Delphi Digital


Michael is a Research Analyst at Delphi. He focuses on all things markets and previously worked at a macro fund and CEX.

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"Worldcoin’s userbase has reached a critical mass to attract organic partners"

metcalf’s law has to start somewhere and DRiP is a vote of confidence in worldcoin’s distribution and tech

obviously an integration with facebook would be better but that’s not going to happen anytime soon. worldcoin needs to scale first

my view is that worldID will be adopted by crypto protocols first bc the sybil problem is more acute in crypto bc of the inherent financialization of the space

the tech giants have no magical solution to PoP. the most innovation I’ve seen on captchas/bot detection has come from discord. but even that will be inevitably broken by advanced AI

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"Worldcoin has one of the largest user bases in crypt"

my thesis is that worldcoin is the clear leader in the decentralized ID space today. whether it “will be” the leader tomorrow is impossible to know

it’s possible to be bullish on a project in the long term but believe that buying a token immediately following a 4x and right before unlocks start is probably not a good idea

and fwiw at ~$90B, I would not describe WLD’s FDV as “peanuts.” esp since most is still locked supply

so the discrepancy b/w office hours and the report is mostly a timing thing

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"At its core, Dialect is a bet that text is the universal interface. It’s a bet that the current paradigm on LLMs continues its inexorable rise."

I think over a long enough time horizon the design will cater to both

If these bots indeed succeed at reducing complexity and improving UX then they should be broadly popular

In terms of GTM, I would target crypto natives first. Iterate the product w power users and establish PMF before trying to attract new-to-crypto people

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"tepid buy pressure"

im not sure the vast majority of participants will get the airdrop, or at least not a material amount

over the last 6 months there's been a lot of inflows/bridging to solana. some of these new entrants prob will not get huge airdrops and may feel underexposed as a result

re: JUP beta, it's a good question and it forms the main bear case for JUP's forward returns imo. if JUP launches close to a $10B FDV it prob doesn't have that much upside left. i mean, even a 3-5x off a $10B FDV base would be insane

so ppl may look at memecoins, NFTs and even SOL itself as higher beta plays on JUP

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"burner wallet"

the way i think about burner wallets is they are hot wallets that you can afford to make a mistake with. so, while its not great UX, ideal opsec is to probably use a different hot wallet for every defi protocol, esp the newer ones that will inevitably pop up fast and furious once this bull really gets going

to give a solana example, as that was the section referenced:

  • download the phantom wallet app
  • create account / wallet labeled "MARGINFI" - use account for all marginfi activites
  • create account / wallet labeled "DRIFT" - use account for all drift activities
  • create account / wallet labeled "TENSOR" - use account for all tensor activities
  • etc...

that way, if you click a malicious marginfi link (note: there was just one the other day that was the first link that popped up on google search) you only use the $ that you had on marginfi and not the money you had on drift and everywhere else

obv this isn't some fool proof strategy, there's no silver bullet here. but in the context of "trying brand new defi apps" its a good mitigate to the most common skems

hope that was helpful. out of curiousity, how do you think about onchain opsec?

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"This will likely drive them towards more cost-effective, monolithic blockchains like Solana and Avalanche"

the main narrative i've heard from the avax community is focused on RWAs. they seem to be really pushing that angle, which obv has giga-sized TAM but is still pretty nascent (i.e. no regulation so no institution ready to full send).

furthermore, it's unclear to me why a developer would pick avax over an L2 like ARB/OP or over something like Monad when it comes out

avax's 'value prop' just seems muddy and non-obvious to me, but admittedly, i haven't been following the eco super closely recently

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"This will likely drive them towards more cost-effective, monolithic blockchains like Solana and Avalanche"

agreed, i personally do not consider avax to be cost-effective. its lack of parallelization is a big issue.

i've always been biased solana > avax bc solana is an end-to-end rewrite of how a blockchain works vs avax, which is kinda just an incremental improvement upon the severely limited evm. tech stack.

great questions

i'll start with the last one first. DePIN has coalesced around Solana bc it's an application that requires a lotta stuff onchain. for example, helium needed to mint ~1 million NFTs on Solana to represent its hotspots. other DePIN projects require a lotta onchain txns. either way, DePIN requires a lotta "onchain stuff."

ethereum and other networks simply cannot handle a lotta onchain stuff at a reasonable cost. things get too expensive and projects become uneconomical. so, the fundamental reason why DePIN has chosen Solana is bc it's the only chain that can handle its high demands.

important to note: Solana is the only chain right now that can handle these demands. who knows, maybe 10 vitalik blog posts from now ethereum will be able to. or maybe sui / some other next-gen L1 will be able to, idk. but i think it's safe to say that for right now, solana is the only chain that can service a lotta onchain stuff at a reasonable cost.

micropayments are no different from DePIN in that they require a lotta stuff onchain at ultra-low (basically zero) cost. when you're paying someone 25c, literally every cent you pay in fees impairs the whole experience.

to date, there has been no competition in micropayments bc they didn't exist. in tradfi, there is simply no way to pay 25c for something online. no one will process your txn bc no one will make money off it. you need to build an entirely new tech stack to handle payments that small. blockchains have done that, but even blockchains are kinda expensive.

most blockchains (bitcoin, ethereum, stellar, etc) have been too expensive for micropayments. solana is probably the closest chain to free. but "almost free" isn't really good enough bc ppl are so used to everything being free in web2. you don't have to pay a fee to Venmo your friend, for instance.

