Inside Pantera’s $500M Solana Treasury Play, with Cosmo Jiang, GP at Pantera Capital

0:00 One is that tokens are a new form of capital formation. In other words, a lot of businesses, platforms, they'll never have a New York Stock Exchange-listed equity.

0:10 They'll only ever have a token, and that token is how they align incentives with management teams, with employees, with token holders, or, you know, the equivalent of shareholders, and very uniquely to digital assets, with users.

0:20 Whole new form of organizational incentive, and capitalism is all about the coordination of incentives, and so there's a totally new form of incentive mechanism to create entirely new businesses.

0:30 [on-hold music] Welcome to another episode of 51 Insights, today with Cosmo Young, general partner at Pantera Capital and board observer at Helios. Cosmo, welcome to the show. Thanks, Marc. Thanks for having me.

0:48 Excited to be here. Yeah. Excited too. It's great to have you here. Uh, we have a big topic today, which is digital asset treasury companies, specifically Helios.

0:58 Helios is the latest big Solana treasury companies that you launched with Pantera Capital, Summer Capital. Can you tell us a little bit more about that? Why now?

1:09 Why Pantera takes such a, a big exposure in the Solana treasury? I know you already, uh, invested in Bitmine. Um, just lead us a little bit through that thought process.

1:22 We're fortunate in, in the fact that we were able to be in these digital asset treasuries fairly early on.

1:27 So to give a little bit of my background, I lead investment strategy at the firm and largely lead all of our public markets-facing investments.

1:34 Most of my background's been in a career in long-short equity or at a hedge fund in TradFi. And so it's really with that mindset that we are bringing in...

1:42 trying to bring in the core of quality, fundamental analysis into digital assets. I think that's why my background really lent ourselves to being early in this digital asset treasury trend.

1:54 If you go back, obviously MicroStrategy, Michael Saylor really s- kicked g- really started this all. And then we had MetaPlanet in Japan. But we didn't really see this take off in a large way outside of those two.

2:04 And as an investor, I'd always ask myself, you know, "Does the MicroStrategy business model make sense?" And you know, why-- what, what if we could do something better with that?

2:13 And, and so we had finally gotten to a point where I had really re-underwritten and understood why I think that digital asset treasury, or at the time what we were calling MicroStrategy copycats, really, really could persist.

2:24 And around that same time, this was late March, early April, I was approached by the team at DeFi DevCorp, or what used to be known as Genever, and we took what was then what was a very non-consensus bet at trying to recreate that magic that MicroStrategy s- had, had in the US and trying to recreate that with a Solana, uh, with a Solana-based treasury company.

2:43 At the time, I thought it'd be one and done, and that we'd have... You know, that, that it was extremely non-consensus. No other venture firm was really giving them the time of day. It was not...

2:52 TradFi wasn't yet there yet. And so I just thought, you know, that'd be something that we take a really long shot bet on, but something that I think could have a lot of upside.

2:59 And it turned out that stock market, the stock reaction was very strong, and people really liked that deal.

3:05 The week after that, Cantor, Tether, SoftBank approached me saying, "Hey, we liked what you did with DeFi DevCorp. We're thinking about... We've been thinking about starting a Bitcoin version for a long time.

3:15 Like, do you wanna help us?" And so we came in early and anchored what was became the, now the second-largest Bitcoin digital asset treasury behind MicroStrategy. And at the time, I still thought it'd be two and done.

3:27 But you know, sitting here, uh, after that, after everyone saw the success of those two first deals, it's like everyone started coming flooding in and realizing that this was a real opportunity at the, at the ground floor of a whole new industry.

3:39 And so now, what is now, I guess, almost six months later, I've now taken over 150 pitches.

3:45 You know, we've been fortunate all along the way to be my team or myself being the first or the first few calls for anyone thinking about starting a digital asset treasury. You know, we...

3:54 I'd gotten tired of saying the word digital asset treasury so long, I c- I came up with the term d- digital asset treasury and called them DATS, and that's, you know, clearly taken off and become the no- moniker for it.

4:03 And, uh, and so we've been just fortunate in being, like, really well placed to help and advise all the major ones that have come to pass.

4:11 And by the time that we had a little bit of room for, for, to take a breath, I realized that, wow, we've created so much success for other ecosystems like Bitcoin, like Ethereum. But

4:21 if we go back to our first love, which was really like Solana, you know, DeFi DevCorp and Upexy have both done well, but neither of them really succeeded or scaled to the extent that we thought was really possible with Solana.

