Crypto 的下一条 Layer 1：与 Smokey The Bera 对谈 | 1000x

When I think about what the future for crypto looks like, I think we’re moving in the right direction in a lot of different ways. We’re seeing lower-latency blockchains, higher TPS, and better proving systems. But really, at the end of the day, we can build the best infrastructure possible, but if people aren’t building applications on top of it, then it doesn’t fucking matter.

This episode is brought to you by Perennial Finance, the on-chain DeFi primitive redesigning derivatives for the DeFi-native. You’ll hear more about Perennial later in the show.

Welcome back to another THX. We have a very special guest here, who I’ll introduce in a second, but just to take a step back, Jonah and I have been talking about making real investments and doing real things, and finding things with real product-market fit and real value in crypto—and how difficult that is. With all of that in mind, we’ve brought on Smokey from Berachain today.

When I first found out about it, I legitimately thought this thing was a complete meme. I think this was 2 years ago. I just thought it was a joke, and then it actually turned into something very real. Smokey’s here to explain to us how it is both real and not real at the same time. Welcome, Smokey. Glad to have you.

Thank you for having me, guys. Truly, the duality of man—or bear, if you will.

That was actually really funny. I don’t know if you still remember, Avi, but back in the day, when you slid into my DMs, it was because there was a copypasta going around on Twitter. It was something like, “Berachain does not exist,” followed by a few more lines. You hit my DMs with that, and I responded with the exact same thing. I think we repeated that for 4 or 5 iterations, and then you were like, “Anyway, what the fuck is this thing? Should I be investing?” I was like, “Yeah, totally.”

That somehow devolved into us making fun of you, Steve Tananbaum, and a number of other things.

That was a hilarious introduction because I genuinely thought this was just a meme coin launch.

Yeah, me too. I didn’t really know what it was. I just knew the content was really funny. Every time I saw it, I would crack up. I looked at the Bong Bears and thought, “Dude, this stuff is great.”

But when I was originally talking to you guys, I couldn’t really wrap my head around what the hell you were actually trying to do, other than just be hilarious. Fast-forward 2 years, and you’ve done a lot. You seem to have accomplished a lot. I see some pretty insane headlines in the news, like, “Berachain raises from all the top VCs that have ever existed.”

What’s fascinating to me is that you’ve managed to combine this weird, whimsical nature with what seems to be real tech. How did Berachain even start? How did you come up with the idea?

The backstory is honestly a series of unfortunate, then fortunate, events, if I think about it.

I’ll give you some quick background on myself and my co-founder, without doxxing too much. My co-founder Papa and I have been in the space for the better part of a decade. We’re definitely not OG ICO people, but we came in a couple of years after that. We were both originally founders in the healthcare space. We raised and scaled companies, raised venture capital, did the whole thing in the Valley—all the classic meme shit—and had fun along the way buying shitcoins.

One of my first investors in my first company was pretty senior at the Ethereum Foundation back in the day. When you’re living in the Bay Area and seeing a whole bunch of people running in a given direction, you either think everyone else is stupid or you’re stupid. I know for a fact that I’m very stupid, so I decided to at least take a shot and follow the crowd a little bit.

I fucked around in the space, and then I watched the market evolve from 2017 to 2018—the absolute meme-coin cycle—and saw more interesting, unique things popping up in terms of Uniswap, Curve, Aave, Compound, Yearn, and everything else in between. DeFi Summer was always keeping me pretty interested while I was effectively in my day job as a founder and then a VC.

I think it was late 2020 or early summer 2021 when Papa and I had been messing around with a whole bunch of these DeFi 2.0 ecosystems and Discords: Frax, Alchemix, Olympus, and all that kind of stuff. We found that NFTs were starting to take an interesting turn. On one hand, they were becoming a little bit more financialized and moving beyond 10,000-profile-picture collections. On the other hand, you were starting to see things that might have interesting utility, as much of a meme as that’s become 3 years later.

I think it was Parallel that was an “aha” moment for us. We saw these high-quality, Magic: The Gathering- and Hearthstone-style, on-chain cards, and thought, “Oh, cool. These are going to have revenue-accrual potential. They’re going to turn into something that’s more than just, ‘Look at my JPEG, bro.’” We thought that was interesting.

So, of course, we chose to launch an NFT collection of 100 completely useless bears smoking weed because we thought it was funny. We were inspired by the greats. It honestly just started as, “Hey, let’s see what we can do with this NFT project and see where we can take it.” It was very much a “make it up as you go” kind of thing.

We decided to raffle these off at 0.069 ETH in a whole bunch of heavily DeFi-oriented Discords. What we ended up doing by accident was cultivating this initial community of Bong Bear holders who were highly left-curved because they were willing to buy a JPEG of a bear smoking weed for no apparent reason, but who were also pretty DeFi-native, tuned in, and sharp based on the communities they came from.

After enough people in the group asked, “When marketing?” and “What happens next?” and “When roadmap?” and “When dev?”, we thought, “Maybe we should do something spicy with this and see where we can take it.”

We decided to make those NFTs effectively rebase—not 8,000% APY rebase, like in the good old days—but expand over time. If you held one of the first NFT collections, you would automatically be entitled to claim one of the NFTs from the second collection for free, with a small amount minted as inflation every time so that new people could enter and buy into it.

Over the course of 4 or 5 collections, we effectively bootstrapped a community of a couple thousand real users, which feels like an oddity nowadays. On one hand, these were people saying, “These are kind of fun, with game-theory mechanics and multiplying bears.” On the other hand, they thought there might be an actual, interesting endgame or community there.

