Hop Protocol AIRDROP and DAO Launch! 🟣_🟣

Chris Winfrey from Hop Protocol tells us all about the launch of the Hop Protocol DAO! ------ OPOLIS | Sign Up to Get 1000 $WORK and 1000 $BANK https://bankless.cc/Opolis ------ SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ ️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across ALTO IRA | TAX-FREE CRYPTO https://bankless.cc/AltoIRA AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave ️ MAKER DAO | THE DAI STABLECOIN https://bankless.cc/MakerDAO BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave ------ Topics Covered: 0:00 Intro 4:30 Chris Whinfrey 7:30 Layer 2 Bridges 10:25 The Hop Origins 14:45 No VC Funding 19:07 The Hop Airdrop 23:56 The Airdrop Meta 28:15 The Distribution 32:57 The Trinity 35:27 The Token 41:00 Yield and the Bridge Wars 47:08 Layer 2 Airdrop Szn 50:57 What's Next? ------ Resources: Chris on Twitter: https://twitter.com/WhinfreyChris?s=20 Announcement Post: https://hop.mirror.xyz/AI5fOUR0X_l0mktShDOx3mwr-hsB24gp8GvTWtS-MBc Hop Links - Twitter: https://twitter.com/HopProtocol?s=20 - Discord: https://discord.gg/PwCF88emV4 - Exchange: https://hop.exchange/ ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:16David Hoffman?

  Welcome Bankless Nation to a very special episode livestream that we got to do just because this is what happens when the news breaks. We have the HOP drop on our hands, the HOP protocol, the bridging protocol between Ethereum Layer 1, Ethereum Layer 2s and other chains. Did a token and of course they're launching a DAO. So we are talking all about these things today on the Bankless livestream because apparently that's what you do when you launch a DAO. You come to Bankless and we livestream about it. It's a ton of fun, the community shows up. They're all in the YouTube comments right now. I'm really going to enjoy this one. For those that don't know, we've also had Chris Winfrey on before. Chris Winfrey, of course, has been with HOP protocol for a very long time. He will be joining me and unpacking the HOP drop and the launch of HOP protocol DAO.

• 0:59David Hoffman?

  Some of the typical questions that you would expect as well as the unique things about HOP protocol. Because HOP as a system, as an org, as a DAO, got spun up with a unique genesis story that lends itself to the long arc of what HOP is and what arc, what HOP will become as well. So of course, what is the token responsible for? How much responsibility did we just receive? The airdrop details and the distribution, of course. There is a new HOP foundation, there's HOP Labs, there's the DAO. How do these things all interface? And where is the HOP protocol going? And then, of course, like Chris has been in this space for a while. So I just want to pick his brain about the coming Layer 2.2.2. This is the second Layer 2 related token to come out in the last two weeks.

• 1:43David Hoffman?

  And there are definitely more on the horizon. So what happens next when more of these tokens come out and about? And it reinvigorates excitement back into DeFi, back into Layer 2s. All of these conversations are coming up next, right after we talk about some of these fantastic sponsors that make the show possible. Arbitrum is an Ethereum Layer 2 scaling solution that's going to completely change how we use DeFi and NFTs. Over 300 projects have already deployed to Arbitrum, and the DeFi and NFT ecosystems are growing rapidly. Some of the coolest and newest NFT collections have chosen Arbitrum as their home, all the while DeFi protocols continue to see increased usage and liquidity. Using Arbitrum has never been easier, especially with the ability to deposit directly into Arbitrum through all the exchanges, including Binance, FTX, Quobi, and Crypto.com. Once inside, you'll notice Arbitrum increases Ethereum's speed

• 2:27David Hoffman?

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• 2:56David Hoffman?

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• 3:40David Hoffman?

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• 3:45David Hoffman?

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• 4:30David Hoffman?

  All right, Bankless Nation, let's go ahead and get right into the show. I'm joined with Chris Winfrey of Hot Protocol. And Chris, exciting news, man. Welcome to the show.

• 4:41Speaker 01

  Thanks, David. It's great to be back on the show. It's definitely been a crazy week, but yeah, super excited to be here.

• 4:46David Hoffman?

  Yeah, all of a sudden, you're, oh, there you go. Camera just became in focus again. Wonderful. Okay, cool. Let's get into it, man. But like, there's so many things to discover, and so many things to talk about. Like, of course, all the airdrop details, the distribution, all the, all the things that people would expect. But of course, we need to actually talk about what we are talking about. So what is Hot Protocol? And what does it do? And why do people use it?