4:32 And so we just thought, wow, we've built all this expertise, all this, all this know-how of like exactly all the nuances of what goes well and what doesn't go well.

4:41 Why don't we put, channel all that energy and experience into doing our own and do it for the sake of Solana, but, uh, uh, and, and for the sake of, uh, our investors?

4:49 And so that's why we decided to take the, take the big leap of putting all this effort and really leaning into launching HSDT to the market, which we believe will be the preeminent Solana DAT.

5:00 Y- you mentioned you had a realization after you looked at MicroStrategy that there's a better model of doing that. What was that realization, and what is now better with those treasury company copycats, as you said?

5:14 It's helpful to understand what exactly the DAT model is and what makes it tick, uh, in order to answer that question appropriately. And so what is, what is a, what is a DAT?

5:25 At the end of the day, the business model is trying to maximize your tokens per share, right? Uh, that, like, that's how you maximize shareholder value is by maximizing your tokens per share.

5:34 Um, and so, uh, when I think about what, uh, when I think about what that business looks like, it looks exactly like actually a whole other set of businesses, like banks and insurance companies.

5:44 I started my career, uh, in investment banking covering these what are called balance sheet-heavy financial companies, and all of them also trade on book value, just like a DAT trades on NAV.

5:54 And the reason why some of them trade above book value is because they execute better and c- they can generate yield on their, on their asset base, which they denominate in dollars.

6:02 It's just a Solana digital asset treasury denominates in Solana. In, on a dollar basis, can they grow their book-... dollar book value per share at a higher rate than their cost of capital through generating yield.

6:12 And the yield comes in many forms. It can come through financial engineering. It can come through doing loans.

6:16 And so all that is why JP Morgan trades at two times book, XYZ regional bank trades at less than one times book because of that execution difference and your ability to generate yield.

6:26 And so when you look at what a digital asset treasury is then, it's exactly that, which is how can you generate as much yield as possible on top of your basic Solana per share or your Solana book value?

6:35 And so it does turn out that the primary driver of that yield comes from financial engineering.

6:40 So it's, you know, generating excitement in order to then, uh, uh, in order to then issue capital via common or convertible debt at a premium, monetize your volatility through convertible debt or warrants, and use that to really continue growing your Solana per share in a creative way.

6:56 Uh, at the end of the day, that will likely be 85, 90, 95% of the total value creation out of that is all about how well you use that capital markets flywheel, that financial engineering.

7:06 The second piece, which is important, is how do you drive... Can you find base sources of yield outside of financial engineering? And I think that's what makes Solana very special relative to something like Bitcoin.

7:17 Solana is a productive asset. It's a generalized smart contract programming platform on which other people can build and, uh, on... And in respo- in return, Solana's able to capture fees.

7:28 And by capturing fees, it generates value for its token holders.

7:30 And so that's why when you stake something like Solana, you can generate yield, not just from nominal inflation, but also from real fundamental value being created on the chain. And so that's very exciting.

7:40 This ability to then go use your Solana, generate this high single digit staking yield or, or DeFi yield to really augment that core, that core financial engineering engine can be very powerful and very additive to what MicroStrategy was already doing.

7:54 The second is really around what DATS can really be for a, for an ecosystem.

7:59 One of the most import- If you, if you go back to, like, our ultimate job is to maximize shareholder value, and, uh, what goes into maximizing shareholder value?

8:05 Well, mission A is making sure that the token has, has good fundamental value, that people understand why the token has value.

8:12 And so our ability to advocate for Solana and really make a difference in telling the Solana story is so much higher than it is for something like Bitcoin, which is already very mainstream and well-known.

8:22 And so we plan to do that very aggressively as well. And why did you launch that on Solana and not on Ethereum, for example?

8:29 So there are a couple reasons why we think Solana is a more interesting opportunity now than it, it is for Ethereum.

8:35 The first is that just from a basic market structure standpoint, Pantera's been a part of really bringing to life the, the, the leading Ethereum treasury strategies.

8:43 I was speaking with Joe Lubin in ConsenSys in the very early days as they were thinking about...

8:48 They also saw the success of DFTV and CEP, the deals that we did, and asked us to help them think about how, how to really construct their own data, and so we were a part of bringing Sharplink to life.

