Is This DAO-led L2 the Answer to ETH's Woes? w/ Arjun Kalsy

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1:30what's up everybody welcome to real vision crypto daily briefing i'm ash bennington today i'm joined by arjun khalsi head of ecosystem at mantle welcome arjun hey hi thank you so much for having me ash well lots to talk about here today and we're gonna get started in just a second but first i want to take a look at the price action in crypto uh right now it looks like the The rally we've seen the last couple of days continues. Bitcoin trading at 31 ,243, trailing 24 hours. We're up about 4.5 % on Bitcoin. Trailing seven days, we're up nearly 21%, trailing seven days on Bitcoin. Ethereum trading right now at 1 ,918, still below that 2K handle, but up 2%, trailing 24 hours, trailing seven-day basis, up over 14%.

2:15So the rally very much continues. I should say we've had a little bit of volatility and choppiness here in U.S. equity markets at the open. RVDB, that's Real Vision Daily Briefing, our sister show where we talk about capital markets and macro at 4 p.m. Eastern time. Close of business, close of markets here in New York City, 1 p.m. Pacific, 9 p.m. in London for folks who are interested in hearing more about that. With that said, Arjun, welcome to the show. Hi, thank you so much. Well, it's a pleasure to have you with us. Let's talk a little bit about what you guys do. Sure thing. So Mantle is an Ethereum L2 network.

2:53That's what we're building. And it's got an interesting backstory that Mantle was actually born out of a DAO vote. So BitDAO is the DAO which incubated Mantle. The DAO participants decided on the forum that they should build some infrastructure. There was a long discussion on what it should look like, what the technology should look like, how we should build it. and then it went to a vote, it was passed, and that's how Mantle Network came to be. So it's a very, very interesting sort of genesis. Typically, when you compare with other chains, right, where you start centralized and then you go into a DAO, we were a DAO to begin with.

3:31And then over the past few months, we've had our test net live since January of this year. We're going to be going into main net very soon. So things are coming together at a very rapid pace. We've also, the way we've designed the technology and the ecosystem is also unique. It's very decentralized, very open. All the funding which we have has come from the DAO. So we have a treasury monitor where we transparently show the community how much we're spending, what are we spending it on, line item by line item. So very transparent, run by the community, owned by the community. And I feel more ecosystems should be run by this.

4:05So this is kind of a quick brief about Mantle. Yeah, well, we're very passionate about talking about new technology and innovation here. I should say, obviously, this is not something yet that has hit mainnet extremely early in this technology. Obviously, early stage token investing is a highly risky activity. None of this should be construed as financial advice. And more specifically, it's not an endorsement of any particular protocol, coin, or technology. But we're here to talk about this innovation. So let's give a little bit of the backstory. You mentioned some of it with BitDAO. BitDAO, obviously, something that folks have heard of because of some of the investors in that.

4:40Peter Thiel, I believe Dragonfly, Pantera, some other folks that are pretty well known in the VC investing space. Talk a little bit about how this got spun up. So it's a very, again, very interesting story, right? So if you look back at what was happening in the early 2020s, we had the advent of Binance Smart Chain, right? And it was this very interesting model where you had the chain and the exchange sort of working together, right? And the model proved to be successful. A lot of value was created. Developers came and built solutions. And then what we also saw was that everybody tried to copy that model.

5:17So every exchange out there tried to run with the same model where you had the chain and the exchange working together and creating value. Now, this was super interesting. Now, when it came to Bybit, the exchange, the founders of Bybit were also the community of Bybit who was asking the founders that, hey, why don't we build a chain? And the founders decided to take a very interesting path. So what they decided was that instead of building a chain, why don't we build a DAO instead? Right. We build a DAO. We get all the top investors into this DAO. So it has, you know, great guidance when it comes to, you know, Web3, crypto and token economics and investments, everything.

5:52And then, you know, let's seed the DAO with liquidity and then the DAO can decide whatever the DAO wants to do. So if you want to create a chain, if you want to build some other product, that's up to the DAO. Like we won't interfere with that decision. But like let's go about building Web3 in a more decentralized manner. And that's kind of how BitDAO came about, right? And BitDAO was seeded with liquidity by Bybit. Sort of the terms were that 2.5 VBS of their daily volume would flow into the DAO. This continued for a long period of time. And now, of course, if you see BitDAO, it's one of the largest DAOs in the space.

6:25You've got close to about$4 billion in assets on chain. And using Mantle now, we will have an ability to take these assets, put them to work, and and create even more value for the community and the network. We should say, for folks who are not familiar, Bybit is an exchange based, I believe, in Dubai and the United Arab Emirates. So offices both in Dubai and Singapore. And yes, Bybit has been around for almost as long as Binance. It's one of the oldest exchanges out there, and it's one of the largest derivatives exchanges in the world. A quick point of order here, I should say. Actually, today we're doing a Summer Friday edition of Real Vision Daily Briefing, So it's going to air at 1 p.m.

