The Chopping Block: When Wall Street Meets DeFi — How Equity Perps and RWAs Redefine Leverage On-Chain - Ep. 937

Summary

---

Unchained Podcast Episode 937 Summary

Episode: The Chopping Block: When Wall Street Meets DeFi — How Equity Perps and RWAs Redefine Leverage On-Chain
Host: Laura Shin
Date: November 1, 2025

Overview

This episode of The Chopping Block dives deep into the integration of traditional financial instruments, particularly equities, into decentralized finance (DeFi) via perpetuals (perps) and real-world assets (RWAs). The panel examines the pros and cons of on-chain equity perps, the market structure challenges they introduce, and the parallels between DeFi and TradFi (traditional finance). It also covers hot topics like the political drama of CZ’s pardon, and the significance of recent M&A moves in the crypto space.

The guests include Tom (Defi Maven), Tarun (Gauntlet), Kaldora (Ostium), and Haseeb (Dragonfly). Together, they explore how DeFi is reimagining leverage, access, and capital formation, while candidly debating the pitfalls, lessons, and the evolving landscape.

---

Key Discussion Points & Insights

1. On-Chain Equity Perpetuals and RWAs

• What Are Equity Perps and RWAs?
  Ostium lets users trade derivatives referencing stocks and indices (RWAs) on-chain via a perp-like product.

• The Funding Rate Debate:

  • Kaldora’s tweet about a 365% funding rate on NASDAQ perps sparked community outrage and debate over the viability and fairness of the current market structure.
    • "At the time when I snapshotted it, it was 365%. So people were up in arms." — Kaldora [04:51]
  • High funding rates, while reflecting market imbalance, undermine the premise of holding perps long-term.
    • "You kill the demand in the first place from the normie audience, which is this sort of North Star." — Kaldora [21:34]
  • Tarun and Tom highlight that short-term speculation dominates perp usage, so long-term holding costs may not matter to most.
    • "The point is people do want to speculate with leverage on a short term time horizon." — Tom [22:35]

• Perps vs. CFDs (Contracts for Difference):
  Kaldora explains that CFDs dominate retail trading outside the US and are simpler than options.

  • "CFDs do trillions in notional volume a month... the largest retail derivatives market for TradFi assets." — Kaldora [16:12]

• Market Dynamics, Arbitrage, and UX:
  The group notes that perps work well in crypto's high-volatility markets but create issues for equities because funding rates are too volatile and infrastructure to arbitrage is lacking.

  • "People want to trade the simpler instrument if they can." — Kaldora [16:30]
  • "In the equities case they happen more frequently than the kind of crypto version." — Tarun [13:33]

---

2. Experiments, Product-Market Fit & Future of On-Chain Equities

• Experimentation is Key:
  There is consensus that running real-market experiments is essential to discover what works, rather than prematurely debating tech design.

  • "People should just run the experiments. I don't know why we have to neck beard before people play around." — Tarun [14:32]

• Retail Demand vs. Whales:
  While most retail users don’t care about funding rate intricacies, large traders (whales) quickly adjust their behavior based on variable funding costs.

  • "We've had hundreds of conversations with freighters where... people changing their behavior on the platform because of the variability of our funding rates." — Kaldora [29:00]

---

3. Political Optics: CZ’s Pardon and Crypto’s Image

• CZ’s Controversial Pardon:
  The episode covers the news cycle surrounding Binance founder CZ’s (Changpeng Zhao) pardon by President Trump, its impact on the industry’s perception, and the swirling accusations of political favoritism and corruption.

  • "I did feel like I, I, I did talk to reporters and I feel like I kind of deflated the story a little bit..." — Tom [33:38]
  • "This is actually a very funny kind of thing. I've also seen there's a couple European countries have this Golden Visa thing..." — Tom [34:03]

• Impact on Crypto Reputation:
  The group notes that the event—which was supposed to be a regulatory closure—ended up backfiring in the media and brought unwanted political scrutiny to crypto.

  • "I think this is actually quite bad for crypto because this has really animated people in a way I was not expecting." — Haseeb [39:03]
  • "Add that to the meme coin and all the other... bad optics just doesn't stop." — Haseeb [41:08]

---

4. Echo, Coinbase, and the New Era of Capital Formation

• Coinbase Acquires Echo:
  The panel analyzes Coinbase's $375M acquisition of Kobe’s crowd sale platform Echo (plus a $25M NFT), positioning Coinbase deeper into token launch and capital formation territory.

  • "Part of this also just seems like a bet on more aggressive token issuance clarity..." — Tom [43:55]

• Crowdfunding, Token Allocation, and 'Luxury Good' Meta:
  The discussion covers the dichotomy in launch dynamics: feast-or-famine sales, strategic community allocation, and the risks of over-distribution vs. exclusivity.

  • "Most things are just... not like evenly distributed. They usually fall on one end or the other end of the spectrum." — Kaldora [46:13]
  • "The history of crypto is someone invents something new, some experiment, it works extremely well and then everyone just copies them until all the alpha's gone..." — Tom [67:58]

• ICOs, Community Alignment, and Optimal Ownership:
  The panel explores whether mass airdrops, tight curation, or a “middle class” of token owners best aligns community and project incentives. The analogy to the luxury goods and fine art world is invoked to explain exclusivity and social signaling of limited allocation.

  • "If you make it, you know, if you race a massive round, you give like a 70% discount to your round, you open your, you know, echo..." — Kaldora [54:56]
  • "You can't just walk into a gallery... and be like, I want this piece of art. They're going to vet you and figure out, okay, are you a person who buys and then flips..." — Tom [57:33]

---

Notable Quotes & Memorable Moments

• On Reaction to Twitter Backlash:
  "Thank you to the haters because it drove more attention to us than we've ever had." — Kaldora [01:51]

• On the Funding Rate Problem:
  "You as a trader might be subject to funding rates that could wildly swing in one way, one direction or another... Which ruin sort of like gets to the very heart of what actually the whole premise is around why people would want to trade these instruments." — Kaldora [06:25]

• On Political Optics:
  "I actually, I do think that the prosecution against CZ was kind of like he got four months...What the fuck is four months." — Haseeb [36:09]

• On Capital Formation as ‘Luxury Goods’:
  "It's more like an auction. It's a sorting hat." — Haseeb & Tom [68:32–68:41]
  "A lot of it is... it's about creating artificial scarcity." — Kaldora [61:19]

---

Key Timestamps

| Segment | Description | Timestamp | |-----------------------------------------------|-------------------------------------------------------------------------------|-------------| | Welcome & Introductions | Meet the panel, Kaldora’s Twitter drama | 00:29–02:51 | | What Are Equity Perps and RWAs? | Defining the products and funding rate issues | 03:28–07:20 | | CFD vs. Perp Dynamics, User Experience | CFDs in TradFi; impact on demand & liquidity | 16:07–22:28 | | Funding Rate Volatility & Market Experiments | Running experiments, market structure, retail vs. whales | 14:32–29:30 | | CZ's Pardon & Political Impact | Scandal, public perception, media/political fallout | 29:30–41:08 | | CoinBase Acquires Echo, Crowd Sales Meta | Capital formation, Echo, parallels to art/luxury goods allocation | 43:24–56:47 | | Distribution Strategy & Community Alignment | Scarcity, curation, middle class of token owners, analogy to IPO/bookbuilding | 55:36–65:03 | | Art World vs. Token Launches | Provenance, exclusivity, luxury good analogies | 65:03–68:41 |

---

Closing

The episode wraps with Kaldora sharing details on Ostium’s differentiated approach to RWAs on-chain, inviting listeners to try the platform. The discussion concludes with reflections on the “sorting hat” approach to allocation, the increasing sophistication in capital formation, and DeFi’s ongoing experiments with importing and reinventing TradFi concepts on-chain.

---

For Further Exploration

• Check out Ostium for on-chain perps with RWAs: stocks, indices, metals, and more.
• Follow Kaldora on Twitter and Telegram: @Kaldora
• Watch The Chopping Block for more industry insider debates on Unchained.

---

This summary highlights the episode’s rich debate, capturing the evolving relationship between Wall Street and DeFi, and how equity perps, community alignment, and political drama are reshaping the future of on-chain finance.

Transcript

[A]

Like everyone who's saying that is definitely like a neckbeard curmudgeon who's. Oh, people who trade per equity equities on perps are like people who care about tax optimization. Yeah, sure, I'm sure. That's like some subset that's definitely not going to be the initial user base at all. Right. They're not going to be the ones who care about exactly how you can outrun them.

[B]

Not a dividend.

[A]

It's a tale of two Kwan.

[C]

Now your losses are on someone else's balance sheet.

[B]

Generally speaking, airdrops are kind of pointless anyways.

[C]

I named trading firms who were very involved.

[B]

Alec Eth is the ultimate defi protocol.