8:56 And then soon thereafter, you know, we'd been knowing Tom Lee for some time, and, uh, he approached us saying that, "Hey, we really wanna do something like this for Ethereum."

9:04 And so we helped work together with Tom Lee and Mosaics to bring Bitmine to life. Uh, and you know, all the kudos goes to Sharplink and Bitmine for continuing the execution and doing all the hard work thereafter.

9:15 But we ha- we were able to be there in the early days and really help, really help jumpstart, uh, their creation, and I think both of them...

9:21 Like, if you think of Ethereum game, the Ethereum game has really been won out by those large guys.

9:25 I think in the end of the day, there will be two or three very large scale DAT players across each of the large cap assets, and it seems like that's,

9:34 that people are figuring out who that is for Bitcoin, but it's probably some subset of the players that are already out there. One is obviously MicroStrategy.

9:41 And then for Ethereum, it does look like it's Bitmine and then Sharplink.

9:44 And so there isn't really an opportunity, or I don't think there's a real value creation opportunity for us to bring something different to the story when it comes to ETH.

9:51 But whereas with Solana, there is no greater than $1 billion DAT yet, and so we had a real opportunity to tell something new and bring something of scale to life.

9:59 Um, and so that white space still existed, and I think it still does exist, and there's a real opportunity for someone like HSTT to tell the story and really advocate for Solana and grow shareholder value in a really special way.

10:10 [laughs] The second reason why we chose Solana over Ethereum is it goes back to, you know, fundamentally what is our job at Pantera is to find digital assets that we believe in and want to invest in for the long term.

10:22 Now, we've owned Ethereum for a long time, and we really respect all the work and the ecosystem that's built around Ethereum.

10:28 But at this, today, at this valuation, at this juncture in history, we believe Solana is just such an incredibly compelling fundamental story that has not yet had an opportunity to tell that story to Tradfi yet.

10:39 If you think about why that is, it gives us back to, like, what is the technology, the adoption, and then the fundamental value creation is leading in every single way.

10:49 From a technology perspective, Solana is very simply faster, cheaper, more accessible.

10:55 To a lo- to a lot of crypto people, that's very obvious, but I think when, when I say that, it just reminds me a lot of my days as a consumer internet analyst.

11:02 I spent most of my career investing in equities and investing in internet stocks. One of the biggest stocks of my career was Amazon, right?

11:08 And what made Amazon really special, Jeff Bezos said it very simply, which is there's this holy trinity of consumer demands that they, that they, that will never change, and is that consumers will always want cheaper, they'll always want faster, and they'll al- they'll always want more convenience.

11:23 And that's exactly what Solana is. And so it's that very clarity of message, that clarity of vision, that makes it so obvious to me why I can have a high conviction bet and why Solana will succeed.

11:34 The second is around just basic fundamentals.

11:36 If you look at, at any metric, whether that's incremental developer, new developers, incremental users, incremental transactions, or incremental growth in fees, very clearly Solana has taken the lion's share of all incremental growth in across digital assets over the last two years.

11:51 And so it's crushing it in terms of market share growth. And then how that translates into actual value creation is I mean, Solana generates $3 billion of annualized free cash flow. That's pretty incredible.

12:01 That's actually a very large business in, quote-unquote, the real world as well, and it only trades at a $120 billion valuation.

12:08 And so 40 times run rate, run rate earnings for something that's growing three X every year is very cheap relative to its growth for any tech investor.

12:17 Uh, and then if you look at it relative to other assets, I mean, Solana's five percent of Bitcoin's market cap, it's twenty percent of ET- ETH's market cap, even though it's leading in all these other fundamental metrics.

12:26 Man, it just makes me so excited that the Solana story is clearly misunderstood or, and, and not well told enough, and we're very excited to do that now.

12:34 Yeah, I would love to dive a little bit deeper into the Solana story, uh, later in the show as well. Just to, um, go back again to the treasury companies and a little bit into the technicals.

12:44 You, you mentioned the flywheel, obviously, which is really important for those dots to generate additional return and yield. And my question there is, one of the, the critical

12:57 metrics is MNAV, market to net asset value, and many people are speaking about this all the time. What are-- what's the MNAV that those companies are trading at? And what happens if the MNAV falls below one?

13:11 What happens if we enter another bear market and, and MNAVs compress? How do you a-assess that metric? MNAV is one of the most important value metrics for a DAT.