7:03Eastern time, 5 p.m. London. OK, let's talk a little bit about the Treasury on BitDAB because that's gotten some buzz. Talk a little bit about how you guys state those numbers. So it's very interesting. So if you go to mantle.xyz, if you go to our website, you can see the entire breakup of the Treasury. So the Treasury is all on-chain, right? So you can go and see the smart contract. You can see all the different tokens we have in there. So we've got like some, I would say, a lot of value in, you know, on chain in the Dow. Now, if I were to talk about how we plan to use some of these, some of this liquidity now.

7:38So, for example, what we're also doing is we're building a liquid staking derivatives protocol. So if you look at our treasury, we've got close to about 270 ,000 ETH just lying there in the treasury. So what we decided is, OK, let's build a liquid staking derivatives protocol. We can stake our own ETH. then we can create our own liquid state ETH. And then we could use that to liquidity provision any DeFi protocol building on our network, right? So this is what makes Mantle unique in the sense that, you know, we're possibly the only chain out there which has got access to a huge pool of liquidity, which we can use to liquidity provision any DeFi or any kind of protocol on chain.

8:10We also have an exchange where we can list like high quality teams and high quality tokens and give those projects ultimate distribution. So with the treasury, which we have by staking this ETH, we will have access to this liquidity. We will also get the yield on this ETH, which we can then use to further amplify the ecosystem in terms of incentives. We also have about another 220 million USDT, about another, I think, about 73 million USDC. So which, again, all of this can be put to work on the chain to create new value. So it's a pretty large treasury. A majority of it is still in BIT tokens.

8:46And as time progresses, as we continue to roll out like bounties within the chain. We continue to sort of support builders with different initiatives. We slowly, over a period of time, decentralize the DAO as these tokens go out of the DAO and end up in the hands of the community. Well, let's walk through some of the numbers on the Treasury. I've got it up on my screen right now. So the BIT token right now is a little over 75%. Eye-bulging number here,$2.6 billion,$2.565 to be precise, million dollars, excuse me, billion dollars, 565 million. on top of what we see here in Ethereum, which you already mentioned, about 250 ,000 ETH.

9:23So you've got roughly a little over$2.5 billion in BitTokens and about$500 million in ETH tokens. Talk a little bit about that. First, are those tokens in any way encumbered? Are they pledged against any other asset? Are they being yield-formed? Is there any other risk associated with those Treasury tokens? They are literally just sitting there. There is no risk with these tokens. I think one of the things which Bitta was very careful about was to not play fast and loose with the community's funds, right? So they were not invested in all of these different yield farming strategies. They were not sort of leveraged in any way.

9:57These are assets in their purest form on chain. And we plan to be very, very strategic about how we use these funds, right? So even when it comes to using them for the chain, if we are to liquidity provision any projects, we're going to ensure there's a full stack due diligence on those teams. They're going to be audits before we plan to use this liquidity. So we want to be very careful with it. Ultimately, it's the community's money. It's not ours. They hold the governance power to direct this liquidity. So we have to be very, very careful and very mindful of how we use this liquidity. Hey, everyone, we're going to take a quick pause and hear a word from our partners.

10:32We'll be right back.

10:37So you're saying they're totally unencumbered, no liabilities against them, no smart contract commits or any other type of liability? Zero liability. And can this all be viewed totally on-chain through Etherscan, for example? 100%. If you go to our Git book, you can see all the different addresses and you can check it out on Etherscan. Yeah. All right. So let's talk a little bit about the relationship between BitDAO and Mantle. Explain what that relationship looks like today and talk a little bit about how those treasury tokens are used within the ecosystem. 100%. So ultimately, the BID token is used as the governance token within the DAO, right?

11:14So whenever the DAO has to make a decision, for example, should we build MATL? Should we invest in gaming, like through Game 7, which is another one of the investments of BIDDAO? Should we invest in Web3 education and research, which is EduDAO, which is another body which was incubated by BIDDAO? So the way BIDDAO works is that there is governance, there is the community, and the community can exercise that governance to basically channel the liquidity which is sitting there in the DAO, to build different vehicles to take Web3 forward. So ultimately what we want to do with the DAO is to build a future of token sort of products which are governed by tokens and then sort of have this sort of token governed products and governance sort of take the Web3 space forward.

11:56So what we're trying to prove also with this model is that we can get like a DAO, a chain, and an exchange sort of working together to create new and newer value for the user. We've seen sort of the chain and sort of the exchange model create value. But I think in our model, it's very interesting that we also have a watchdog, which is the DAO. So for example, if there is any unethical activities happening on the chain, for example, if the team does not live up to the expectations of the community, the community can pass a vote and choose to fire the entire team or even shut down the chain. So the ultimate power lies in the community.

