Stani Kulechov joins us to discuss how Aave and Lens are building scalable primitives to accelerate crypto's adoption curve. We explore crypto's killer app, why decentralized social matters, how the Momoca DA layer scales Lens, the incentives behind building GHO and more!

And as usual, we start the episode with our analyst bullpen to discuss Coinbase's new subscription product, Lido exit liquidity games and Curve's LLAMA lending protocol.
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Timestamps:
(00:00) Introduction
(00:43) Hot Seat/Cool Throne
(34:59) Interview Start: Crypto’s Adoption Curve and Killer App
(46:35) Should Protocols Share Revenue With Token Holders?
(51:00) Why Decentralized Social Media?
(57:07) Building on Polygon
(1:03:16) Lens Tx Process Flow and the Momoca DA Layer
(1:14:46) Aave’s GHO
(1:18:38) How Spark Will Influence Aave’s Market for DAI Lending
(1:21:57) Building Core Infrastructure
(1:24:49) Decentralized Identity Solutions & Undercollateralized Loans
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Disclaimer: Nothing said on 0xResearch is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Dan, Sam, and our guests may hold positions in the companies, funds, or projects discussed.

Every time you peel back another layer, you just end up figuring out that this thing is, again, a masterclass in mechanism design.

All right, everyone, welcome back to another episode of 0 X Research.

The show was made possible thanks to our fantastic sponsor, the Atom Accelerator.

It has literally never been easier or more attractive to build in the Cosmos ecosystem.

So if you're a contributor looking for grants between $10, 000 and $1 million, check out atomaccelerator.com online or look at the show notes.

And we have an awesome interview lined up with Stani, the founder of Aave and Lens.

He is a true crypto OG, so getting his perspective on the current state of DeFi and where Aave and Lens are at was super exciting.

But as always, before that, we are going to hop into a little hot seat, cool throne with Ren and Efreet Capitals from the Blockworks Research Team.

Ren, who you got on the hot seat or cool throne?

I got Coinbase in the cool throne this week.

I know I've sort of talked about them a few years episodes ago, but slightly different today.

Last Thursday, Coinbase announced their new program.

It's basically a subscription plan for $29.99 a month and with that subscription you get 0 trading fees, you get a lower staking take rate for Cardano, Atom, Solana, and XTZ.

You also get a discount for permissionless, so if you're going, maybe subscribe for Coinbase 1 for what I think is a 20% discount.

Importantly, you also get a 10% off lemonade, which is kind of like an AI insurance underwriter, so to say.

I think it's an interesting trend, right?

So because if you're sort of seeing a progression of WebTubes, everything has eventually transitioned to a subscription model.

YouTube, premium, Netflix, Spotify, Apple Music, everything trends to a subscription sooner or later.

And it'll be interesting to see whether that trend pays out, starting with Coinbase.

And I think there's a few other interesting things that I'd like to talk about.

The first is that there's probably a large amount of retail users which don't generate a huge amount of revenue for the exchange.

So at a 40 bps maker rate, it would take roughly $8, 000 in monthly volume to generate $30 in fees for Coinbase.

And I would guess the bottom of the pile like retail traders don't generate $8, 000 in monthly trading volume And that $29.99 Coinbase 1 subscription may generate a lot more revenue for Coinbase.

And I think another interesting thing is that they included Lemonade, which has nothing to do with crypto.

It's just like a lifestyle insurance product.

So is it possible that Coinbase is able to onboard more users into crypto by offering more sort of these lifestyle perks?

You get a monthly free DoorDash code, you get 20% off Uber, And maybe I'm sort of like giving the blue case here, but for example, Coinbase may work together with these companies that they're onboarding into Coinbase 1 subscriptions and get them to use Coinbase Commerce, which is their version of like PayPal or Visa, or sort of like their payment system that merchants can use.

And I just thought it's an interesting move, probably an opportune 1 given the current market conditions and how transaction fees and the trading volume haven't been the greatest and they don't look so great for Q2 so far.

But we'd love to hear what you guys think of it.