At some point, we talked to the Olympus guys about what it would look like to build a chain, just because we thought that was a funny and interesting concept. There were thoughts about what a reserve currency could actually look like, and despite the falls from grace and reductions in sentiment over the past few years, I think there were a lot of cool ideas that came out of the Olympus DeFi 2.0 ecosystem. Protocol-owned liquidity and a lot of that stuff really did find its existence there.

At some point, after talking to those guys for long enough, along with the community we had developed—which was largely traders, developers, and retail users—we tried to better understand the problems they were facing in their day-to-day user environments.

One thing that came up a ton, and initially seemed kind of silly, was the trade-off between liquidity and security when someone is allocating capital on a network. Nine times out of 10, it’s, “Okay, I have 32 ETH. Do I run a node, or do I toss this in Lido? Do I toss it into your DEXs—your Uniswaps, your Aaves, whatever—or into something like Lido or EigenLayer?”

Lido and EigenLayer have started to move this in the right direction by allowing you to use liquid staking tokens to go a lot further. Nonetheless, that isn’t really a native, out-of-the-gate solution. It’s something you opt into. It’s an option; it’s not the default.

We thought it was illogical, especially after seeing so many ghost chains in the 2021–2022 cycle with hundreds of millions, if not billions, of dollars securing the chain but virtually zero capital or activity actually active on the network. That had become the metagame.

We thought to ourselves, “What if it were possible to build an ecosystem that allowed you to align incentives between liquidity and security at the protocol level?”

More importantly, around that time, we were at the peak of this zero-interest-rate phenomenon, with airdrop grants and everything being driven by the meta, where the only difference between a builder going to Chain A or Chain B was how much money you were going to throw at them. I think that’s incredibly perverse, completely stupid, a waste of time and funds, and something that attracts the wrong type of builders.

The secondary thought in the back of our heads was, “Is there a way that we can actually build a system, from a mechanism-design and incentive-design point of view, at the protocol level that’s meant to drive value to the application layer?”

When I think about what the future for crypto looks like, I think we’re moving in the right direction in a lot of different ways. We’re seeing lower-latency blockchains, higher TPS, and better proving systems. But really, at the end of the day, we can build the best infrastructure possible, but if people aren’t building applications on top of it, then it doesn’t fucking matter.

There are some clear use cases that are quite basic—stablecoins, payments, and so on—but my strong belief is that if you don’t have applications that are uniquely built for or exist in an on-chain environment, then there’s very little impetus for someone to actually go from a Web2 world to a Web3 world and start using them.

We see Berachain as, more than anything, a bet on the application layer powered by the chain itself.

If I sum this all up and put these rambles into a nutshell, we thought it made a lot of sense to build Berachain because it’s the first L1 that allows users to turn their liquidity into security without adding leverage risk, and to use that liquidity to help power the protocols that are building on the chain itself.

That is a deeply articulate take for a bear. I appreciate the years in the forest, man.

What’s interesting is that we’ve been talking for a while about how it’s sometimes hard to see how you derive value for the base layer from the application layer. In theory, the application layer should eventually be worth a lot more than the base layer because the applications are what actually drive people to use the platform. They’re what people engage with. In theory, they should be able to generate economic value because of that.

In the case of chains like Solana, or really high-throughput, highly scalable chains, having that value accrue back to the chain is a little bit tough. The chain is effectively just a place for you to run code. That’s it. You get some security for that, but it’s just a place for you to code.

You’ve brought the application layer and the base layer a little bit closer together. That’s what you’re tying together. One question for you is: Does that improve the stability of the platform, or are there risks to embedding applications so closely with the base layer in terms of security?

I think it’s all a matter of nuance in the process.

At a fundamental level, the way Berachain works is that the network itself is still secured from a staking perspective by the BERA token, which is the gas token of the network. It’s relatively generic in that sense and is used to pay fees.

Where it becomes interesting is in the flow of value and the flow of emissions across the network. A typical proof-of-stake chain works like this: The vast majority of emissions and block rewards are generated as the chain inflates, or as more blocks are produced, and they end up going to validators and their delegators.

In many cases, those rewards just end up going to the validators. While validators play a very important role in maintaining the security of the network and keeping it up and running, they aren’t necessarily the groups that are driving new value or bringing new applications into the network.

In a world where the biggest meme is, “Cool, we’ve got all this infrastructure and all these layers for people to build on, but no one is building things on it for users to actually use,” that seemed really counterintuitive to us.

The way Berachain works is that validators have to post a standard bond in BERA to come online or turn on their validator. They’re also able to get BGT delegated to them. BGT is the illiquid, soulbound rewards-and-emissions token of Berachain, and it’s what block rewards are actually given out in.

The only way to earn BGT is by providing liquidity on the network in a set of different venues. When the chain goes live, this will be a pretty vanilla set of DeFi primitives: a DEX, a perp vault, and a stablecoin lending market.

Over time—and this is where things might get spicier from a security perspective—that can extend to really any application on the network, as voted in through governance. You can think of it as Curve at the chain level, from an emissions perspective. Instead of those emissions only being able to go to pools on a DEX, they can actually go to any smart contract on the chain.

A given validator always has the same likelihood of proposing a block. However, a validator with more BGT delegated to it—that is, more people who have provided liquidity choosing to delegate to it—will produce a larger block reward when it actually produces a block.

