Uneasy Money: Hyperliquid's Dilemma After 10/10: Protect Itself or Its Users? - Ep. 954

Summary

Unchained – Uneasy Money: Hyperliquid's Dilemma After 10/10: Protect Itself or Its Users?

Episode 954, November 21, 2025

Episode Overview

In this episode of "Uneasy Money"—hosted on the Unchained Podcast feed—DeFi OGs Kane Warrick, Luca Netz, and Taylor Monahan discuss the fallout from the infamous "10/10" Hyperliquid liquidation event and dig into broader questions about decentralized trading venue design, risk, and incentive alignment. Along the way, they reflect on the return of crypto ICOs, the psychological and market impacts of airdrops versus token sales, and the risks in novel yield protocols like Athena. The conversation is candid, technical, and laced with first-hand builder war stories.

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Key Discussion Points and Insights

1. The Return of the ICO Meta

[03:07 – 19:03]

• ICOs Resurgence: The hosts remark on the recent surge in ICOs, comparing modern launches (e.g., Mega ETH, Monad, Aztec) to the wild 2017–2018 era.
• Coinbase’s Involvement: Coinbase's foray into ICO facilitation adds regulatory legitimacy and perceived safety for participants, but also raises expectations about downside risk.
  • "Coinbase doing it feels like you're safe and that you're not going to get like popped four years from now… If I'm not allowed to do it, then, like, what are you doing letting this huge hundred billion dollar publicly traded company, you know, enabling me to do it." – Luca Netz, [05:01]
• Valuation Creep: New ICOs are priced far higher (FDVs in the hundreds of millions or billions), cutting out the life-changing multiples accessible in the early days.
  • "This is the equivalent of like an IPO that some like OpenAI IPOs at a trillion dollars and it's like, cool, okay… there isn't that kind of early stage sense of you're getting in at a cheap price." – Kane Warrick, [08:02]
• Historic Anecdotes: They give a detailed breakdown of the EOS and Gnosis ICO mechanisms, including Dutch auctions and bizarrely protracted fundraising.
• Mechanism Evolution: New launch platforms (Sonar, Echo), designed by veterans like Kobe, attempt to mitigate some of the perverse incentives (gas wars, FOMO).

2. Airdrop vs. ICO – The Pudgy Penguins Example

[15:17 – 19:10]

• Luca Netz, as the founder of Pudgy Penguins, discusses the rationale for Pengu’s airdrop launch versus doing an ICO.
  • "The story of pudgy penguins is that it's the mascot and based crypto and the People's Coin… conceptualized through the form of generosity… not taking." – Luca Netz, [15:46]
• Aligning a token’s launch with its narrative and values is as important as mechanics and fundraising optimization.

3. Psychoeconomics and User Behavior in Token Distributions

[21:30 – 23:56]

• The difference between receiving a token for free (airdrop) versus having skin in the game (ICO participation) influences user mindset, loyalty, and willingness to hold.
  • "The difference there is that you have bought a thing… you, you feel like you made a good investment that went up and therefore you want to hold on to it versus someone gave you free money…" – Kane Warrick, [22:01]

4. The Spectacle and Risks of Early ICOs

[26:17 – 28:13]

• Much of the capital raised during early ICOs was in ETH, subject to wild price swings, which threatened project runway and led to existential crises for teams.
  • "We raised 30,000 ETH at $980. By the time we got to 2018, if we had done nothing, it's worth $3 million." – Kane Warrick, [27:59]
• The necessity of rapid iteration and aggressive risk-taking to stay relevant in crypto, even at the expense of financial runway.
  • "You gotta put it all on the line, because if not the community, the space will chew you up and spit you out." – Luca Netz, [30:37]

5. The Hyperliquid 10/10 Crisis: Systemic Risk and Venue Design

[32:46 – 49:06]

• Event Recap: The "10/10" event saw cascading liquidations across exchanges, with Hyperliquid’s design prioritizing the exchange’s viability over user protection.
  • "They made a decision, Hyper Liquid made a decision to protect the venue, to protect the exchange at the expense of traders…" – Kane Warrick, [34:44]
• The Human Toll: Well-known traders, such as "The White Whale," left Hyperliquid, citing the devastation the event wrought for them and their followers.
  • "Across the industry, everyone's doing victory laps, there's zero bad debt, the liquidations process flawlessly… but like, there's like dead bodies everywhere, pros." – Taylor Monahan, [36:54]
  • "This is the first time in crypto that I have multiple people message me saying, it's over for me. Right? Can I have money? Can you loan me money?" – Luca Netz, [40:05]
• Design Dilemma: There’s a tension: Protecting the protocol from catastrophic failure often comes at the expense of user experience and fairness.
• Alternate Approaches: Some venues (e.g., Drift) use softer, time-weighted liquidations and oracle-based safeguards, but at the risk of introducing technical fragility or bad debt.
• Market Impacts and Incentives: Price wicks often induce cascading, unfair liquidations—raising fundamental issues of "real price" discovery in fast, thin markets.

6. Competition & Evolution in Venue Design

[49:06 – 54:15]

• Hyperliquid’s Position: Still has no serious like-for-like competitor, but the team’s bias towards protocol safety could prove a future liability.
  • "I think this is what is going to be really interesting, right, is like, okay, so now 1010 has happened. A bunch of people lost big time. Moving forward, there is some amount of competition in this space, right? Hyper Liquid, they sprinted and blew this market open… Some of those [upstarts] are going to be good enough on the technicals and… innovative…" – Taylor Monahan, [49:08]
• Design Arms Race: The cycle of innovation, fork-and-tweak, and user migration is inevitable; new venues may win user trust with stronger user protections, but risk collapse if under-designed.
  • "There will be an exchange, I promise you, that turns up and says we are so much better for our users… and we haven’t really thought it through… This exchange will last for like [minutes]." – Kane Warrick, [51:00]

7. Yield-Bearing Stablecoins and Multicoin’s INA Bet

[54:15 – 67:39]

• Multicoin on INA: The crew discusses Multicoin Capital’s investment in INA (Athena), a tokenized eth-basis trade product, marking a departure from their "back the killer, not the leader" VC playbook.
  • "It’s quite funny to me that multicoin chose to invest in INA over trying to fund an INA killer because that was their M.O. for a really long time." – Kane Warrick, [56:26]
• INA/Yield Protocol Risk: The inherent risks in delta-neutral basis products, especially during market dislocations (duration/maturity mismatch, ad-hoc hedging unwind, exchange risk).
  • "They need to unwind those positions. So even though in theory all the money’s there… what happens if there is some huge ADL event… ADL means: we don’t have enough money to pay the winners…" – Kane Warrick, [64:02]
• Duration/Redemption Risk Parallels: Just like with Lido (stETH), there are scenarios where users may need instant liquidity but underlying assets are illiquid or slow to exit.

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Notable Quotes & Memorable Moments

• On ICOs shifting from open-for-all to exclusive, high-priced sales:
  "ICOs, crazy times." – Kane Warrick, [13:05]

• On High-Stakes Crypto Building:
  "I will plow this thing into the ground. And he was just like, I don’t even know what to say. You're cy[cho]." – Kane Warrick, [29:33]
  "You gotta put it all on the line… the space will chew you up and spit you out. You don't have years to figure it out." – Luca Netz, [30:37]

• On the fairness of liquidations after 10/10:
  "How is that an exchange? How if you're an exchange, how is that not your biggest priority to make sure that doesn't happen again, like, what priority is bigger than that, Kane?" – Luca Netz, [43:06]

• On the protocol vs. user protection tradeoff:
  "If there's a 5% chance that the exchange blows up… or a 5% chance that a bunch of my best customers have their brains blown out, [the founder’s] like, yeah, sorry about your brains." – Kane Warrick, [48:30]

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Important Timestamps & Segments

• [03:07] – ICO Meta Returns: Price discussion, sale mechanics, Coinbase entry
• [08:48] – Explainer: EOS and Gnosis ICOs, Dutch Auctions
• [15:17] – Pudgy Penguins: Why airdrop, not ICO?
• [21:30] – Psychological difference between airdrop & ICO participation
• [26:17] – The runway risks of raising in ETH, founder war stories
• [32:46] – Hyperliquid’s 10/10 event: cascade, system design, user impact
• [36:54] – The human toll: testimonials, DMs, forced sales
• [43:06] – Demanding exchange accountability for unfair liquidations
• [49:08] – Venue competition, potential for user-driven design pivots
• [54:15] – Multicoin's INA bet, yield stablecoin risks, basis trade mechanics

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Tone & Language

The hosts are seasoned, blunt, and frequently self-deprecating, using crypto-native jargon and recounting their own hard lessons with humor and candor.

