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Dan Smith

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2022-10-28
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2022-10-28
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  1. “Yeah, so you can find me on Twitter at swmartin19. Sam Martin is my full name. And for the sign up link for the newsletter, we always put in really good commentary on kind of everything you need to know on crypto and then governance related alpha or like maybe some trade ideas or free NFT mints or anything along those lines. So it's a nice place to get all the stuff you need to know on the day in like five to ten minutes. And we can include a link for that in the show notes as well.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  2. “Yeah, absolutely. I'm a smy guy on Twitter, Dan Smith. It shouldn't be too hard to find. There's only like what, one Dan Smith in the world? Thanks, mom and dad. Still giving them heck for that one. But yeah, Blockworks Research is at BlockworksRes on Twitter and BlockworksResearch.com. Yeah, lots of great insights. We have a ton of great free reports out there as well. So even if you're not a subscriber, you can still kind of get a flavor for what it exactly is we write about, what kind of like where our heads at, where our heads are at, kind of like what we're focused on. And every time we drop a report, whether or not it is free or behind the paywall. We do put out a pretty solid Twitter thread, kind of just like highlighting important things in that report. So definitely be sure to check out the Block Research Twitter account.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  3. “I'm talking longer term, like three to six months or even the next year. Obviously, we're in the middle of what I would consider a bear market rally, which is kind of weak at this point. S&P 500 is like trying to get to like 3,800, which two months ago we'd consider that low, but now we consider that high. Stocks I'm having a little harder time getting there because I think we are headed for a recession that is quite It's not going to be good. I think we're headed for a recession. And I think like, you know, whether we're in it already or we will, you know, the dating committee will actually say, oh, it started on November 3rd. It doesn't really matter to me, but yeah, economic growth is slowing, not a great time to own stocks. That's just been the playbook. And like a lot of rules you could throw out the window this year, but I think that's still the case. So we'll see unless you have another question for me, I think we should end it there.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  4. “I think bonds can rally, yes, I think the two-year treasury yield, which let's just say was at a peak of like 4.5, 4.6%, that was pricing in a terminal rate, like the peak of the mountain, the highest the Fed gets in April of 2023 to be 5%, if it's, quote, only 4.5%, the two-year treasury yield can stop can actually fall and it's been falling over the past two days. If I'm right about no pivot, then it can't fall that much, but it can definitely like rally a little bit. And if you use leverage for euro dollar future, it's something that can be a profitable trade. Yeah, I think 10 year can rally bonds go up, yields goes down. Same with 30 year stocks I'm having a little bit of a harder time seeing that picture.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  5. “I'm not focused on the P word. I'm focused on the I word intervention. And yeah, I think that could definitely happen. As early as it could happen in 2022, do I think that's my base case? No, but yeah.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  6. “Limited amount of purchases like every month. Whereas yield curve control is targeting a specific level on the yield. And, you know, if the yield stays there by itself, you don't have to buy anything or you can even sell. But quantitative vegan is like a certain amount every month. So yeah, that's my base case. No QE, no Fed pivot, no interest rate cuts, but a targeted intervention to fix the bond market. Sure. I mean, we're recording this on Wednesday, October 26th. About a week ago, like maybe the 19th, 18th, 20th somewhere on there, the long end of the treasury market was looking very weak. I mean, TLT went from like, which is a ETF that owns like long-duration treasury bonds, went from like $102 to $93 in like a few days. And that's not something that should happen for like the safest asset in the world. Yes, it has tons of interest rate risk, but yeah, things are melting down. People are constantly talking about how liquidity is so poor. So I think.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  7. “Mortgage backed securities that sort of meet that cap. But yeah, will we have a Bank of England type intervention? Yes. Is that my base case? I don't know. It's kind of like 50-50. I just spoke with Lynalden and she's pretty convinced. Yield curve control where the Federal Reserve says, oh, actually the 10-year treasury yield can't go above 4%. And if it does, if someone's foolish enough to short the 10-year treasury bond, we're going to buy it back from them and impose on them a loss. That's what the Bank of Japan is doing with the Japanese government bond market at 25 basis points. No, I think yield curve control is a more extreme measure than quantitative easing, I think. I mean, quantitative easing is a”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  8. “He's happy, but are they going to actually be increasing their balance sheet again? The Bernanke doctrine is that no, that rates like QE should be an extraordinary measure where interest rates should be at zero and then, oh, we're at zero, but there's still a depression. Like then we do QE. So it's considered like forbidden kind of by central banks to do quantitative easing when rates are higher than zero. And we're extremely higher than zero and we're going to get even more higher than zero. So yeah, my base case is no interest rate pivot until second half of 2023 at the very earliest. Definitely no quantitative easing that is called quantitative easing by the Federal increase of the Fed's balance sheet. I don't think they're going to sell treasuries or sell mortgage-backed securities. I just, I think they're going to let it roll off. And that will be a maximum of $95 billion a month, but it effectively will be less because there are fewer more.