In this way, the security of the network isn’t threatened in any manner because there is always BERA at stake securing the network. The validators that have worked with the people who have provided the most liquidity to the network stand to gain the most from producing larger block rewards when they hit a block.

This episode is brought to you by Perennial Finance. Perennial is quickly becoming one of the go-to derivatives platforms and liquidity layers for all of DeFi. There are kind of three things you need when you’re thinking about a place and a platform to trade on: great trade execution, low fees, and an on-chain permissionless platform. Perennial nails all three of those buckets. With the launch of Perennial V2, they’ve made all of that possible by introducing faster oracles, which reduce trade execution to seconds; lower fees, competing with major centralized exchanges and minimizing fees for both takers and makers; fully modular markets, which allow the protocol to support any price feed out there; and cash settlement—the trades are cash-settled in USD, not in crypto. Perennial allows you, the trader, to gain access to deeper liquidity with only a fraction of the TVL. Perennial enables a two-sided market made up of both traders and liquidity providers. Traders deposit assets to get leveraged exposure, while liquidity providers provide pools of capital to earn fees for taking the other side of the trader position. Perennial allows you to trade crypto perps, FX, and, coming soon, NFTs and more. Backed by some of the best investors in the industry, Perennial is a must-check-out platform if you’re a crypto trader. Go check them out by clicking the link in the description. Give 1000x credit. Go check out Perennial—you’re going to love them.

I have a theory about crypto right now that I’ve taken a lot of heat for, and I wanted to run it by you because it ties into that specific point.

Basically, I’m worried that, just as you said, there aren’t enough applications showing up. There aren’t enough people building applications that users want to use. There’s a lot of infrastructure being built everywhere, but applications need to show up and attract users. Otherwise, what the hell are we doing here?

My thesis has been that we don’t need more infrastructure; we need people to build killer apps. The pushback I’ve gotten—which I assume you probably agree with—is, “Infrastructure has been built and there’s a lot of it around, but it isn’t the right infrastructure.”

Back in the day, NEAR did something very interesting. They rewarded economic activity on their network by paying developers in NEAR, proportionate to the amount of smart-contract activity a given application generated. I thought that was brilliant. That’s like what the dollar does: You participate in the system, and you get rewarded in dollars. That’s how petrodollar economies work.

They built this amazing, sharded, technological empire on that premise, and nobody showed up to the party to build apps.

Can you touch on why your liquidity-based reward system—which is similar, but also very different—will encourage a certain type of builder to show up and build? What type of application does it encourage?

Great question. I think it bears some resemblance to the CRV-type stuff we’ve seen over the last cycle or two, and I do think that a lot of those metrics end up being gameable. That’s why I think both the mid-curve take and the correct take is that social consensus and capital consensus should drive incentive distribution.

I think that’s very much what the Berachain system enables. Each validator effectively has a gauge, and they can choose how they would like to direct emissions when they win a block.

They could say, “I’ve got a bunch of capital in this pool. As a validator, I’m going to put all my emissions there.” Or they could say, “I’m going to put 20% on this pool, 20% on that pool, 20% on another one, and 30% in this options protocol,” whatever it might be.

Where it gets more interesting is when you add or explore the incentive marketplace built on top of it. In DeFi, people would conventionally think of this as bribes.

An application can say, “I’m going to post a bribe or an incentive that anyone can pick up.” A validator can say, “In exchange for X amount of emissions, I’ll give you Y amount of my token to be distributed among myself as a validator—I’ll take some commission—and my delegates, who have chosen to delegate BGT to me and give me voting power.”

That creates a new layer of the market, where people can decide their own risk preferences and what they want to get more exposure to.

That doesn’t directly answer your core question. It answers more of the question of what makes us interesting for a protocol in the first place: We can decrease their cost of capital.

Instead of doing a classic pool-two liquidity-mining program, where they pair a token against their own token and emit a whole bunch of it, they can pay a small amount in their token and, ideally, based on an efficient market, receive a number of emissions in the form of the chain’s token itself—BGT—which one would hope accrues value and becomes useful over time.

But I also think the answer is—and this has been the biggest inefficiency I see in most ecosystems—this “if you build it, they will come” attitude. I think that’s bullshit. If you build it, no one will give a fuck.

You have to go out there and aggressively tell people what solutions you have, why they need them, and why they’re a good fit. We’ve seen so many people pontificate and build castles in the sky that have ultimately yielded very little or nothing. Maybe they do in a 5- to 10-year time horizon, but I very much believe in power-law distributions.

If you go and hit up 100 different teams and 10 of them are half-decent, maybe 1 of those turns into a unicorn application. If you’re not going out there and chatting with hundreds, if not thousands, of builders, then the chance of finding the next Stone, the next Uniswap, the next GMX—whatever you want to call it—on your chain is near zero.

You can have all the right base plates from an incentive-design or builder perspective, but if you don’t go out there and do the work, then it’s ultimately useless. Having the right design helps remove friction, as I see it, but by no means guarantees outcomes.

That’s a fantastic answer. I will say that you guys have definitely figured out how to go out there.

The community and the memes are absurd. The cult that you’ve been able to assemble had to have been somewhat intentional. You’ve built what is effectively a meme-coin cult around a real product in a way that I haven’t really seen since LINK.

You guys remind me a lot of LINK, honestly. There’s a deep, hardcore community, at least on that side, backed up by somewhat real tech. It’s interesting to see those things combined because it’s really hard to thread that needle—to be serious builders while also having fun.