• 5:08Speaker 01

  Yeah, so Hot Protocol is a cross-chain bridge. We're very much focused on the Ethereum ecosystem. So we have a hub-and-spoke model where Ethereum is the hub. And then we support Layer 2 networks like Arbitrum and Optimism. We support other L1s that, that, you know, are close to the Ethereum ecosystem, like Polygon and Nosis Chain. And ultimately, we can support any chain that has a message bridge with Ethereum. So, you know, we will be expanding and connecting Ethereum with kind of the broader crypto ecosystem. But we, you know, keep Ethereum at the center of it. And this allows us to have this really secure bridge model where we can put these stopgaps

• 5:51Speaker 01

  between each network. So if any one network were to fail, the users on the other networks are safe. So that way, users on Arbitrum and Optimism can enjoy, you know, trustless, you know, enjoy the full security of Ethereum. But then you can still jump, you know, straight over to to another chain like Polygon and, you know, enjoy the low fees and so on.

• 6:16David Hoffman?

  All right, okay. And of course, just asking the very basic questions. Why do we need bridges? Why are bridges necessary?

• 6:23Speaker 01

  Yeah, so you know, within the Ethereum ecosystem, you know, we're seeing this movement from Layer 1 Ethereum to Layer 2. And with the kind of rollup-centric Ethereum roadmap, scaling roadmap, you know, usage is moving to this, you know, very diverse Layer 2 ecosystem. So right now, you know, we have Arbitrum, we have Optimism, you know, we have, we have some Starkware rollups that are application-specific, but you know, they're going to be launching their own rollup. ZK Sync is live, their V2 is coming very soon. And so we just have like all of these different solutions. They all have different use cases, different trade-offs. But ultimately,

• 7:04Speaker 01

  for regular users, Layer 1 is super, super expensive. So if you want to be using Ethereum, you actually want to just be this Layer 2 native citizen, where you jump from one Layer 2 to the next and never have to touch the base layer of Ethereum. And then also, you know, if you want to jump to outside the Ethereum ecosystem, you also need a bridge to kind of get your assets over

• 7:26David Hoffman?

  there. Okay, of course, of course, right. We are going into a multi-chain world, whether you think it's a multi-layer 2 world, a multi-layer 1 world, but we're going to need bridges around these things. But each, each different Layer 2 has its own canonical bridge, right? Can you help, help the listeners unpack the difference between the Layer 2 bridges that are built by the Layer 2s themselves, like the Layer 2 Optimism Bridge and the Layer 2 Arbitrum Bridge, and things like Hop and Connects? Can you differentiate between these things?

• 7:54Speaker 01

  Yeah, absolutely. So, you know, like you said, each, each of the Layer 2s, as well as kind of these like Ethereum sidechains, like Polygon and Nosis Chain, have a asset and a message bridge with Ethereum. So this lets you, you know, like one contract can talk to each other, and then also, if you just want to move your assets over, you can. With, specifically with Optimism or Optimistic rollups, this message bridge takes a full week to get back to Ethereum. And this is enough time for any kind of fraud detection to play out on-chain, make sure that On the, you know, those networks are secure.

• 8:35Speaker 01

  And then also, all of these bridges are just between the networks and Ethereum. And so what HOP does is we basically leverage these bridges, specifically the message bridges, to create this broader kind of cross-chain bridge. So that you cannot just go from like Polygon to Ethereum, or Optimism to Ethereum, or Arbitrum to Ethereum. But you can actually go directly between each of these. And the way that we do this is we bundle messages on one chain. So we get, you know, thousands of messages that are sending from, say, you know, Polygon to Arbitrum. We pack those up and then we send them through Layer One Ethereum to the destination. But that's a, you know, very small package.

• 9:19Speaker 01

  And then we can unpack them over there. And this creates this, you know, very scalable way to get a message from one, you know, non-Ethereum chain to the next by using Ethereum as HOP.

• 9:31David Hoffman?

  Certainly. And without these cross-layer-two bridges, if you were on Polygon and wanted to get to Arbitrum, you would have to go down to the Ethereum Layer One and then send your money over to the Arbitrum Bridge and then up to Arbitrum. And then if you wanted to go to Optimism, you would go back down. That would take seven days. And then you could go over to Arbitrum or Optimism, then up to Optimism. And then getting off of Optimism would take another seven days. But with these cross-layer-two bridges, we can just go and hop from Layer Two to Layer Two to Layer Two without any of that time delay. One of the cool things about this whole thing is that we knew that this was a problem for Layer Twos, like from a long way off. This whole seven-day withdrawal thing is just not going to be tenable for users.