So Code has taken the same approach as other Solana apps (drip, dialect) and subsidized all their user fees. everything is free! obviously, there is a cost associated for the code team, but their bet is that "free" is way more attractive to normies than "almost free."

another decision code made with normie mainstream adoption in mind was to build its sequencer / L2. In Web2, things always work. Have you ever sent a Venmo and it "failed"? I personally haven't. code believes that to go mainstream, micropayments must be predictably instant. so, while Solana is fast, it's not instant. you still have to wait a few seconds or longer for a txn to confirm. code sees this as an anxiety-inducing turnoff for normies and built its L2 to address this. code's L2 is able to instantly confirm txns thanks to some really cutting-edge tech the team built (durable nonces + timelock program).

so to answer your question, code's edge over the competition is the fact that it chewed glass for 2+ years building this L2 and all its associated tech. another team could do the same or even fork code (it's all open source), but it's unlikely they'd be able to ship as fast as the team. also, it's unlikely micropayments would work on ethereum / other chains right now bc they are too expensive (same reason as depin)

I hope this answers your Qs! btw, I'd highly recommend checking out Code's docs if you're interested in learning more on the technical side; they are super thorough.

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great point. KIN's liquidity is a bit of a double-edged sword depending on how you look at it (similar to the rest of the project i guess lol)

to start with the pros, there's low to non-existent onchain liquidity, at least if you want to move KIN in size. for kin supporters, this is seen as a feature bc it means the token is easily susceptible to upward buy pressure - it doesn't take many dollars to pump vs say a larger more liquid token like SOL

but this dynamic also works to the downside and there's no real liquidity backdrop, so the kin price could plunge just as quickly as it pumped. this is where the kin critics would probably call its low liquidity a bug, not a feature

how is KIN a 50M mkt cap

i'd assume a lot of KIN is held offline in wallets, CEXs, etc. fwiw, this isn't unusual, especially on solana. in our ghosts of cycles past report we looked at this issue w/r/t LSTs. solana has a high stake rate but super low liquid stake rate. there are several factors at play here and i'd guess the drivers behind solana's low LST adoption and low KIN onchain liquidity are actually pretty similar. namely, there's still not much to do on solana. there aren't many big liquid tokens yet and liquidity is bad for pretty much everything (at least compared to eth defi). also, ppl still worry about network downtime

so i'd guess a lotta ppl are just opting to keep their LSTs/KIN in a wallet /CEX/etc bc its safer from a security perspective, but also bc there's limited upside w/r/t "what can i do with it onchain." notably, i think this dynamic will change quickly with all these upcoming airdrops and formal LM programs, but we shall see

the last thing to consider is KIN had a long winding road to become an SPL token. it went from ETH -> stellar -> forked stellar -> solana. i sometimes wonder how many ppl had a few 100 bucks worth of kin and just said "screw it" after the third migration. so i'd bet that at least a small chunk of its mkt cap is prob tokens that have been lost/forgotten, but that's just speculation on my part

the taxation point is well said and i totally agree - it's very under-discussed across crypto. i'd guess the reason is bc no one has a great answer on how to solve it lol. on some level, the whole space is in limbo right now, awaiting regulatory clarity. so yea, the tax part makes it difficult to see any -- not just kin -- but any crypto token become a "means of payment." rip to all the eth / sol maxis saying their favored token is the "future of internet payments" ...

that said, I'm personally optimistic and think this is a solvable problem

  1. regulators could actually give us regulatory clarity. this would be obv be yuge! but I'm not counting on it

  2. tax solutions can improve and make onchain UX better and less scary from a tax perspective. I'm more bullish on this one in the short term, but admittedly, we still have a ways to go here

on your second point, i tend to agree. I've gone back and forth on code's decision to use kin. obviously, it's super risky and could easily fail. it also adds complexity, esp for normie/non-crypto ppl. but on the other hand, i think the pros and the benefits outweigh the cons and downsides. like there's a reason venmo / cash app have a virtual monopoly on payments -- it's bc it's really f-ing hard to build a 10x better version of them and also, even if you do, it's damn near impossible to bootstrap a network to compete with them

the switching costs of leaving venmo/cash app are super high. no one wants to be the guy at dinner w friends that's like "well, does anyone use zelle." no one likes that guy. so on some level, payments is just a network effect and i think to date crypto has shown that building a network around free floating tokens (btc, eth, sol, etc) is possible. and while a lotta ppl use stables, i wouldn't say they have the same network / community as free-floating tokens. so, while I'm not sure the kin experiment will ultimately work, i think i agree with the code team's calculated bet on it