If you were going to start a hedge fund, you wouldn’t name it Pissant Capital LLC. That doesn’t attract an LP. Investors don’t want to put their money into something with a name like that, so what you get is the opposite end of the spectrum: Everything is named Bridgewater, Blackstone, Stone Ridge, Citadel, Castle. It’s all boring.

You hit the middle of the gradient perfectly. Your background is Jesus Christ as a bear with a bunch of bear apostles. It’s freaking hilarious, but it doesn’t sacrifice the sense that you’re safe on this chain. You’ve struck a very difficult balance.

Why bears? Bears make prices go down.

I don’t know if you guys saw this, but for our April Fools’ gag this year, we rebranded to bullet chain for a day. We dropped a video showing the running of the bulls and said we were going to build a perpendicular EVM L4 to Cardano.

I think that’s exactly it. I believe in horseshoe theory, or a barbell distribution, if you will. I really believe that the left and the right curve even out at some point, and that to win, you need to be both highly fucking silly and highly competent—at least in a space like crypto, where the industry is so new but also caters to a younger demographic.

We are seeing Fidelity, Franklin Templeton, and others start to plow into the space and get involved. In many cases, they’re being advised by, or taking a good look from, someone closer to our age. You have to be able to appeal to that population, too.

I realized a while back that, between our founding team, the people we have on board, and what we’ve seen in the space over time, we weren’t going to win by being a VC chain. There’s no world in which we try to come off as polished as Sui or Mysten, or Polygon—depending on whether they’re making Polygon jokes or not—and end up in a position of power.

We realized that we had to carve our own path and our own brand. The bears felt fitting because the whole thing was going to evolve out of an NFT project of bears smoking weed. We might as well run with it.

We originally called them the Bong Bears. Then someone came into the Discord and said, “Oh, bong-a-bear,” and we thought, “Hey, that’s pretty funny,” so we ran with it.

Is that random guy a core team member now?

That man dropped off the face of the earth a couple of years ago, but his impact is felt and has lasted.

What we realized at some point was that leaning into that whimsical nature and being able to execute while also being kind of silly was a space that hadn’t really been fully explored or done right at the protocol level.

It also felt correct for us. The virality is critical because you can’t just build something and expect people to show up and build amazing apps. Leaning into the culture is part of making that happen.

You built Berachain during the bear market of 2022. Tell us what that was like. Very few products launched, or even got conceived of and worked on, back then. Most people were just busy throwing in the towel.

There was a healthy amount of rope around the office.

We managed to grind through it for the most part, and I attribute that to a couple of different things. One is that community sentiment has always been meaningful. On our side, we’ve typically seen chains built by someone saying, “I have a professor at X or Y university, or someone from X or Y research institution. I’m going to spin this shit out, raise a bunch of capital, and try to make people care.”

We took the opposite approach. We effectively had a bunch of people who cared from the beginning. As more things came together, they still cared. As we worked our way along and iterated on the idea, more people popped up saying, “I want to build this,” or, “I want to build that.”

I also think that, having seen somebody’s business develop and relationships mature over the last couple of years, that period of trauma bonding was important. It’s like when you get hazed in a fraternity: You go through some shitty times together, but then you end up being closer over a longer period of time.

Building through the bear was a pain in the ass, but it wasn’t the worst thing. If we had had a live product at the time, I probably wouldn’t have enjoyed it quite as much, because it would have been all doom and gloom, with people saying, “When will the devs fix the price?” I truly feel for all of our comrades who had to go through that.

But it also provided massive turnaround opportunities and hero moments for some groups we’re big fans of. I remember talking to the Pendle guys in late summer or early fall of 2022. At the time, they were figuring out what the end of V1 and the beginning of V2 would look like. They were completely rebuilding their internal pricing models, and the market had absolutely destroyed them. They were at a $4 million or $5 million market cap.

I talked to them and thought, “These guys are cracked. I’m pretty bullish on interest-rate derivatives, so I feel like I should pay attention to this.” I wish I had bought a bigger bag, but then I saw them absolutely kill it over the next couple of years. They killed the points meta, the LST meta, and everything alongside it.

I find that building in the bear is more of a barometer of grit or mental fortitude. If you’re a grifter, there’s a decent chance you tap out there. If you’re mentally weak, there’s a decent chance you tap out there as well.

We were fortunate not to be in either of those scenarios. It gave us a lot of time to go heads-down and figure some shit out.

That being said, raising toward the end of that period was a pain in the ass. We were closing our Series A about a week before FTX blew up. FTX blew up while we were still taking wires, and it was like, “Ah, this is less fun than it was a couple of weeks ago.”

Was FTX committed to being an investor at that point?

No. We were not taking money from FTX. We had a conversation with some of the members of their team, and they were really unimpressive.

That’s really funny. At that point, they were basically throwing money at everything they could. But the way they would do it was come up to you and say, “We are the best thing that’s ever happened to you. Take our money and give us the best terms ever.”

We do not negotiate with terrorists, so there was no such luck over here.

That was a different time.

It was good that you guys persevered through that. I don’t think I’ve ever wanted to rope myself as badly as I did after FTX. I remember sitting there in the TradFi world, and it’s always the best feeling and the worst feeling in the world when TradFi looks down on you with disdain and disgust.

On one hand, you have to deal with all of them. On the other hand, you know how good it’s going to feel when things start going back up.

You know that comeback is going to be crazy.

It hits different when everyone told you 3 months ago that it was going to die, and then suddenly it’s alive. The shit’s alive.

It also hits different when you try to explain to somebody that you invested in something called Berachain, and it’s returned money for you, and they look at you and say, “I invested in Walgreens, and it’s down 25% today.”