[C]

Protocols are the antidote to this problem. 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 Intro is first. You got Tom the Defi maven and master of memes.

[A]

Hello, everyone.

[C]

Next we've got Tarun, the Giga Brain and Grand Poobah at Gauntlet.

[A]

Yo.

[C]

Joining us today we've got special guest Kaldora, Empress of Rwas at Ostium.

[D]

Thanks for having me.

[A]

Hey, your alliterations are getting worse. You used to make sure all of.

[C]

These titles have alliterations of rwa. I thought that was pretty good. It's like, it's a good game.

[A]

It used to be alliterative, though. You've kind of like.

[C]

It is alliterative. Empress of Rwas at Ostium. It's like. It's like an Emily Dickinson. It's like a half. Half alliteration kind of thing.

[B]

Yeah.

[C]

All right, give it to me, give it to me, give it to me. All right, fine.

[D]

It's illiterate.

[C]

You can write these from now on if you want.

[D]

It's musical.

[A]

Yeah, you can write rhythmic, I'll give you that.

[C]

Okay. All right. Rhythmic, you say? All right. Well, I'm a Steve, the head man of Dragonfly. We're 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 Blocks at XYZ for more disclosures. So, Kaldora, you just got off being the main character of Crypto Twitter for about a day. You got pushed through the washing machine of everybody on the Internet getting mad at you. How was that? Tell us, tell us about.

[D]

It was an experience. It was my first time being, I would say, experiencing a public flogging. So I can. I can Recommend going through experience at least once. It was definitely informative. I mean, look, I. My main, my main takeaway was thank you to the haters because it drove more attention to us than we've ever had. So overall, I think I was surprised, I think, by how people are able to misinterpret things or interpret things in a way that you totally did not anticipate. So any potential lack of clarity on a topic that is likely to elicit strong opinions will likely be misinterpreted by some subset of the people who are reading it. So that was an important learning. But overall, I mean, look, I think it generated a very interesting discussion and I'm just happy to see people talking about the topic because we've been thinking about it for a long time and it's great to see it finally, I think getting sort of mainstream attention. So even if some of that is negative, it's actually wound up being very good for us. And we've seen now all time high volumes in stocks and indices this week. So all's well that ends well.

[C]

Every cycle. There's always one community that is like the roving bandits who just murder everybody in their way. This cycle it's the HLS in the past. I remember actually the show got assaulted by the Cardano guys a while back. I don't know if you remember that.

[D]

Interesting.

[C]

I think both you and I had run ins with the Cardano crew back in the day. It used to be Blink Marines, the Link Marines.

[D]

I was going to tweet this, but I was like, I'm going to make so many more enemies if I say this, but I'll say it now. The. The Dottie Chelsea of the new Link Marines was my first. But yeah, it's good. People, people are passionate. I. Passionate.

[C]

They're very passionate. They're very passionate. But it did. So it did lead to a very interesting conversation at a reading level that I usually don't expect from CT these days. I think I even got Jez to like write a paper about the convergence of funding rates to pay out dividends and da, da, da. So we should talk about what we're talking about for the audience that isn't quite as brain damaged as we are. So ostium, which is a protocol that you're building, is on chain perps on RWAs. Now what does that mean? These are derivatives. They're delta 1 derivatives. They track the underlying price of RWAs, meaning real world assets. So things like the NASDAQ gold named stocks. So like Tesla stock or whatever you can trade derivatives of those things using Ostium and your claim. And the thing that got CT up in arms is that. So what hyperliquid is doing, or rather what unit, which is a protocol built on top of Hyperliquid. They're one of the first three markets on Hyperliquid. They launched a product recently called Trade XYZ and Traded xyz. Right now it's got capped open interest. So the market is not fully open quite yet. But people are going on there trading the first popular product, which is basically, I believe it's the nasdaq. Right. And the NASDAQ market on there has a pretty large funding rate for what you would normally think is probably an extremely liquid and very easy to hedge market. And so I think it was paying. So you snapshotted it at some point?

[D]

I snapshot it at one point in time and I think some people's gripes was that it was a very narrow point in time and it didn't reflect the sort of average funding rate. But my point was more about the magnitude of the rate. At the time when I snapshotted it, it was 365%. So people were up in arms because. Because. For several reasons. One, because they misinterpreted the post in the direction of the pay of the payment. But two, because the claim, they felt that it was an unfair claim that the funding rates being so high was an indication of market structure failure in some sense. And my claim was that from a user experience perspective, having such extremely volatile funding rates that can either go, can. Can reach 365% in one direction or the other is detrimental to the user experience because the result is you as a user you typically want to be unless you're running an arbitrage strategy, which is very different. But if we're talking about sort of the average retail user, which is really what people have, this is sort of the broader vision for equity perps. Like the narrative right now, and I'm fully bought into that we've been around this for a long time, is that there's a massive opportunity in basically expanding this sort of perp or perpl like instrument to sort of the general audience, especially on assets like stocks that people, if they want leverage, they're typically trading it through options, which are a much more complicated instrument to understand. But that the whole premise that this is based on is like this is, this is a, you know, it's a linear instrument, it's easier to understand and you're not trading. There's fewer extrinsic sort of like market specific variables that you have to track or like instrument specific variables that you have to track rather than just tracking sort of like the directionality of the price. But the fact is that that assumption or belief completely erodes and actually winds up not being true if the traders are you as a trader might be subject to funding rates that could wildly swing in one way, one direction or another that are orders of magnitude larger than what the average price change would be of the asset over the course of that year. And so as a result, the thing that actually impacts your P and L winds up being more so the funding rates so that the payments between the sides wind up impacting your P and L more than the actual change in price of the asset. Which ruin sort of like gets to the very heart of what actually the whole premise is around why people would want to trade these instruments. So that, that was my broader point. And yeah, I took the screenshot at like a very. It wasn't, I wasn't like tracking the number and then screenshotting at the right time. I just like went onto the page, saw the number and I'd been looking at it periodically over the course of the day and I screenshot at that time. But yes, it was quite high at the time and longs are getting.

[C]

So I want to get into the wonkish side of this debate about the structure. What's the right structure for which perps should come on chain. But I also want to give a little bit of background for the audience who might not follow all the details here. So I'm going to try to see if I can get them caught up. So the big story that we've been talking about off and on on the show has been that perpetuals, which is the primary way that crypto derivatives get traded, are actually really well suited instrument to trade a lot of different stuff. And many people want to bring perps to equities. So Robinhood very famously is trying to do this. Coinbase has talked about this and many people have talked about, hey, can we get this instrument that trades so much volume in crypto to generalize to other assets? Now many people think this is one of the largest opportunities that exist in crypto. And if you want to get equities on chain, one way to get equities tradable on chain is to tokenize them, get the actual physical equities, put them in a box, put them on the blockchain. But a much faster way to do it is to just create derivatives. And of course Derivatives trade much more than spot in crypto and in every asset class. So the natur way this is done with perps, and this is the thing you're pointing to, is that in a perp, when there are more people who want to be short than long than people who are short have to pay the people who are long. And they might have to pay them a lot of money if there's not enough people willing to go long. And what you're pointing out is that they were going to have to pay them if the funding rate did not normalize, which obviously it fluctuates a lot. They would have to pay them 300% a year in order to hold this position for a year. Basically this massive carry. Now the number's been fluctuating. Last I saw it was between 15 to 20% or something like that. There's still open interest caps. So one would assume as the market matures that that number is going to go down, given that it's really easy to hedge the Nasdaq, but there's still meaningful funding rate. And crypto at various times has had funding rates go up and down to varying degrees. So hopefully that's some exposition of why there's so much debate about, okay, does it really make sense to have a venue to trade these things where you're having to pay even, let's say not 300% a year, but like 15% a year to hold these positions? Because of course a lot of people invest in the NASDAQ not because they're YOLOing. I mean, some people are yellowing the Nasdaq, but a lot of people are buying the NASDAQ because they're like, yeah, I want to invest in the NASDAQ for the long run, but the NASDAQ doesn't go up more than 50% a year on average. So it kind of, you know, if that's actually what the. If the funding rate is actually causing long to pay shorts, then it's kind of a moot point to hold a position long term. Now, many people don't use perps to trade long term. So many of the counterarguments like, well, no, these are really short term derivatives to get leverage and do like a short term trade. These are not positions you should have open for a year. So I'm going to pause there. Tarun, want to get your take on this whole debate about whether or not perps are well suited to trade equities and other RWA type instruments.