• 10:13David Hoffman?

  And so like products like HOP and Connect started getting built even before the Layer Twos had launched. And so it was one of the cool instances of problems being solved before they were even coming into existence. And that brings me to my next question about the genesis of HOP. How did HOP come to be? Where did it come from? Because of course, now that it is turning into a DAO, I think it's important to understand the genesis of this whole thing. So where did, how did HOP come to be in the first place? Who created it?

• 10:43Speaker 01

  Yeah, so you know, our team has been around the space for a long time now. And so previously, we're working on a contract-based account wallet called Ethereum. And so this was, you know, targeted towards regular users that just wanted to kind of log in with the username and password, but we, you know, stuck to kind of the core Ethereum ethos, where it was like non-custodial, you know, you could access it on your own. And but it still made it like very easy to onboard. But you know, DeFi summer hit, we saw, started to see a lot of these users just get completely priced out of mainnet Ethereum, because unless you're dealing with, you know, tens of thousands of dollars, if you're paying hundreds of dollars of transaction fees, like you're just getting your yield cut, it, you know, stops making sense very, very fast.

• 11:28Speaker 01

  And so what we did with Ethereum is we started integrating with different Layer 2s. At the time, it was like Diversify and Loopring, you know, so primarily application-specific Layer 2s focused on exchanges or being exchanges. And we saw our users, they would kind of move to these Layer 2s, they'd make a few transactions, and then they move back. And by the time they they pay the bridging costs, you know, they deployed their Layer 1 account, they might as well have just used UnSwap on Layer 1, like they weren't really saving money. And so, and meanwhile, we are, you know, seeing like our onboarding flow just get destroyed by fees, because now all these new users that had this smooth onboarding flow now have

• 12:13Speaker 01

  to pay, you know, a hundred, $200 just to deploy their account and get started, which was just like a deal breaker for for most regular people. So we were, we knew that, okay, we need to onboard users directly to Layer 2, and then just let them hop around from one Layer 2 to the next, never touch Layer 1, never have to deploy that contract-based account. And yeah, started to think about different ways we could do this. And yeah, so we came up with a hot protocol. It's a, you know, very unique design. We put the white paper out towards the beginning of 2021, just to the research community. And then, yeah, not too long after Vitalik released

• 12:52Speaker 01

  His paper on the rollup centric scaling roadmap and that post actually called for exactly what we were building like we need to do. You know, we need to be better about transferring assets from one role to the next. So we got super, super excited. Just kind of went heads down, built the thing as fast as we possibly could. You know, went through a bunch of audits, made sure everything was secure, released it last July. And then, yeah, had been growing it since.

• 13:21David Hoffman?

  Man, that is a cool story. So how many people who were working on the original Ethereum project were rotated into the hot project?

• 13:30Speaker 01

  Yeah. So it's the three founders. Yeah.

• 13:34David Hoffman?

  That's three. So three guys. Okay. Great. And then, and then how has the hop community grown since then?

• 13:40Speaker 01

  I mean, in terms of the team, we have Lido on our team as well. So it's, you know, Shane, Miguel, myself and Lido. And, you know, we're going to be growing the team pretty aggressively coming up. So, you know, if you're interested in, in, you know, building a bridge and, you know, helping us scale Ethereum, definitely reach out. And then as far as the community goes, like that, that's been one of the coolest things to see is, is, you know, we've, we've really seen a lot of people step up. You know, take charge, whether it's like mods in the Discord or people building Dune dashboards or Twitter bots and all kinds of stuff, just like making small contributions to.

• 14:21David Hoffman?

  Yeah. And I think this makes for a really unique story out of hot protocol where you, you guys saw a need ahead of time based off of what you were building. It's like, well, this is a problem for our current product. And then you had like this nice immaculate, just like Vitalik paper saying, hey, this is going to be a problem coming forward. And you guys were like, oh, we already knew that. Let's keep on building. It was like the Vitalik validation. But then like you rotated Ethereum into hot protocol way ahead of the curve before the role, the, the like roll up centric mode map roadmap was even well understood by the broader Ethereum community. But you guys never actually took any additional VC funding from, from anyone before, after the rotation from Ethereum into hot protocol. Is that correct?