Anyone who invested in biotech during the 2021 COVID vaccine boom knows that feeling.

I had a lot of fundamentals homies asking, “What the fuck are you doing in these internet coins, sir?”

Somehow, through all of this, you managed to get some TradFi money. I think I saw that in the latest headline. Who was it?

Brevan Howard.

Brevan Howard. They’re pretty TradFi. I know they have a crypto business, but what is it like sitting in front of somebody and trying to pitch them something serious while also needing them to understand that it’s supposed to be a joke? That’s good for it, right?

Compliance definitely didn’t get it too easily, but they figured it out at some point after a lot of leg-pulling.

The good thing is that the partners at Brevan have become increasingly crypto-native over time. They picked up the guys from the Dragonfly liquid desk, who were good friends and early investors of ours, so that made the transition a lot smoother.

There’s also the fact that, in a past life, Papa and I, along with a lot of our team members, were suits. We’ve had to be serious on extreme occasions. It’s something I try to avoid, but when necessary, you do what you have to do.

We were capable of cleaning up. More than that, we were capable of letting people take a peek under the hood and get past their first impressions. I find that it tends to be an interesting cognitive-dissonance exercise for us.

There were a lot of people who wrote us off at some point or said, “This is bullshit. What the fuck is Berachain? This can’t be serious.” They formed a very strong opinion based on that.

But it’s the same thing you mentioned earlier with the markets. When we actually chatted with them and they got a chance to look under the hood a little bit, they thought, “Oh, wait. Maybe these guys are actually onto something.”

That reversal—from someone who is highly against you to an extreme zealot—tends to be a pretty powerful one if you pull it off properly. I think that definitely leans in our favor.

Around the time we were finishing up our Series A, Kava was live and Osmosis was live, and everyone was trying to compare us to them. We were like, “Okay, cool, guys. Lots of respect for those teams in some cases, but I just think that comparison is inaccurate. We’ll let the market decide.”

The market has made some noise since then, perhaps in one direction.

A lot of those teams were working on cool, interesting ideas. I don’t think by any means that we’ve found ourselves in a position of success yet. We still have so much to prove, and we can still fuck up so many different things.

It was very easy for people to take a mid-curve position. Institutions especially would say, “Isn’t it just this?” And it was like, “No, not really.”

On that note, what does success look like?

There was a period of time during the post-2021 euphoria when every new L1 was basically, “Get a couple of DEXs on there, something that looks like a CLOB, something that looks like Uniswap V3, a few basic infrastructure plays, maybe an L2 depending on the chain.”

I get the feeling that your chain has one of the highest throughputs in the entire crypto space. It’s capable of processing immense amounts of computation. Surely, talk to us about your ecosystem, what success looks like, and what types of applications you want to see crushing it on your chain.

I’m sure the answer isn’t, “Something that looks like Uniswap on Berachain,” or, “Another CLOB.” What does it look like?

One thing I always try to do is be direct and honest about where we are, where we win massively, and where we don’t.

I’d love to see us become incredibly scalable, and we have thoughts on how to do that in the future. Right now, I think we see ourselves as one of the fastest and most efficient L1 designs—if not the fastest and most efficient EVM-compatible L1 design. I’m sure Monad is faster than us, and Sui and Sei have their own trade-offs as well.

What we have that’s interesting from a technology point of view is that Berachain is the first completely EVM-identical L1. You’ve heard a lot of people say EVM-compatible—Polygon, Avalanche, and so on—and that means the vast majority of things are compatible. But in many cases, they still maintain some degree of a Geth fork.

What Berachain actually has is an identical execution environment to Ethereum. You can run the Ethereum environment using Nethermind, Erigon, Reth, or any of these different execution clients. That means we don’t need a team of 20 researchers trying to maintain a Geth fork. If there’s an EIP or something that goes into place on mainnet or is upstreamed, we can make that change very easily as well.

That compatibility saves us a ton of trouble and makes it easy for people to build scaling solutions, rollups, and everything in between on Berachain. We’re already seeing that prior to launch, which is pretty exciting for me.

We also use CometBFT consensus under the hood, so we still get single-slot finality, which is really nice to have and is one of the things on Ethereum’s roadmap. I expect Ethereum to implement something similar to CometBFT eventually, but Berachain gets the best of both worlds: a super EVM-identical environment, where if you can deploy something on mainnet, you can deploy it on Berachain without reinventing the wheel or doing extra legwork, along with single-slot finality, which is great from a transaction-execution and ordering point of view.

More importantly, I think success looks like Berachain being the ecosystem where people go to see cool new things being built.

I don’t necessarily subscribe to the concept of an “ETH killer.” I think it’s possible in some senses, but I don’t know if that’s the game I want to play. I’d much rather see us play a game where, if you’re looking for the most interesting new applications that have a shot at product-market fit, they’re coming to life on Berachain from a cultural and liquidity point of view.

That goes back to what I was talking about earlier in terms of shots on net, portfolio construction, and power laws. The structure of Berachain is designed so that validators drive incentives and rewards toward the application layer.

I see that as an enabling factor that gives the greatest number of applications the best opportunity to reach escape velocity, break out, and achieve real adoption. I’d love to see the next groundbreaking applications that define the crypto space as a whole living on Berachain and finding their home there before going multichain, or using it as their home-base settlement layer—whatever you want to call it.

There are a ton of interesting applications that come to mind. One that I’ve been talking about recently, and that I bet you guys would think is cool as traders, is called Exponents.