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  9. “Where they said, Look, we're going to lend essentially an unlimited amount of money. Like, if the market needed 600 billion, they'd make it $700 billion. It's like as much as much money as you need. And that's not giving people money. That's just lending against very sound collateral. So people called that the QE that wasn't the QE. They called it like not QE. So do I think there will be another not QE? Yeah, definitely. And I think that if there is a Fed I don't think that's a P word though. Like I think a true I think that many people will declare victory and say that an intervention will be a P word, but I don't think it will be a P word. I think a P word will have to be truly cutting cutting rates. And I also don't think that it will do quantitative easing. It will do not quantitative easing, which is by sort of, we're going to make something happen. Look, Sam, you're the bond market. I'm the Fed. We're going to make something happen. Okay, we're going to make sure we have a deal. We're going to make sure everything goes home.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  10. “Fantastic question as defined by if a pivot means cutting rates, I think no until like the second half of 2023 at the earliest. But if we're talking about targeted interventions where the Federal Reserve says, oh, yeah, this 20-year treasury note is looking pretty weak. We're going to, over the next week, we are going to be doing $5 billion a day or maybe $10 billion a day. Just do a little liquidity support. It's just a facility. We're not pivoting, Sam. It's just a facility, you know, and that's kind of what they did in 2019 where they stopped doing quantitative easing, quantitative, sorry, yeah, they were actually reducing their balance sheet. I think they stopped reducing the balance sheet, but they were not doing quantitative easing in 2019, but they did a little intervention where, you know, repo rates spiked to very high, and they had a $500 billion standing repo.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  11. “Right. And like the lightning payment is like a great use case. Micropayments make sense. But then to your point, why would I want to spend this money? And too, like. Ethereum gives me the ability to use stablecoins as payment, right? Like I can have one USDC or maybe like five USDC and buy a coffee. And that's like a more realistic application than like spending 0.001 Bitcoin on a coffee. Like that mental translation makes, you know, that's a hard grasp. Yeah, I just think stablecoins are very likely to be the most prominent use case of blockchains and like in terms of like a daily life transactions. And yeah, that lives on Ethereum.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  12. “That makes sense, and I'm saying that makes sense. I'm not agreeing or disagreeing. But yeah, I mean, the global economy really took off once it left the gold standard. Like gold is great. Don't get me wrong. I have no beef with gold and, you know, Bitcoin is great too. It's digital gold. But like, yeah, when you go to the Starbucks, it's hard to pay in gold. And like Bitcoin is the hardest money, which I think a reasonable case can be made that it is. You don't want to spend hard money. Gresham people always talk about Gresham's law, but yeah, that means that the hardest money will never be spent. And it's like, we'll just live in this like deflationary world where no one spends any money. If Bitcoin was only money, like no one would spend it because it's too valuable to spend, you know, so we're all become like King Tut where we just like bury ourselves with all this gold.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  13. “It's like it's simplicity, right? Like it's just this hard asset with 21 million gold-like properties. But what's the market cap of gold? It's around like 10 trillion, right? Personally, for me, like Ethereum is trying to build a global digital economy in a world, in a day and age where like everybody's becoming increasingly ingrained with technology and moving online is like a pretty easy concept for most people to grasp. Like, you know, you walk down, you go to like lunch at a restaurant and you see like a toddler just like knowing how to use an iPad. You're like, these kids are growing up with technology. So like the shift to online for that age class is that's like a no-brainer. And I think that's like, you know, pretty commonly held belief. So like the shift to like an online digital economy, personally, that is more valuable than potentially we're going to be a massive asset class. Digital economies will have massive scale.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  14. “We're not covering aptos officially, but like, this is something we're still paying attention to. You know, these things do deserve to be explored, even if my personal views or Sam's personal views don't necessarily think that these are going to be the winners. You have to give a reason why, right? So experimenting on these chains, seeing what's going on is definitely important to do. And so on the Bitcoin question, though, I would probably take the opposite view. This is like in our analyst Slack channel, this argument goes down at least once a week, I think. But yeah, I think like the flippanting where the market cap of Ethereum increases to over the size of Bitcoin, I think that's inevitable, right? Like Bitcoin wants to be like this hard money, which first of all, I'm not bearish or bullish on Bitcoin. I'm pretty neutral on the asset. I think what it does is great. I think it's most important quality is, like Sam said.