• 15:07Speaker 01

  So we did do the round with Ethereum, like you said. And then we did actually do a very small round just to get a few DeFi founders. And so, you know, we brought on Kane and Stani from Synthetix and Abe. And then as well as Stefan from Bosis and then a key, a few key individuals. But this was just, you know, a very, very, very small allocation just to kind of keep us going and get these folks involved. So, yeah, we've really kept funding to a minimum and, you know, been like super lean with, you know, how we built out HOP. But that's allowed us to give, you know, just a ton to the community and make sure that the DAO has like a bunch of firepower in the treasury.

• 15:51Speaker 01

  And, yeah, really happy with the way everything turned out.

• 15:55David Hoffman?

  Yeah, and where the, the current state of crypto right now is that seed funding and seed rounds are just like going bonkers in valuations in the private markets. And HOP never really engaged with that. And so you guys had the one round with Ethereum years ago. And then I think, and then what you just said, just with a few key more people, just to keep, to keep a gas in the gas tank. But it never really seemed to be about like, how much can we raise from, from VCs? Can you talk about just the ethos and the vibes that you guys have tried to make into the whole HOP entire, into the HOP ecosystem?

• 16:31Speaker 01

  Yeah, I mean, that's exactly right. Like, we truly believe in decentralization. And, you know, ultimately, if the company behind, or that like initially develops the product has like, you know, all the funding. Then, then, you know, the community only has so much control. And so what we want is really for HOP to be community, truly community led. And so, you know, the community will own the treasury. And, you know, there may be opportunities for investors to get a piece of that treasury if they decide. But we, as, as kind of the initial development team, are now kind of transitioning to being a service provider for the DAO.

• 17:13Speaker 01

  And so in terms of like our budget and, and, you know, that's all going to have to be requested from us to the community saying, you know, here's what we're providing. What we're bringing to the table and what we're asking to kind of like keep ourselves going.

• 17:28David Hoffman?

  Okay, so and one final question before we get into the fun stuff, the token stuff. How many full-time hoppers are there? How many full-time people like work for the hop protocol?

• 17:37Speaker 01

  So there's four of us.

• 17:39David Hoffman?

  Four of us? Okay, cool.

• 17:40Speaker 01

  Yeah.

• 17:40David Hoffman?

  That's not that many.

• 17:42Speaker 01

  Not that many, but you know, like I said, we're going to be growing the team pretty aggressively. So hopefully we'll have a bunch more hoppers here pretty soon.

• 17:51David Hoffman?

  How much like bottom-up community involvement has there been?

• 17:55Speaker 01

  Um, there's been a lot, you know, we've seen, um, you know, definitely people have picked up. You know, like I said, uh, Dune dashboards, uh, Twitter bots, um, you know, someone did a Nosis Safe integration. Uh, we've seen tons of like integrations across different, um, products in, in the crypto space. Like David Mihal with crypto fees has been, uh, pretty cool. And, and yeah, you know, definitely seeing the community start to pick up anything they can.

• 18:23David Hoffman?

  Amazing, yeah, I'm just reminded of how, uh, lean and simple, not necessarily simple, but just like, it doesn't take a whole lot to make a whole lot of value out of this space. Like Uniswap doing as much volume as Coinbase only had like 20 to 30 employees. And now we're seeing entire cross, uh, cross layer two bridges come out with just four people and a community. Uh, I would imagine that community is about to get a lot bigger coming up soon here.

• 18:48Speaker 01

  Yeah, and you know, the three of us founders are all super technical. We all still are writing code, you know, are in the weeds. And then, you know, Lido is just incredible on the marketing side and growth side. So, um, you know, feel good, you know, even though we're a smart, small team, we can, um, you know, definitely pack a punch and, and get stuff out there.

• 19:07David Hoffman?

  Amazing, okay, let's go into the details of the hop drop itself. What were the criteria for, for getting the, the airdrop? And how was that criteria decided?

• 19:16Speaker 01

  Yeah, so, so with our airdrop, um, the, the goal was to one, you know, reward early, uh, participants of the network. So, you know, if you provided liquidity, um, then we wanted to basically like reward, uh, for that contribution. Um, and then beyond that, we, we targeted, uh, achieving as broad of a distribution as possible. So, you know, like I've been talking about, we really want hop to be truly community-led, uh, and, you know, truly decentralized. And, and so in order to do that, you know, we need to have like a very healthy distribution of tokens across, you know, a broad set. This has become an incredibly hard problem to do and just like I don't think people really

• 19:58Speaker 01

  realize the scale of people farming airdrops like it is truly an industry. I, you know, I would guess that over the past year, you know, billions of dollars of tokens have been given away and these farms are making, you know, probably hundreds of millions of dollars. And so you can imagine, like, if they're scaling things up, they're hiring people, they are, you know, it really is a massive scale. It's not just like Joe Schmo over there kind of spinning up 20 accounts and claiming 20 airdrops. And, you know, so these folks have Discord accounts, they have Twitter accounts, they have ENS names, they're spending millions of dollars in transaction fees. Like,