13:21 This is very similar to how price to book value is, is very, is the most important valuation metric for a financial institution like a bank or an insurance company. Uh, and so everything should be judged based...

13:33 Your, your goal as a company, just like it is for a tech stock is to grow your earnings per share, for a bank or insurance company, it's to grow your book value per share, and for a DAT, it's to grow your NAV per share.

13:45 And, and therefore, your MNAV or your multiple of NAV, your market cap to NAV ratio is really important 'cause that's a signal of how fast the market thinks you will grow, and it also gives you ammunition to grow faster.

13:56 Just like, you know, if you, if a company trades at a high price to earnings ratio or a bank trades at a high price to book ratio, that gives them more ammunition to grow faster, and it also means the, the, the investor universe thinks they can grow faster.

14:09 Uh, and so that's why MNAV is so important because it's an indicator of how fast the market thinks you can grow, and it also is a limiter on how much ammunition you have to grow.

14:17 Now, the-- when the converse is also true, which is that if you do trade below one times MNAV, that means the market doesn't have a lot of confidence in your ability to grow, and the market doesn't have a lot of confidence, and that you cannot then go do all these very accretive capital raising strategies to grow your NAV per share.

14:33 Because so much of the, of the value of a DAT comes from the financial engineering, it requires a high MNAV multiple because that's what drives the financial engineering.

14:42 And how do you see this play out if we enter another bear cycle and those MNAVs compress?

14:48 You should expect that there will be cycles for this, for these types of businesses, just like there are for any types of businesses. And I, I wanna be very clear, like nothing is number go up forever.

14:56 You wanna find people that are good executors, and you wanna fi-find people that know how to manage a capital structure appropriately to live through bear cycles.

15:04 Uh, this is natural for any type of business, and so it is also natural for a digital asset treasury.

15:09 It's, it's pretty clear to me over time that, you know, the primary driver of differentiation for a, for a DAT is your ability to, uh, your ability to scale, your ability to do marketing, your ability to tap the capital, capital markets, and that like most other industries, it will likely evolve into an oligopolistic market structure.

15:26 So that means there will be two, maybe three large scale DATs that are able to drive a cost, a return above their cost of capital and therefore deserve a MNAV multiple above one.

15:36 And then the vast majority of everyone else will likely not be able to drive a return above their cost of capital and therefore trade at, at one times or maybe even slightly below one times MNAV.

15:44 And I think that's very natural, very normal, and you should expect that from any normal, healthy industry. We're already starting to see that play out to some extent in the market.

15:52 The natural reaction to that is, like during a bear market, certainly MNAV mul-- just like pri-- PE multiples compress, so will MNAV multiples.

15:59 And we'd expect that, you know, if that happens, HSDT will be very aggressive about trying to maximize our shareholder value, right?

16:07 And so if your MNAV multiple is above one times, you can issue stock at a premium in order to grow your MNAV per share.

16:12 If the stock trades below one times, you can buy back your stock to grow your MNAV per sh- grow, grow your NAV per share. And so we think the best capital allocators will be most focused on maximizing shareholder value.

16:24 That's what HSDT is about.

16:26 It's all about maximizing shareholder value, and we plan to use all, all the capital markets tools available to us, whether our MNAV is above one or below one, we'll always have an opportunity to grow our MNAV per share.

16:37 Most of the DOT companies that came to market until now used so-called pipe structure to raise their capital. You used a pipe structure, but you also issued warrants to raise your capital.

16:50 Is there a specific reason why you used a, a mix of those two instruments?

16:55 If we go back to all the experience that we've been able to build, I've been able to see so many deals and pick and choose exactly what's worked and the good parts of everything. I wanna be very clear.

17:05 Every, all of human history is about learning from, from what other people have done and building on it, and that's really what we're trying to do with HSDT.

17:12 And so one of the really elegant structures that came up as been newer to the market is the addition of stapled warrants to an additional pi- to an initial pipe.

17:20 The reason why that's really special is because, you know, we raised a five hundred million dollar pipe or over a five hundred million dollar pipe.

17:26 By adding stapled warrants, effectively what that, what that means is that all our investors also have the opportunity to buy more stock if the stock goes up more than fifty percent.

17:35 And so the strike price on the warrants is a, is fifty percent above. What's really nice is that all these c- all these warrants are cash exercise.