[A]

I mean, I guess I think all derivatives have some funding Costs, right? Like if you're trading options, you want to pay an annual, you have an annualized option, you're going to be paying the roll costs of rolling each expiry. I think, you know, obviously continuously price things are maybe harder to deal with than options where it's like, it does feel like a lottery ticket. Actually when Jeff was on tcb, I think like a few months ago, maybe like six months ago, we kind of had this debate right, where he was like, oh yeah, everyone wants perps for equities. Like it's, it's completely obvious. And I was like, well some people like lottery tickets because they don't have to think about them. They just throw the money in and then they don't think about it unless they win, right? Like they don't, they don't have to think about liquidation price, they don't have to think about their payoff changing their payoff is either zero or whatever the lottery ticket is. And in equities, for some reason that's like systematically built in. I don't think all these debates about the dividends are annoying to compound and include are useful. Like everyone who's saying that is definitely like a neck beard curmudgeon who's like oh, like people who trade per equity equities on perps are like people who care about tax optimization. Like yeah, sure, I'm sure that's like some subset that's definitely not going to be the initial user base at all. Right. They're not going to be the ones who care about exactly how you compound. Like they want 10x long Tesla. Like that dividend is like 25% of that, right? Like they, I doubt they even care at all. But I guess collateral management's a lot more annoying with RWA perps obviously you have to think about collateral in and out. Also it's not clear that a lot of the systematic things in crypto that people take as truisms like basis trades are particularly in contango in a certain way like it is with bitcoin is going to be true for equities. I don't think we have enough volume to really know whether you kind of, you know, it could be the. A funny thing but it may turn out that like equity purposes have some weird properties where due to their, you know, the fact that like during market hours they're sort of like a linear delta one product like that tracks spot thing but like after hours they're more like some weird futures market on the next day's opening price. That funding flips overnight to the opposite sign that it is during the day. And there's lots of weird idiosyncrasies that I have no clue how they will change. And obviously how you choose the Oracle and all these things impacts that. So I guess, I don't know, I don't see a reason to be like oh we should kill this thing before anyone even tries. But I also just sort of think it's much more likely you're going to be more successful at getting these right if you've had to do collateral management for the per, for like the crypto assets first and then figure out the lessons learned from the crypto assets and then specialize to the these kind of assets with way more covenants than the other way around. Because I, I just think crypto collateral management is kind of just its own beast and all of these things are going to be margined against that, at least in the beginning. I, I, I don't, I mean the.

[C]

I mean one thing that we have learned is that crypto is really simple compared to these real world assets. Right? There's no dividends, there's no weekend versus day.

[A]

So you're talking about this 365% funding rate on October 10th on multiple centralized exchanges Solana was at minus 200% because someone blew out. No one was market making and no one was taking the other side for six to seven hours. So these things do happen in even the continuous assets in these kind of really bad event times. It's just that in the equities case they happen more frequently than the kind of crypto version. So I think it's just there's kind of this belief that PERPS or Delta 1 is also a little bit of a lie because the funding rate process need not be this thing that's like mean zero and very small at all. It can have these kind of huge blow ups that suddenly make you look like you had this kind of option smile exposure, this tail risk exposure. So yeah, I guess it's more like people should just run the experiments. I don't know why we have to neck beard before people play around with market. It just seems like too much intelligence.

[C]

I thought that was literally your job is to neck beard stuff before.

[A]

Yeah, but the perpetuate the equity perps thing is I just need to see the demand first. Right. It first needs to just have users that are a lot of them before we can make any kind of claims in my opinion.

[D]

I have a lot of thoughts. My first comment would be, I mean I'm totally On the same page like this is we 100% should be running this experiment and the markets are only going to get, I mean I'm vastly a proponent of different implementations, people trying different stuff and we have a very different approach and it's great. It makes everybody more competitive. You want different competitive products in the markets, there'll be different approaches and some will work and some will work less than others. My, my, my comment on, on sort of funding rates was more as it relates to what it'll do for demand. And I think that's also what pissed people off the most about the post because you know, you just mentioned you first want to see what the demand is and what we found the reason. So we, we moved away from a model that had funding rates to. And we can talk more about this. You actually made a post about this Haseeb afterwards which is, you know, you were asking like why were equity perps better than CFDs for some of these assets? And, and our liquidity model, we need to find actually a better name to describe it. I think some of our problem is that we don't, we need to be a better nomenclature. So that's, that's in the works. But our model is somewhat of a, of a mix between a perp and a cfd. There's a lot in the liquidity model that's actually more akin to a CFD just put on chain and made more.

[C]

Transparent and sorry Kildor, can you explain what a CFD is and the difference with a perp?

[D]

Sure. So a CFD is a contract for difference and CFDs do trillions in notional volume a month. Outside the US they're like the largest retail derivatives market for tradfi assets. They effectively are besides like some, some other markets on FX outside the US they are the primary way that people trade derivatives outside beyond the US and India where options are the largest retail derivatives market. Besides those two geographies, CFDs are the largest instrument, most widely used instrument. And my general view is I think that actually reflects something very important about demand. Like people want to trade the simpler instrument if they can. And maybe my quippy way of describing that same phenomenon in crypto is like given the option between options and perps, like people pick perps, perps are a far larger market. They're like nearly 100 times larger in crypto than options. And you see similarly in any market where people have the choice between retail is a choice between using options and using a cfd, they pick a cfd. For those who are unfamiliar with like how it works. Like CFDs are very similar to perps in a lot of ways. They don't expire, they allow you to go long or short easily. They're fully synthetic so you can't redeem them for the underlying. And they are sort of a linear instrument. Maybe absent the sort of funding rate discussion. They're a linear instrument. And the difference is they don't have a free floating mark price. They don't have these sort of natural market dynamics the way that you have in like a proper perpetual on an order book exchange. The way I would think about it is if you're an online trading platform in the Philippines and you want to offer, you know, your people, you know, your guys want to trade the nasdaq, you're not going to try to recreate your own native exchange and native order book for that. You're instead going to go and pull pricing from the most liquid market. And there are thousands of retail brokers around the world and they're not each going to create their own. It's this fun. I think it's this, it is a strange phenomenon in crypto because I suppose like a binance is both like a retail facing, like a consumer facing platform and an exchange where those markets are made. But that's actually not the case. And I would actually bet, I would bet on a strong thesis that like I think the disaggregation between like the exchange layer and the more front facing there's like the extreme end of the front facing which is like you're just a front end, you're routing trade somewhere else. There's something that's a little bit more in the middle where you have some control over liquidity. You do aggregate liquidity in some way but you don't have an order book and there's actually the back end like order book. I would bet that that's, I think these are going to become like much more distinct categories in crypto as the space matures. Just in the same way that you've seen in the traditional markets. And yeah there's these thousands of consumer facing trading platforms around the world to get entry into different markets. They're not recreating their own exchanges. If people want to trade the nasdaq, they're not trying to recreate, you know, like or Tesla. They're not recreating their own exchange for Tesla it's even a Robinhood, right? They're, they're going in their routing, they're finding Robinhood is a slightly different model but like on one of These CFD brokers, they're going and quoting a price from the underlying market, usually with some small spread or markup on top based on their own internal pricing model. And then they're internalizing some of that flow and then they're routing some of that flow to liquidity providers who then aggregate that across exchanges ultimately lay that off in the underlying market in some way through some intermediaries. The point that I'm making here is we have moved away from this pure sort of traditional perp model because. And you know, you could make an argument that we were just too early. That's like, I'm open to that argument, but I do think, like the core insight that we found was we tried to use natural market dynamics like a funding rate to incentivize balance between the sides, like balance and open interest. And what we found was ironically the same funding rate that would incentivize people to come in and hedge on the short side. Because people, you know, general, the market is like skewed long was ironically like basically the same funding rate that would completely kill the demand on the long side. So it's this terrible kind of like catch 22, like cold start problem. We tried it. Like we actually used to have funding rates, like proper funding rates on all of the traditional assets and we moved away, we kept them on crypto because there's a whole market for arbitraging the stuff. And like there's. The market structure exists to arb that stuff out, but it doesn't exist. Especially when you think about, I mean, even what it would take to run, you know, something delta neutral and rebalance your collateral across wherever you're hedging off chain and on chain. There just isn't this infrastructure to go and hedge out these imbalances and ensure that your book isn't massively skewed. So you just wound up with like, you know, you could have one whale, especially in the market's nascent, you could have one whale that comes in, opens a massive position on one side and completely screws it for all the other traders and suddenly they're faced with this massive funding rate and it's this chicken or egg problem where. And then I totally believe that over time this stuff will get better on the large assets. The problem is as you go into the long tail and then like, you know, NASDAQ right now on chain is a long tail asset. It's behaving. It has the funding rate volatility and the, you know, like liquidity depth of basically like a shitcoin because like it is relative to the amount of liquidity that's, that's sitting around in crypto to go and market, make this stuff. It's like really close to, close to the bottom of the totem pole. But over time it'll get better. But if you, if you're trying to list hundreds of stocks, it's just, you're going to unfortunately wind up with a system where as I was saying in the beginning, people, you're going to, you're going to kill the demand ahead of time if you have these funding costs that are so variable because no normal person, I mean maybe some crypto people are willing to tolerate it because they're like used to it and they're not actually doing the math in their head. Like it actually does make sense in crypto when assets move like you know, 20% in a day to, to maybe bear that cost. You're, you're like willing to pay for the exposure, the leverage exposure to an asset with that much volatility. That's not really the case for, for more traditional assets. Even though recently, you know, even gold, you know, $30 trillion asset has been behaving, you know, behaving like a shitcoin. But it's, yeah, you are, you are going to wind up, you kill the demand in the first place from the sort of normie audience, which is this sort of North Star. Like normal people are going to want to trade perps on these assets instead of options. You kill the demand in the first place if you eliminate the core promise of using this sort of like Delta one instrument in the first place as a means of taking on exposure.

