Hello everyone. Thank you for being here, and a huge thank you to Cartik and the entire ETH Global team. This is a great time to hold an event in the middle of New York City. You know, with all the negative energy and the fact that Ethereum is terrible, the number of people is going to decrease, and I think being here right now is great and very powerful great and very powerful . So, you will see the face of Ethereum on the screen.
My organization is called Fire Eyes, and here I made Ethereum Eyes. On Ethereum Eyes you can see one universe that looks normal, has small stars, and then one universe that looks amazing, right? One universe that has gravity, a lot more gravity, a lot more stars, a lot more amazing possibilities. So today's conversation is really: How do we get from what's on the left to what's on the right? How do we make Ethereum a more beautiful universe with more stars, more amazing things inside it?
And what are these stars, I would say, they are something like tokens on Ethereum, right? And how these tokens can continue to evolve. So we want to create a beautiful universe, you know, that can have a lot more inside. So any statistics on the number of tokens on Ethereum? So you can see, you know, this is a chart from 2017 to 2021, roughly like the number of tokens, the total number of tokens created on different blockchains.
You can see that Ethereum has a clear market share. You know, there's really nothing else there. There are several on the B&B network, but by 2021, Ethereum is the very clear winner in terms of the number of tokens. Then, oh no, Salana! Look at how many tokens Salana has; They have, you know, 100 million tokens now, and Ethereum is just a tiny fraction of that.
So why am I here talking about how Ethereum tokens can evolve ? I should be talking about Salana tokens. Well, the reality is that Salana tokens are worthless. Even though they have 10 times more tokens, you know, in addition to Salana, they've maintained a very, very small market share in terms of total value, you know, which is mainly because, I would say, you know, even though the number of tokens, you know, is growing and growing over time, the number of tokens that were valuable has remained the same and they've all been ETH-based. Even though there are 100 times more tokens on Salana than Ethereum, you know, that value has just never been captured by these ecosystems.
And actually, you know, in the last couple of months you've seen an even bigger crash, right? It is very difficult to be a stable token based on Salana; maybe there are one or two indices that actually make sense, compared to Ethereum, which has a much larger market share. So, you know, let's look at 10 years of tokens from now until now, and maybe why, you know, even though I love all the tokens and, you know, different kinds of magical powers, they're suffering, right? I won't embellish. You know, over the last year, you know, all the tokens have fallen at once.
So why is this happening and how can we change it? So, on the left you will see that at the beginning of the tokens there was DA and a project called Digix and a few others called Digix and a few others . These were projects that were really in the early stages of the Ethereum ecosystem, and you were essentially just contributing your ETH, right? You would take your Ethereum, send that Ethereum to the contract, and then get the token back at a 1:1 rate, right? So, if I deposit 10%ETH, I get 10% tokens.
I also get 10% of the market power to manage this DAO, right manage this DAO, right ? So for both the DAO and Digex, if I deposit 10% of ETH, I have 10% control over what happens to that ETH. Yes? This is kind of the initial phase of what ICOs were and what tokens were, you know, the first tokens launched on top of Ethereum. Then we do this for several years.
You know, some of these things succeed, some completely fail, and we move on to governance tokens, right? And where governance tokens really gain momentum, and that's 2019-2020 with a complex governance contract. You see things like the UNIS exchange, you know, uh, the ensk year, pretty good projects, but that was the time of governance tokens, right? We all talk about management. That's what it is .
And we, you know, Digix and uh DA, they were governance tokens, right? But we just didn't call them that. Then we fast forward a couple of years again and get to, you know, the newest era where tokens don't really do much, right much, right ? You can see the transition from Dow and Digex, where it's, you know, a token that directly controls the treasury, you know, all the way to the other end, which is IEN and Worldcoin. And you know, no disrespect to the iiger or worldcoin teams, you know, but the way that this token interacts with the protocol, compared to something like Dow or Digex, is clearly very different, right?