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Takeaway

This episode provides a granular, inside-the-arena look at how the wildest events in onchain trading impact both builders and users—and lays bare the trade-offs and realities of designing protocols in a ruthlessly efficient, pathologically risky, and still human DeFi ecosystem.

Transcript

[A]

Hey all, before we begin, I've got some exciting news to share. We've been working on something a little wild behind the scenes. It's called Unchained on Air, a revamped live stream series and podcast feed that takes you way beyond the headlines. It features sharp, maybe even controversial takes on major events and the kind of on chain intel that never makes it to your feed. Way more shows way more often, each one laser focused on a different slice of crypto and finance. First up is Dex in the city where the wallets are cold and the takes are hot with Jesse Brooks, Katherine Kirkpatrick, Boz and V. Lee, three powerhouse lawyers gathering to dish about the latest. From defi enforcement to token regulation and everything in between, it livestreams every Tuesday at 12pm ET. Second is uneasy money because what happens on Chain never stays on Chain with Luca Netz, Kane Warrick and Taylor Monahan, three OG DeFi builders unpacking everything happening on Chain, from tokenomics to daos, from hacks to yields. It airs Wednesdays at 3pm ET. And finally, bits and the Interview, an addition to our group chat show in which our executive editor Stephen Ehrlich takes you deeper with one on one conversations. This streams on Thursdays at 12pm ET. To catch the live streams, follow Unchained on x, subscribe on YouTube or find us on your favorite streaming platform now. And don't forget to hit the bell icon so you never miss a show. And if you can't make the live stream, these episodes will show up in your podcast feed the very next day. Thanks as always for your support.

[B]

Someone's on the other side of this making money. And so you have to make a decision between whether or not you want your venue to be perfectly efficient or whether you're willing to take some risk to tamp down the volatility a little bit when it comes to liquidations. And it seems like Hyper Liquid is saying, too bad. So sad. We're not doing that. Hey everyone, I'm Kane Warrick and welcome to the second episode of Uneasy Money. Because what happens on Chain never stays on Chain. This is a show where we dig into what's really happening on Chain. The experiments, the incentives, the chaos, and the innovation driving the next financial system. Each week I'll be joined by Luca Netz and Taylor Monahan as we talk to economics. Daos yield security and everything in between from people actually building in the space. One quick thing before we start Nothing new here on Easy Money is financial advice. We're just three builders talking about what's happening on chain. And we want you to always do your own research before aping in mind all our disclosures@unchained crypto.com uneasy money. All right. Hey, guys, how are we doing?

[C]

Hey. Hey.

[D]

Hanging in there.

[B]

I wonder if we're going to do that in the intro, which episode it is every time. This is episode 386.

[C]

At some point we're just gonna forget to update it though. Like four fourth episodes.

[B]

Yeah, exactly, exactly. So. So let's talk ICOS quickly. So we've had a very interesting few weeks for ICOs. The ICO meta is back. I think they're. You know, we had the Mega Eth ICO which we talked about last week. This week, Monad and Aztec are doing ICOs on different platforms. So Mega Eth was on the Sonar platform, Monad is on the, the new Coinbase platform, which you could be forgiven for being confused about because Coinbase also bought Sonar, but this is on a different platform that Coinbase built independently. It took me a couple days to unpack that one myself. And then Aztec is running their own ico, which is like a node sale or something like that. So. So yeah, let's, let's dig into that. I think the Monad ICO has been interesting because the price was I think maybe relatively high given market sentiment right now at 2.5 billion versus mega eth. That was 1 billion. So, yeah, it's taken a little bit of time. It's still not fully sold out.

[D]

Yeah.

[B]

What are, what are our thoughts on the, the, this new ICO meta?

[D]

Super bullish on the ICO meta. Because I think this idea of not putting your money where your mouth is and expecting huge upside, I think is a fallacy that I think Web3 ran with, that I think was not healthy. So I do like this idea of ICOs in general. I like the idea that Coinbase is doing it because you kind of have that Legion and Coinless and others have been doing it for a while.

[B]

But.

[D]

Coinbase doing it feels like you're safe and that you're not going to get like popped four years from now or two years from now for doing it. Feels like, dude, this publicly traded hundred billion dollar company empowered me to do this, so I'm doing it now. And like, you know, like, if I'm not allowed to do it, then, like, what are you doing letting this huge hundred billion dollar publicly traded company, you know, enabling me to do it. So I like that.

[B]

Well, at least, at least if, you know, Gensler V2 comes after someone they'll come after Coinbase. Right. They're probably not going to come after you personally. So, you know, it's a bit of COVID fire, I guess. A little bit of COVID fire.

[D]

And I, I like it because I, I think we might have spoken about this last week, but this just idea that, you know, like getting huge life changing generational returns in public markets just aren't there the same way they used to be. And one of the beauties about crypto has just been that ability to allow people to get in really early, which I think would be like my only reservation with the Monad ico.

[B]

Right. Is the prices.

[D]

Yeah, yeah. It's like too high, man. You got to do these prices where it's not just an easy double. Right. Like it's an easy 4, 5, 6, 7x. I think, like, I think we're kind of misconstruing the beauty of, I think the ICO mechanic if it's done at those type of prices. But I do understand community alignment and if it's going to fail, it's going to fail. It probably will end up failing.

[B]

Well, there is, there, there's a. Yeah, there's an argument that like the way that the Coinbase fill from the bottom setup is, has been done. It kind of encourages people to wait. Which people wait anyway. Like, you know, I think mega eth. I looked at it and there were like 20,000 people that had gone in and then in the last like 24 hours it was like another 30,000. It was like more, more people went in in the last 24 hours and went in the first like four days or something. So I think people in crypto feel as, you know, very high opportunity cost of having capital locked up. And so I actually, maybe the Maggie money is still locked up. I don't know if they released that yet.

[D]

I don't think it's all really. I think they're on the, on the precipice of release. It's like on the verge right there.

[B]

I saw a couple of jokes that they might just hold it until the Monad sale is over, which feels very adversarial.

[C]

But yeah, I also. Okay, do you guys understand? I don't understand. There was drama on the timeline. I think like the other launch pads or whatever were kind of like ragging on the Monad sale for not selling out instantly.

[B]

Yeah.

[C]

But then there was other people saying like, oh, no, but it's fine. And this is like, why, like the way that the, the mechanism was designed was not designed to like fomo. Everyone and sell out and you're actually better waiting. Is that right?

[B]

I think that's right. I think. But you know, to Lucas point, the price is the price though, right? Like 2.5 billion is, is pretty high. Like, you know, go back to the EOS ico, which is my favorite ICO of all time, right. That went on for a year and raised $4 billion. You know, there is a point where I think to, you know, as you said, Luca, like there isn't really the potential for. This is the equivalent of like an IPO that some like OpenAI IPOs at a trillion dollars and it's like, cool, okay, like, thanks. I guess, like, hopefully it goes to 2 trillion, but like there isn't that kind of early stage sense of you're getting in at a cheap price. Right. Where there's a lot of upside.

[D]

I do think it'd be great for listeners. Can you actually explain the EOS ico, how that worked, how they were able.