[C]

Okay, so let me, let me, let me get Tom in here. Tom, what's your take on funding rates as a dynamic in RWA perps?

[B]

I mean, I think that I always kind of comp it actually to like, like leverage ETFs where you obviously also have volatility drag. But they're like insanely popular. You know, some of the most popular ETFs that have launched this year are like 3x leveraged single name equity ETFs. But the point, and obviously the point also run options is these aren't people who are taking their retirement account and putting it into a purple. I would not recommend you do that. The point is people do want to speculate with leverage on a short term time horizon, right? Like zero DTE options. You're just trading delta, getting leverage through the delta. I mean those are what quadrupled in the past three years. And so like, I think I hear people that like, hey, obviously on a long time horizon, you know, funding rates are not attractive. But like the point is like these are short time horizons. Like these aren't long time horizons. And I think, you know, clearly they work in crypto where you can, you can get spot access. And yet, you know, perps are still gigantic. And so I guess, like, I guess maybe zooming out, it's like, I think the critique doesn't really makes sense to me because you can see the analogies in traditional finance and in crypto where clearly people are okay, paying for this because the type of exposure that they want is different. So I also don't know why people are so up in arms about equities perps. Because I agree CFDs are insanely popular. Obviously some of the specifics are different between the two. But I'm like, this doesn't strike me as so insane of an idea that okay, people in crypto might also want exposure. And it also seems like a more feasible path in my mind than yes, literally trying to tokenize actual shares of assets and put them on chain and have this access to a global audience, which is obviously just very, very difficult to do.

[D]

It just depends on, on what the competitive landscape looks like if like what you're saying is true. Like people hold their positions over a short period of time. Like they're not, you know, they're trading over a short time horizon if they're trading on high leverage on perps. But if there's a place, if there's one place where they might, you know, a large trader might face like massive, they might suddenly massively skew the book. And they have no, they, they're, they're not, they don't actually know when funding rates might renormalize and it's very unpredictable and it's now an additional factor they've taken to account. But there's another platform where they can go and they know they're going to face a much more predictable cost that's much lower. They, they will migrate there. Right? So it, it's, I, I think like the market structure is path dependent and I think that's something that people tend to ignore sometimes because like you're working with markets that already people might be also willing to pay like a premium to trade something on chain, maybe a 5x premium or a 2x premium. They're probably not willing to pay like a 20x premium. Like there, there is the, the, the bar for the liquidity you have to offer and the, the, the Cost that people have to pay is it is just a higher bar in terms of, because of the alternatives that exist. It's not the same as sort of like a defi Wild West.

[C]

So yeah, so I mean this is one thing that Troon has brought up many times is how retail just gets destroyed on these leveraged ETFs. Like the roll costs are terrible, they don't really track the underlying very well, but nevertheless they keep making them because they just sell like hotcakes. Like people love these leveraged ETFs because they're just extremely simple products. And I think that to me that's emblematic of. I actually don't know how much the market structure stuff is going to matter so much as just the go to market and the product marketing and just getting all the little fin finishes and the details right. I kind of think the worst, I think people sort of overestimate the kind of call it structural determinism of building products and building startups. It's not clear to me at all that the best product by structure or design is going to win. The reality is that equity perps are tiny. All this stuff is tiny compared to crypto trading and the CFD market is absolutely fucking enormous. And so if crypto can start to just take a bigger and bigger piece of that pie, probably doesn't matter that much in the short term. I mean maybe if people get up in arms about it and they can manage to make it something about which they raise a stink and socialize the idea, they're like, oh, these funding rates consistently make this a bad trade because blah, blah, blah, blah. Yeah, fine, But I more or less agree with Tom that a lot of people are coming into these trades, they're not thinking about making 15%. They're thinking about either I'm going to this is my lottery ticket out of this dump or it's back to wage cucking or whatever the kids call it these days. That is what they call it. If that's your mentality, then who gives a shit? Mostly when you're going for somewhere that is a cool product, easy to access, easy onboarding and that your friends are using and that has this viral just sort of accessibility to it, I think that feels to me much more relevant than is the funding rate 15% or 20% or is it like how many market makers are arbitraging this and that? Now I could be wrong and I do think that at some point people are going to come on chain not to yolo, but to actually save. And obviously There are many more savers in the NASDAQ than there are Yoloers. Right. Obviously Robinhood and zero dt options and all this stuff. Yes, it's all been growing, but it's all still tiny compared to the people who just passively hold their money in all these instruments. And so, on some level, if you're talking about trading fees, you don't make trading fees from passive holders. But if you're talking about the AUM that comes on chain and the real kind of economic disruption, I think that also happens from savers coming on chain and savers coming on chain is a much longer putt. And to me, I think that's probably more about tokenization than it is about derivatives, because I don't know that you want to have a derivative position open for 10 years. I don't think any protocol is necessarily going to be around by the time that you want to exit your savings position. Whereas if you're trading and you're YOLOing some like, Hey, I think Trump's going to strike a great trade deal. I'm going to go 20x long the NASDAQ, then, yeah, you're playing a different game.

[D]

It just depends on size, too, right? There are YOLO shrimps, and you're probably right that they're not even looking at funding rate at all. But there are a lot of very high leverage traders.

[C]

If you are the market. Yes, if you are the market, if.

[D]

You'Re trading a lot of size, which there are a lot of whale down there.

[C]

That's the thing. When you have that scale of money, too, you're also probably more smarter economically literate. Yeah, yeah, yeah. You're thinking a lot more about, hey, what's my carrying cost for this trade if I want to put it on for a few days?

[D]

And I can just say this from personal experience. We've had hundreds of conversations with freighters where, and like, we changed the system specifically because of this complaint. Like after months of complaints, like conversate, like people changing their behavior on the platform because of the variability of our funding rates. And we had like dozens of hours of calls with people trying to figure out what to do. So. But these are largely. Yes, these are largely whales, to be fair. It's not like, you know, someone you're onboarding through TikTok in that respect.

[C]

All right, well, speaking of whales, we're gonna, we're gonna switch gears a little bit and talk about one of the big stories this last week we're gonna. Which was the pardon of CZ. So CZ of course, was indicted 2023. He entered into a plea agreement with the DOJ and served a four month jail sentence. He was basically, it's kind of a complicated story, but the Wall Street Journal actually did a great deep dive into all the back and forth that took place here. So basically what happened was that there was a lot of reporting that CZ was angling for a pardon and CZ publicly denied that he was angling for a pardon. He said, no, and I'm not trying to get a pardon. What are you talking about? Never heard of this. For which is his thing of like, oh, this fud. And then it was reported that CZ decided like, you know what, since everyone's reporting that I'm looking for a pardon, fine, I will go ahead and publicly apply for a pardon. Mr. Trump, please pardon me. It was widely reported, of course, that mgx, which is one of the sovereign wealth funds behind the uae, invested into Binance, the first ever investment they made into a crypto Exchange. They invested $2 billion into Binance, and that investment was made entirely in USD 1, which is world Liberty Financial's stablecoin. And to this day, I think binance still holds 90% of the USD1 still in USD1, and it's one of the largest sources of circulating supply for USD 1. It was also reported that there was some assistance that Binance gave to World Liberty Financial in terms of development and some stuff they were doing together and in Pakistan or something, Something, something. I don't know. There's a bunch of stuff lying around about how different ways in which they work together with the world of financial team. And all of this apparently culminated in CZ receiving a pardon last week. So Trump announced the pardon and he claimed in the pardon that he had never met Sisi, but that he had heard that Sisi was a good guy and that this was a Biden era, you know, one of these victimless crimes, whatever, blah, blah, blah. This part of the, part of the whole crypto witch hunt that Biden was doing. And so the Crypt largely celebrated. But this has seemingly resulted in a massive political backlash. I've been honestly somewhat surprised at how much press time this pardon is getting, but it's even now really penetrating maga. I think you're getting a backlash within the MAGA movement about this pardon because of the fact that of course, it just appears to be potentially corrupt. Pay to play. There's all this discussion about, hey, you know, CZ is, he's not even American. Like, you know, he seems to have been has some financial interest with the Trump family, blah, blah, blah. So now, of course, all of this is, these are more or less like, immaterial because he already served his jail sentence, so he's already out. But the presumable impact of this is that there are things that one cannot do as a result of his plea agreement with the doj. One of those is that he could not be an officer of Binance anymore. And so he was kind of separated aside and instead running his family office and investing and doing sort of other stuff in the wings as opposed to directly being involved in Binance. Now that he is pardoned, presumably he is able to retake the reins and become CEO of Binance if he so chooses. Now, unclear yet what he's going to do with that or what that means, but obviously this has been a pretty Titanic story within the crypto industry. Tarun, what's your take? CZ getting pardoned. How do you feel about it?