• 20:41Speaker 01

  the going into this, we were like mind blown, once we started digging into the different transactions. And so with HOP specifically, we saw that, you know, a lot of these airdrop farmers were kind of like on, on the low end where they would send, you know, 50 cents back and forth, back and forth, a bunch of times with a bunch of accounts. And then we saw everything from that to like, you know, much more sophisticated, where, you know, farmers where they, they actually have, you know, millions of dollars, like, you know, they're making hundreds of thousands of dollars of volume, you know, really solid, the full spectrum. And, and so what, this creates this

• 21:25Speaker 01

  like really hard problems. It's like, we want to give HOP to the community, that's the goal. But how do we sort out our actual community from, you know, one, these large scale bot farmers, two, people who see kind of the airdrop as the product themselves, they don't care about the bridge, they just really want to get the airdrop and then bounce on to the next thing. And then there's like our actual community. And so we tried a bunch of techniques, what we landed on was like creating these like initial criteria where it's like, hey, you know, we can't sort

• 22:00Speaker 01

  If we just look at everybody, but if we create this like initial criteria, most of the bots will fall under it. And then we'll be able to actually manually go through and you know, both programmatically and manually go through and find our actual users and get them hot token. So what we did is we we set the initial criteria. This moved around a little bit and we set it as low as we possibly could at at two transfers and a thousand dollars of volume. So you know, an average of $500 if you're just doing two transfers. If you're only working with a hundred dollars, you could still make 10 transfers and you'll still be included. And so this kind of gave us our initial set of addresses.

• 22:41Speaker 01

  And then what we did is we we ran this, you know, algorithm that that actually tracked every single transfer that that these addresses have made. Every single bridge transaction that these these addresses have made. And then we filtered out all the exchanges, all of the contracts, all anything that that might have interacted with multiple individuals. And split up the interactions and and so this kind of like allowed us to isolate these groups of addresses that that we could identify as being individuals. All that it's done programmatically, spits out a list of groups.

• 23:18Speaker 01

  And then we actually manually went through every single group and said, hey, you know, this group, they all are are doing this exact same transaction at this exact same time. Looks like a bot farm eliminated, or this group, you know, looks like a bunch of NFT users that are all friends with each other, sending each other money. Look, you know, they're still included, they're getting hot token. And that kind of led to where we landed. So we, you know, out of 40,000 addresses that met the criteria, we eliminated 10,000 of them. And now the community is is kind of helping to eliminate a bunch more. I don't know if you want to get into that already.

• 23:55David Hoffman?

  Yeah, no, we we certainly will. I I think this is really cool and just kind of illustrates the changing meta of airdrop dynamics. Uniswap had this just immaculate blessing of not having to worry about this because they invented the whole concept of a retroactive airdrop. And so no one was farming the Uniswap airdrop because that wasn't a thing to do. But they were the only people that were able to do that. Whoever was going to do the retroactive airdrop first had the blessing of like, cool, you get to do it first and it's pure that way. Following that, every single app was like, ooh, retroactive airdrop, retroactive airdrop. And it's starting to become gamed. And now it seems to be like there's this arms race of airdroppers versus airdrop farmers.

• 24:37David Hoffman?

  Like, who can get more creative in trying to figure out the mechanisms to farm the airdrop? Versus which teams can figure out how to mitigate against these retroactive airdrop farmers? How would you, if you had to like rate your efforts, your guys' efforts, as in like, give your guys a scorecard of like, how well you did in achieving your goals of mitigating the farmers? How well would you, how strongly would you rate yourself?

• 25:01Speaker 01

  I think we did really well, you know, there was, we spent three months trying to figure this problem out. And, you know, the whole time we're so jealous of Uniswap just kind of being able to put it out there. And there's no expectations and, but yeah, we knew people, you know, had expectations. And we really wanted to get, get, not just do like a plutocratic airdrop where we give to just the liquidity providers or just based on volume, like stuff that can't be gamed. But it was such a hard problem to figure out. But yeah, I think we did really well. I think, you know, there's, there are more bots that, that, you know, may still be there. But I think that, you know, we've already seen some really promising submissions from the community.