I can already hear Effort Capital in the back of my head telling me how, not Amazon, but Coinbase rather is taking over the world.

And it's funny that I accidentally said Amazon there.

But yeah, it seems like an interesting model.

I liked your comparisons to the kind of how the, uh, the web 2 world has become very subscription based and it's interesting to see the lifestyle edition there.

Effort do you have a more interesting take on why they're kind of potentially moving into that lifestyle?

I mean, if you think about it, Coinbase fundamentally thinks that cryptocurrencies can transform the entire financial sector, create new financial products, and innovate on financial products that haven't seen innovation in decades, right?

I actually really like the Coinbase commerce angle that you're going with, Ryan.

I honestly didn't even really think about that.

But I mean, insurance, we've seen DeFi protocols like Nexus Mutual, which I think gets shit on, and on crypto Twitter for really not being that good of a product, really not bailing out crypto protocols when they're needed as their insurance offering.

Fighting insurance is an area of finance in general that needs an overhaul.

My mother actually is an insurance underwriter.

It doesn't actually pay out users when there's floods.

Flood insurance doesn't even work properly.

There's not proper risk frameworks, I think, that properly calculate risk or quantify risk.

And maybe like eventually Coinbase decides to create like a lifestyle financial product.

Could you imagine Coinbase insurance leveraging DeFi protocols and leveraging some type of decentralized identity solution on top of that?

I think there's other product offerings that just by grabbing in the user, leveraging Coinbase 1 where it gets entire lifestyle package on top of the other use cases like their 0 fee trading or whatnot on their exchange platform.

They're just trying to create a stickier ecosystem, kind of like what Apple did with their phone and their app store.

Once you kind of grab onto the customer, you're offering them other products and services to kind of keep them within this ecosystem.

And arguably, Apple has the best ecosystem in all tech.

You obviously say the same thing about like Amazon and Apple as well.

I'm sorry, Amazon and Facebook as well are meta.

But I think Coinbase is trying to figure out other ways to branch out their revenue stream and keep their customer base sticky, especially in a bear market when trading volumes are like the lowest we've seen in literally like 2019, since 2019 in some instance, I believe.

I mean, it's more recurring revenue, it's decentralizing or distributing.

There are different revenue streams out there.

I like the point you made, Effort, in regards to just smoothing out the revenue.

I think that's ultimately the story here.

I think they just want more predictable MRR in the long run.

Obviously, crypto is pretty volatile as is, so they probably want to smooth that out as best they can.

And to be honest, it makes a ton of sense for a ton of people.

Like if you, if you do $15, 000 a volume on Coinbase, like for $30 a month and 0 fees, like you're probably out positive on that deal.

And like, you would be sure to redirect your trading volume on Coinbase because you have that subscription.

So ultimately it makes a stick your customer base.

I think 1 thing that I find interesting is that it doesn't lower the take rate for ETH staking.

I mean, Coinbase has the highest take rate for eavesdaking out of all staking service providers whether that's like a centralized exchange or a liquid staking protocol and it stands at 25% today.

I'm not sure how sticky Coinbase thinks their eavesdaker customers are, but I would bet not that sticky, especially in the long term.

And as these liquid staking protocols become like more battle tested, you wouldn't really settle for a 25% take rate when a 10% take rate exists out there.

And if I'm not wrong, Binance also has a VIP program where if you're part of that VIP program, you have like an even lower take rate than what they're offering normally.

And that's kind of shown in the data, right?

Ever since the Shepeta upgrade, the amount of ETH that's staked with Coinbase has decreased versus all the other liquid staking providers which have gone up by like

I might take the other side of this 1 because I agree with you.

The data definitely shows exactly what you mentioned.

But I think there's a very specific reason for that.

And the people in crypto right now are all tech savvy, rational investors that want to maximize their profit.

But the next wave of users, I don't think will classify as that.

And I very much so expect people to pile into the Coinbase app, mint CB ETH through the app and hold CB ETH and like fully thinking that they're earning the native staking yield.

And even if they're aware there's a 25% fee, they'll be totally okay with that because of the ease of access of CBE.