[A]

I mean, I feel like I've gotten lots of angry messages from people I know who hate crypto.

[C]

You got angry messages?

[A]

Yeah.

[C]

Why did you get angry messages?

[A]

Fuck you guys. How did you guys figure out how to bribe the president? You know, like, I feel like I got, I got, I got like texts and DMs and group chats that were.

[C]

Just like, how did you guys. Wait, why, why is he roping us into this?

[A]

You guys mean like anyone vaguely related to crypto was, was, was the, you guys, you know, so, okay, I will say, I will say I, the political backlash. I feel like I, I've never gotten more random reporters emailing me. Do you have any comments on, like, what you think about this thing? I'm like, what the fuck? I forgot that this, I got a.

[C]

Lot of reporters hitting about this.

[A]

Yeah, yeah, I do.

[B]

I did feel like I, I, I did talk to reporters and I feel like I kind of deflated the story a little bit where I think you look at it and you see if you know nothing, you're like, oh my God, $2 billion going, going into worldly big financial. And it's like, no, no, no, actually they're using the stablecoin and they're foregoing the yield. So depending on what the current short term treasury, it's like, okay, maybe like 60, 80 mil of yield that they could be getting, they're not getting. And so it's like this is actually kind of very roundabout way to your point of basically giving finances to this thing that is in part owned by Trump family. But it's like, I Feel like this is actually a very funny kind of thing. I've also seen there's a couple European countries have this Golden Visa thing. And I've seen people where they have like a bitcoin fund that just holds bitcoin, has insanely high fees, but it's like if you do this, you can get the Golden Visa. And so it's like very much like a backdoor, like, just give us some money because you were going to pay non market rates for this management fee, which is effectively very similar, versus, like, okay, literally give somebody some money. And so I don't know how you think about opportunity cost or cost of capital as a form of bribe, but that's basically kind of. We were given up here.

[C]

Well, to be clear, Binance doesn't like if they were holding it in tether, they would also forego the interest.

[B]

Yes.

[C]

So, yeah, they would have to. The counterfactual has to be that they're holding it in cash in a bank account, which probably they have bank accounts now, but once upon a time Binance didn't have bank accounts that they could hold that kind of money in.

[A]

I did try.

[B]

Maybe they're getting some off chain rewards. We don't. We don't. You don't know the full story.

[A]

I did try debating, debating one of these. One person who kind of really brought this into this one group chat of friend, old friends of mine from like 15 years ago. And I was just kind of like, yeah, well, HSBC is paying like $2 billion in AML fines a year. I don't see their CEO going to jail for six months. But I got pilloried. And then I quickly never replied to the rest of that.

[C]

Your friends are very aggressive against you for like collective blame for what happens.

[D]

In the crypto market or your friends?

[A]

Yeah, yeah. Let's put this way, there's a reason Zoran is winning in New York. Okay.

[D]

Okay.

[A]

All right.

[C]

Kaldora, what was your reaction?

[D]

Oh, man. Honest to God, I didn't spend too much time on it. I don't have a very strong opinion. I'm very curious to see what he does.

[C]

You think CZ should have gotten pardoned?

[D]

I'm going to decline to express a strong opinion. I actually, I really don't have a strong opinion.

[C]

Spoken like somebody who needs to get listed on Binance. Very good. Excellent. Excellent.

[A]

Haseeb, The. The translator.

[C]

Yeah, yeah, yeah. No, I actually, I. I think it's an. It's an interesting case because I actually, I do think that the prosecution against CZ was kind of like he got four months, which is like, what, you know, you claim that he's some criminal mastermind and that he facilitated sanctions violations and you know, routed all this money.

[D]

Like a slap on the wrist in name only.

[C]

Yeah, it's like this is like a fake. It's like, okay, either he's a, either he's a horrible criminal or he's not. Right? Like there's no, like, what the fuck is four months. And the other thing, of course, that he's the only person who's ever been put in prison for a bank secrecy act violation. So it was claimed that, oh, he's like a, you know, his money laundering violation. It was not a money laundering violation. It was a failure to implement an anti money laundering program violation, which is not the same thing as money laundering money. Launderers get very different treatment. They do not get four months and you know, a slap on the wrist and like a minimum security whatever camp in Seattle or whatever it was that CZ was serving his time at. So I do think it was very clear that this was a post ftx. Something must be done. This is something. He's Chinese, he's the big boss guy who Elizabeth Warren says, we got to go get them. And so they went and got them. So I do think that the prosecution of cz, and not necessarily the prosecution, but certainly the sentence was clearly unjust. Right. And like, I think the same thing largely true for Arthur Hayes is that like, again, relative to that, Arthur Hayes didn't serve any time. But I think both of these prosecutions were obviously unjust. Now, that being said, I think the optics of Trump doing this are incredibly stupid. Like, I mean, what the fuck did he think was gonna happen when you pardoned the guy who, like.

[D]

It'S not.

[C]

I don't think Trump is 60 to 80 million dollars. But he already got the money. He already got the. What more does he need?

[A]

Yeah, how does the pardon. Yeah, exactly. The pardon and that are almost completely separate. Right. It seemed like the part.

[C]

Well, I guess the answer is you keep the money in USD 1, right. So like, you know, obviously you can.

[B]

Redeem it does feel. I agree the optics were really bad, but then I'm like, I don't know what the standard is. Like if you bank with Chase and they also pay you nothing in interest, are you bribing Jamie Dimon? Like, you know, you could run the exact same playbook, but I mean, Nobody.

[C]

Who'S holding 2 billion with Jamie Dimon, to be fair.

[A]

Yeah. It's also like there's not just like.

[B]

One, you know, just stick it in the Chase savings account. You're earning 0.01%. You know, there's a free 80 mil for Jamie.

[A]

No, but as a percentage of your market cap of your float. No one is giving a bank CEO that much also.

[C]

Yeah, the bank CEO doesn't make that much of the margin of.

[B]

I was, you know, it's being donated to JP Morgan, Chase's top line. Yeah, yeah, yeah, the joke.

[A]

It's being donated to the evil building.

[C]

Yeah. Look, I don't know, I don't know what the right answer is here. I mean, so for one, like, I think doing this in the middle of your administration is just incredibly stupid. Like, especially going into the midterms. I think this is now, like, I think this is actually quite bad for crypto because this has really animated people in a way that I was not expecting. I kind of thought like, okay, it's another Trump scandal, you know, whatever. But like this is still front page news. It's been like a week. And like there's Wall Street Journal. Journal is running like a full page spread on it right now.

[A]

It's even going to reach the, the, the retirement homes because I heard there's like a 60 minutes, like long form special.

[D]

Oh, no.

[C]

Yes, yes, there's a 60 minutes that's coming on this as well.

[A]

So, so I don't, I don't think I doxed anything. But yeah, I guess there's, there's a.

[C]

They'Ve been talking to a ton of people. So yeah, people, people have been getting the word. So yeah, there's, this is definitely going to be, this is definitely going to play in the midterms and I think this does hurt crypto and its credibility.

[D]

So do you really think this will play in the midterms? You think people care? They're going to play out the interesting.

[C]

Yeah, yeah. I mean like, this is, this is.

[D]

Maybe I have, I have friends. I don't know. I, I, I.

[C]

So Tarot. Taru's got friends who are pillaring him and, you know, collectively blaming him for the sins of the industry, your friends.

[A]

But this has been true for a long time.

[D]

Complete silence. I'm not, not one friend has brought this up to me, so I don't know, I must have a very.

[C]

Maybe you're just ostracized from your. Because you're in New York, right?

[D]

Yeah, yeah, yeah, yeah.

[C]

Are your friends pretty liberal?

[D]

Not really, to be honest. Yeah, I've talked to a lot of pretty, like most of my friends are like pretty libertarian tech friends.

[C]

Okay, okay. Yeah, Maybe they're fine with it then.

[B]

I think. I agree it looks worse for crypto. Like, I don't think any Trump voters are like, oh, well, this is the final straw. Him pardoning cz, that's actually the thing that's not going to make me vote, vote Republican or vote for Trump anymore. But I think to your point, we felt like the industry had these tailwinds. Things were getting more legitimized, more buttoned up. And then it's like, oh, this is kind of a pointless detour versus kind of all the other headlines that we were getting, which I think were quite good.