[B]

To keep it going? So back in the ICO era, EOS turned up and said, uh, we're going to do an ico and, and people were really excited for this, right? Like this was a, a new network. This was like one of the first post Ethereum, Alt L1 kind of projects that, that people were really excited about before, like bsc, before Solana, before a lot of these things. And, and they, they were going to take a different approach, be more centralized. Shockingly, that was the different approach, have fewer validators. It was going to be proof of stake. And there was this period through 2018 where it was one of the hottest projects. And so the ICO meta was everyone does an ICO through 2016, 2017, 2018. So I think the ICO for them started in early 2018. But they did this mechanism and it's funny, ICOs back then, they. There was actually quite a bit of innovation in the way that the ICOS were designed. Right? Their innovation was how can we max extract? And so they did this ICO where every week there was an auction for EOS tokens. And so the auction would start, it would run for a week, people would place bids throughout the week and then the auction would close and then another week would start. And it ran for a year, which.

[C]

It was insane, right Prior to this, the way that it worked was that you would have this up and coming project, they would start getting their name out there, people would start talking about them, they would start shilling themselves and you know, you figure out whatever the hell they're doing and then they would, they would. Based on, like, you know, a variety of factors, they would then sort of figure out how much they wanted to raise. And that was like the defining thing. And so it's like, oh, we're going to do like a $5 million or $15 million or $100 million or whatever it was, but there was always like a cap on it. And so like in, in mid-2017, it was like, you know, like brave and like, status and all these, like, big ones, but the big ones were still like $100 million and they would, like sell out.

[B]

Like 100 was like the max that, that people could pull off, right?

[C]

Yeah. And it would still sell out instantly. Like, or nearly instantly. Like, we're talking minutes to.

[B]

Minutes to hours. Yeah, exactly. Yeah.

[C]

And then EOS comes along, is basically like, wait, why is that even capping this?

[B]

Yeah. Oh, So I think there's two. There's two crazy outliers in this era. Right. Gnosis is one, maybe polkadot you could throw in there. Right. But gnosis is one and gnosis is, is another outlier. Not because they were trying to max extract, but because they kind of hit the peak of FOMO and they created this reverse Dutch auction where the percentage of the supply. This is like classic Koppelman. Like, we're going to solve this problem through math and, you know, incentive design. Martin Koppelman's founder of Nose is one of the founders. Stephan George is the other one. And so they designed this, this system where instead of, to your point, having to decide up front how much to sell at what price, they would have this reverse Dutch auction. And it basically sold out in like two minutes. They raised.

[C]

Yeah, because in theory, in theory, you're supposed to wait. The whole mechanism design is forced.

[B]

It was based on waiting.

[C]

Yeah, because no one waited that you. Yeah. And then. And it was like one of the most peak, like, like genius cryptographers meets, meets crypto.

[B]

Because the cryptographers and the cryptographers did not.

[C]

They're like, rationally, you have to wait. And then the DJs were like, everything goes offline. All the money goes in instantly. And like this researchers are like, raised 400,000 each.

[B]

Yeah, they raised 400,000 each. And they sold like single digit percentage of the network or something like that. Right. And then I think everyone was like, all right, we're never doing auctions again. That was a failure. But they still have like 300,000 eth. So well played. Um, so, so EOS goes, okay, what if Instead of doing one ICO, we did 52 ICOs and made them a week long, and then they raised $4 billion. And I don't even know what the implied FDV was. By the time it finished, everyone was just over it. Like, it would. Like, every few months, people would remember that this EOS ICO was still going on. And. And so the other thing that was really interesting about it is people were like. Because we didn't have the technology back then to track anything happening on chain. And so people were like, they're just putting their own money back in because they could pull the money out every week. So every week the auction would finish and they could withdraw the money. And people were like, is this just them rebuying the same tokens, like, over and over? Because sometimes the price would go down for the auction and then it would get bit up at the last minute. Anyway, ICOs, crazy times. So.

[C]

But wait, hold on. Today it's better, though, right? Like, we're way better.

[B]

No, way better. Like, it's definitely better. We have. We've got better ICO technology, I think. You know, the thing that was really interesting to me about both echo and sonar is Kobe designed both of those systems with ICOs in mind. Right. Obviously, he was. He was there throughout all of ICOs and he. He was like, I'm trying to build a system that. That is going to actually make it more accessible. Right. Like, I'm going to try and, you know, remove some of the perverse incentives in here. And, yeah, I think, you know, that that kind of worked.

[C]

Yeah. Yeah, well. And like, Kobe, I mean, he really lived through it. So I am excited for the continued. I don't know, we do this thing where we, like, go all the way to the moon and it's insane and bad, and then we, like, forget about it, and then we come back in a more stable, better, like, actually solving problems.

[B]

Markets take time. So, Luca, I have a question for you. You did an airdrop launch of the Pengu token in 2024. Early 24, is that right? End of 24. Oh, wow. Okay. Wow. It feels like it's a lot longer than that. So if this ICO meta had returned, would you have considered doing an ICO instead of an airdrop?

[D]

No. No, because not for the story that it's trying to tell. Right. Like, the story of pudgy penguins is that it's the mascot and based crypto and the People's Coin. Right. So the People's Coin is conceptualized and conceptualized through the form of generosity. Right. And, like, giving and not taking though this meta does, I think, make us look at other things that I think are a little bit different. Right. Like, we have abstract, we have other companies in the igloo, you know, and so we're just looking around. Right. Like, obviously I really like the mechanic of, you know, airdropping the most loyal supporters and then obviously having an ICO for the opportunists and the traders. I do like that balance. But Pengu specifically, just in its form factor, I also don't think it would have been as successful. I don't think where it's going to go. I think if you would have done it any other way, I think would have handicapped it from going to where I think its future ultimately lies.

[B]

Interesting.

[D]

But I do function because it's a community coin, right? It's a community. It's a, it's a proxy of community. I really believe that. But I do believe that in a world where the ICOs have come back, like they've come back today, it's almost irresponsible from a, from a founder perspective to not really take these things seriously. Especially if you're more of a, you know, you know, technically driven, you know, business driven, you know, type of protocol driven, you know, type of token versus. I think we're in a very unique category.

[B]

Right. You're not trying to generate revenue and, and you know, build, like, build some weird defi scheme or something like that.

[D]

Yeah, it's a, it's a proxy of impressions. And do you believe that we are the next iteration of Mickey Mouse and like, you know, is, is. Do you believe in the meme and the culture that is the token versus, you know, nobody's underwriting Pangu because, you know, we're going to do $50 million a year in revenue this year.

[B]

Right.

[D]

You know, if you did, I'd be like, you're, you're kind of, you know, you're getting it wrong, you know, better than me. A lot of these guys are way dumber than everybody knows.

[B]

Yeah.

[D]

You know, yeah, there's some people who have underwritten it in such way, but.

[B]

You know, but it was, it wouldn't be 50 million, it'd be $50 billion in revenue a year. Right. Like that's. That the, that's like the left curve take is like, so, so to close this, this ICO meta out, right? The, the other side of the, of the spectrum, it was Aztec or Aztec is about to do their ico, I think, in a couple weeks. And they started with an FTV of 350 million. Which, you know, again, to go back to your point, Tay, like the ICOs, you know, they would raise like, you know, brave or whatever. They would raise like 50 million, 100 million, selling like 50 to 60 to 75% of the tokens. Right. So these were like FDVs of like 50 million, 80 million. Like the haven token. The FTV was like 60 million.

[D]

So I have a question. Were those fully unlocked the second that they came out? Yes.

[B]

Yeah. Yeah, I know you would think, like, it was so wild. It was so wild.

[C]

That was like, like people. Okay, this is the thing is like there was this, there was this tension between the true believers and the people who had been in Ethereum for a while and then like sort of the newer, fresher faces or just the people who were there more for the, the financial gains. Right? The people that were true believers were like, it doesn't have a product, it's not going to ever ship. They're like, there's nothing here. And then the other guys would be like, yeah. And, and then the true believers would be like, yeah, what?

[B]

They'd be like, you can't do this. You're ruining.

[C]

Why would you, why would you buy it? The answer obviously was because you could literally sell it at like minimum 2x instantly. But oftentimes if it was a really like, if it sold out, you could sell it like 10x100x, you know, within days or hours.

[B]

It would be hard. It would be hard. You would, you would have to stay up until 2am especially.