17:42 And so we have now almost a built-in second slug of capital that's ready to come in if we do succeed at what we're trying to do.

17:49 In, in other words, you know, if the goal of the DAT is to continue to try to raise capital in a, in a share accretive way, we already, we already have that pre-built into our deal.

17:56 We already have it pre-built into our company.

17:58 That second raise of capital of seven hundred and fifty million dollars of capital can come in at one and a half times NAV, which is accretive for shareholders, it's accretive for the original pipe investors Uh, because it only gets called if they're in the money.

18:10 So we just think it's a really, really elegant win-win for everyone to help us accelerate our growth, uh, starting with a, starting with a more modest and r-right-sized base.

18:19 Common theme that you hear about Solana, particularly from traditional investors who start to invest in, in different layer ones, they look at inflation rates and they see that Bitcoin has no inflation, Ethereum has a very low inflation or a negative inflation, and Solana has a much higher inflation.

18:38 How do you deal with that question? So what I try to do is I try to translate everything back to Tradfi terms.

18:44 I think a lot of crypto people think that they've invented something new, when in reality they've actually just renamed something that's always existed in, in the Tradfi markets.

18:52 And so when people talk about token inflation, really they're talking about what is the equivalent of stock-based compensation in, or equity-based compensation in, in traditional equities.

19:00 And so when I think about it in that context, look, the biggest, best tech companies that are growing fast, they want to reward people that are adding value to their, their business, which in this case is employees.

19:12 They wanna reward them with stock. They wanna reward them with, quote-unquote, inflation.

19:16 Just similarly, with ecosystems like in Ethereum or Solana, it is really important that we are rewarding the, the ecosystem participants that are adding value to the ecosystem, in this case through staking.

19:26 We are rewarding them with additional equity-based compensation or what people in crypto like to call token inflation. So we think that's a really healthy and important part of any growing ecosystem.

19:36 Now, there's, there is sometimes you can... Just like you can pay out too much stock-based comp, you can also pay out too much inflation. Just like you pay... You can be too...

19:44 Just like in, in an equity, you can pay out too little stock-based comp, you can also pay out too little inflation. And so it's all about striking the right balance.

19:50 We do think that for Solana there are a lot-- there have been many, uh, proposals out there to lower the inflation rate, which we would be supportive of.

19:57 We do think Solana's at a point in its, in its, uh, history where it is very well developed, and so there, there may not be as much reason to, to, to emit as much inflation.

20:07 That said, as someone who is an active participant as a staker in the ecosystem, HSDT is a beneficiary of a high inflation ecosystem because we are adding value to Solana by staking, by participating in DeFi, and we'll continue to benefit from that.

20:20 And so I have to wear both hats, one of which is I wanna maximize HSDT shareholder value, and we do think having... Solana having a high staking yield is very attractive for a lot of investors, especially into HSDT.

20:32 The flip side is the other mission of HSDT to make sure that Solana as an underlying token maximizes its value and goes up.

20:38 And so we think from that perspective, lowering the inflation rate would, would help Solana as the underlying asset grow faster.

20:45 What is a realistic yield that you think you will be able to achieve when you use Solana for staking DeFi markets? What do you think is realistic here?

20:55 We think shooting for high single digit is what makes the most sense.

20:59 I think something that a lot of people don't understand, uh, when they t- when they think about that, and this is people coming from a, from purely crypto native world, right? Pantera, we come from...

21:07 And I, myself, we come from a, a very solid Tradfi understanding, is that once you're in the real world and you're an equity company, like things like basic things like friction, transaction friction and taxes actually really matter.

21:18 And so as much as I want to deploy into what are the highest yield potential, which I do, we are very much focusing on maximizing net income and net value per share on an after-tax basis.

21:30 And so from that basis, there is a higher hurdle for us to participate in DeFi, right? You have to, you have to beat the post-tax hurdle of us doing passive staking.

21:37 Now, that's very interesting, and we think there are opportunities to do that, and so we're going to do that. In the near term, we do think that will translate into what is a high single digit yield on a blended basis.

21:46 Another thing that's important to point out is that because Pantera is one of the lo- one of the large players in the Solana ecosystem, we have very differentiated economics with any of our staking providers, where in many cases they are operating at a gross margin negative basis on our behalf because they want...

22:02 they v-value our partnership and because perhaps the staking business isn't where they make the most of their money, right? They, they're solving for a stake weighted QOS.