[C]

Yeah, I think add that to the meme coin and all the other. It's just like the parade of kind of bad optics just doesn't stop. So I don't know, I'm hoping that this news cycle does end because again, I assume that for cz, it's nice to have a pardon. And when you're worth that amount of money, 60, 80 million, whatever, is not a big deal to pay for getting your name cleared. So I wouldn't fault CZ if in fact that was the master plan from the beginning. But it's just such a headache for the rest of the industry now that you have to, to have to deal with this because, yeah, it's just stupid. Okay, so moving on. The other big news that we had over the last week was it's seemingly M and A season and one of the big M and A stories was around the platform called Echo. So Echo, of course, is a crowd sale platform and it was founded by Kobe, who's one of the beloved traders in crypto, Twitter and Kobe. So it's used for ICOs and or syndicates that you can follow a syndicate into investing, into a prelaunch investment, into a token. And Coinbase announced very recently they're acquiring Echo for $375 million. Combination of cash and Coinbase stock closing in Q4. Alongside that, they also bought the $25 million up only NFT. This is an NFT that Kobe created, seemingly as a joke, claiming that if anybody bought this NFT at an absurd listing price, that he, the buyer, would be eligible to commission one extra season of the Up Only podcast. And so, seemingly as a publicity stunt, Coinbase bought the NFT the day before they announced the acquisition. I'm assuming that this is part of the acquisition price, not actually that they paid 400 million, but obviously very, very, very good marketing stunt. Got the entire Internet excited. But actually a pretty massive outcome, of course, for Kobe, but also a very interesting deal in them acquiring an ICO platform and seemingly putting their sights on capital formation and going earlier in the token generation pipeline and you know, kind of playing a little bit in our lane. Gentlemen, thoughts on the Kobe acquisition.

[A]

Do you consider Coinless a competitor to vcs?

[B]

Yeah, I'm not worried.

[A]

I mean, they're like, what? I don't think.

[C]

I mean, they say they are. I mean, do you not agree? That's certainly the rhetoric.

[A]

Yeah, definitely not. Yeah.

[B]

I don't know. When you walk down, you know, the street and you see, you know, world's best coffee in the store sign, do you also believe it's the world's best coffee?

[A]

Do you believe that the 500 number one Chinese restaurants are number one?

[B]

Yes, they're all number one.

[C]

They're all number one.

[B]

I do think it seems like, I mean, I agree they're just trying to go more full stack and you see Coinbase doing this with more and more companies. I mean, they also bought Liquify, which was a portfolio company for us doing just like token distribution and investing. So it's sort of like this full token life cycle. Kraken obviously doing its partnership with Legion. So they also have their kind of own play in the token launch platform world. I mean, part of this also just seems like a bet on more aggressive token issuance clarity or something like it, passing more types of companies issuing more different types of tokens beyond kind of what we've seen historically. And also just I think that the most interesting with Echo, it seems like it's kind of gotten over a lot of this adverse selection issue that you'd normally see with crowdfunding platforms where they have actually had a lot of decent wins early on in the life of the platform. Whereas you go on the vast majority of crypto or non crypto crowdfunding sites and it's always just garbage and the performance has always been bad. And maybe Echo just wait, has that kind of sheen to it.

[A]

You're telling me that the 500 billion OpenAI SPV that's charging me a 7% management fee is a bad idea? Damn.

[B]

Well, it's that or some sort of Juicero type startup. Those are really your two options when it comes to crowdfunding platforms. But I don't know, maybe there's also again banking that we're going to see 10 times more crowd sales in the future.

[C]

Yeah, I mean, look, obviously Echo right now is the premier one. Legion is sort of second and Then there's whatever, just kind of a graveyard of other ones that don't really matter. What's interesting is that, like, it's very. Feast or famine, I think is the right way to understand these platforms, which is that most sales on Echo do not sell out. Like they're. The demand is not clear the market. Like, there's still tokens left over and then there are the blockbuster ones, you know, the Mega Eats or the Plasmas, and they just go like crazy. It's just completely oversubscribed and there are very few deals that actually end up doing well. Those are. Those are two of the ones that have done very well off of. Off of Echo. But it's like there's a little bit of a. Almost like a fantasy that's being sold to founders that this is like the solve for capital formation, that you're going to be able to raise money using these things even if Nobody else, the VCs don't want you. But there's always retail and you can always go on Echo. And I don't know, Kaldor, how do you view these platforms?

[D]

As a founder, I think, I mean, the timing matters a ton. I think a lot of people probably try to go out exactly what you said. It's totally feast or fan. It's like most things, to be honest, like, I mean, the world just like almost all things are just. They're not like evenly distributed. Like they're. They usually fall like on one end or the other end of the spectrum. So when you. We've thought about it a lot, to be honest, and I think like, the timing for when you do one of these sort of like crowd sales and the platform you use and how you want to do it is extremely important. There's also this like, kind of unique dynamic that I'm still trying to work through and I think it's going to. It's going to change substantially. Where I think the Echo was initially used as this kind of like, way to get in a bunch of crypto kols after a large VC round. And there's this weird dynamic where, like, in order to, you know, some platform, you know, you might be right before a large round or you might be for you might be right before your next fundraising round. And you can either have, you know, a vc price it and have your round and raise most of it from VCs, but then you have a smaller allocation left over for some sort of crowd sale and then they expect the expectation typically has been like some discount to the last round or if you give a larger allocation, maybe the time between your last round, you know, round one and round two, you three X'd. So if you try to, if you try to majority raise through sort of like crowdfunding, maybe you're trying to give a disc, you'd wind up at the same price. So you're gonna do a price midway between round one and round two at the, for the, let's say, the echo sale. But people will see that there'll be a negative perception because you're doing it before the next round. And so people think, well, how, you know, this is so unfair. You're not giving the community the right to. You're. You're raising at a higher valuation than the last round. Meanwhile, like, you know, you couldn't possibly raise that amount of money at the last round valuation. You would be insanely diluted. So. And you'd have like a very unfavorable token pie, let's say. Whereas, you know, then the expectations, they, you know, people want a discount, then you kind of have to go out and raise regardless and have someone institutional put a price on the thing and then offer this discount and then you sort of like pay the perception game better, but then you can only offer so much. Well, one, because you're expecting to have to give a discount and then two, you've given up the majority of the round to sort of in a set of institutional investors. And so there's less leftover. So there's, there's this. I, I think the.

[C]

As with all you can't win is what you're saying. Yeah, yeah.

[D]

Well, well, look, you can, you can, look, you can, you can play both sides so you come out on top. That's the answer. You can always win. There's always. You can always win. So. But you have to be very strategic, I think about when you do it. And so I think, yeah, I mean, it's totally, it's like if you're, I suppose, naive as a founder, it can be. You can perceive it as like some panacea. Like, you know, nobody, as you said, like nobody wants you, but like you can totally go out and raise crowdfunding. That's just like simply not the case. Like all of the winnings tend to aggregate to, to the top. So you need to already.

[C]

The problem is that it was once the case, right? Like there were moments when absolute doctor products were raising a lot of money.

[A]

Money.

[C]

And yeah, you're right, it's gone that window.

[D]

That's also a different story. Like dog product versus like dog Narrative, Those are two different things. You could have a pretty bad product and a great narrative. So, yeah, many such cases. So I'm less. Product side entirely aside, I'm talking more so sort of like building up public perception and hype around like the perceived valuation of what you're building. Yeah, it's a very. For better or for worse, I think, because people largely fail to understand sort of the general, like maybe like round mechanics or how dilution works and those sorts of things and what's going on behind the scenes. There is a lot of crafting that winds up needing to go into, like, the precise time at which companies. Even with, I mean, with Mega, you guys are clearly much more the experts on Mega than I am as investors. But, you know, they bought back some of the equity prior, which was, I think, very. It was a very interesting choice from like a signaling perspective, and then went out and did this, this crowdfund. So those sorts of. Yeah, it's, it's. It's another tool in a toolkit. And I can totally understand why Coinbase is investing massively because, I mean, this is kind of somewhat the original promise of crypto in some way. There are a lot of different sort of parallel promises of crypto and narratives that people got people to buy in in the first place. But I remember when I was first trying to convince, you know, I don't know, my grandpa, that like, there was, there was some value in trying to explain crypto. One of the examples I used was like, network, you know, the early users of a product, being able to be owners of it, all these guys, all these drivers. This was the example I used my grandpa on Uber. It's so unfair because all of these drivers who help build out the network and you wouldn't have Uber beat it is today if there were. These drivers didn't exist. They didn't invest early on. They never saw any upside beyond just what they got paid. They should be able to. And that's more related to, like, rewarding network participants. But, you know, what if they had been allowed. What if, based on hitting the criteria of using, being a driver for Uber, they had been allowed to invest or had been allowed to earn a share of it? Like that. That is, I think, very core to the initial promise of crypto. And it's often what I found when I'm trying to convince normies, for lack of a better word, is one of the things that people find most convincing.