[C]

You had to click.

[B]

Yeah, you had to click a lot. Things would go down, you know, like the, the website would go down, the chain would get congested. Like there were some where, like gas price, I mean, gas price spiked.

[C]

Yeah. Gas prices would spike.

[D]

Can I run a theoretical by you guys? And I want you to, and I just want to underrate because I know you'd give me good advice as a friend and as somebody who's like aligned, but let's say I had something really special cooking, really special. And you take me at face value. That and, and I told you and I said, Kane, I wanted to ICO it. I wanted to raise 50 million at, you know, 75 million FDV and I wanted to give it all out as somebody, you know me to be a high integrity guy who's here long term. I really just want to help shape the space for the better. Would you advise me? Because outside of that mechanic being really exciting for like a week or two. Right. Like, do you think like the long term Success of that. Can something actually succeed through a function, through a mechanism like that? Like, would you advise somebody like me to go and do it that way? Or you're like, nah, it's just really fun for three weeks and it's not, it's going to blow up in your face.

[B]

Look, it's a bit of, it's a bit of both, right? And the reason why I asked you about airdrop, you know, we talked last week about airdrop versus ico, right? And there is absolutely a psychological difference, you know, to your point, Tay, yeah, there were a lot of flippers, but there were a lot of people. Like, I guarantee you, if you go through the chain, there are a lot of people who bought the gnosis token in 2017 and have never sold it. Like they swap their eth and they've just literally been like diamond handing it for that entire time, right?

[C]

I have like hundreds of these, by the way. Hundreds. Literally hundreds of tokens. I'm like the all time diamond hander and 90% have gone to literally zero.

[B]

So it's like, it's like, okay, you sell a token to people very cheaply, right? And it's, you know, you're talking 75 million FDV, 100 million FTV these days. And that was sort of the point I was making. Like, Aztec feels cheap at 350 million FTV, right? Like the, the times have changed. Like there were ICOs that were doing like 20mil FTV, 10mil FDV. Like they were, you know, it was just a different era. So selling tokens to something that people have any kind of long term belief in very cheaply. There's, there's two components to this. One, okay, how do you decide who gets those tokens? And this is one of the challenges, right? Like there were a ton of ICOs in late 17 where it was like, and, you know, not an auction, it was, it was just, you know, put a ticket in and it was a lottery system who would get access. You know, there were a bunch of different ways that this could play out, but let's say that this was something in the pudgy penguins ecosystem, right? If it were me, I would say if you hold a pudgy, you get an allocation into this ico, right? That, that was kind of the point I was making about Pengu, right? Is like, if you hold a pudgy, rather than airdropping it to you, you're allowed to buy Pengu at, I don't know, 50 million FTV, right? The difference there is that you have bought a thing and, and there's two components to it. One, you have a cost basis, so you believe like you had to choose to buy the thing. But the other thing is you, you feel like you made a good investment that went up and therefore you want to hold on to it versus someone gave you free money that you now need to dump to realize just a different. It's a different mindset.

[C]

Yeah. And it's also. It's different today because, yeah, they're like. I'm sure there were some amount of automated systems that were buying these ICOs, but the vast majority of the ICOs was actually like very, very manual, which is just insane to think about. And every time I recall this, I have to go check myself because I'm like, there's no way. But it was actually. Yeah, there wasn't this MEV land. There wasn't this really understanding it would take years for that. Even early defi.

[A]

Really.

[C]

It had like manual back running and stuff. Right. It took us years to get to that point where like. But if you were to do an ICO today in the same way that we were doing them back then, it would just be like. I mean, we saw this with NFTs a bit. Right. Like you just like the bots and the. Yeah, it's all automated.

[B]

Exactly. That's, that's the hard thing now is like figuring out like, what would the mechanism be. Right. So, yeah, it's, it's. Do you remember Civic. The Civic iCo. Yeah. So, so, so the Civic ICO was an interesting one because it was like this three day period where you had to register and wait and then there, the distribution of allocations was like capped. But then there were like, there was like a weird bidding phase that to me was like the peak, peak of people trying to get into a very small door. And there were like hundreds of thousands of people that tried to get into that ico and like 5,000 people got an allocation. It was like today that you just couldn't get away with that. And then they, and then what did they do? They. They literally released like a vending machine.

[C]

Yeah, I don't. I think that's one that just died quietly, quietly, quickly. It was like. I don't. But yeah, it's like, also, what's the point of the ico? Do you want like fair distribution? Do you want, you want to create the market? You want the price? You want founder exit? Do you want community? You want loyalty? Like, what exactly are you going for? For a lot of the early ICOs, it was like. It's kind of like a seed round. It was kind of like a PR community building thing, but also.

[B]

But not like a seed round, but where you sold all of the tokens up front and never raised again. Which was, you know, not the smartest, tactical. Like, part of the reason I think so many of them went to zero. Right. Is like, you raised $10 million and you think $10 million is a lot of money, and. And it definitely was back then, you know, but like, two years later, especially because everyone raised an eth. Right. So this is the other ICO dynamic that people forget about. Right. Every single ICO was denominated. We didn't have stable coins. We didn't have stablecoins during the ico.

[C]

Yeah. It was all eth.

[B]

It was only.

[C]

I have so many tokens that are zero now. Don't tell me how much they were worth in eth.

[B]

USDT was on the Omni Network. It was on a different Network. There wasn't $60 billion of USDT sitting on Ethereum mainnet. Right. So ETH was the only medium of exchange we had. And. And so everyone raised an eth, which was a huge ETH sink, which is why the price of ETH went up, which is why people could then raise more, etc. Etc. And then it all unwound, and here we are still.

[C]

Yeah. So, like, if you raised in late 2017, when the price was like 500, the price of ETH was like 500 to a thousand. A year later, ETH was What, down to 80? Well, I mean, in December, we go down to 80.

[B]

Yeah, yeah.

[C]

So you didn't raise $10 million anymore?

[B]

I mean, haven 1 million. We. We raised 30,000 eth. Right. So 30,008. That $980, which was 30 million.

[C]

This was you. You were at the top.

[B]

This is me. I was there. That's me that you're literally describing me. So we raised 30,000 ETH at $980. By the time we got to 2018, if we had done nothing, it's worth $3 million.

[D]

Yeah.

[B]

Imagine that you're sitting there, like, in, like in a smoking crater, and you're like, what have I done with my life?

[C]

And also, like, you sold, like, all of your, like, everything.

[B]

Yeah, it was crazy. It was crazy. Well, you sold it, right?

[D]

When it failed, you basically just denominated from each dollars. You didn't hold it until 4,000 each. And.

[B]

No, so. Well, I mean, like, payroll and, like. Yeah, exp were expenses. Right. So the. The. My favorite part about this, right, is that obviously synthetics is still here today. So we didn't run out of money, but it was. I. I remember sitting there in. In 2019, it was like Feb. 2019, and we were looking at our Runway, and it was down to, like, months at that point, right? And Jordan, my co founder, is like, okay, I've got a plan. Like, we can cut costs. Like, we're going to, you know, figure this out. We'll cut, you know, the team down to, like, five or six core people, engineering or whatever. And I literally looked at him, I said, listen, we have six months to either make this work or it's dead anyway. Like, if we. If we, you know, kind of try and extend that to nine months is not going to make a difference. We need to throw everything at this. And I said to him, I was like, I will plow this thing into the ground. And he was just like, I don't even know what to say. You're cy. No.

[D]

But you want to know what, Kane? Keep going.

[B]

Yeah. No, that's it. And so. And I did. And, like, at the last second, we pulled out of this death spiral and. And survived.

[D]

There's a common denominator here because I almost told my co founder the same thing verbatim, and it was a little bit a different context. But we were going. We basically bought pudgy. FTX blew up. We were going broke. We had to put another million dollars into the business. And he was doing this thing of like, two years Runway. And I said, lorenzo, I said, by the time we survive two years in crypto, we would be irrelevant, and this whole thing will be cooked. And so our strategy, basically, even today is like, I'm fully all in this whole three year Runway thing. In crypto, you don't survive three years if you're not staying relevant and keeping top of mind. I don't run three year run. I mean, now we've been able to capitalize the business well enough where we can run at that run rate. But I tell these guys, you got to put. You got to put it all on the line, because if not the community, the space will chew you up and spit you out. You don't have. You don't have years to figure it out.