It’s effectively a new take on derivatives. We’ve seen some of this recently in terms of allowing you to take leverage on long-tail assets—perps on shitcoins—but the really cool part is that they’ve added a different incentive layer on top of that.

It isn’t just, “Here’s your long, here’s your short, and here’s your funding rate.” They’ve added a separate incentive layer so that you can speculate on trading direction and say, “I’m going to bribe someone or incentivize longs or incentivize shorts specifically.”

You can have coins playing against each other in a more explicit manner than ever before. If you’re TRUMP versus BODEN, for example, you can bribe people to short one coin while longing another. That’s very cool, beyond just incentivizing LPs, which has been the metagame to date.

It relies on capital velocity and turns into a pretty crazy yield sandwich when you think about it in the Berachain environment. You could have a given pair using Uniswap-style spot-arbitrage pricing, with leverage determining the fees generated by the protocol. Then you add the bribe layer on top of longing and shorting, and then you add protocol liquidity and BGT emissions on top of that.

That becomes a really cool set of applications for someone to build around.

There are groups building funnier things in the consumer space. I was telling you guys a little bit before the call about one I’ve been calling “vape-to-earn” on Berachain. It’s actually “quit smoking to earn,” and it’s called PuffPaw.

It’s being built by a group of really sharp guys who have shipped 75 million vapes to some of the leading tobacco and vape manufacturers in the world, and who are partnered with some of the largest quit-smoking applications in the world.

It’s a custom-made DePIN vape that incentivizes you to decrease your nicotine usage over time. You get more tokens for using less nicotine until you get down to effectively a green-tea extract.

That’s really cool. I’ve heard of very few applications in crypto that actually help people with their health. Everything else destroys it.

I think it’s really cool because my thesis on a lot of these things is that tokens are incentive tools in many cases. They take a behavior that people are already accustomed to and allow them to potentially financialize it.

That’s broadly how I think about crypto gaming as well, in cases where it might work. If you could play RuneScape, or play RuneScape at 75% of the quality but potentially make a few bucks, I feel like you would play the second one as long as the quality drop-off wasn’t massive.

I think stuff like that is really cool. I’ve always been a DeFi guy, so I’m super excited about the DeFi ecosystem there.

There’s a group called Shogun that was incubated by us, as was PuffPaw. Those guys are effectively building a platform that allows you to trade any asset from any chain without difficulty.

If you want to go from SAYAN on Sei to BODEN, or JUP on Solana, they make that trade route possible. They also have some very interesting just-in-time liquidity vaults that allow you to turn MEV into trader-extractable value and put that back in the hands of the user.

It’s essentially an intent layer and intent-solver system combined with those just-in-time liquidity vaults, allowing you to get the best execution possible without ever leaving your home network.

I think that kind of thing is really cool. There are also zero-day-to-expiry options with the guys from IVX, and credit-default swaps and distressed debt on-chain from the guys at Concrete Finance.

That’s one of my favorite ones recently. The founder is a prolific on-chain degen, but he trained as a surgeon at Oxford, was a VP for years at Two Sigma, and then was absolutely in the trenches buying and selling JPEG tokens with me. Little did I know.

Now he’s built one of the most interesting on-chain derivative systems I’ve seen.

All that kind of stuff is coming to the ecosystem.

You aren’t on mainnet right now, right? You just launched on testnet?

Correct.

How did you get all these people to start building on a testnet? It’s been very difficult for people to get any activity before mainnet launch, and you’re talking about all these projects. It seems like you have a lot of projects, even though you’re still on testnet.

For us, it was about taking a proactive approach. It’s very possible to get people to build, especially if they understand that they have an opportunity to do more with their applications on Berachain than anywhere else.

Proof of liquidity feels tangible. It isn’t just, “We’re going to give you this grant, and please stay with us for a few months.” It’s, “There’s a way for you to be effectively enshrined into the block-creation and block-reward process on a chain.”

That’s special for applications when they think about their roadmaps and capital efficiency.

I also think tapping into the culture that’s been built has helped. There’s a collegial, camaraderie-based feel to it. We’ve gotten teams together for dinners and events at Token2049, ETHDenver, and so on. It’s crazy to see them come together.

The other thing we’ve done to supplement that is create an incubator program that’s run at arm’s length from the foundation called Build-a-Bera.

It incubates and works closely with 5 teams every 6 months. These are meant to be cool, new, exciting projects that set a bar for quality in the ecosystem.

The goal is to help teams go to market, figure out fundraising, and handle everything required to build a lasting company: tokenomics, management structure, organizational and international scaling, taxes, legal issues, and all that kind of stuff. We use that to give those teams a leg up.

We view the foundation, labs, or whatever you want to call it as an extension of the ecosystem. It’s there to empower people.

By combining that with proof of liquidity as a fundamental, and with a culture of “fuck around and find out, but do it in a really effective way,” you end up with a pretty magnetic group for builders.

That’s been our great edge, honestly. We’ve also made sure not to take our feet off the gas. The team has been incredibly competent when it comes to going out there and telling builders how they have an opportunity to win on Berachain, and how we’re there to help make that a reality.

You obviously need community. I experienced this the hard way. Back when Solana was trading at $20, I criticized Solana, and the community came out and took me out. That was an early sign that the token was going to go up from there.

If you have a strong community of people fighting to create valuable products, building things people want even in bear markets, and fighting back against FUD, you have something lasting. If you’re seeing that community inside your ecosystem already, that’s a phenomenal sign, even if you haven’t made it to mainnet.