And so I think they're just going to see this separation of investor preferences between ease of access, which Coinbase absolutely dominates in, total fee revenue or fee maximization, which will be something like maybe a 2 token model like FraxEth or other smaller providers that you kind of have to go a little further out on the risk curve for, or decentralization like something like a RocketPool or quite frankly, even StakedEth.

So we see these, there's just going to be a distribution of preferences, but I really do think that the next wave of users are just going to favor the ease of access piece.

Sam, who do you got in the hot seat or cool throne this week?

So mine might be a little bit controversial.

I'm not sure, depending upon what people's opinion is on the matter.

But I think everyone by now probably knows there was a Lido draft proposal on the forum, basically saying that we should return protocol revenue, or at least a portion of, I think it was 30% to 50% of the actual take rate to the Dow Treasury on the forum last week.

And there was some suspicious timing with a couple of tweets from notable figures in the industry, 1 being Andrew Kang and the other being HowPress.

Andrew actually tweeted about an LDO proposal an hour before there was any proposal live.

And then 4 or 5 minutes later, HowPress started tweeting about the proposal.

So maybe he has forum post notifications on and just saw it really fast, or someone texted them and said, Hey, there's a new proposal up.

And the account that made the post was created that day and it was only live for like 8 hours before making the proposal.

So just some sketchy things going on in governance land feels like kind of an attempt to get a last little bit of exit liquidity to sell into for people with big bags of LDO looking to exit their position.

So not saying that's exactly what happened, but it definitely doesn't look good.

And it was enough to warrant a hot seat in my view.

So not sure if you guys have any opinions on that or if you guys have any thoughts in general about the proposal that we saw.

Yeah, it definitely seems like some peak bear market fuckery and no liquidity, quick forum post, get a pump, get out of the asset.

It's tough to say if that was actually what happened.

To be fully transparent here, we all have governance trackers on.

I get an email a second, there's a forum post in a series of different assets in their governance forum.

Of course, tweeting before the thing happens that that, of course, isn't possible.

So I don't know if maybe it was referencing a different proposal.

Hard to say, but definitely a little sketchy.

You know, the better mentality to take in this space I've kind of found is if it can be manipulated, it will be manipulated.

That's like kind of how I view a lot of the active address activity.

We tend to see, you know, these crazy pumps and active addresses on super cheap chains, like, okay, so it's very easy to increase the number of daily active addresses.

I don't know, just kind of like a general framework I have when assessing certain things in this space.

And I think this kind of falls into that category.

I mean, maybe Alpress is using GovHub, our new governance aggregator, Blockers Research, a little silent chill right there.

No, I think it's deservedly so to be on the hot seat.

It might not be the specific of the 2 people that you mentioned, Sam.

We don't know exactly the exact actions that were taking place, but all we know is a random account went on the Lido forum that was created 7 hours before the proposal was even made.

So it wasn't even by someone that's known in the Lido community that actually has some clout, can actually get a proposal like that passed, just some random account posted this, how press just so happens to see it within 4 minutes, maybe using GovHub, that's great if he is, but our product is great.

And we actually were talking about that Lido proposal like 3 minutes before, like the moment that it came in, I think, Ren, you saw it, like within a minute of the posting so I'm not exactly sure how you saw it, probably go up, but really cool that we were able to catch on and discuss it ourselves, but it's just nefarious activities however you see it.

You could tell that the person that made the proposal doesn't actually really know much about Lido because they were saying that the DAO itself had 17 and a half years of runway, which took into account the native token in a treasury.

It was just a really bad proposal overall.

It doesn't make sense today for Lido to pass revenue back to their token holders.

It was a poor proposal overall and overall, the moment it got posted and got announced on Twitter, it was the talk of the market and the local eye and whoever posted it found their engineered exit liquidity.