[B]

Yeah, you got six months. Exactly. Yeah, six months.

[D]

So it's ironic you say that. It's pretty interesting because I do think that's a really interesting factoid and common denominator that I haven't heard many other people say. But since you mentioned it, I think is so critical for at least our success was like, dude, we had to put it all on the line and that's what kept us out shipping everyone. At a certain point, everyone was looking around in NFT land being like, dude, you're like shipping everyone, right? And it was because I was just putting it all on the line every time.

[C]

Yeah, because you can't. You cannot wait and you can't. Like. Yeah, because if you survive three years, like, that doesn't actually get you. Like, what are you going to do at the end of the three years? Like, that doesn't.

[B]

Crypto is nothing. Right. There's plenty of ICOs that survive through three years and no one's ever heard of them. Right. Like, they, they were just like pennies, you know, and then eventually they died anyway. Because you have to have attention in crypto. If you don't have attention, it's not going to work. I was just going to say, I remember that picture of you with all the pudgy toys in Walmart. And I was like, this guy is like insane. How did this happen? Like, my mind was blown. Like, I saw that tweet and like my head exploded. I was like, how did he get an NFT into Walmart? Like, what is happening right now? So, yeah, yeah, definitely worked and I.

[D]

Shouldn'T have done that, but I put it all on the line.

[B]

Right.

[D]

I basically said, I was like. Because theoretically, just one last point to this before we switch topics is like, I was way too small to be in Walmart at that.

[B]

Yeah, yeah. This is before anywhere.

[D]

Yeah. So the risk that I was taking and we underwrote it as such, which is we either are not going to do this and miss our biggest swing at bat, or we're going to do this and risk blowing up our relationship and completely flopping in mass market retail because there's no. Almost no way we can sell a million toys. Thankfully we did. We've been in there for now two and a half years, but, you know, had to put it all on the line. If not, I would have been cooked and a lot of things probably wouldn't have happened the way that they did. So, yeah, put it all in line.

[B]

That's the. So let's move on. Next topic. People. People leaving hype. There's been a bit of hype f around the white whale. Who, you know, one of one of probably like 10 large anon traders which, you know, it's a really interesting dynamic with Hyper liquid because all of the trades are on chain. You have these people like James Wynne The White whale. There's you know, a few of them that trade. They're almost like celebrity traders. Right. People can watch their trades, they know their accounts, they can see their P and L and the white whale. Post 1010, the huge liquidation crisis that happened now like six weeks ago, which it feels like yesterday, but there was this liquidation cascade that was triggered by Binance and a bunch of different, different kind of circumstances that obviously cascaded through all of the exchanges. But in particular Hyperliquid, there were a lot of people who were liquidated. There was an issue with auto deleveraging where Hyperliquid was, was designed. And, and I think Jeff, the founder of Hyperliquid, you know, came out and, and talked about this and said we are designing hyperliquid to be as resilient as possible. Right. This is an interesting question about trade offs in, in a trading venue. Right. Okay. You're, you've got you know, this tension between protecting the venue itself and protecting traders. Right. And you have, and you know, it's a little bit zero sum. The more you protect the venue the, you know, the harder it is potentially for traders. And so they made a decision, Hyper Liquid made a decision to protect the venue, to protect the exchange at the expense of traders. And you know, they said this is just very clearly the, the design structure that we've chosen for Hyper Liquid. We think it'll make the exchange more resilient, we think it'll attract more liquidity, etc. But we have some of these celebrity traders who are saying we don't love this and, and we're going to leave and, and go and you know, trade elsewhere. Find places that are more trader friendly let's call it, which is, which is you know, again there's been a few Hyper Liquid incidents I suppose. Right. You know, that, that you know, come out and, and created a little bit of fud and you know, but this is definitely the most recent and one of the bigger ones I think, you know, traders leaving the exchange.

[C]

Yeah, I think his, I don't know his point. I think it's really interesting that he specifically is talking about like he has this emotional and like real connection to like real people who are, he's either directly talking to or like he's aware or like copy trading him and like they all got wiped out. And that's, I think the, the thing that's like kind of underlying this entire point is like when I read his post, Elise, like it's not the biggest part of the post but I think this Is like his story. And like, why, like the, the shift in his mind, he goes, so this thing happened 1010 happened. Like the liquidations happen, everyone gets wrecked, et cetera, et cetera. He's like, but across the industry, everyone's doing victory laps, there's zero bad debt, the liquidations process flawlessly, the protocol didn't die, etc. Etc. And I think he's sitting here like, wait, but like, there's like dead bodies everywhere. Pros. What the hell? And to me, like, I don't know, it resonates with me because I have lived that experience so often where what my personal observations and relationships and like the people are struggling is in direct conflict with what's happening. Like what the ecosystem's narrative is. Because as long as the protocol, as long as the tech was good and operating logically and rationally and by the.

[B]

Rules or whatever, I mean, Maker, Maker, this was, you know, like there, there was a long period. So MakerDAO, OG protocol, you know, SK now there, this is, you know, leverage, right? Let's like, you know, Hyper Liquid is a leverage trading venue. Maker was the leverage trading venue of the, you know, 2018, 2019 era. And it was all on chain and so you could see all of the positions and there used to be these graphs that people would post of, you know, at E$600 there is going to be, you know, however many million hundreds of millions of dollars of liquidations at 550, there's going to be, you know, $1 billion of liquidations at 350, etc. And you could look at this graph and see the progression. But to your point, Tay, like, that was us. Like, those were our positions that were about to be liquidated. And you know, oftentimes people in the maker ecosystem would come out and be like, yep, job done. Liquidated. All of those plebs, you know, like, yes.

[C]

Yeah, it was like they look at it, ate through that liquidation wall like it was nothing. And I'm like, bro, that's someone's livelihood. What the hell is happening here?

[B]

I know. Yeah. So yeah, there is. I mean it's. It's kind of to that same point that you made about the ICOs, right? It's the like mechanism Designer mathematician meets degens. And it's like, wait, someone, you know, was recursively levering up through Maker, you know, borrowing and you know, levering up on ETH and just got wrecked and probably lost millions of dollars. Maybe lost all of their ethics.

[C]

Right?

[D]

So, yeah, I think my interpretation of it Was like, he loves Hyper Liquid. We all love Hyper Liquid. It's a great platform. But after 10:10, he spoke to Jeff, and Jeff was not taking the same type of, you know, didn't take the problem, right? The problem that, you know, everyone can get, you know, the systemic design of the exchange, which created or contributed to the problem. Obviously, I don't think Hyper Liquid was the problem. I think we kind of know what the problem was at this point, but, like, he wants to go and trade on venues where people want to address the systemic problem. Now, I might take the other. I might take the side of this where I actually might fundamentally agree. I mean, at what point. And Arthur from Deviance has had a lot of takes here, and I don't really know what's wrong with these takes. And I would actually love if maybe you guys could steal me on the other side of it, because I know he got some pushback on this, But I don't fundamentally understand how you could get some pushback on this. I mean, what you're basically asking for is claiming that there's systemic flaws in the system and somehow, some way, we have to address it, and we don't need to go and innovate and prophesize on how to do it. There's protocols like Drift and others that are not completely calling your liquidation if something wicks for a couple minutes, right? There's some sort of, you know, it doesn't. It doesn't feel like a circuit breaker, right, like, where the whole thing halts, but there is something in place and to sit back and to see 1010 happen and for. And Kane, you would know, because I would. I know. And you probably know more than me just because of how probably more well connected you are than I am. I mean, everyone got smoked. I mean, when I'm. This is the first time in crypto that I have multiple people message me saying, it's over for me. Right? Can I have money? Can you loan me money? People asking me for loans. I mean, one of our biggest holders, I basically, I gave him money for all of his penguins, and he said, I will. He was like, no matter. He's like, if penguins could go down 9%, I'm give you this money back whenever I get this money. And if it appreciates, I'll give you the appreciation for helping me out. I mean, in droves, they were coming to me. And it wasn't like that we deserved it. It wasn't like, oh, like, yeah, we really fucked up this time. Right, Right. Like, it actually was a Systemic breaking of the system. Right. Like something internally broke, which, you know, in one venue, that broke things in other venues. And why does everyone have to suffer for what probably ended up being one or two, you know, two or three people, you know, making a mistake, clicking some buttons or doing some rounding errors on some math. Right. Like that should not cost detail tens of billions of dollars. I don't.