12:27And this is why the governance is so important. This is why in any kind of model where there is a chain and there is an exchange, it is so important to have a watchdog there. And for us, we have the best watchdog, right? We have an all powerful DAO, which can take all decisions. Now the decision, now sort of the relationship between the DAO and the chain is very interesting in the sense that the chain was incubated by the DAO. So all the funding which we have has come from a DAO vote. And you can go to the DAO forums and you can see the entire detailed proposal of exactly how much funding we want for exactly which line item.

12:57And all of this is like super transparent. And this is why, this is kind of why it's, you know, why it's very interesting for us that that that and what we really feel is this is how ecosystems should be built and run with this level of transparency where every major decision you take with respect to funding they have to be there has to be clear like line items of how you're going to use that because you owe that to the community um also what's interesting about mantle is that we're using the same token as the dow so we will be building utility for that token so for example in this case if you take the bit token we will be using the bit token as cash fees it'll be used for for governance on the DAO, it'll be used in the ecosystem which we're building on Mantle.

13:36It would be used for staking at the infrastructure layer. So we would be building multiple levels of utility for the token. And so if we are able to build this kind of utility, the token will capture more and more value of the entire ecosystem. And this intent over a period of time makes the DAO even stronger and gives us the wherewithal to launch even broader or more ambitious projects. So this is kind of how the... Let's stick with that for a second and talk a little bit about the BitDAO token. I don't know if we can bring up a chart of this. Obviously, when you look at this screen with the X-axis set to max, you see a drawdown of about 85 or so percent from about three bucks to where we're trading right now at around 43 cents.

14:13Total, I think, return here is about 71 percent negative from inception. Talk a little bit about the price action and what your perception is about why markets have priced this down so significantly since late 2021? So I think a lot of things have changed since late 2021. So there's been a markdown. And I think every asset out there, including Bitcoin, ETH, and every other token out there. What I also feel is that what is different about the BIT token earlier was that it was used purely for governance. Like it did not have a lot of utility outside of governance. I think with Mantle, now that there's, you know, there are whole levels of utility which we can build for the token, where it'll be used in many different ways.

14:54also other products which we are building right now like the liquid staking derivatives protocol which will also be using the mantle token so we will be able to build these multiple levels of utility and then the token will continue to sort of or capture a larger share of of this entire business and all the value it's accruing um and this is why i feel over a period of time that you know we can position mantle as as as sort of as a really really sort of strong token so we're also doing this rebranding process. We are rebranding sort of BIDDAO to Mantle Governance. We are redoing the token as well from BIT to MNT because when the token BIT was created, it was not designed to be run in a chain.

15:33Like there were several functions missing, et cetera. So we literally had to redo the token so it could be used in a layer to chain. So we will have a new token, MNT. The details are there on the website as well. We will be redoing the DAO. And what this essentially means is that mantle dow will be sort of a product focused out where the core product is the mantle infrastructure chain uh we will also be building a liquid shaking derivatives protocol and we will also build other products in the future and all of them will build utility for the mnt token so this is kind of the path we've set for the token right now where now there are multiple levels of utility and we'll continue to keep building those as time progresses so which is kind of like i don't want to comment on on token price or you know definitely not financial advice but but i feel that if you can build multiple levels of utility for a token, then it will start to capture sort of the entire value of the business.

16:21And that I think would be good in the long term for the DAO. So this is kind of how we want to design it. So let me ask you this question about liquid staking derivatives. In the post-Shanghai, Shappella, Ethereum world, where Beacon Chain, you can access those funds. Talk about the role of liquid staking derivatives and why they're important in your view to the ecosystem? So I think as Ethereum has transitioned to a proof of stake chain, of course, you want to stake as many assets as you can, or as much ETH as you can on the chain so that you can secure the assets, or rather you can secure all the value which is being created on Ethereum, right?

16:57So a proof of stake chain is only as strong as the value staked in it. Now, the problem with the stake was that there was no real incentive to stake outside of possibly the returns you might get from Ethereum, right? And Ethereum as a chain was becoming more and more congested with a period of time. But liquid staking, what this has allowed us to do is that if you're a user, you can stake your ETH, you can get yield on that stake, but then you can also get this token as a receipt, whether it's CBE or SDE, depending on whichever staking protocol you use. And then you can take that token and then you can participate in sort of DeFi or in any sort of other activity, or you could even restake that into other sort of vehicles like Eigenlayer where again it's used to provide security for various different chains.