• 25:45Speaker 01

  And so what we've done is, is said that, hey, if you submit a group of addresses with very solid proof, we don't ever want to accidentally eliminate a legitimate user. So it has to be like, you know, super tight. And, but if you do, you get 25% of the tokens that would have gone to the civil attacker. And then also, if you are a civil attacker, you can report yourself. So if you are scared that you are going to get caught by the community, which, you know, they likely will, there's a huge incentive to do it, you could just report yourself and, and you will get 25% of the tokens that you otherwise would have gotten, or you can wait and get nothing.

• 26:29Speaker 01

  And so I'm super excited.

• 26:31David Hoffman?

  That's amazing. That's, that's such a Chad move because like it's game theoretical rational to just turn yourself in. Cause like you still get the, you still are farming the airdrop, but you're mitigated by, by 75%. So you like, you still like, congrats, like you, you got something, but like you're, you're still getting kneecapped in the total supply of what you're getting. That is genius.

• 26:54Speaker 01

  So a little little tip from the IRS.

• 26:59David Hoffman?

  Oh, my God, that's too funny. And so also what you're doing with allowing people to report this, report the the farmers, the airdrop farmers is like you're allowing other people to farm the farmers. And so like it's it's you're putting this out into the market and you're allowing just raw financial incentives to reduce the distribution of tokens into the hands of people that shouldn't have gotten it in the first place. This is really cool.

• 27:23Speaker 01

  Exactly. Yeah.

• 27:25David Hoffman?

  And so is this is this like you do you think going to be like the standard mechanism going forward? I feel like all future airdrops would probably use some sort of like mechanism like this.

• 27:37Speaker 01

  I do, I do. And I but like you said, like, I think it is an arms race and ultimately it comes down to solving civil resistance. And, you know, you've seen people work on it for years, like, like notably, Gitcoin has been working on it for a long time. It's a really hard problem. I don't know if it's solvable. So I, you know, I do think people will use this if they try to do civil resistant airdrops, but we might see this be one of the last civil resistant airdrops because the incentives are just too big for the farmers and and it's too easy for them to hide.

• 28:12David Hoffman?

  Well, this is going to be an involving story as we go forward, of course. Okay, I actually want to go into the actual distribution. And so, Chris, you're not seeing it because I'm live streaming my screen, but I'm showing the hop distribution pie chart. We got the treasury, we got the airdrop, we got the investors, we got the team, and we also have the future team. And so I kind of want to just go through these one by one, starting with the actual treasury. So typically, I think you see, I've seen the treasury for like typical DAOs gets spun up at just 50% seems to be like the shelling point. But you guys have chosen 60.5%. Is there any just like rhyme or reason into how that number got decided?

• 28:48Speaker 01

  Yeah, I mean, it's a symptom of like how lean we've been able to stay and get the protocol out there. So, you know, we think of insiders as both team and investors and the typical slice for insiders in a DAO is like 40 to 50%. And for us, it's, you know, right around 30%. And so that's what has allowed us to give an extra 10% of firepower to the DAO.

• 29:15David Hoffman?

  Fantastic, fantastic. Okay. And then also, I should also start with, there's a 1 billion hop supply, correct? So that makes it, what is that, 650, 605 million tokens of hop tokens are in the treasury? And there's no other, there's no plans for those, right? They're just in the treasury, right?

• 29:33Speaker 01

  Yeah, it's gonna be up to the community.

• 29:35David Hoffman?

  Okay, so I'm not sure if there's consensus on this, but I want you to check this take of mine. If it's in the treasury, it's basically tokens that aren't in circulation but are minted. But like, when it comes to like, the trading, like, volume, and also the market cap of this thing, they basically count as like, un-minted tokens. And so I actually consider the 605 million hop tokens to not actually exist, because they're in the treasury, right? And also, does the treasury have a lockup?

• 30:05Speaker 01

  I think that's a fair take. And the treasury doesn't have a lockup, so the community can kind of spend them as they see fit.

• 30:13David Hoffman?

  Okay, so if you take my take, there's actually really just about 400 million hop tokens out there. The 605 million from the treasury will slowly make themselves relevant over time. So this is why we call fully diluted valuation. But if we're talking about like, today, the airdrop and what people are going to be clamoring about as soon as this token starts trading, for those purposes, like, these tokens just don't exist. But also, there are some other categories where that falls into the same category as well. So we'll talk about that. Airdrop at 8%, 8% of the total supply. So what is that, 80 million hop tokens? How did you guys decide on 8%?