Another thing that happened during the same period was that tokens became really attractive and started to look like cool assets that people wanted to invest in. And so venture capitalists decided that instead of letting retail buyers buy them, it would be much better if you could approach the founder as a venture capitalist and say, “This is a really amazing protocol. This is truly an amazing project. I want to give you $10 million, and I want to have a significant portion of your tokens right before they are distributed or there is any talk of people touching them. And so it changed the game from one that was very permissionless, very open, you show up with your ETH, contribute to the pool and now have ownership of this, you know, asset, to something that was completely put under decentralized control.
Right? Many of these tokens are on the right, even though I love them and have worked with many of them. You know, these are tokens them. You know, these are tokens where the value of that token and the control over that token is very disconnected from what it used to be . And the ratings continued to increase, you know, almost linearly.
You know almost linearly. You know , if you go through this list, you 'll see that the valuations were very small, in the millions or tens of millions, and then hundreds of millions or even billions, you know, of the value that these token collectors were grabbing , which may not have been the best option. Here are some things you won't be able to read sitting here, but it's essentially a story of technical innovation, as well as some social innovation around tokens in addition to Ethereum. One of the reasons I think tokens have really struggled lately is because we had 5 years of technology, from about 2016 to 2021, when we seemed to give you the initial ERC20 token. We created the first Compound Governor contract and started scaling tokens, and then, you know, nothing happened since 2021.
Now, something has happened, but when it comes to tokens, very little innovation has been implemented, right? We're still using the Compound Governor contracts that we created in 2021, and we expect...these billion dollar tokens are using technology that's, like, 5 years old, you know, despite the fact that we're talking about this beautiful technology that tokens are and what they're going to enable and all the different programmable things that they can do. Well, we need to program, right ? We actually need to build a thing, not just use old technology and restart it 100 times to launch new tokens.
So, you know what tokens can be compared to reality; here's my amazing AI Care Bear image, which is: tokens can do anything, you know? I think in the early days of tokenization, when these first, you know, not the tokenization that Chris just discussed about Plume, I think, you know, RWA is also a very interesting type of tokenization, but it's a little different from tokens on top of these different blockchains and blockchains and how they're, um, you know, tokens and governance tokens, that kind of thing governance tokens, that kind of thing . So, you know, these were supposed to be amazing programmable tokens that could do anything, and we could all be...glad that we were building a new financial system. Instead, you know Instead, you know , we usually have a team and investors who buy houses.
You know, in most major DeFi major DeFi protocols that have tokens, the founder has a very big, beautiful house. Hmm, that's good. You know, they should have a really big nice house, but maybe other people should have some of that value too, right? Maybe if retail sales were down 99%, you know, maybe you didn't have a really big nice house as a token target. And I think we've kind of gotten lost in this obsession with value, where it's really hard to resist the idea that " idea that " quantity is increasing."
You know, if you see your tokens growing and growing and growing and you get richer and richer, you know, does your incentive to create anything innovative in general decrease? Perhaps. Hmm, you know, tokens were for regulatory arbitrage. They were for investors in teams to capture value for scammers, you know, just for the downside. But I at least really hope that That's not the only thing they're useful for, is it?
They're also useful for programmability, digital trust, you know, decentralized ownership. And we just need to create new technologies to achieve this. New governance contracts, new token standards, new innovations in supply circulation, you know, we really need to innovate and not just follow the same default path that tokens have been on for the last 5 years because it's obvious that it's not working, right? Right now we have skyrocketing valuations and tokens are headed down. So, you know, I actually hope actually hope that these tokens can continue to evolve and it's not just a game of infinite decline where there's never any positive amount of, you know, energy.
And I think this schedule will continue, right? He's made waves before. I think he will continue to make his waves. Ethereum will continue to have the overwhelming market share, because why would you want to deploy your token anywhere else? So if this is the story of why tokens haven't evolved, you know, the kind of problems you know, the kind of problems that I've noticed around this, what are these paths of evolution?