[B]

Point here, though, right. Is like, let's look at price action today. So, you know, bitcoin, wicked down to, you know, whatever. It was like 104 on Binance or something like that. And. And we're at 89 today. And this is unfortunately fundamentally the problem. There were a bunch of people who were long Bitcoin at 20K and the. That price was wrong. The market has corrected. Price of bitcoin is now 90k. And you were, you know, 20x levered up speculating that bitcoin would go up. Right. And so, you know, like, we. We sit back a month later, six weeks later, and the market was right. Those traders were wrong and they would have been liquidated at some point anyway. Now that's. That's a maybe a harsh thing.

[D]

Let me, Let me steal man, this, because I can just speak to it anecdotally. I had a hyper. I had my hyperloop account. I got liquidated on everything. And the stop my liquidation prices were 95 off of the spot price.

[B]

Yeah.

[D]

So I was like, I'm never gonna get liquidated. And if it gets liquidated, I'm gonna fill it. Right. And I'm. Or if it gets close to it, I'm gonna, you know, re up the wall and you know, it's cross. I'm gonna make sure I don't get liquidated. I got liquidated on things that would have never gotten liquidated in any efficient or correct market. Right. So the bitcoin analogy, okay, it didn't really get affected as much, but basically, on anything that wasn't bitcoin, soul, ethereum or anything in the top five or.

[B]

Top six, Adam went to zero. Like, we've never literally zero. Literally zero.

[C]

Never literally zero.

[D]

How is that right?

[C]

And it was all so fast, right? Like the wicks were true wicks. It was down and then it was right back up. So even if it continued down over time, you still have a chance.

[B]

Yeah.

[D]

So like, again, how is that an exchange? How if you're an exchange, how is that not your biggest priority to make sure that doesn't happen again, like, what priority is bigger than that, Kane?

[B]

Yeah, I agree. I think it's interesting. We've been reflecting on this at Synthetix now, right. For a while, you know, OG synthetics, the old protocol, it was a leverage. You had leveraged synthetic tokens. Um, but without liquidations. And the reason why we had had no liquidations is because we had this view that, you know, the market will almost be induced into liquidating people if you have liquidations. Right. So, so, you know, there is, there is a sense, especially on Hyper Liquid, that if you can see that liquidating someone is going to be profitable and someone's stop is close to, you know, you can get hunted right now there's arguments. Well, no, because there's an oracle and it uses external prices, etc. But, but you know, there is something to be said for very efficient, aggressive liquidations. Induce more liquidations, you know, because people make money from liquid. I mean, this is. Go back to the maker example, you know, back like the, the maker Oracle debacle that happened in, I think I want to say 2019 or something like this. I'm forgetting my lore a little bit. But there were people who were effectively running those liquidations, running liquidation bots that made like tens of thousands of eth on this day when there was a liquidation cascade that happened on Maker. The price dislocated, etc. Same thing, right? Like someone's on the other side of this making money. And so you have to make a decision between whether or not you, you know, want your venue to be perfectly efficient or whether you're willing to take some risk to, you know, tamp down the volatility a little bit when it comes to liquidations. And it seems like Hyper Liquid is saying like, too bad, so sad we're not doing that. And so, you know, there's definitely room for other people to come in and say, well, you know, what if we had liquidation insurance? What if we had WIC insurance? What if we had some things that, you know, and, and there's a cost to these things, of course. Right. But if you knew, okay, if Adam goes to zero for a one minute candle, I'm not going to get liquidated because that wasn't the real price. Like this is what it comes down to, I think, you know, Luca, to. To sort of maybe distill your point. The price was wrong and that's not fair that you got liquidated at the wrong price. Like that's ultimately what it comes down to. Right? I got liquidated at 5 cents and that's not the price. Like if you look, you know, it's One thing to say, Bitcoin. Okay, bitcoin, you know, 104 or 90, like, what is the real price? But, like, some of these alts, the price was wrong and I got liquidated at the wrong price. And that just doesn't feel fair. And, you know, everyone's willing to kind of take. I think everyone's willing to take the risk when they're in a leveraged trading venue, but, like, the rules should be fair, and if the price is wrong, you know, then. Then we've got a problem. Right. And I think that that's ultimately what everyone feels right now is, like, the prices were wrong, I got liquidated at the wrong price. Doesn't feel good.

[C]

Yeah. And I think also, like, I think probably from Jeff's perspective and the team's perspective, they are probably more focused on the protocol and the design and the credibility and the trustworthiness and, like, all these more technical things, because there's a lot of people betting that it won't, you know, like, they'll just end up with, like, a massive amount of bad debt and fail. Right. Like, that's what people are. Right. So in their view, you steal, man.

[D]

Jeff's point. Cane. I'm sorry, what is their take? Like, actually.

[B]

So here's.

[C]

Well, hold on. I don't think that. I don't think that Jeff is saying. Or hyper liquid. I don't think that they're saying, like, users should be just, like, liquidated en masse at the wrong price. I think that they just don't have that on their radar as much as they have everything else on their radar. Because since the day that they started building, it's been like, hyperliquid is going to fail for X, Y, Z reasons. And those failures are all protocol failures. They're all technical failures. They're all market failures in that sense.

[B]

Article failures like, you know, funding rate fail. Like, all of these design flaws that people have been pointing out. And so their. Their view, I think, is that we could not have scaled this venue if we didn't make the design choices we did, which are aggressively skewed towards protecting the protocol over its users. And, you know, it's hard to run that counterfactual. Right? But, like, it has worked, so you kind of have to go, okay, fine. But this is the problem with crypto. Things work until they don't. If you. If you start ripping the faces off your users and they all feel, you know, aggrieved and that they were treated unfairly, they might leave. And if your users leave Then you don't have an exchange. And so there is a very, you know, there's a tension here. I do, I do understand Jeff's point because what you want to avoid if you're running a venue is the entire. It would be far worse for them. And, and I don't think there's a perfect trade off, right? But he is saying if there's a 5% chance that the exchange blows up, right, and you know, HLP gets bankrupted and you know, the entire venue collapses, or a 5% chance that, that a bunch of my best customers have their brains blown out. He's like, yeah, sorry about your brains. Like that's, that's the choice that's being made here, right?

[D]

Like, yeah, that clarity, Tae.

[C]

And yeah, well, and, and I think this is what is going to be really interesting, right, is like, okay, so now 1010 has happened. A bunch of people like lost big time moving forward. There is some amount of competition in this space, right? Hyper Liquid, they sprinted and blew this market open, right? And so now you have all these other, you know, upstarts that are, that are appearing. Some of those are going to be good enough on the technicals and some of those are not going to be good enough, but they're going to be innovative and probably at least one of them is going to do both right where they actually are, you know, structurally sound enough, but also have something that differentiates them. Now if that differentiating factor around say like users and liquidations and, and those sorts of things, if that's good enough, they will then eventually be Hyper Liquid, right? Hyperliquid will just hemorrhage users to them some point. Then hyperliquid, likely depending on the exact mechanism or whatever, likely, you know, starts to prioritize that to keep their users. And that's why like, in my opinion, like, up until this point, they're Hyper Liquid. Does. I mean, even today I have a hard time saying that Hyper Liquid has like a competitor in the same, in the same sense. Like, sure, you have Binance and that's like their competitor, but you know, there's no reason for them to drop everything and pivot to users right now from like a economic logical perspective, in my view, they should, right? Because it's the right thing to do. Because they can, because they can solve this problem. There's a lot of ways that they can go about it and they're in a good position to do so. But I do understand why they might not.