[C]

It is. It is very compelling. Ironically, it has totally failed. Like the story that, okay, you just, like Airdrop your users and then that's going to create this like, aligned community that will never abandon you. We've seen in real time how that narrative has completely just evaporated and we've seen a reversion now to the ICO meta, right? And that's exactly what Echo plays into, is that, okay, the Airdrop meta is dead. Like, it's all farmed. It's all kind of these bullshit artists who will pretend to be aligned with you until your token goes down and they'll tell you how terrible you are. And the real thing that you want is economic alignment. You want a big mass of investors who are all going to care about you. So to your point about Mega Eth, Mega Eth right now is raising, I guess their last ICO because they did multiple pre ICO or pre TG raises. This is their last public raise and they're raising at a billion dollar valuation. Selling, was it 50 million? I think they're selling. And there's over a billion dollars in interest that registered for this particular sale. And the way the mechanics of the sale work. So it's like, I think it's like, what is 16x oversubscribed or something like that.

[D]

25X last time I checked, 25.4.

[C]

Oh, I'm sorry, you're right. Yeah, 27x oversubscribed. And so this the way, my understanding is that in this sale, the mechanic is that they basically decide how to clear the market. So it's not just, okay, we divide up by everybody gets 1 27th of what they asked for. We're going to look at who you are, what you did. We're going to try to figure out if you're sibling or signing up all your grandparents to join the. Because you have to KYC in order to participate in this ico. And they're basically going to decide how aligned you are before they give you.

[D]

An allocation, which I also think is fair.

[C]

I totally think it's fair.

[D]

Something I've thought a lot about, maybe kind of more like an open question, is it's very unclear what the optimal sort of GENIE coefficient of like ownership of some supply of ownership in like a token or a company is like if. Because I think some of the promise or like initially, I think the way people were using Echo was like, I got to get all the Kols on Twitter to like say nice things about me. So I'm going to give them all like a tiny, you know, throw them a tiny bone, right? And then they're going to say nice Things. The problem is like, if you don't have enough skin in the game, and you guys certainly know this as investors, like if you don't have enough skin in the game, you simply don't care. You're going to be more mercenary. You have to kind of people only really value things that they've invested like capital or effort into. And so if you make it, you know, if you race a massive round, you give like a 70% discount to your round. You open your, you know, echo, you know, everyone and their mother is in. It's just like you're not really creating alignment. Like, there's a lot of other things that go into it and like, it's probably better to have, you know, whatever, like selling 10% of your company. You know, maybe, maybe the optimal setup is like 10 investors with 1% each rather than like 10,000 investors. So I think. I don't know. I don't really have an answer, but it's a very interesting question I was analyzing the other day. What was the split among at hype tge? I was very curious and I was looking at a couple different TGEs. What was the split of again, the kind of Gini coefficient of ownership. It's a very thorny question. It kind of depends on the product. It depends on the market too. But max distribution is not always necessarily optimal. Obviously a high level of concentration is not, which is sort of what you see in the, in the VC world. Like I think we like went probably too far with like purely private capital raises and a very high concentration among a small number of people. Then there's sort of like. And you, you wound up with this like super skewed thing where you had like, you know, people marginally raised through VCs. It'd be super concentrated. Then you do this tiny echo round where everyone's putting in like a thousand dollars. Right? You kind of. I think you need more of a middle class. And I think that's like what this, this what I see, I think mega eth aspiring to and I hope that they achieve it through this ability to solicit all of the demand and then ultimately make the call on who gets a piece of it. Though they did cap it, to be fair. I would be very curious to know why they capped it at like 182,000 per person. Because I would imagine more of a middle class, you might want a higher cap or different ranks, like you could have different tranches. Some commit. That was you know, like a minute. Then the big jump between the tranches, like min you know, minimum 10k up to 100k and then you can have a tranche that's like 500k to 2 million and you can kind of architect these like different tranches based on what you want. The composition of your, the, of your sort of cap table, whatever token cap table you want to call it to look like.

[C]

Tom, what's your take here?

[B]

No, I really good points and I think I agree with a lot of it. I've kind of discussed this with Megith and other teams that are going through this, this, this process of like, yeah, you don't want to just pro rata distribute tokens to everyone based on who ended up bidding the clearing price. Because then like you said, it's do I care about a thousand dollar position? No, I'm just going to yeet it and move on to the next one. You actually want real skin in the game. And then part of that also is like, who is this investor? What have they done? Are they willing to lock? Is this sizable for them? It's really this kind of multivariable auction at the end of the day. In some ways I was kind of, it kind of reminds me of a little bit of the art market or luxury goods market where it's like you can't just walk into a gallery, like a high end gallery and be like, I want this piece of art. They're going to vet you and figure out, okay, are you a person who buys and then flips on the auction? If you do, you're banned, you can't buy this art. Or are you someone who has previously bought really nice stuff and has a taste maker, okay, then you can actually buy it and there's vetting of the people to make sure that, okay, you're going to be a long term appreciator and holder and you're going to bring some sort of aura to the brand. And I feel like maybe token projects are also going through kind of a.

[C]

Similar sort of phase. Okay, hold on, I want to delve into this analogy here because this is very interesting to me. Okay, I understand this for let's say you're whatever, a high end beauty brand and it's like, okay, we want to engender a certain vibe about the brand and certain clientele and so on. But if you are an art dealer, that seems different to me. Like in the case of, in the case of when you're buying some high end beauty store, they are giving you bulk discounts and they're giving you special favors and there's a whole system of pricing that they use to bring you in and make you feel like you're being treated in a special way. Whereas when you go into an art gallery, it's like, okay, well, you could buy this $25 million piece of art. If you're gonna go flip it, why does the art dealer care?

[B]

It doesn't work like that. Literally, you could go into a gallery in New York and be like, I wanna pay full freight for this piece of work, and they're just not going to give it to you.

[C]

But why? Why?

[B]

A lot of it is.

[D]

It's like the Birkin bag.

[B]

You can't buy the Birkin Bagin bag or Rolex. It's very reflexive, right? It's. It's. How do we sort of. Ultimately, a lot of this also is.

[C]

About, like, it's because they own the stock of that particular artist. So it's like for that artist.

[B]

Yes.

[C]

They are trying to make artists.

[B]

Yes, yes. The biggest one is sell a floor price.

[D]

That is the job of the gallery.

[C]

Right.

[B]

And it's also who you are. Right. Like, if you're someone who has a history of buying great art and creating a track record and being a socialite in some way, great. You're more likely to be able to be approved to buy a really nice watch or a Birkin or a piece of art versus some Joe Schmoe who comes in off the street. And so I think because of it is kind of manufactured in some ways. That is also why there's all these sort of touch points around who gets to buy this piece of art or whatever the item actually is.

[D]

The reason the gallery is like a 50% cut.

[C]

But the difference here, of course, is that these are both examples of whether it's like the Hermes bag or whether it's the emerging new artists at the fancy gallery is that these are one limited supply and they're positional goods. Right? So, like, these are things that are valuable because of their scarcity and because of who owns them. Whereas, you know, mega eth tokens. Like, the reason why it's valuable to be in the ICO is because everybody knows the clearing price is below the fair market value, Right?

[B]

Yeah. And if you're buying, which is quite different. No, no, no. If you're buying, like again, let's say a Rolex today, that's like an in demand model. The retail price that you're buying at is like way below what it's selling for on the secondary market. Right. So you're also effectively getting a giveaway, I think the point in all of these practices, to encourage the appreciation of the price of these items over time. There are a lot of things that are rare or scarce, that aren't super valuable or that don't necessarily go up over time. But here it's basically like it's sort of an artificial scarcity, but then also placed with people who aren't just going to go sell and also create induced demand for the item over time. And so it's sort of like, yeah, I'm only going to sell the people who promise to lock it away in a vault forever. I'm like, great. That's actually like if you care about the appreciation of the assets that you sell over time, those are like the best buyers you can have. And so that's also why you kind of get the report system.

[C]

So you think it's a one to one analogy.

[B]

It's not one to one. I mean certainly there's like a, you know, sort of soft component to it. But like ultimately it's like with any of these sales it's like you're basically giving away some value and the trade off is that you want to give it to people who are going to be good stewards of the asset to make sure that hey, this thing isn't going to get sold immediately. That's sort of, sort of like, you know, long term capital. Right? Like why does someone raise from a VC or P fund versus just like going to the market? It's like, yeah, because this is long term patient capital that's going to be there to sort of support the thing which is how you create value and sort of price appreciation over time. And so it's, I'd say more similar in that way versus hold on, hold on.