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  15. “So I'll kind of work backwards to the questions. So, first, on the first question, so we really only focus on like DeFi assets and layer ones. You know, we're passionate that DeFi will be likely to be the first application that's heavily used for the average user. I think the other application could potentially be gaming, but that's really yet to be seen in really a whole nother conversation. But yeah, so we focus mostly on DeFi and a lot of that is currently happening on Ethereum. That's just the largest ecosystem where this is going down. Cosmos is kind of becoming this growing ecosystem that we are paying close attention to as well. Solana is another covered asset that we stay on top of. You know, we're watching what's going on in Avalanche as well. It's really just like my personal view that Cosmos and Ethereum are going to be like the winners here, but we do cover what's going on in the other layer ones, like who's building what, like Aptos recently just launched.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  16. “So, yeah, I think that Bitcoin's value is that it moves slowly. And then Ethereum is more far out on the risk spectrum and like, hey, like we're trying to develop a world computer with decentralized ecosystems and finance and gaming and the metaverse. I just think that, yeah, Bitcoin's better off trying to maybe work on the lightning network. And doing like micropayments across that as the capacity grows and more channels open up than they are trying to compete with Ethereum on a space that they're clearly the winner on right now.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  17. “Yeah, tap root in relation to the merge, like it took Bitcoin years to get taproot through. And for the merge also took a long time. But the difference in scale between the accomplishment is pretty large. Like Bitcoin just moves incredibly slow, but that's also one of its main value propositions. It is what it is. It's a finished product. There's only 21 million, like you said.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  18. “Yeah, a bridge is basically just to get from one blockchain to another. So if I want to go from Ethereum to Solana, then I have to use a bridge. And those bridges basically lock assets in the bridge and then they get exploited and people steal all the money in them. And this has happened time and time again, probably $2 billion of bridge exploits in the last year and a half. So I definitely don't like bridges. I think native assets are key in the future. I also just really like the approach that Ethereum is taking as a Bitcoiner. Like I think decentralization is super important at the base layer. And they're prioritizing a slow base layer in exchange for really good security and low hardware requirements to actually help validate the chain. That's critical. And that's why I think Ethereum will end up being the winner. Like there's no reason that you can't have somewhat centralized layer twos or layer threes on top of Ethereum.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  19. “Yeah, for sure. I mean, I just think in my head, it makes the most sense for there to be one secure censorship resistant, like very solid and slower moving base layer that kind of secures everything on top of it. I don't really understand the Cosmos vision with fragmented security and then trying to figure out IBC and hoping that there's no vulnerabilities to be found in there when you swap assets from chain to chain. We see bridge exploits literally all of the time. So I don't want to dabble in any of that.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  20. “Exchange that was built on Ethereum. So DYDX, it's like a perpetuals futures exchange, that actually is leaving the Ethereum blockchain to come be its own application specific blockchain in the Cosmos ecosystem. And the main couple different things they wanted, but the main reason for this was they wanted to maximize the level of decentralization they had. And they felt that using their own validator set on their own chain, that gave them the more flexibility, customization, and decentralization than what Ethereum was offering them. So it's just like a different set of trade-offs if you're a developer, like, where am I going to build my application? But both seem to be really promising because a network of blockchains are all communicating with each other is kind of creating this modular system of blockchains that you can still send assets. You can still, the UX is still pretty friendly, just like it is on Ethereum. But again, it's just like a different.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  21. “So front running is a thing in an on-chain exchanges, right? Like you can see orders in the mempool and if I can see that and I know you're buying this asset, well, cool, I'm going to buy it right before you and then sell it right after you. And now I gave you a worse price for my profit. And so that's something you can mitigate in a decentralized exchange application specific blockchain. And then like a big movement we saw recently was like an OG original”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  22. “Chains that can all speak to each other, whereas the Ethereum world, you have this one vase layer of security, this one base layer chain with different applications built on top of it. So it's like a different approach. And there's like trade-offs to that, right? Like if I'm a developer and I want to build a decentralized exchange, I have to think, okay, do I want to be an application on Ethereum or do I want to be my own specific application specific blockchain that I can like design to be just for my decentralized exchange? And so benefits of being an application specific blockchain are like”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  23. “To be a Cosmos chain just means you're built with the Cosmos SDK. The SDK is like a development kit that's basically just like different modules of code that you could like plug and play together to create a blockchain. And then they all use a proof of stake consensus and this kind of allows them to be on the same wavelength. And then they're all connected through what is called IBC interblockchain communication. So there's this like communication layer where the atom chain and osmosis. So the cosmos of an osmosis to independent blockchains are connected with IBC. So if they want to like send assets to each other, they can do that. If they want to send messages to each other, they can do that. And so it's just like in the Cosmos world, you have like this mesh of.