• 30:51Speaker 01

  So we really wanted to get a lot of tokens into the hands of the community, but you know, like giving too much to bots was a concern. And then also the bridging space is incredibly competitive right now. And liquidity mining plays a huge role in this. So what we imagine the community will do, you know, soon after the DAO launches is set up like a liquidity mining to get, you know, more liquidity into the pools. That's going to allow larger transfers and cheaper transfers through the bridge. And so we do imagine that a large portion of the treasury is going to be distributed,

• 31:36Speaker 01

  you know, over the next year, over the next two years and moving forward.

• 31:40David Hoffman?

  Yeah, and I definitely want to talk about the yield opportunities that Layer 2 Bridges present, but we'll save that for the second half of the show. Investors, 6.25%. You talked about those. It's the people that invested in Ethereum back in the day and also some select angels. How long was the lockup on those people?

• 31:57Speaker 01

  So for both team and investors, we have a three-year lockup with a one-year cliff. So both the team and the investors will have zero voting share in the DAO. It's really going to be the bridge users and the liquidity providers who are in control for the first year.

• 32:14David Hoffman?

  Okay, 22.45% for the team. That's the four founding members of the team, correct?

• 32:20Speaker 01

  Yeah, just three founders.

• 32:21David Hoffman?

  Three founders, excuse me. And then also 2.8% for the future team, which also will lead into a topic here in a second. But I would imagine the same lockup on those as well.

• 32:32Speaker 01

  For future team, it will likely be a, you know, standard four-year vesting schedule. The reason we did three years is because we've already been, you know, the founding team's been working on this for three years, if you count Ethereum. And yeah, we've all been doing it at least one year.

• 32:47David Hoffman?

  Yeah, okay. Well, definitely congratulations on this event. This has probably been a long time coming to have a token out and about. So this is probably pretty exciting for you.

• 32:56Speaker 01

  Thanks, yeah, definitely is.

• 32:58David Hoffman?

  There's one other part of the announcement post that we'll have linked in the show notes as soon as this live stream is over. It's the HOP Foundation plus the HOP Labs. And of course, the post itself is talking about the HOP DAO. So there's three entities now, the Foundation, Labs, the DAO. Can you just talk about all of these entities and how they relate to each other and what each one does?

• 33:17Speaker 01

  Sure. So Hop Labs is kind of this initial entity. It's a US, you know, Delaware C corp. We, you know, developed hop protocol and this is, you know, who employs us. And so now that, you know, we're turning into a DAO, we, you know, the foundation is spun up in the Cayman Islands. And so this kind of acts as like a legal layer for the DAO because there's a lot of stuff still figuring, being figured out as far as like how to treat DAOs legally and, and you know, what that looks like, you know,

• 33:55Speaker 01

  how taxes are paid and so on. And so this, you know, helps kind of limit liability and give like an entity for regulatory bodies to interact with if necessary. But ultimately it's controlled by the DAO. You know, the, the, the foundation is beholden to the token holders. The token holders can add and remove board members of the foundation. The entire treasury is actually held, you know, in the, you know, governance contracts. So it's not like the, the foundation has like large amounts of funds or anything. So yeah, it really just acts as like a legal layer for the DAO.

• 34:37Speaker 01

  And then, you know, us as, as Hop Labs, now that, that, you know, the, that, once the DAO is out there, we become a service provider to the DAO. So, you know, we've stayed super lean. We don't have like a massive treasury or a huge budget or anything. And so what, what, you know, you'll see moving forward is that we will actually request funds from the DAO from the get go. I know lots of other projects are going to do this eventually, but you know, they still have a long runway of VC funding to burn through before they really need to, to make the ask. But, you know, we want, we, we think it's important to, you know, actually, you know, be beholden to the, the community and, and this is one way to do it where if they don't like what we're doing

• 35:19Speaker 01

  or, or, you know, we're not providing the services promised, like we, you know, our funding relies on it.

• 35:25David Hoffman?

  Yeah, you guys get asked just like. Yeah, okay, cool. And then just one last few set of questions before we go to the second half of the show, which I think will be very, very fun. Of course, what does the token do? What sort of responsibility does the DAO have? What are the powers of the token? What does it govern over?

• 35:42Speaker 01

  Yeah. So, so right now, it is very much a like purely governance token. So, but we do have like a bunch of key parts of V1 hop that that need governance. So, you know, one like top of mind one is incentives for the AMMs. So we do imagine the community will choose to set up incentives, you know, get, get a lot more liquidity, make, you know, transactions cheaper. And then we have this like active liquidity provider role called the bonder. And V1 of hop has this constraint where we, you know, we can't just open up the bonder to be a completely permissionless role.