[C]

There's a difference though between the exclusivity of the holder base, right? Which is like what it is. So there's holding period and then there's exclusivity.

[B]

Yes.

[C]

Maximizing just for holding period is different from maximizing for. I only want really cool people who are extremely refine.

[B]

Yeah, it's multivariable, right. Like if you are extremely cool, your sort of effective price maybe goes down even if you occasionally sell in your sec art, you know, on an auction. But you know, hey, if you're not super cool but you are a storied collector and you never sell anything, then you know, maybe that sort of increases, you know, sort of your effective value that you provide. So it's like it is multiple things sort of triangulating to what is your actual bid on this Item what I.

[D]

Was going to say on this is a lot of it's just like it's about creating artificial scarcity. I was thinking just not to bring this up again, but just thinking because I was looking at the numbers specifically on the hype TG and looking at a few other ones and there I think it really played in their favor that you couldn't buy it on any centralized exchange because. And that's only the case, it's kind of like inflating the money supply. It could be deflationary or inflationary. 2008, everybody was of concern things would get super inflationary, really pumping money in the economy and actually became a little bit more deflationary. So basically what you're adding is you're adding something to the system that can create a reflexive loop, but it can go one way or the other. If you create scarcity, if not enough people care about it, you actually can deflate the value. If not enough people care, they can't buy your token. It's like obviously most token launches that don't get listed on Bybit, Binance, OkX, whatever, it's a sign that they're going to go poorly. But in that case there was enough of a reflexive loop that was pushing things upwards that I actually think it was a huge benefit to them because I don't know how you guys felt at the time, but it was honesty. Honestly to me. It's funny we're talking about this now. I was reflecting on it yesterday. It almost felt like a luxury good. You had to bridge to this new chain. You had to go to this new exchange, go and buy the token. There was one place you can get it. It was kind of hard to get and I really think that played in their favor. And there was a small, there was a small number of very fervent supporters talking about it, but not that many people got the airdrop. It was like, you know, most people didn't approve the thing in their what it was like five, six thousand people got like something actually meaningful and that was like. But it was really life changing for them. And so it created this like incredible mystique and hype around the few people who had access. In the same way that like, you know, you own a Birkin bag and it's like, holy crap. Like this really cool person owns it. Like, you know, it was really valuable for the few people who had it. But then there was this sort of like artificial barrier of scarcity that, that massively, I think like increased the sort of like mistake and demand for this thing. And I think like, similarly, I was thinking about this in relation and by the way, like, we're talking about ICOs. Like, you know how they run an IPO, right? You like go around, there's a roadshow and you go and you're trying to build your book and you figure out, and they love to ask you exactly how much is available. People, you know, VCs do this too, right? Like how much is available in the round. You actually should not tell people exactly how much is available because when you do it then you're, then you're cornering people into being like, okay, I'm taking five more checks of like 250 or whatever it is. Just like, you know, you don't know actually, you know, like, I don't, I don't know it like, depends on how much conviction you show. It depends on how much you say you want to put in. What's the optimal amount? What, what is your target amount you want to put in? And then I can take that back and look at it and then we'll close the books and we'll decide. And like that is what they do in an ipo. And I think that's generally what you should do as a founder when you're fundraising. And I think that's what you should do through like an ico. Obviously it's, there's going to be a lot more people. You're going to be able to be a little bit less considered. You have to be more programmatic about it. It's going to be less vibes based. But my view has always been like, you know, if you're trying to close the last 5 million or whatever it is, like in a round, rather than saying like, okay, I can only take 1 million, you've pre allocated ahead of time, people should tell you, give me a range. Like what is your desired, what is the max amount you would want, what is the minimum that it makes sense for you to have enough skin in the game? And then you collect all of that. You're like, all right, final numbers are in, I've closed the books. And then you decide and you allocate at your own discretion according to who you think ultimately is going to be the best steward of the equity of your company. And I think like that is the process that's used in IPOs that, that works and that's, that's how it should work. Like you should you. And I think like, yeah, these platforms are really just go back to the core topic, like there, there's a few things that have been tried. There's been the, like, get as many people as possible to put in a thousand dollars. I don't think that's the way, the way that you maximize, you get more out of like if you can fill out a million dollars in any way you want to fill it out in the best way possible, that's going to go towards the people who are going to be the best steward of your capital and create treat your company and treat your token like a luxury good. Because if you really believe in it, it is.

[C]

All right, we're running up on time, but I want to get Tarun's take on the luxury goods. ICO question Tarun, what is your take as the sort of chief scientist of the podcast?

[A]

Having sold a couple art pieces, I at least have some idea of the other side of the market, of whether what the value a gallery gives you is. And I would say there's something that's kind of tom hinted at, but I think like you kind of missing here, which is not really true for token launches. But generally the history of the buyer is extremely important in the art world. Not even just the history of it being an individual, but like there are artists who will only sell to institutions that have like a certain set of criteria met, right. Like it's an institution that's young. I won't sell to moma because them, they're too, too like old people go there. Like there is stuff like that, that's constraints that like the artists actually place, which is like the equivalent here. And a lot of those are paths.

[C]

This conversation is making me feel like a pleb. I just want to, just want to.

[A]

Say that they're all, they're all. They're very like path dependent. Like you, you care about like the entire history. You definitely. Whereas like in the pseudonymous world world, the path dependence is like purposely broken, right? Like, it's like I'm purposely trying to hide as much as possible as I go into the airdrop. So, so there's like a little bit of like a weird trade off there. Like, I know that like the, the, the protocol developers would love to force revelation, like force the users to disclose something about themselves.

[C]

But realistically they are right?

[A]

They're forcing some stuff. But it's, it's, it's like you don't know their whole provenance, right? Like you don't.

[C]

Do they not have you connect other stuff?

[B]

Yeah, they have like, like I think Twitter or Telegram or something.

[C]

You connect your socials and stuff. And yeah, you can do it even better.

[D]

You can see your whole onchain transaction history. You know, you could have, oh, you could have another wallet where you're dumping stuff.

[A]

Yeah, why would I ever reveal a wallet that actually is like, people are.

[C]

Surprisingly unsophisticated about this stuff, I feel like, and like you're either like a industrial farmer or you're just, I mean.

[A]

My favorite thing is watching all the hyper liquid airdropping farmers who never used crypto before, like suddenly realize everyone could watch all their trades and front run them. Because, like there is, there, there is that aspect. But I do think like the people who you want as sort of stewards or whatever, like your criteria is going to have to take a lot of factors. And, and, and I think the art world is kind of weird in that the next sale price is completely determined by the entire history of holders and the past. And I'm not sure that's, you know, I think that's what NFTs were trying to get at, but they obviously didn't really work out. Whereas, like, I definitely don't think that's true for token, especially tokens with yield, like staking tokens. Like, why is that true? Like, eventually that goes away and like you've seen that with all of them. That, that doesn't matter.

[C]

All right, Tom, I'll give you the last word here before we close out.

[B]

I, I, I, I, I don't know what the last word is here. I, I, I do think the history of crypto is someone invents something new, some experiment, it works extremely well and then everyone just copies them until all the alpha is gone and the strategy is exhausted and then we're on to the next thing. And I actually think we are on the cusp of something happening in ICOs. I think this mega eth style, reveal me your true bid, show me your true colors and I will sort of place allocation where I see fit. Feels like the way things are going.

[A]

You mean it's the sorting hat.

[B]

It's a sorting hat, yes.

[A]

That's like basically what it's close to an auction. It's a sorting hat.

[B]

Yes. But to Kaldor's point, like, this is in some ways crypto also relearning the lessons of TradFi and like maybe some things were good and overall I'm just like, it feels like the sophistication of capital allocation is just getting higher and higher. So.

[C]

Got it. Okay, well, that's all the time that we have. Kaldora, thank you for joining us. Where can people find you. And what do you want to plug?

[D]

Thanks for having me, guys. You can find me on Twitter and telegram. I'm Kalidora. Everywhere, just my first name. K, L, E, D, R, A. And yeah, come to Ostium. We have the most predictable and stable funding rates and deepest liquidity on stocks, indices, metals, energy, fx. So really, any tradfi asset you want to trade, we are far and away the most liquid and the best place to do that. We got a lot of people trading. Google, Apple, Amazon, nasdaq and even weird indices like the Hong Seng Index if you want to bet on the Chinese market indirectly. So, yeah, come try it and give me feedback. If you don't like it, message me DMs and I will.

[C]

If you don't like it, roast her on Twitter. She enjoys it.

[D]

Message me and we'll fix it. I can promise you that.

[C]

Okay, great. All right, we'll be back next week. Thank you, everybody.

[A]

Good.

[D]

Cool. Thank you, Robbie.