90% of Crypto Tokens Are Broken — Alex Cutler, CEO of Dromos Labs, Explains Why

Alex, a follow-up question there is, you know, when are emissions productive investments and when are you simply paying for activity with inflation?

Yeah.

That is a great question.

And it's one we think of that a lot.

One way I would think about this is that if you are a VC, right, and you're investing in a traditional startup, you know, in Web2 or things like that, you are investing in all of these different seed rounds.

And your expectation is that you will be diluted over time, right? You may invest early and you know that that next round, you're going to be diluted by 20%.

50% or more.

And I think the average is about like for any like high growth startup, a VC will expect to be diluted like 50% every two years, right? So why in a traditional sort of startup does dilution exist, right? Like why and why do investors sort of tolerate that? It's because that dilution is there to fuel additional growth.

and that the investors who are getting diluted don't feel like they are necessarily getting less.

They are getting a smaller piece of a much larger pie, right? That is the fundamental bet of investors and the role that dilution plays.

So within our own system, we see an opportunity whereby global spot markets on chain are the single highest value producing vertical of the on chain economy.

Second, I should say, if you're leaving aside like stable coins, which I think would be a bit more of a traditional thing.

Spot markets last year created about $5 billion in fees, which is insane to think about.

Derivatives, I believe, which has really been the darling of this cycle, over this past cycle, thanks to hyperliquid, I think they did about $3 billion.

Chains did somewhere in the realm of $2 billion.

And I think lending did even less than that, about $1 billion.

So if we are positioned to capture all of that value represented by global on chain spot markets, you'd probably expect that we would be using dilution, right? Using some degree of emissions to fuel that growth.

And that those people participating in the system would be much more worried if we were not sufficiently I guess, fueling that growth versus, you know, dropping emissions like super low.

So in our system, that is what we are focused on.

You know, in the all new era that is coming out right now, the global cap for our annualized emissions, I believe, is about 20%.

And we have this adaptive emissions rate that will be able to compensate and adapt that emissions rate to be basically aligned to the amount of revenue that we can capture.

So we ensure that it's never out of whack with growth.

But the key thing here that I think is really, really interesting is Five billion dollars in fees being produced in global spot markets.

That's the size of the pie as it existed last year.

Think about all the things that are happening right now.