22:09 They're solving for other things to make their application better. And so as a result, we have...

22:15 we are able to receive industry-leading yields, which we obviously make sure happens on, on behalf of HSDT, which is much higher than whatever headline yields that people see, especially 'cause we pay effectively zero or less than zero, uh, commissions.

22:27 Um, and, and so that's been very exciting, uh, something that we're passing along. Uh, and that enables us to continue to participate in staking for longer than perhaps other people will choose to. Yeah. All right.

22:38 Uh, I would love to move over a little bit to, uh, the Solana thesis.

22:43 Uh, I know you've been an investor in Solana, and instead of talking now about speed and performance and costs, which is obviously a, a, a great value proposition of Solana, help us to debunk a little bit what are those misconceptions that you see in the market right now, particularly from institutional investors when they think about Solana and Solana as part of the broader digital asset ecosystem?

23:06 When I talk to institutional investors, I think there are two fundamental misunderstandings about digital assets generally, and then, you know, we can talk about Solana specifically. Mm-hmm.

23:14 But generally, I think there are two major misunderstandings. One is that tokens are a new form of capital formation.

23:22 In other words, a lot of businesses, platforms, they'll never have a New York Stock Exchange-listed equity. They'll only ever have a token.

23:30 And that token is how they align incentives with management teams, with employees, with token holders or, you know, the equivalent of shareholders, and very uniquely to digital assets, with users.

23:40 That's what's so exciting to me about digital assets and tokens.

23:43 It's a whole new form of organizational incentives, and capitalism is all about the coordination of incentives, and so there's a totally new form of incentive mechanism to create entirely new businesses.

23:53 And so a lot of people still think of tokens as currencies, as commodities, when in reality these are actually...

23:59 Tokens come in many forms, but the most important form and the thing that I think will persist for the longest outside of Bitcoin are these tokens that represent ownership units in cash flow-producing protocols.

24:12 And now one of the most, one of the most interesting-- So that's one big misunderstanding, that tokens should be valued as cash flow producing like protocols or, you know, very similar to how equities are, are valued.

24:23 The, the other large misunderstanding is that these are all very early stage investments, right? The, the nature of crypto is that in order to have a live product, you actually have to go public.

24:33 Imagine being a series A, series B company in classic venture equity and going public. That is exactly what every single crypto protocol has to do.

24:40 And so the, the end result is that, is that, you know, obviously there's gonna be a lot of volatility because these are venture stage companies that have to be public.

24:48 Uh, if you were to go to a startup, and I'm sure you can, you can, uh, you know, sympathize with this, Marc, is like some days when you're an entrepreneur at a startup, you feel like you're on top of the world, you're killing it.

24:56 The next day you might feel like you're going out of business. And so that natural emotional volatility is, is apparent for any startup.

25:03 It just so happens that in traditional equities, you don't see that 'cause there, there's, there's no public price, right? You don't see that day-by-day, day-to-day volatility of life or death.

25:12 But in crypto, because it is public very early on, you do see that high amount of volatility because you just get these early stage investment opportunities, uh, that are... have a public mark.

25:22 So those are the two major misunderstandings, I think, of that investors need to grapple with when they first enter the space.

25:29 As it relates to Solana, you know, the first is that a lot of people still think of Solana as a commodity when in reality it is this massively cash flow producing asset platform that delivers value, right?

25:40 I don't think enough people realize that Solana as an ecosystem, all the applications in Solana are doing over ten billion dollars of revenue annualized. Like, that is incredible.

25:49 That is a very thriving software ecosystem platform. And in return, Solana itself collects three billion dollars of annualized free cash flow. And that, that is like free cash flow that goes back to token holders.

26:01 I think that's very exciting. You know, when you talk to anyone, like, man, a three billion dollar, three billion dollar revenue business, let alone free cash flow, is a massive, massive business in the real world.

26:09 And so not enough people realize that that is what's going on with Solana, that it's not a simple, like, commodity currency. It's actually this really, really valuable piece of software that is tradable and ownable.

26:20 The second, uh, and, and the second is that it's still very early stage, and so that it deserves to trade at a very high multiple.

26:26 You look at something like Solana trading at a hundred and twenty billion, that might initially, uh, give some people sticker shock. But in reality, it, it's...