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on the first question, that's a fair concern and, frankly, a pain point that everyone in crypto deals with. I don't know about you, but I've yet to walk into a coffee shop and pay for a cup of joe in BTC/ETH/USDC/etc -- we just aren't there yet. Hopefully, we get there one day, but we aren't there yet. merchants still want good ole USD.

code's bet on KIN -- as opposed to stables -- is guided by the fact that while stables have found PMF within crypto for moving value onchain -- trading, transfers, etc -- they've yet to find PMF IRL. there are no everyday stores that I'm aware of accepting USDC.

so, to answer your first question directly, we'll 'know' whether people are using code by looking at the application layer built on top. it's simple - are devs integrating code's SDK and leveraging micropayments or not?

on the second point, that's a pretty serious accusation, given the fact that chai was an outright fraud. the sec found that chai did not use terra at all for payments. rather, they replicated chai payments on terra to make it appear as tho they were occurring onchain, when, in fact, chai payments were made via traditional rails. as of today, code's entire tech stack is open source and all the txns settle on solana, which anyone can independently verify. also, unlike luna/ust/chai there is no peg or crazy mechanism. code uses KIN and only KIN as the base currency.

on the last point, if Alice sends 100 KIN to Bob = Alice -100 KIN and Bob + 100 KIN.

there's no currency conversions occurring in between like chai, or crazy peg mechanism like UST.  so yes, the price of KIN can go up and down -- and it will! -- but there is a 0% possibility of any sorta depeg bc there's no peg to begin with.

code is not making some pie-in-the-sky claim that they're "gonna fix all payments and get super rich in the process" like luna/ust/chai. rather, they are laser-focused on enabling micropayments. right now, the absolute max a developer can charge using code's SDK is $2 USD -- this threshold is meant to highlight code's ability to handle micropayment txns. i believe this point is fundamentally misunderstood. until now, micropayments -- aka sub $1 payments -- were literally impossible. if you wanted to pay 50c for something on the internet, you couldn't! the capability simply did not exist - no payment processor would process your txn bc they wouldn't make money on it.

code unlocks internet micropayments for the first time ever. whether ppl will actually care and/or whether KIN will pump as a result, I can't say with any certainty. but my view is that micropayments are one of the few 0 to 1 moments we've ever had in crypto and it's only a matter of time before devs start integrating them in interesting ways into applications.

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personally, i think we break $100k/BTC easily this next cycle. timing is obv the hard part, but im not worried about topping out around 60/70k -still a lotta tradfi capital offsides right now.

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"Phoenix’s fully onchain CLOB where LPs are actually profitable"

Phoenix is a central limit order book (CLOB), which enables more expressive market making than Orca, which is an automated market maker (AMM)

If you ask HFT ppl, most will say they prefer CLOBs bc they allow for more granular liquidity provision vs the blunt approach AMMs take. There’s obviously nuance here, and some AMMs (lifinity) are ‘better’ than others (orca). But generally, CLOBs make it easier for traders to react to volatility and adjust their MMing accordingly

@jarxiao is a good follow on x dot com. he’s ex-HFT and the founder of Phoenix and has some good takes on CLOBs vs AMMs

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"Few seemed to understand what it’s like to transact on-chain — bringing back a conversation around the learning curve."

100% agree. I tend to think crypto's UI/UX is one of biggest reasons why fraud is so prevalent. It's hard to send money to the wrong person on Venmo, but much easier to do so with MetaMask/Phantom. As crypto UI/UX continues to close the gap with fintech, I think we'll see 'fraud' decline. Also, I'm hopeful we'll continue to find novel ways to protect users, like Squad's Fuse and Backpack's NFT locking feature. We should be fighting back with tech, not regulation!

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"fails to gain user traction and cement its product-market fit over the next 6-12 months."

thank you for the question mr. satoshi sir!

full transparency - I'm not an active user of these bots, but a close friend of mine is, and he's one of the most prolific degens I know and trust, so the following comes from him:

(btw, i'd be happy to connect you guys offline if you ping me on Twttr @mrink0)

my friend is bullish banana the project, not banana the token. he thinks the banana token is fairly priced right now and probably has limited short-term upside

higher-level -- he believes the token tax meta is over. it sucks too much $ out of the market and the token, and more generally, optimizes for short-term pumps and twttr virality vs sustained price appreciation and broad adoption

he says unibot is "legit dead" and is unsure if they can revive themselves

he's watching out for the rampage beta, which releases tonight at 12am pacific (I think?). he believes that's probably the next play in the TG bot meta

our recent coinbase report touches on this a bit. curious to get your thoughts on it: what’d you like/not like? things you want us to go deeper on?

fwiw, I think a deep dive comparison of “everything apps” is sorely needed too, and it’s something we’ve been discussing a lot internally. we should have more to say on this soon…

rinko has not authored any research reports yet.