One thing I heard you say that I found inspiring, and that I think our listeners would appreciate, is the gamification of activities that haven’t been gamified yet but should be—vaping, for example, or quitting smoking.

X-to-earn is obviously a massive use case for crypto, but I honestly think one reason it hasn’t caught on sustainably, with a few notable exceptions like Axie Infinity, is that you’re earning tokens, not greenbacks. For your earnings to be sustainable and hold their value, there needs to be liquidity.

There hasn’t really been a chain until now that guarantees pools of liquidity for all these different types of applications, or at least builds it in at the L1 level the way yours does. I think that’s incredibly important to unlock the massive potential for X-to-earn applications to go live and scale.

Thank you, man. We very much see liquidity as the lifeblood of DeFi, and DeFi as fundamental to crypto nowadays.

Everything you see—whether it’s Fantasy Top’s bonding curves, Pump.fun, or anything else—is downstream of, or tapping into, a DeFi ecosystem. Some things are just more obvious than others.

A lot of people think proof of liquidity can only be useful for DeFi applications. I don’t think so. I think it can play a role in a whole bunch of different things because almost everything has some element of liquidity-centricism.

That’s where I’m excited in the long term. We’re starting to see plans at very early stages for proof of liquidity to be used outside the Berachain ecosystem, for extensions. I’ll leave that a little bit amorphous, but I think we’ll see those assets doing a lot more than just providing liquidity on Berachain over time, which will be really exciting.

We’re seeing more NFTs, games, social applications, and all the things that are extensions of the culture, if you will.

We’re also seeing these L2s, which present their own interesting world. Berachain has its own brand, its own way of life, and its own selection of culture. But we’re seeing highly competent groups from consumer, gaming, media, and other areas build L2s that will roll up to Berachain.

They can take advantage of and draw on that native community while also onboarding tens of millions of new people in a similar-but-different manner. They’ll be an extension or an arm of the brand, but they’ll have their own ecosystem, lifestyle, and culture that can move back and forth.

That’s part of what becomes interesting about building this anonymously. Berachain is a little bit amorphous in terms of its identity.

On one hand, people can view it as a DeFi chain. On another, they can view it as a meme chain. On another, they can view it as an application-acceleration layer. People can say, “It’s something between EVM and Cosmos.” There are 100 different ways to view it.

Things get really interesting when you have a number of different extensions of that brand that allow it to tap into different demographics. It isn’t us trying to boil the ocean. It’s about finding enough ways, in a B2B2C manner, to spread the good word in places where it makes sense, so that everyone has a reason to care about Berachain.

Going back to your Solana example, I think they’ve done a really good job of that at different points in their life cycle. Having the community beat down on someone, or having the ability for someone to get absolutely wrecked by a community, is one of the most bullish things possible.

We saw that a ton back in the day with LINK and at other points with meme coins. We’re seeing it now, too. But that only happens when you have people who care about all these different aspects.

Whether it was the Magic Eden ecosystem, the DePIN ecosystem, Pump.fun, or DeFi, I think Solana has been one of the best to do it so far. I have a lot of respect for what those guys have put together from a longevity, scope, and performance point of view.

In terms of what our listeners care about, people who listen to a trading podcast hosted by traders tend to want to know where the money is and how they’re going to make money from this.

Thinking about how to bridge the gap between your community and the trading community, one thing that immediately comes to mind is that, if you’re building a liquidity-focused L1, the money is wherever there’s going to be liquidity for your tokens and your earnings.

If I were to brand Berachain, it would be the chain where you don’t get rugged by disappearing pools. Because you can’t validate without staking liquidity into the network, applications that touch Berachain should ultimately be more stable for people who earn tokens on those applications.

I don’t know if you want to brand it that way, but that’s part of the idea.

I think I would double-click on that even more. It’s a chain built to provide the majority of the value being generated to applications and users.

Ultimately, it’s validators to applications and applications to users in terms of the flow of incentives. There’s a way you could position it that’s probably a little bit more consumer-friendly, but it’s a chain that rewards you for using it.

The term we’ve been playing around with internally is, “Have your steak and eat it, too.” The idea is that on Berachain, you can go and LP in whatever you want and use whatever protocol you want.

If that protocol happens to be one of the protocols whitelisted or receiving emissions from the chain itself, you get whatever rewards you would normally receive, but you also get the additional upside of the chain’s governance or emissions token, BGT.

You can choose to use that to compound in whatever manner you like. You can stake it with a validator that is incentivizing the pool you’re already participating in and effectively compound your own rewards.

You can also stake it with a validator receiving incentives or bribes from another protocol that you want exposure to. That’s effectively a long-tail call option.

There’s a lot of game theory and a lot of different choices available to the user, all without sacrificing the basic behavior they would have taken anyway.

You get to do what you want and pursue your normal user behavior, ideally with a whole bunch of fun, cool new applications if you choose to use them, while reaping the benefits of exposure to a new ecosystem.

I don’t think any system is truly perfect, but there’s a lot more thought put into the incentive alignment across all parties here.

This conversation over the last 50 minutes reminds me of the conversations I used to have in 2020 or 2021, when people were actually building new and innovative DeFi applications. I feel like I haven’t had a conversation like this in a very long time.

Everybody is focused on dogs with hats, which I love. I love a dog with a hat. It has good tech, good community, and a good cult. Sometimes, though, it’s nice to get into the weeds of something new and innovative.