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  24. “So they're each their own siloed, very independent blockchains and then in Cosmos. So there's the Atom chain, there's the Osmosis chain, there's the Thor chain, there's Sift chain, there's like, let's just say there's only three just for simplicity. Sure. So how is that all in the...”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  25. “It's like creates this base layer security, and then applications get populated on top of it. And whereas the Cosmos ecosystem, each app is essentially its own blockchain. So it has its own validator sets, and they can like build the rules of this blockchain to specifically facilitate whatever the purpose is. So like osmosis is an application specific blockchain built in the Cosmos ecosystem. And like its validator set is, it has its own validators and like the rules of this blockchain are built to specifically be a decentralized exchange. So it's essentially where we have like osmosis in the cosmos space. We have like a uniswap in Ethereum. They're both facilitating swaps between different assets. It's just a totally different approach of how to get there.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  26. “So, like the monolithic view is everything runs on one chain. So, like Solana, you know, they've created this new technology. It's like super high throughput. They can run an insane number of transactions. But like it's still a shaky product. Like it goes down frequently. Whereas the Ethereum network does not go down. That's something that's kind of like built for. It's built for liveness. And so I'll let Sam talk about why the Ethereum roadmap makes a ton of sense and like what they're doing right. But I'll kind of hit on Cosmos and what that ecosystem is and like kind of what that shape is. And so Cosmos is essentially a network of application specific blockchains. So each blockchain is built for one purpose. So let's an example of this is so on the Ethereum network you have applications built on top of it because Ethereum is a general purpose blockchain.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  27. “So, the way I see the world right now is there's like two ecosystems that seem to be winning Ethereum and Cosmos. They're both taking slightly different strategies to reach their scalable end states, but they kind of both have the same premise that's like more of this modular view than this monolithic view”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  28. “Yeah, no, I think Sam kind of painted the picture there. Really, I think the big takeaway there is Ethereum isn't that scalable and it's like very and its base layer state when there's a ton of on-chain activity transactions get more expensive. It's a supply and demand for block space. And when they get expensive, it could be like $200 to execute a transaction and maybe you're only selling like a $50 asset, right? So obviously like that's not worth it. And that's like not a feasible end state for Ethereum. So layer twos, so like basically extensions of Ethereum are the way to scale this. And as Sam said, zero knowledge proved. And kind of like finalized is approaching finalization, I should say, is what appears to be the most realistic way to actually”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  29. “Yeah, so there's kind of three angles to try and tackle Ethereum scaling. One is sidechain, and that's Polygon. They're not secured by Ethereum's validator set at all. So it's not nearly as secure as Ethereum. But then you have two really secure options, which are optimistic roll-ups and ZK rollups that you mentioned. Optimistic roll-ups use fraud proofs, so it assumes all the transactions are valid that occur and waits seven days for someone to challenge the validity of those transactions. But then you have ZK rollups, which there is no trust. There's no trust assumptions at all. It's all mathematically based. But the problem is, is the really computationally intensive. That's why what they're building has been so difficult, but it's really important because it's the most secure, it's the best UX, and it's kind of the best tech for long-term scaling. So Ethereum's kind of dedicating their roadmap, sorry, to target.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  30. “So, yeah, ZK is zero knowledge. And by the way, I've always known that it's not like I just looked that up before this podcast. ZK is just for zero knowledge, zero knowledge proofs, which I understand is a important concept in cryptography. I don't understand why. I'd love your help on that. And then also ZK roll up ZKR. So, why is your knowledge so important? What is zero knowledge and why is it so important?”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  31. “Directly from Ethereum onto the ZK ABM. And a lot of projects have announced that they are. I think Ave and Uniswap and a couple others. So it's going to be like a really exciting time. And I know ZK EVMs are very much in their infancy. They're launching on mainnet alpha in two days. But that means that it's only open for developers and not users. Like users won't be able to use this tech for probably six months or so.