very famously ended in infamy with a explosion because they went bankrupt, they were very briefly rescued by ftx. Turns out they were being rescued by somebody who themselves needed to get rescued.
- [51:25]
Robert
It was a mess.
- [51:26]
Aseeb
So no, they all fell into the ocean alongside the Titanic. So this, there's gotten a lot of interesting eyebrow raise of like, oh, this is kind of blockfi esque of 8% yield on cash. That doesn't sound like that could make money. But of course it's a acquisition strategy to bring in customers, not uncommon. So Galaxy 1, it's a different universe today. So want to be clear, we're not implying in any way that you know that it's going to suffer the same fate. And obviously having a $15 billion public company behind you puts you in a very different financial position than what BlockFi was way back in the day. And I'm assuming that their loans are probably not to Three Arrows. So, thoughts Galaxy One?
- [52:09]
Robert
Well, all I'll say is you love to see it and you hate to see it. You love to see a second chance and a comeback story. It is cinema to watch Zach Prince reboot blockfi from within Galaxy when he joined them. I don't know what like a year ago, I was genuinely curious, I was like, what is he going to do with Galaxy? I was like, and I'll be honest, it was not on my bingo card. I actually did not expect the answer was going be to. To be he's going to bring back Block by. I actually thought it was going to be something totally different, frankly. But I love a comeback story. I love to see second chances. I definitely hope that it ends differently than BlockFi. For galaxy's sake and for everybody's sake. I think there have been a lot of lessons learned. I mean, you know, that was such an insane moment in time. Yes, there was a bunch of dominoes, but at the end of the day, BlockFi blew up because their largest customers, Three Hours Capital, who was the largest customer of all the lending desks? Everybody made a really bad decision to make massive decisions.
- [53:11]
Aseeb
What was so tragic about that story was that first it was Three Arrows, then it was ftx. So they had two totally borrowers who just defaulted.
- [53:21]
Robert
But Zach got burned lending the majority of the money to Three Arrows Capital, which was not a trustworthy borrower there was extreme concentration risk. The whole thing went sideways and it ended terribly. It was horrible risk management, frankly.
- [53:34]
Aseeb
Right.
- [53:35]
Robert
But you suffer a problem when there's a lot of retail and they're like pumping money and you have to put it somewhere to earn that return. And like the biggest borrower was Three Arrows and they borrowed from everybody and they burned everybody.
- [53:46]
Tarun
Right.
- [53:47]
Robert
Because they were doing dangerous stuff with that money. It was just a inverse waterfall of risk that got riskier and riskier and riskier. Hopefully a lot of lessons have been learned. Hopefully there's better risk management. But at the end of the day, I haven't seen additional transparency into the product. The balance sheet, the composition of it. BlockFi was notorious for no one really knowing what was going on under the hood. I used to critique all the time CEFI lending relative to Defi lending. Defi having radical transparency in real time 247 and CEFI having absolutely no transparency. And that lack of transparency is what blew up the entire system last time. And I hope to see improvements made there. If no one has really relearned the lessons and we're all just like, well, Galaxy seems more responsible than everyone else who's come before them. I mean Genesis seemed responsible.
- [54:44]
Aseeb
You don't think being a public company is going to solve some of those.
- [54:47]
Robert
Issues just by default? I hope so. I think hopefully there's enough like scar tissue there. A lot enough lessons have been learned. But if mechanically the product looks and works the same way and we still don't really know what's behind it.
- [55:01]
Tarun
Right.
- [55:02]
Robert
How do we know if it's not another giant Three Arrows capital like lurking in the darkness, borrowing all the money and all this smooth until one day something blows up and it just spirals out of control again. So I just hope that the lessons have been learned. I hope they can calibrate for that. The only true difference I've seen, and this is, I guess, risk management, I'll throw quite a quotes and a question mark on this, is that there's a 60 day redemption period to withdraw from the product. So if you give them your money, you can't immediately demand it back. You have to wait 60 days. And in some ways maybe that does sort of prevent, you know, what happened in the actual death throes of BlockFi. The 11th hour when things were really collapsing. It was like the problem is, you know, people asked for their money back and they didn't have it. So it's possible. Gating the liquidity does make it a little bit more defensive. But we'll see. I wish them the best.
- [55:55]
Aseeb
If Your counterpart is three arrows, 60 days is not going to save you. Right?
- [55:58]
Robert
Yeah.
- [55:59]
Aseeb
The loans are dead. That being said, today, I mean so I don't know this market terribly well but today the prevailing source of bitcoin yield, isn't it like farming? Isn't it like BTCFI and Babylon, all this stuff.
- [56:14]
Robert
There's that.
- [56:15]
Aseeb
You might know this better than I do.
- [56:16]
Robert
There's also the bitcoin basis which is the same as it's always been. It's like you can essentially lend cash by buying bitcoin, selling bitcoin futures, whether through perps or futures and earn like 6%. So the crypto risk free rate is like closer to 6%. I'm sure the unsecured rate that they're lending and will lend more into is probably higher, probably like 10%, 12%, 14% or something. But the risk free rate in crypto is like 6% right now.