[B]

But I think one thing we've seen right in the space and we saw this in defi is someone comes up with a design that they think is sound, right? And they've optimized for all of the right things and you know, maker even, right like leveraged eth, you know, borrowing against leverage eth, et cetera. And then someone else turns up, forks it and goes what if we just tweak these parameters a little bit and make it much better and 20 minutes later it's smoking crazy. And so like there will be an exchange, I promise you that turns up and says we are so much better for our users for these crazy reasons and we haven't really thought it through. And, and you know, I saw one where they're like we don't have liquidations. I read the first like the, the, the kind of excerpt and I was like this is insane. This is going to blow up. This exchange will last for like what's the.

[C]

What. So what, they just like haircut everyone. Like what is the mechanism?

[B]

They charge higher funding rates. Like it's. And, and I had someone send it to me. They're like oh, these guys have no liquidations. And I'm like, you can't just have no liquidation.

[C]

Yeah, I mean that's the, the, the knee jerk reaction.

[B]

Yeah, we'll just remove them whenever people.

[C]

Are like oh, Drift has the whole.

[B]

I don't.

[C]

Do you know Kane, how. What's Drift's mechanism?

[B]

No, I don't, I don't know enough to speak.

[D]

It's basically like, like a slow twap out if you hit your liquidation price over like a fixed period of time so you're not like completely obliterated if for some reason you get wicked down.

[B]

You maybe lose a little bit position and, and this. Yeah, like I think the, the Oracle, you know, ultimately unfortunately like everything in defi, it all comes back to Oracles. And so the Oracle design becomes really, really critical around like how where do Oracle prices come from? You know, and again maker and compound and a, like all of the Oracle design, your chain link, pith, etc like this has all been Oracle design of like how do we know what the price is? And if you tweak the way the Oracle price moves then you get different results. So you know, but that's, that's a very different story to say we have liquidations. We just have a slightly different design. An exchange showing up and saying we have. Because the problem is you say we have no liquidations and everyone goes oh amazing, let me go and trade over there. And then it's like oh actually they're downstream consequences. Chances of not having liquidations when everyone loses all their money.

[C]

Okay, hold on. I found the drift. I found the drift. This is actually interesting. Okay, so they trigger liquidations based on Oracle Price, not Mark Price. That's number one. Number two, they block liquidations based on 50% divergence between Oracle and the Oracle 5 Minute Swap. And then three is they perform partial liquidations over an extended period of time, for example, 10 seconds. And then obviously they have insurance and stuff to cover any losses from like bad debt, et cetera, et cetera. So it seems like maybe they've just prioritized how the liquidations happen by taking the edge off. Basically.

[B]

Yeah, yeah, soft liquidations. But the challenge here, right, that the, the trade off is. And you know, Jeff and the hyper liquid team are not idiots, right? Like they have sharp liquidations because they are worried about blow up risk. Right? Like, and so, you know, you look at a system like that where the liquidations are soft and you go, okay, what are the trade offs? What happens if we have soft liquidations? Well, there's a couple of things that can happen. A huge price at dislocation. That's real. Like Bitcoin decides that it's worth 40k now while we're on this call, right? And soft liquidations, the exchange blows up. That's just what happens if you have soft liquidations and the price goes down to 40k in the space of a 5 minute candle. And you were slowly liquidating people based on a T wop and you had a, you know, some kind of circuit breaker or whatever. Unfortunately, you know, circuit breakers only work if you control all of the trading in a single venue. Like the NASDAQ can say, hey, sorry guys, we're not allowing Tesla to trade for 15 minutes. So you guys can cool off a little bit. But if there are 50 different places where Tesla is trading and 49 of them are like, Tesla's worth $2 and one of them's like, no, no, no, bro, like that's the wrong price. Like stop trading for a minute so you guys can figure out what the real price is. The, the 50th one is going to have a bad time when, when it switches back on and people are going to be mad. So, all right, let's, let's move on though, because I'm sure we'll be talking about Hyper liquid and per dexes every week for a while. Multicoin decided to go long Ina and this is a bit of a like, first of all, I'm a big Enable. So I'll just say that at the outset, the reason why this story was kind of surprising to me. Kyle came out and said, hey, we've been buying Ina for the last some period of time, right? So first of all, they've been buying in a while. The price has been going down. And I always love when multicoin loses money. So that's, that's. Even though I've also been losing money, I. I couldn't help but be like, oh, okay, that I like, that's the.

[D]

Beef with Multi Coin.

[B]

So. So maybe I'll get to the second part. The other reason why the story was interesting to me is multicoin in 2018. So they turned up to Defi and they were like, okay, you know, they were big eth bulls. And then they switched off. They became not eth bulls. They went and did Solana and Eos and a bunch of other things, right? And they turned up in, in like late 2018 and they were like, okay, defi cool. It seems like you guys have survived. Congratulations. Like, you know, you've got 10 real projects here. Instead of saying, why don't we turn up and invest in all those projects and like, help to support them or whatever, they literally were like, who is building the exact same thing that we can fund to attack all of these projects? And we were just like, what the hell is wrong with you guys? Like that. Like, it was just. And so it's quite funny to me that multicoin chose to invest in INA over trying to fund in a killer because that was their M.O. for a really long time. So I don't know if they've like lost their minds or pivoted or whatever. But, you know, as, as a VC funding the blank, you know, like, as a VC funding a Pengu killer. And I'm sure, you know, there's a few out there or whatever that are like, oh, we're going to be better than Pudgy Penguins and Pengu for reasons, right? It's just positive.

[D]

Ev.

[B]

If someone come. If someone turns 10, people turn up and say, well, we're. We're building the next Pudgy Penguins. We're going to do all of this stuff. We're going to be in Walmart too. I'm also, you know, a tall guy who's young and dynamic and like, you know, they literally like, they'll roll them out, right? And there's like 10 of these dudes that are like all like, you know, like they've got like the plush toys and everything and multicoin is like, yeah, we'll fund every one of you guys. Let's go. And they, and they, you know, will invest at like a 20 mil val and they're like, we only need one of these things to pay off. Meanwhile you're like bro, I've been grinding for four years here. Like when you give me some money to actually scale this thing that's already working. Like why are you funding these guys to come in and. And you know, pretend to be me and fork me and take me down and whatever. So that's why it was interesting that multicoin said actually you know what, fine, we'll. We'll invest in something that already exists on market.

[D]

Definitely empathize with your energy. Given that context. Obviously like I'm, you know, I support the multi coin guys just because they've supported us in the past. But that's good context and anecdotally I feel that because I've been very upset in the past just personally having guys that do really support us who haven't gone done exactly that. Right. You know, trying to make a place.

[B]

Yeah. Like someone's like we've got. We've got even bigger plush toys and Our founder is 6, 8. Like what do you think about that? Huh? And it's like wait, what? Like, because it's just encrypted, they'll find.

[D]

Deals that are not even that compelling as the crazier part. That sounds pretty compelling, but they'll fund deals that are like a fraction as compelling as that. I mean if that was the case, maybe I'll let them.

[B]

But they're.

[D]

Yeah, some of these guys are doing way worse.

[B]

Yeah, fair fair, fair. So. So anyway, so I think you know, well done multicoin. I good. I have to give credit where credit's due. Buying. Buying liquid tokens on. On market of something. I think maybe we should just explain what is quickly for. For the audience. So so Athena was. Is a project that actually came out of this is. This is interesting lore. So Arthur Hayes wrote an article in 2023 and was like what we need is a tokenized basis trade. So without going into too much detail, effectively tokenizing basis trade just says when funding rates on perp exchanges. So Arthur Hayes is the founder of Bitmex and so obviously he thinks about funding rates a lot and he was like if we tokenize the bitcoin basis trade you could get yield from people who were effectively paying funding paying to go long bitcoin. So all of these degens that are long Bitcoin 10x20x50x100x long Bitcoin are paying for that and we could tokenize it and get yield from a stable coin. Now that was both genius and retarded because you can't tokenize a basis to trade for bitcoin very easily. And we have this network called Ethereum where it was such an obvious play. And so guy from Athena is like, okay, except for the bitcoin weird voodoo magic stuff where you're going to build some technology there. We can just do this on Ethereum. And so he built Athena and it became this huge project. I think they're like six or $10 billion in stablecoins. Like it's an incredible growth in the Stablecoin tvl and obviously because it's crypto, a bunch of people were like, oh, we can tokenize the basis trade better than you and came out trying to build these yield bearing stable coins. But multicoins double down on the leader which yeah, fairly feels, feels pretty good.