So, I would break this down into three separate categories. Um, existing large tokens, existing small tokens, and new and emerging tokens together. The first concerns existing large tokens. You know things like institutional memory. So if you're a billion dollar protocol or a billion dollar company, you usually have pretty good standards for decision making.
Right? Why was this decision made? Who was in the room? Do you know what to consider...where...
where is the document document we use to draw up the meeting agenda? You know, nothing like that inside a lot of these bigger dows. You know, I really love ave and Maker. You know, Maker is actually probably the leader in this , but still, you know, there's no institutional memory. Um, formalized contribution structures...
contribution structures... So, ENS is...um, ENS, excuse my New Zealand accent, when I say ENS, people are like, "What are you..." saying? "ENS...
um has... saying? "ENS...um has... has a service provider program, which is a very, you know, interesting and new mechanism.
In this service provider program, 15 participants are competing for $5 million to build something based on the protocol and drive ENS adoption, right? To me, this is actually something very interesting that many other protocols should also adopt: the idea of having an open contribution structure with serious pools of capital that you can access to build something interesting. The next step for these large tokens is to experiment with parallel governance. So what this means is that now we have these complex governance contracts that everyone uses, battle-tested, and you don't want to, you know, you don't want to put your protocol in the hands of someone bad because you deployed the wrong governance contract. Right?
But you can run smaller experiments where you don't have to make all the token decisions. But you can create new contracts, deposit ETH or whatever token you know into them , and experiment with how you want to move it.” money around. But basically it's keeping the big structures as they are now, but creating smaller experiments inside some of these bigger protocols. Then these, um, existing little tokens, you know, I mean, the old standards clearly don't work, right don't work, right ?
We don't want the token to have a very low valuation and you think, "Oh yeah, let's just continue where we are, we shouldn't change anything, you know, this is a great path." “I don’t think it’s going to work, you know? So it's time to, you know, step up, step up like some of these little tokens, and really, like, make a statement and start experimenting in unique ways. Here are some good examples of this: We just did some cross country work. A cross is a bridge within, um, what's up, the Ethereum cryptocurrency.
Across had a really useful protocol, didn't it? A lot of people were using the Across protocol, and it had a lot of throughput and volume, but the token didn't really have a lot of popularity, did it? It had a very small market cap, so Across just did something called a " something called a " bridge," and inside that offering, you essentially redeemed tokens or exchanged tokens for a private token. So inside this private token, you can convert your tokens one-for-one into shares of C corp, right? So if you have 10% of So if you have 10% of the tokens, you now have 10% of the C corp.
” share capital. As someone who loves tokens with all my heart , I'm not telling you that everyone should just convert their tokens into equity and we should give up on that, right? But it has to be at least an option, you know? And creating different options for these tokens and these different projects, I think that's really important. Two other examples are Liquidity and Infinex.
Liquidity is a decentralized stablecoin protocol that has a couple hundred million TVL. Infinex is a new trading platform that seems to be fully web3 compliant, built by Kane from synthetic materials. But then again , both of these projects have tiny market capitalizations. That's about $10-20 million, despite the fact that they have a functional product that people use and that generates revenue. So how do we tie these things back together?
What systems and mechanisms can we put in place to combine these things and make the token actually tied to the product or to revenue, or whatever. Not that I whatever. Not that I ...Of course, this conversation is n't trying to say that we should maximize revenue either, right? The whole " either, right?
The whole " buy and burn" goal that, uh buy and burn" goal that, uh , hyperliquid really pushed, you know, should you as a startup burn 100% of your revenue? My answer is generally no. You know, I do n't think you should burn 100% of should burn 100% of your income. Should you burn 50%? Perhaps.
But I don't think you should burn 100% of your income as a startup. But it's about, you know, experimenting with maybe 10% at the beginning, and then see how it goes, and then put the rest into a coffers that can be used to achieve positive outcomes for this project. So the last one is new tokens and thoughts on how, um, if you're a new token, I'm really excited to experiment with circulating supply. So one of the main problems, I think, with a lot of these big tokens is that we were building a lot of time...It was a fire when these big protocols were building a pie chart, right?