26:33 You know, we're talking about a, an asset that's growing so tremendously year over year, that's going from what is tens of millions us-users today to likely billions over time, and so still has this hundred X in future growth across all these application services, whether that's DeFi, whether that's DePIN, whether that's AI, whether that's real world assets, whether that's stable coins.

26:53 And so all this is coming together and really being built on Solana and can really drive the picture of this three billion dollars free cash flow asset growing to tens of billion dollars of free cash flow over time.

27:02 That is an extremely exciting story for anyone from traditional financial institutions or trad, tradfi, uh, investment, uh, firms.

27:10 That is a story when I talk to all my friends who are partners at Tiger and Coatue and Lone Pine and all these funds. You know, we all grew up together. We all talk stocks together.

27:19 When I talk ab-about Solana in that way, they get so pumped up and so excited, and they just don't have access to it.

27:24 And so that's why HSDT, what we're bringing is really exciting, is HSDT is making Solana accessible in a form while also giving them the benefit of the DAT structure.

27:33 And so that's why we think HSDT is really well positioned as an asset to, to attract, to attract demand in the market.

27:40 Question I also often comment about is that Ethereum has about ten X the stablecoin supply than on Solana. It has about also ten X the total value locked in DeFi than Solana right now. Why do you think this is the case?

27:57 So there's a lot of power to network effects and early scale advantages.

28:01 But the most im-- And so Ethereum certainly as the first smart contract platform that gained broad adoption for sure has a first mover advantage where a lot of the TVL, a lot of the stablecoin, uh, a lot of stablecoin issuance has happened on the Ethereum chain over the last few years.

28:16 And certainly during the last cycle, that was the chain, uh, the only really scale chain that people could build on. Fast-forward to today, if you think we are only at what is...

28:26 let's call it tens of millions of users a day, daily active users of crypto, and you believe that we're going to billions over time, then your market share today almost has... is totally inconsequential, right?

28:35 If you're only one percent penetrated, it almost doesn't matter where everyone's starting. Everyone's basically starting at zero if, if someone's at one and someone's at point five, right?

28:42 And your, and your goal is to get to a hundred. And so from that perspective, it's like, yes, Ethereum is leading, and we think Ethereum will be a very important platform on a go-forward basis.

28:51 But Solana's basically neck and neck on any metric that anyone in the real world cares about, which is, like, billions of users. And so from that perspective, it's very clear to us that both are very competitive.

29:01 And then from an incremental growth perspective, so what that means is, as a growth investor, you care a lot about what your starting point is, but what you care even more about is how much of the future market share that you're taking as measured by, you know, if the market grows from a million dollars to two million dollars, how much of that in- additional one million dollars did you take?

29:19 And on that basis, Solana is very clearly crushing the competition on incremental market share growth.

29:24 And so if you take that, if you take that asymptote to where it naturally goes, it's pretty clear that Solana will be a very large player as we go from what is we're only one percent penetrated of what we think the total potential for crypto is.

29:36 Mm-hmm. Twenty twenty-five was the rise of corporate layer ones. We saw, uh, Stripe launching its own chain. We saw, uh, Circle launching its own, own chain.

29:45 In the context of public permissionless blockchains like Solana or Ethereum and credible neutrality and trust, how do you see the rise of those layer ones, and, and do you think that's gonna be a threat for Solana, or how do you see this play out over the long term?

30:04 I believe we're gonna live in a multi-chain world in the future.

30:06 Ultimately, if I think about starting from what will be the optimal experience and building backwards from there, the optimal experience of the future will be everyone is using blockchain rails in the background, but none of us know what blockchain we're using.

30:19 And I think that's ultimately where we end up heading. I think five years from now, every single financial application on your phone will run on blockchain rails.

30:26 You just won't know it, and you won't feel it, and that'll be great. When you think about it from that basis then, it almost doesn't matter how many chains there are. There can be multiple chains that succeed.

30:34 I do think there are real network effects, and scale effects, and moats that do occur with these networks because they are flywheel businesses.

30:41 And so there won't be infinite chains, but there will be multiple chains, and everyone has their own specific right to win.

30:46 I think in the permissionless open, open world, Ethereum and Solana w- are clearly in the lead and are well positioned to be the leaders as we look forward 5, 10 years from now.

30:56 Anyone from a traditional institution with a very large built-in distribution base, whether that's Stripe with all its customers, whether that's Visa, wheth- or someone else, for sure they have a right to win as well because they already have this built-in distribution.