17:41So that's why I think liquid staking is interesting where there's now an incentive for people to stake their tokens because they will get this receipt token which they can further use in a variety of DeFi, in a variety of chains or in a variety of ways. And so in some sense there's now an extra incentive to do staking and it's good for Ethereum to have more and more Ethereum staked on it so that the network just continues to become stronger over time. So you mentioned the eigenlayer, which is the protocol that allows restaking in Ethereum. Talk a little bit about the significance of the eigenlayer and its relationship to the mantle token.

18:11Sure, definitely. So I think eigenlayer is like probably a very, very, very interesting concept, right, in general. So with eigenlayer, essentially you're creating a decentralized layer of trust, right? And when you're building decentralized trust, you need to sort of have a trust assumption. And the idea being that if you can stake, so for example, if you can stake ETH and then you get your liquid stake token. If you can stake those liquid stake tokens on Eigenlayer, then you can provide crypto economic security to many different types of use cases, whether it's data availability, whether it's bridging, whatever have you, because once you solve decentralized trust, you can like do many different things.

18:46And this is kind of why we've been partnering with Eigenlayer for almost, we've been working very closely with the team for the almost last six to nine months, because when we were building Mantle, we decided to build a modular chain right so what we felt is that instead of having monolithic architecture where all the components of a blockchain are tightly bound together if you build it like like in a modular fashion like for example with legos where you have chain processing you have data availability you have transaction finality consensus then the chain will be easier to upgrade easy to maintain and we could continue to improve it with time so in our model architecture we've gone with eigenlayer as the data availability sort of solution so what this means is that our chain sort of will have possibly anywhere from 30 % to 50 % lower costs than any other roll-up out there.

19:32It will also be faster because you don't have to push all of that data onto Ethereum. You can now push it to the data availability layer. And how this is interesting for the token as well is that for this layer as well, for the data availability layer, you need to provide crypto-economic security. And for that security, you'll again be staking the mantle token, the MNT token, which is the sort of one-to-one redone token for the bid token. So this idea of modular architecture is incredibly important in your thesis, at least as I understand it. You mentioned this notion of how roll-ups are done.

20:07Traditionally, it's with zero-knowledge proofs or with optimistic roll-ups. This is a third option, essentially disaggregating this at the architecture layer so that you have different layers doing different things. Can you give us an overview of what those modular layers are in your ecosystem and how you think about the functionality perhaps with a stylized, simplified example? Sure, definitely. So let me explain it. Okay, so in terms of roll-ups, you still have either optimistic roll-ups or zero-knowledge roll-ups, right? And we've seen both of those in the market. So we've gone with the optimistic roll-up stack since the technology has been around for a long period of time.

20:42It's a tried and tested technology. And if you look at the liquidity, which we're playing with, we wanted to go with something which is more tried and tested and sort of has been in the market for a long period of time. So in terms of roll-ups, there is like optimistic roll-ups of ZK roll-ups. But modular architecture essentially sort of talks about the basics of how you want to design the chain in the first place, right? So for example, if you were, so monolithic architecture, which I talked about, is when all the components of a chain are in some sense welded together. So imagine if you build a car, right?

21:12And instead of bolting all the parts together, you weld everything together, right? So the car, you know, everything is welded together. You can run the car, but if you want to change the engine, if you want to change the tires, if you want to change anything about the car, it requires a massive refit, right? And lots and lots of testing before it can be roadworthy, right? But with modular architecture, what you do is that all the different parts of a chain are modules essentially, which you can sort of mix and match. So it's like bolting together parts of a car. And then if you want to change the engine, you just bolt it out, swap out the engine.

21:41If you want to change the tires, you swap those out. If you want to change the body, you swap that out. And this allows you to create like a sort of a vehicle or a car, which you can continue to upgrade with time, right? Like a lot of people do, right? They modify their cars. for different types of use cases. And this is kind of how modular architecture works, where all the parts of a chain are like Lego blocks, and you can add different types of data availability. You can upgrade your chain processing. You can add different types of fraud proofs, whether you want to do optimistic, whether you want to do ZK, whatever have you, right?

22:11So your chain becomes a lot more easier to operate. It becomes easier to test. It becomes easier to upgrade. And the general consensus in the blockchain world is that modular architecture is the way forward. And more and more chains are now being designed in a modular fashion. Hey, everyone, we're going to take another quick break and hear a word from our partners. We'll be right back to the Real Vision Crypto Daily Briefing.

22:38So what are those layers as you see it? And what's the functionality of each one? If you could just give us an example, perhaps with a simple transaction so that people could try and understand and visualize what those layers are, what each one does, and why it's critical to the system? Sure, definitely. So this is interesting, right? So let's walk through a transaction, right? So the user pings a transaction, right? So what happens? So you have a chain, right? The chain is sort of collating all of those transactions. Those transactions essentially are being sort of bunched into blocks, right?