I think 1 thing I think about is that when I first found out about the shenanigans, I was like, okay, yeah, that seems like kind of scammy, low key illegal, but then I thought about it a bit more like, how is this different from like 1 of those big trad 5 hedge funds that specialize in shorting stocks and then releasing like a hit piece about how like some companies books are completely messed up like, it feels kind of similar you know like, you accumulate a position whether that's long or short, and then you've released some information, obviously in the case of like a short fund with the intention of manipulating the stock price or having some effect on the stock price And then using that as exit equity.

Chances are in like Catfight, they probably have like a slightly longer term outlook on like kind of short to stock rather than this title case where it just pumped and dumped in like 2 hours.

But that was just an interesting comparison that I thought

And I think that's a fair comparison to make.

I guess just with the 1 caveat being the Lido 1 is actually trying to change fundamentally how the token accrues value, whereas the example of an equity research shop that's shorting, I guess they're kind of evaluating facts and not changing the actual structure of the company.

But I think it's a fair comparison to make and something I hadn't thought about.

But we did actually, Dan and I hopped on Bellcurve for a roundup this week.

So if you're more interested to hear about the whole LIDA situation in depth, you guys can check that 1 out on Apple or Spotify.

But Efrat, I'll kick it over to you for your hot seat or cool turn.

Yeah, my hot seat today, I have Stepin, the sneaker NFT application that was pretty big heading into the end of this past bull cycle.

So they announced this morning that they integrated Apple Pay into their app store application.

And it said the users will not need a crypto wallet to purchase Stepin sneaker NFTs.

Instead of needing a crypto wallet to, I guess, deposit USDC into to buy a sneaker NFT, you're actually able to use Apple Pay to buy something called Spark Credits and then 10 Spark Credits equals 1 USDC.

And then I guess you use these Spark credits.

And I'm assuming you haven't used the app yet, to be fully honest, but I'm guessing you sign in using Google or some type of Web2 identification system, and you are able to buy your Sync or NFTs and it's attached to that Web2 account, which I think, in general, is a cool innovation.

I'm not saying that it's not, but the reason why I thought they're on the hot seat today is because they use things like this in their Twitter thread.

We thank Apple for their continued support for Stepin since their launch in 2021.

Apple doesn't probably even know what Stepin is.

All Stepin did was use their Apple Pay SDK and got a payment provider to actually accept that.

Apple Pay, nobody cares about Stepin's sneaker NFTs and their

This is literally a protocol in 2017, 2018.

And as recently as Avalanche earlier this year, who I also put on the hot seat for a very similar reason, saying that they have AWS as their partner.

It's like, no, just because AWS is running nodes or made it easy to do one-click node setup of your layer 1 blockchain, that doesn't mean AWS partnered with you.

They're just providing a service because they're in the business of making money.

Like, there's no way Stefan was supported by Apple.

Like, I'm just sick of protocols, especially in a bear market.

I'm just sick of protocols you're trying to use.

Like again, engineered exit liquidity, because I guarantee you the moment this came out, some people that were in the know probably dumped their tokens.

So that's why it's happens on the hot seat.

I think this is where crypto has to go to, though.

It has to be like we got to abstract away the crypto wallet.

I think applications will need to have built in wallets so you don't require someone to download an additional application like Coinbase or MetaMask.

I like where this is going, but I'm just over this space hyping things that aren't partnerships.

I echo that sentiment there on that last bit, but I'm curious, like what does this look like on the on-chain side?

So if you like log into the app and have some control based on your username and password over some assets that are on chain, I'm imagining that there's just like a wallet on chain that like holds all these assets and then some database off chain that kind of maps username and password to NFT.

Does anybody know if that's how it works?

I'm actually not too sure how it works under the hood, but I'd imagine it's exactly that with the on-chain information actually serving as kind of like the escrow account for all of the users.

And I'd imagine you'd be able to send these NFTs to a separate EOA that you actually control off or on chain.

I strongly agree though, Effort, these partnerships are pretty exhausting and they're really not partnerships at all.

So I was actually trying to think of some pros on this.

And I guess just at the end of the day, you need to make sure that there's people willing to spend more money in the app than people who expect to just extract money out.

And that's not what we've seen from Steppin to date.