31:08 And so we're, we're likely to see a multi-chain world with multiple winners, and frankly, I think it's all very net positive for everyone.

31:14 If we, if we go back to we're only tens of millions of active users today going to billions over time, the market, the, the field is wide open for everyone to grow, uh, tremendously together.

31:23 Uh, Cosmo, we're almost at the end of the show. I would like to look a little bit into the future over the next months and year, and also at this, uh, bull cycle that we're in right now.

31:32 What are some of the catalysts that you're looking at, things you find interesting or priorities that are your, on your agenda?

31:41 So one of the most important things will be the opening up, the continued opening up of US regulatory environment. Uh, this, this is both, uh, on a policy side as well as on the regulatory front.

31:51 We've already seen such a sea change from this time last year, which has been really exciting.

31:56 We saw the stablecoin legislation go through Congress and get signed into law, and then I believe soon we are going to see market structure legisl- legislation as soon as late this year get, uh, fully passed and signed into law.

32:07 The reason why that is so important is it, because it'll make tokens fully accessible to US investors and US companies.

32:15 Uh, and so, you know, up until then, there's still a little bit of lack of clarity around how people can interact with tokens, how they're regulated, but with market structure legislation, the gates will be open for all, uh, token issuers and token c- and, and developer teams that really, as long as they abide by very common sense rules, can innovate now in a very open way, which is very exciting.

32:34 And so market structure legislation will be this huge unleashing of innovation for the crypto industry, which is likely coming late this year, so only in a few months.

32:43 On the, on the regulatory front, uh, which, you know, clearly matches and follows policy, the SEC has already made many strides in talking about how they want to really open up DeFi innovation and open up, uh, token access for investors.

32:57 And so w- I'm looking forward to, you know, the launch of crypto ETFs, including a likely Solana ETF within weeks of today, which I think will be very exciting, uh, as well as the launch of multi-asset ETFs and all these other products, uh, that hopefully the SEC will, as the guide that they're starting to lay out, will allow to come into, into pass.

33:14 And the second is on the DeFi safe harbor front.

33:16 Today, a lot of institutions are afraid to interact with DeFi because of the lack of regulatory clarity, but it does sound like the SEC is moving toward creating DeFi safe harbors so that institutions can start to interact and, and deliver all the benefits that exist in DeFi to their customers, which I think will unlock a huge wave of productivity and innovation for our economy.

33:35 And so both those things I think are very exciting, that are... I think have massive long-term benefits but are happening actually in the very near term, and, and so that's really exciting. Mm-hmm.

33:44 Exciting for DeFi, exciting for crypto, and especially exciting for HSDT, Solana, and the Solana ecosystem. Cosmo, last one.

33:52 When you talk to your TradFi friends, are there any non-obvious projects or companies that you're looking at that you're super excited about right now?

34:03 I think the one thing that gets people the most a- amped up when I talk to institutions, it's always the same two questions, which are totally valid questions. One is, where are the use cases?

34:11 And two, uh, like, uh, you know, sh- where's the profitability?

34:15 And when you think about that, it's like the best, uh, examples of that, of, like, real world use cases that are delivering incremental value wide blockchain are Depin applications.

34:28 And so I spend a lot of my time at the intersection of Depin, at the intersection of AI and blockchain, because these are protocols that are actually using blockchain in a really unique way to deliver a service that traditional companies cannot without blockchain incentives.

34:41 And that is what gets people excited. That's what helps people realize that blockchain is a necessary innovation, and ultimately what, that, that kind of innovation is what will drive our future growth in the industry.

34:51 All right. Cosmo, thanks so much for coming on the show. It was a great pleasure to have you here. Where can people learn more about you? Yeah, definitely feel free to visit us, HSDT.

35:01 We're on, we're on, at Twitter, and you can find our, you can find our website if you search Helios, Helios HSDT or HSDT Solana. And then I'm, I'm easily searchable on Twitter.

35:10 It's your first underscore last name, not very pseudonymous.

35:13 And so yeah, thank you so much, Mark, for the opportunity to talk about HSDT, why we're so excited about Solana and the dapp that we're building, and the potential for maximizing shareholder returns at HSDT. Yeah.

35:25 Thank you, Cosmo, for coming. I feel like there would be so much more to talk about, blockchain and AI, Depin, a lot of different topics. Thanks for coming and all the best with Helium. Awesome. Thanks, Mark.

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