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  32. “Yeah, yeah. So, this is just to try and give a high level overview of how their ZK EVM works. It's not equivalent at the bytecode level. It's only taking high level source code. So the smart contract language on Ethereum is Solidity. And basically the whole goal of being EVM compatible is to make it so that developers and users, et cetera, can move over to this layer two with very, very little friction because you don't want them to have to learn a whole new developer language or something like that. So what they're doing is they're taking the Solidity code and compiling it into Yule, which they can then run through the LLVM compiler framework and get it into a language that is ZKEVM friendly. It's really hard to generate proofs. It's a problem that like a dozen teams are working on. So this is their way of doing it. And although it won't be 100% compatible, like 99% of things will be able to port directly.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  33. “This is the amount of gas on Ethereum mainnet spent by L2s to settle their transactions. So L2s are secured by Ethereum because they post all the call data or transaction data that occurs in Layer 2 onto Layer 1. And as you can see, it's just steadily been growing and now it accounts for roughly 3% of all gas spent on Ethereum mainnet. And I imagine over the next five to ten years that's going to gradually move towards 70, 80 percent of all settlement costs on Ethereum. And then Jack, if you can go to the third chart.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  34. “Yes, total value locks. So the amount of dollars locked in smart contracts on that chain. So it got up to about $10 billion. And basically what I'm trying to highlight here is just to show the audience that if gas fees do pick back up again, if there is something that's more secure than Polygon, like a ZK EVM, that ZK sync is coming out with, then it might make a lot of sense that they would capture a lot of that migration from Ethereum mainnet to another layer. And yeah, if you go up one picture jack here.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  35. “We're going to do internal. We've got Westy coming on to talk about proof of stake Ethereum and how Mev works in that ecosystem after the merge. So that'll be a really good one that you won't want to miss.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  36. “Yeah, for sure. So it's called Zero X Research, and it's a podcast hosted by analysts kind of for people who want to think like a crypto analyst. And we're going to be bringing on a lot of interesting guests, interesting researchers from all around the space, and just kind of picking their brains and picking apart their research and trying to deliver that kind of insightful stuff to our listeners. Everyone's got like a million things that they have to read. And the list kind of just keeps growing. So we want to kind of give an audible way to digest research so that way you can kind of learn something on your car at home or something like that. So that's what we're looking to do. It launches on November 2nd and it will be available on Apple, Spotify, and YouTube. And I'm sure we can drop some links in the show notes.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  37. “Like, never really gets traction, never takes off. These are still the most high risk assets that are available, right? Like if you're looking at the risk of like a respectable tech stock or even like Ethereum, Ethereum's the riskier option every single time. I think that's just a function of this is still such a niche market that the potential of is so far from realized that we're going to take hits like this when broader markets fall apart.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  38. “Right, because if the token was still, let's say $50, and you can see on that chart on the right, during the heat of the bull market, right, from that December time frame just until the UST Luna blow up in early May, like bribe total bribe rewards paid to these tokens was upwards of $10 million, right? In some cases, closer to $20. But now we're down to that like $3 to $5 million range. So if it was still a $50 token, of course, these yields would be much lower because this calculation does run everything based in dollar terms. And so, you know, when broader DeFi has taken a massive hit, whether or not it should or shouldn't have are the good assets or bad assets pretty much everything's down 90% from the highs. And that's just because there is this massive, like there is the chance that DeFi fails, right? Like crypto.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  39. “Ah, that's a great question. I actually have this chart up, so I'm going to just look at it quickly. So fracks generally is about half of the protocol revenue. Like they are responsible for a good portion of this yield because, again, liquidity is so important to them. And let's see one, two, three. So of the last round, let's see, there's only one other stablecoin. So you're mostly getting this paid in volatile assets. But of course, like you have the ability to sell those into whichever assets you choose.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  40. “Revenue APR. And so this bribe revenue consists generally around 90 plus percent of the total revenue. So CVX is generating both of these. And like the easiest way to think about this is almost like bi-weekly dividends, right? Like every two weeks I'm getting a new check basically from a new deposits from other protocols that are like, hey, you have a valuable asset that can direct liquidity to my pool. Here's some money for it. Like we'll vote on your behalf, basically.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  41. “A stablecoin, then I need liquidity, or else my stable coin will lose its peg. Or let's just say I want like a large, maybe I'm not a stablecoin, right? I just have a token and want other people to be able to trade it. Like a large buyers or traders can't buy my token on chain unless there is a large amount of liquidity. So like on-chain liquidity is vastly important to having like a successful well-traded token. And Convex is saying, hey, if we have a ton of votes and the ability to direct where liquidity flows, so if you have any interest in that, you can rent liquidity or pay our token holders for that liquidity. And that's been a pretty consistent 20 to 40 percent over the past since January of this year. And so you'll see that kind of on the left side, you see vote lock revenue APR and bribe.