And I find it hard to believe that people are going to want to spend thousands of dollars on a pair of sneakers just to extract a few dollars a day and then also reinvest all those profits into a new pair of digital sneakers.

Like it feels more like the means of the end is to make money.

So not too bullish stepping, but also I think it's cool that they're trying to go mainstream with the Apple integration.

I think 1 for me, at least over the past few months, is that there's been a lot of developments in the mobile world for crypto, right?

First, Uniswap got their wallet approved.

And then I think Axie Infinity also got approved on the App Store and now StepVent.

And I think there's like a decent amount of protocols for the next big upgrade.

DYDX, for example, for v4, they're going to build out a full-fledged iOS and Android app.

And it seems like crypto is really trying to make that push into mobile, which at the end of the day is what I feel the majority of people will access or at least interact with crypto on, not like a laptop or a desktop.

And I think another interesting thing about Stepvan, also a food disclaimer, I didn't partake in Stepvan in the blue market, but Stepvan, especially like buying that Spark credits seems very pay to win.

And pay to win is like a huge category in traditional gaming that makes a lot of money, and is actually sustainable for the game developers rather than a play to earn which is kind of like what we saw during the boom market between Axie Infinity and all of these other games that just continuously issued all of their like native tokens and they got dumped into the ground once the market kind of died down.

But pay to win is a lot more sustainable of a business model.

And I would love to see more games or sort of more like protocols like Step-in integrate that into the app using new developments such as like integrating the Apple Pay or launching on mobile.

If you take the step in piece out of it, how do you guys feel about this like semi on chain reality that they're like augmenting for their users?

You know, like you still have this web 2 feel, but in reality, like you are transacting on chain just through a proxy.

To me right now, this industry just needs to get people on chain when they don't even need to be on chain, or they don't know that they're on chain, I should say.

So this Web 2.5 field, I think we're gradually going to get there.

When there's better infrastructure, when there's better...

When signing in with Ethereum, where everyone in the world has an ANS or something, We'll get there.

It's going to probably take 5 to 10 years plus.

So I don't mean to put them on the hot seat.

I do think there's some innovation here and I do think this is the right way this space needs to head in the short to midterm.

And I think that's really all that matters.

It's just getting more people on chain, interacting, feeling more comfortable with using a decentralized application, whether or not they know it's decentralized or not.

Ultimately, us nerds care that it's decentralized.

We care about this cool innovation in tech, but the average user, even in 10 years, even if crypto is mainstream and managing billions and trillions of dollars, most average people still won't even know.

It should just work and feel the exact same way as Web

Effort, do you happen to know if these spark credits are like more like fortnight's V bucks and that they're not like redeemable once you buy them or any RC 20 type token?

Like like once you buy them with dollars like is that pretty much just that's what they are.

You have to buy sneakers with them in order to redeem them?

Because that'd be interesting, because like I know gift card industries like make a shit ton of money just because people leave a couple dollars on every card and then you've got a million people with a card and it adds up pretty quick.

Yeah, in their medium, I honestly don't know the answer to that.

Like in their medium post, they don't say whether or not it's an ERC 20.

They just keep calling them spark credits and that there's the smallest unit of spark credits is 1.

So that just like thinking about it, like every other ERC 20 out there, pretty much you can go as like small denomination as possible and send that wallet wallet.

The fact that they're saying like the smallest denominations 1, they're calling it credits are not saying it's related to ERC20, I'm assuming that it's not redeemable, or you can't transfer that to other users.

Anyways, Dan, who you got in the hot seat or cool throne?

The LLAMA lending protocol and CRVUSD stablecoin is a masterclass in mechanism design.

I'm not prepared to say it's flawless because there are a ton of parameters that definitely need to be optimized as time goes on.

But the early testing looks pretty damn good.

I mean, right now there's only 1 listed collateral.

It's staked FraxEth and that's the yield accruing version of Frax's liquid staking token.

And it launched with a $10 million debt ceiling.

It's currently at just over 7 million in less than a week since launching.

So we've already seen an initial pretty good onslaught of demand.

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Can Decentralized Social Scale? | Stani Kulecov (Lens, Aave)