Who gets how many tokens? How much do investors get? What is the unlocking schedule unlocking schedule ? How much do I get as a founder? You know, often the work of fire is to say, "I think you shouldn't have 10% of the you shouldn't have 10% of the token supply for yourself, Mr.
Founder, because this is a decentralized protocol, and if you have 10% of the entire market share, you know, forever, to do nothing, maybe this protocol won't last long." " won't last long." " And so, I think the idea of, um, doing experiments with circulating supply where we don't start with a billion tokens right away that we're going to issue on day one, but instead something like, uh, the idea that we talked about last night, is that you start with a 10-year plan of what you'd like the circulation to be like. Right? So in the first month, the founder receives 100% of the founder receives 100% of the tokens.
In the second month, you sell, and you know what the next 100% of these tokens will be released to the market. So now the founder has 50%. Next month, you issue new tokens to people who use your protocol in a certain way and conduct an airdrop. But the circulating supply experiments, I think, will be what will push us to new results, because we were too focused on issuing all your tokens at once, and also starting with very high valuations. So, you know, for these new tokens, it's like a big thank you to what, um, the universal" Swap does with CCA, you know, it's CCA–it's a clearing auction.
I don't remember auction. I don't remember what the other C is, you know, but basically it's like they start the grade at a very low level the grade at a very low level . That's the point, isn't it? Are these CCA Uni's swaps that are happening, they don't start at a $5 billion valuation, they start at a $5 million valuation, you know? So I think that when you think about this circulating supply and how much you want to support it at the beginning, you know, maybe you don't want your protocol to be worth a billion dollars and then drop 10x and then investors are still going up 10x while retail is going down 10x, right?
Because that's simply not the case, and that's what most tokens seem to fall into that category. Um, so it's like three separate paths. But I think, you know, more importantly, if we want to build this amazing, you know, such an amazing, beautiful universe with all the lights and all the stars and all the different participants that are... participants that are... like making Ethereum the best it can be, you know, tokens are important.
I really love the Ethereum Foundation really love the Ethereum Foundation , but the Ethereum Foundation could never talk about tokens, could it? Because it is something financially secured. There are scary things there. Maybe we can't talk about it. You know, Fire Eyes really tried to intervene tried to intervene , you know, through the existence of Ethereum, and achieve better outcomes for many of the biggest projects in the ecosystem.
But I feel pretty alone in this, don't I ? Most people who develop tokens or think about these distributions do so from a very fixed perspective, meaning they are investors, right? They're investors, they're consultants, you know, they're developing this to make money. They design it to make you money and you, your investors, money. And it's not really about how we innovate at all .
So, you know, I'm waving the flag here, like, let's innovate with tokens. And then I often meet founders who say, "I do n't really want to innovate with my token because my investor told me I shouldn't , and I got a lot of money from them lot of money from them , and I'm a little scared of it, you know." So part of it is about taking a step forward, right step forward, right ? And with the understanding that what we are creating is revolutionary technology. You know, Ethereum is an interplanetary network, and Ethereum-based tokens allow for the coordination of projects the coordination of projects , protocols, etc.
on an interplanetary scale. You know, this is a huge opportunity huge opportunity that we have, and we take one step and go, “Okay, now we have my protocol with my token that I can get rich with, and I get 25% of the tokens for my team, and we’re never going to overprice the token again. Thank you for coming. And I hope that those who are listening to me online, in real life, can…supposedly take this as an opportunity to see how Ethereum tokens can continue to evolve. And if we, you know, go back to that schedule, you know, I don't think it's going to go down to a minimum.
Even though tokens are a brutal market, you know, I don't think it's just going to bottom out and stop at zero, and there's never going to be any market cap on these different protocols. I think it continues to grow. So I encourage everyone here to help, you know here to help, you know , push this forward and get founders and token holders involved in experimenting and moving forward in a way that makes this a truly innovative way for tokens to work on Ethereum. Thank you very much.
Automatic transcript — names and jargon may be misspelled.