[D]

Yeah, I like it, I like it. I like, I like. Whenever somebody.

[B]

What's your, what's your history with multicoin? Multicoin supported you. What, what's.

[D]

I think they've been friendly. I, I've, I've been. You know, when I first did Pengu, that whole Solana ecosystem really rallied behind me of course. And so Kyle was, you know, I don't, I don't know if they ended up buying but he was supportive and he wanted to invest in early and you know, I told him that it's not this really what it was but you know, anybody that I think pick up the, you know, because we're building an Ethereum land for so long, like no one picked up the phone. So when I hopped in Solana land, right, And I started and then like literally the top ten figureheads of Solana all got on the phone with me and gave me advice. I, I respected it and I, and I, and I appreciated it to say.

[B]

The least, by the way. Yeah.

[C]

I will say this. Kyle is like, I will rage against him. We have. You can go search Twitter. There's like years of beef, but I have like endless respect because like when he goes in on someone and he goes in on a lot of people, he is actually a viciously great supporter. And so like if he's on your team, like, and I do, I have respect for that. Like he, and he's not going to back down. So as much. As much beef as we have on the edges, like fundamentally, like, I don't.

[B]

Know, I can't Yeah, I can't like.

[C]

Deeply hate him or anything.

[B]

Yeah, same energy. I. You know, it's funny, I sat there with him at ethereal conference in 2018 and he was literally the only guy bidding ETH then. Yeah, he like, he had a bunch of cash and he was bidding eth and I was like, wow. Actually, you know, so I have a weird love hate relationship with, with Kyle. Like he does some stuff where I'm like, this guy's amazing. And then he does stuff where I'm just like, what are you doing?

[C]

How.

[D]

How does Athena blow up? Right? Like, what is the black swan? I mean, you'd think 1010 would have really put. Pushed, you know, pushed the boundaries on that out. I actually put a lot of size. I never. I. Because the Luna ptsd. But actually like early earlier this month, I put a lot of money in Athena for the first time because I was like, if they were going to blow up, they were going to blow up on 10 10. What is the black swan scenario for Cain? Just so I can underwrite my risk. Yeah.

[B]

So I think the. Well, the interesting thing is it was actually the USD peg that a lot of people kind of point to as one of the factors on Binance, where again, Oracle, the Oracle price versus what the actual price was, et cetera. And it always comes down to Oracles the black swan risk. I think that the people talk about is that it will be hard for Athena in a volatile environment to unwind all of the positions that they have that are backing the stablecoin. Right. So they're delta neutral, which means they're not exposed directionally to the price movement of Eth, but they do have these constructed positions where they're long eth and short eth and that's how they get neutral. It's not like they're just sitting in dollars in a. In a vault somewhere. Right. That's where the yield comes from though. The, the difference in cost of holding ETH versus shorting ETH is where the money comes from. And so they need to unwind those positions. So even though in theory all the money's there. Right. I think 1010 was interesting because it exposed something that I would have said people were under appreciating in terms of risk. Like what happens if there is some huge ADL event. Right. So if. And again, auto deleveraging is basically, we don't have enough money to pay the winners on the exchange. So you know, you had a winning position and Instead of getting 100% of your win, you're only going to get 80% of your win. Win. Now the risk for Athena there is they have a position that if they don't get paid 100% of it, all of a sudden the stable coin is not backed. Right. They have to get paid 100% of it. And so this is another place where some FUD came out where it. I think there were rumors, I don't know if it was actually confirmed that Athena had a deal because they're not leveraged, they're 1x leverage. So this is, this is a, you know, position that they have that is not, you know, on margin or whatever. They're not borrowing. So they have a deal where they can't be auto deleveraged is, is the rumor. I don't know if it was confirmed, which means they didn't lose money. But in theory, if something really, really bad happened, they could be, you know, they could be in a position where their, their delta neutral position suddenly becomes directional. And this is what happened to a lot of the market makers and why they lost money and why you're seeing market makers complaining about 1010 so much even today, or liquid funds, like anyone who's still griping on the timeline about 1010 lost a lot of money is basically the theory. Right. And so I don't know what the, I don't know what they expect to come out of the griping. I think they're just, they're just griping on the timeline. But if you had a position where, let's say you were long bitcoin on Binance and short bitcoin coin on Bybit, 1010 was a bad day for you because in theory you were, you know, farming the funding rate or you're trying to, you know, some arbitrage play or whatever. But one of those venues kind of blew you up and so your position ended up being directional, which is not what you want. If you're, if you're a Delta Nu, if you're hedge, if you're trying to hedge the price exposure and all of a sudden you're exposed to price exposure and all of a sudden the prices are moving wildly, it's going to be a bad day for you.

[C]

Yeah. And I think Athena generally like super generally, the black swan is like a combination of like late. I think it's predicated like you have the bear market and so the funding rates are negative or whatever for any amount of time. And then you have something happen where you have a gap that's created or obviously like there's counterparty risk theoretically, although they've mitigated a huge amount of that. Like, it's still a thing. So then you have like, yeah, this, this triggering event, let's call it, that's, you know, something blows up somewhere and then due to probably like the more long term market conditions, as people are trying to pull out, as they're trying to unwind the positions, as they're trying to get, you know, back into sane territory, one, it just takes a minute and they can't. And to the direction of the market is like further impacting them. Right. Because like when you're unwinding positions, you're. The money is moving around, which means that you're going to have an impact on the market, you know, and if you're in that position where your own actions. Right. This is like Tara, right? They're like, unwind as fast as we can, but every time you unwind, you're making the situation worse.

[A]

Yeah, Right.

[C]

And so I think that's generally, I guess like the, the biggest fear. Again, they have taken a lot of steps, I think they've taken a lot of steps to try to mitigate this.

[B]

Like they have, they have. I mean, it's the same thing as like Lido, right. You know, wrapped staked eth. Wrap. Staked eth is a tokenized version of eth that gets yield from being staked in proof of stake. Right. The problem is to unwind a staked eth position. There's a cooldown period, you know, so you're going to be sitting in the withdrawal queue. And sometimes the withdrawal queue to get out of staking is short. Sometimes it's long. You can imagine it might get much longer. If all of a sudden people really needed that ETH that was in the staking pools because they had a position long bitcoin that was getting wrecked that they're trying to like cover the margin for for. Right. And so in a market that's dislocating, you can get these weird duration risks. Basically like, I need my money 10 seconds ago and you're telling me it's going to be 30 days. And in that 30 days, bad things will happen. And so then at that point I'm like, I don't care about your 30 days. I'm willing to sell at a 20, 30, 50, 99 discount because I need every single penny that I can get to go and defend a position over here, here. And so anytime there's any duration risk where it's like, hey Luca, I'm going to give you, you know, a million bucks for a month. And then 20 minutes later I'm like, actually I need it. And you're like, sorry, bro, like you said I could have it for a month. And I'm like, no, no, no, like re like how much can you give me? And you're like zero. And I'm like dead like that. That's duration risk. And I'm like begging you. I'm like, just give me five bucks. And you're like, sorry, I can't do that. It yeah, so.

[C]

Or you're like, I'll give you $1.

[D]

In I'll give you $1.

[B]

Can you make it $2, please? So that's it for this episode of Uneasy Money. Thanks for tuning in. If you like the episode, follow us on the Unchained feed on X YouTube or wherever you get your podcasts. We'll see you next week.

[C]

Bye, guys.

[A]

Sa.