- [56:47]
Aseeb
Makes sense. Tarun, how, how do you obviously with the stuff you guys do as a rangers or, or gauntlet and morpho, you guys are very plugged into the bitcoin yield market. How do you think that the yield market has changed compared to what it was like in the three arrows days?
- [57:03]
Tarun
Yeah, I mean I will say like a lot more of the lending facilities overall are on chain. Like I don't think the centralized lending has come back to anywhere near the same size that it was. I actually think it's like funny we're talking about Three Arrows and dcg. Whatever the. I don't know why I'm Genesis, Genesis, Genesis. On the day that like TRADFI is basically learning that a lot of private credit had about the same level of diligence as people did on Three Arrows.
- [57:31]
Robert
Oh, great story.
- [57:31]
Aseeb
Yeah.
- [57:32]
Tarun
This current story of like this huge loss and where $2.3 billion is unaccounted for and no one knows where it went. So so anyway, great articles, first brand type of stuff. So I think it's actually kind of interesting whenever you see like the same types of lessons learned again and it, it always just shows up whenever there's sort of like an asset bubble of some form. But I, I think like people are much more comfortable using on train lending than they were then. Even to the point of like just looking at the size, looking at the fact that the centralized exchanges aren't even offering competitive rates anymore. So I think that part is different. Although I'm sure like if you really want a large size fixed rate loan, you were probably giving A Galaxy or some prime. Anyway, you weren't.
- [58:17]
Tom
So like.
- [58:17]
Tarun
I think the difference I guess is like Galaxy has been sort of doing this more than BlockFi ever was to some extent. So yeah, I don't, I don't totally understand the borrow side of this, but I actually imagine a non trivial portion of that 8% is just syndicating on chain and you can get close to that anyway, so that part is actually 8% doesn't sound so crazy. Like if they were like Promising Over 10 fixed then I'm a little more dubious. But 8 actually on chain right now is pretty relatively simple to do.
- [58:52]
Robert
But we don't know if they're doing this on chain. We don't know.
- [58:54]
Aseeb
We don't.
- [58:54]
Tarun
Yeah, we don't. We, we don't. To, to be fair, I'm just saying I do think it's possible to make that product that way. I would say the thing that is a little bit funny to me about this is why is the product named the same as a bunch of other things? A lot of FinTechs have this X1 type of thing. Robert made mention to Coinbase One. There's a bunch of other things that are these subscription plans and fintechs. I just don't get the naming because honestly, kind of confusing to me. Like Galaxy One also sounds like a phone. Yeah, it sounds like a phone or like a spaceship. Right. It doesn't really, it doesn't really sound like a bank product. And so the name is the part that I'm just a little like.
- [59:39]
Robert
I feel like it should be Galaxy Earn. Galaxy Land.
- [59:43]
Tarun
No, no, I like a lot. Even a lot of people.
- [59:48]
Aseeb
G5 would be a great name actually.
- [59:50]
Tarun
G5 would be good. I feel like there's lots of memes to me there.
- [59:54]
Aseeb
All right, hit up Robert if you're doing a rebrand. Galaxy.
- [59:56]
Robert
Yeah, GFI nomination Control. Gfi.
- [59:59]
Aseeb
Yeah, I like that.
- [60:01]
Tarun
Yeah. I guess like the only thing I would add to this at the end is just like I just don't see the same borrowing, unsecured borrowing ecosystem in crypto. Like people still have a lot of scars from that in general in a way that I think people like.
- [60:19]
Robert
Agreed.
- [60:20]
Tarun
Yeah. I think the on stuff is coming back.
- [60:22]
Robert
Maple and Wildcat and like we are seeing a resurgence of unsecured borrowing.
- [60:29]
Tarun
Right.
- [60:30]
Robert
Like we are. It's going back. People are forgetting the lessons of the last time.
- [60:37]
Tom
Yeah, I, I may be more optimistic that like, hey, we actually have good, you know, better risk management controls in, in place. I mean I will also be very curious to see how this does versus Coinbase's lending product, which is all on chain. Right. I think they kind of caught some flack on Twitter when they announced their own lending product because they sort of led with this earn up to 10.8% or whatever, and people are like, oh, this is blockfi over again. But it's like, no, no, no. They're just taking your USDC. They're putting into Morpho. You're not guaranteed 10%. You're getting whatever the market rate is. But ultimately it's just sort of this defi mullet. They're sending your money into a contract and it's secured. And so obviously they've seen crazy growth on the lending side. On the borrow side, rather. We'll be curious to see how the consumer lending product does, but it'll be kind of a cool case study of like, hey, can you actually get something really big just using Defi Rails, or is kind of the centralized version still going to be able to win out?
- [61:33]
Aseeb
Yeah. Very good. Okay, well, I think we're up on time, so we got to wrap things there, but thank you everybody and we will be back next week.
- [61:43]
Robert
Thanks, everybody.
- [61:44]
Tarun
You all.