A lot of the latest projects that release airdrops, and a lot of the L2s, are effectively the same. They’re all the same across the board. Maybe one uses a slightly different version of ZK technology than another, but it’s all basically the same.

There’s been a lot of fatigue from this. People are tired, and the reason they keep chasing memecoins is partly the returns, but also because there aren’t people working on or releasing interesting things. It gets very repetitive, over and over.

A lot of people in crypto have gone from being users back to being spectators. I was a power user of crypto for 2 or 3 years, but I’ve probably used crypto less in the last 18 months—actually messed around on-chain less—than I did in 1 month in 2021.

There were just so many things to do back then. It almost seems like there’s less to do today, at least in terms of what I’m doing day to day.

This has been fun to listen to. We’re going to have to have everybody check it out. Can we use the testnet? Is it public?

Absolutely. It’s usable and pretty snappy. I enjoy it. We’re seeing a bunch of applications starting to go live on it.

We moved over from our old testnet to a new one about 2½ to 3 weeks ago. We’ll see a lot of the old guard redeploying, but there are already some pretty fun dApps on there to play around with.

That’s exactly it, Avi. We want to make crypto fun. If there’s any brand or community that has a good chance of making that happen, both from a vibe point of view and an application point of view, I think we have a lot of shots on goal here.

What I care about is net-new things—things you haven’t seen somewhere else. We’ve seen a few flashes in the pan over the last 6 to 12 months. There have been 4 or 5 times when I’ve said, “Hey, that’s something cool and new,” but I don’t think it’s the norm by any means.

Our goal is to keep a steady stream of interesting things on Berachain.

My high-level thesis is that most alt-L1s—or most chains that aren’t Ethereum mainnet, and maybe Solana—can only sustain 10 to 15 applications, or 20 if you’re really optimistic, and actually get a bunch of use without a ton of liquidity fragmentation and a lack of real usability.

Ideally, that’s some degree of a rotating set. There are always a few that remain at the top—like English Premier League teams. A few swap out, but there’s a solid cohort that stays at the front of that Cambrian explosion.

I want Berachain to have the coolest ones at the front of that pack.

Some of them are really fried, but others could completely reinvent the way we think about the industry. On one hand, we have B.E.T. [?], which has AI bear reporters that will talk about shit and eventually turn into something like a MapleStory megaphone. You could use it to distribute content and bid over slots where you can talk through people. It’s effectively a content-distribution engine.

Or you have GummiFi, which allows you to borrow and lend against any asset, with an order-book-style system under the hood and shared liquidity profiles, if desired.

That’s the duality. You need things that are just good, fried shit, and things that are future finance. Sometimes they’re one and the same.

I love it. I’m completely on board with this. I want to mess around on-chain again.

Just talking to you about this, with the AI stuff, when are we going to start tokenizing random people who are trying to quit smoking, bribing them to fall off the wagon, and having them play against each other? You could hold people at different levels of the game.

Bro, you’re on mute. Are you saying we should incentivize people to relapse?

Yes, that is what I said, but now I feel bad for saying it.

No, it’s okay, it’s okay. Look, if you can go one way, you can go the other way. We’re all capitalists here.

My favorite part was when we were trying to figure out what that flywheel looks like. We were like, “Okay, so this vape-to-earn thing is sort of Zyn-to-win, but do you eventually go back to straight cigarettes? How do you continue the loop?”

Maybe we shouldn’t continue that loop.

Cigarettes are making a comeback. I think they’re Lindy now. People are getting tired of the blueberry-ice vapes and the strawberry-raspberry sorbet. Nobody wants to inhale that stuff anymore.

I can verify that in the commodities industry. For every Gen Z person with a banana-ice vape, there are 3 guys outside at any given time smoking cigarettes.

Really?

Return to tradition. This is what it’s all about. At the end of the day, the future of finance is good vibes.

I like this. This is good.

If I were to put the future of finance in anyone’s hands, I’d be happy to give it to you, Smokey.

You just need to get the air-conditioned bear suits for the future conventions. I bet those things get hot.

I don’t want any sweaty bears in charge of finance.

You need the marshmallow-style ones with the big fans—a nice, large headset and all the good stuff.

The fundraises are being put to good use.

We appreciate you coming on, Smokey. This was definitely one of the most fun podcasts we’ve done.

I’m always happy to entertain.

We’ll have to have you back on once you launch mainnet. Then you can meticulously walk all of our listeners through exactly how to make money on Berachain. If they lose any money on Berachain, you can guarantee their funds, right?

That sounds exactly like something my legal and compliance department would love.

Not financial advice. Nothing on this podcast is financial advice. Please don’t listen to us about anything. We are literally interviewing a bear.

We appreciate it. We’ll catch you soon. Any last words for our audience?

I’d love to see you guys fuck around and test out the Berachain testnet, play in the community a little bit, and keep an eye on things when we go live.

When we think about what we care about and what we want to achieve at launch, one goal is helping reach new users and making sure lots of people have an opportunity to get involved in Berachain.

On the other hand, if the chain is called proof of liquidity, there better be a bunch of liquidity on it. We want to bring a whole bunch of capital into the ecosystem.

Then we want to do right by all the application builders, community members, and people who have been riding with us for the past couple of years.

Keep your eyes peeled, and if there’s an opportunity to get involved, take it. If you happen to be a retail trader, investor, or builder who wants to get involved and start messing around on the most fun chain there ever was, reach out to us. We’d love to find a way to help.

Amazing. Great show. Thank you so much for talking to us, Smokey.

Thanks for having me, guys. Much appreciated.