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  42. “Right. So it's a variety of tokens. And so see that chart on the far right there. It says VLCVX bribe revenue. The VL in there just means. Deposited my CVX tokens into the protocol and I'm getting governance rights and returns. So the bribe revenue there is in a variety of tokens. The dark purple on the bottom of this chart is fracks. So that's a stable coin you're getting paid in. And then the other protocols or the other bars on this chart are other tokens. And so the reason why other protocols are willing to pay CVX holders for their votes is they're saying, hey, you have a ton of these voting rights that will send like liquidity to my pool. So I will pay you to allocate these voting rights in a certain way. And so they're essentially renting liquidity from convex voters. And so I know this is like a crazy concept, but basically like on-chain liquidity is incredibly important. If I'm a protocol and like, let's say I'm watching.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  43. “But sorry, sorry. I feel like when you say so non inflationary would mean that it's paid in curve, the CVX, the curve token, because it's like if you're borrowed from me like Jackcoin, but like I'm paying you 100%, but I'm just I'm just making money from nothing because that's super inflationary. So like yeah, what is it paid into? Because I feel like that's a really important question.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  44. “Yeah, so the beauty of these rewards is they're not just inflationary rewards like a lot of these protocols do. This is very much so real yield. You actually get no inflationary rewards in this 20 to 40 percent. And so this is, yeah, so it's real yield and we'll get to what it's paid to or what it's paid in in a second.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  45. “Is CVX, and when I lock that in the protocol to basically confer, that gives me governance rights over convex. And that token, CVX, has pretty consistently generated between a 20 and 40 percent return.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  46. “And so, like, they use a portion of that revenue and they can kind of point to different users, like user groups within their protocol, right? So the LPs get about 90% of this revenue, but then the So let me back up. So the way that they maximize rewards for these users is by they own a large portion of the governance token for curb finance. And so owning the governance token for curve allows them to control where new emissions go. So basically they get to, they are actively voting in which liquidity providers are getting the most rewards. And that's kind of how they are able to maximize returns for their users. And so that's like the goal of this protocol is essentially, again, to optimize and simplify. And so the governance token of convex finance.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  47. “Yeah, so this is a rules based approach. Convex has like, they service two protocols, FRACs finance, and curb finance. And within each of those protocols, they have their own set of rules that are slightly different, but like the same general premise. And so yeah, there's like when I give my assets to convex, I'm like telling them specifically where I want them to go. And so they do all this back end work. And that's generating a ton of revenue for their users.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  48. “That sounds like a bond ETF rather than just like, oh, I'm buying a bond of some company, which, you know, the minimum bid is probably like a million dollars or something. How about we put a thousand of those bonds into an ETF and I can buy one share of that ETF for like $10? My question is, are those like who chooses what are the yield protocols? Is it just a passively managed all the protocols or is it like certain rules-based approach? Are they being selected by a particular person?”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  49. “Then they're paying me fees to do so. The liquidity management section of this is like, it's not like super user friendly and like maximizing your rewards takes a bunch of work and it's like there's a whole lot of maintenance that goes into it. So convex was built just to like basically abstract that all the way from the user and basically instead of directly depositing my assets into the decentralized exchange curve, I can instead give them to convex and convex will take everybody's assets together, deposit them into curve on our behalf, and then do all this like maintenance work on the back end to be maximizing the returns that flow to the users. So in essence, like we throw this, we throw context into this yield aggregation subsector of DeFi. And again, their main purpose is to simplify and optimize.”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT

  50. “Okay, perfect. So first of all, we definitely need to pick a new term for this as an industry because bribe has such a negative connotation in everything other than this one subset of crypto. But so yeah, this is the rewards that flow to CBX token holders. And so CVX is the protocol asset of a platform called Convex Finance. And Convex Finance is a yield aggregator that's built on Ethereum mainnet and basically the purpose of Convex is to simplify and amplify returns for users. And so if I'm a liquidity provider into another protocol called curve, curve is a decentralized exchange that facilitates swaps between assets. So if I'm a liquidity provider and I'm letting other traders use my liquidity for asset to facilitate swaps,”

    2022-10-28 · Forward Guidance · IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch · IDENTIFIED FROM THE TRANSCRIPT