• 36:24Speaker 01

  Because they, they, you know, with V1, like bonders might step on each other's toes and, and it has to be like a little bit more coordinated. So we have a bonder whitelist and ultimately the community will be able to choose which bonders are kind of running for, for each asset until we get to V2, where we completely remove the whitelist. The bonder is like a fully permissionless role. Anyone can spin one up like they would spin up like E2 node in their living room. And yeah, so that's the bonder whitelist piece.

• 37:01Speaker 01

  And then, you know, we'd love to see the community set up like grant programs, you know, like a lot like other DAOs have done. And then, you know, obviously manage the treasury funds. It would like likely make sense to diversify a little bit, make sure that that hop can survive a bear market. But then also, you know, is like competitive with, you know, a lot, a lot of these other bridges that that have like massive, massive treasuries to, to, you know, spend on various things. And then lastly, like I said, you know, our own funding, it needs to come from the hop down itself. So the community will be in control of, of like, you know, what that looks like and, and, you know, what they, they ask from us.

• 37:44David Hoffman?

  And I'm now cognizant that I forgot to ask the very important question of this is not an airdrop they can claim at this present moment. There will be a claim date in the future. This is the period of time where all the sibylers can get identified and all of that shenanigans. But when does the token actually go live? When will actually be able to be claimed by the airdrop recipients?

• 38:06Speaker 01

  So we're going to give the community at least two weeks to make reports of any kind of like civil attacker groups. Depending if we've seen like super high quality groups being reported still after that two week period, we might extend it a bit. But yeah, so I think we're looking about two to three weeks, you'll be able to claim your tokens. And then, you know, Hop will be in the community's hands.

• 38:31David Hoffman?

  So it's like the timing of a microwave popcorn bag. If you still hear the pops going off, we're going to wait until we don't hear the pops going off anymore?

• 38:39Speaker 01

  Exactly. Yeah, that's a good way to put it.

• 38:41David Hoffman?

  Amazing. Okay, cool. Chris, I want to just pick your brain about layer twos. There's a bunch of like yield opportunities with layer twos, especially as volume picks up over layer two summer. And overall, you talked about how competitive the cross-chain layer two bridge landscape is going to get. So I also want to pick your brain on that. And overall, just your takes on the layer two ecosystem, the L222 movement, and whether you subscribe to that ideal or not. So all of those conversations are coming up in the second half of the show, right after we get to some of these fantastic sponsors that make the show possible. If you're trying to grow and preserve your crypto wealth, optimizing your taxes is just as lucrative as trying to find the next hidden gem. Alto IRA can help you invest in crypto in tax advantaged ways to help you preserve your hard earned money. Also,

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• 41:49David Hoffman?

  Alright guys, and we are back for the second half of the show. And Chris, this is where I want to start first. You talked about how competitive the cross-layer-two bridging ecosystem is going to get, and alluded to how a lot of that treasury will likely be used for liquidity mining incentives. So I want to talk about the yield opportunities for cross-trained Layer 2 bridges, and how yield farming might begin in this whole entire paradigm. Like, how much yield is out there? Like, how much yield is available to capture? And when the competition for these Layer 2s really heats up, like, how big of a deal do you think this is going to get?

• 42:24Speaker 01

  Yeah, I think it should be really interesting. Like, you know, we're super excited about Optimism's token launch. You know, we'll see what else happens from there. And then, you know, with the HOP token out there, you know, if the community lines up incentives there, like, things could definitely get really juicy. I think already, you know, with HOP, you know, you're seeing double-digit returns for stable tokens on some of the pools that are already incentivized, like the Polygon and Nosis pools.

• 42:56Speaker 01

  And yeah, so there's, yeah, tons of opportunities. And then, I think, like, what you want to get into is, like, you know, once we do see, like, these Layer 2s warring with each other, it's going to be tough to win, you know, liquidity. And so, you know, we might see, you know, the returns start to get really, really nice as, you know, it gets more and more competitive to see, like, who's going to attract the most TBL.

• 43:22David Hoffman?

  And so if we're looking to be liquidity providers for HOP, and I think the cross-layer-two bridging liquidity providing ecosystem is actually unique and different, and like, more attractive to me personally than just, like, liquidity or liquidity providing in Uniswap, right? Because if I want to liquidity provide my ETH in Uniswap, I kind of have to do it with, like, stable coins, which means I have to cut my ETH position in half and turn it into 50% stable coins. But like, I'm way more bullish on ETH than just holding a 50% supply of stable coins. So like, with a cross-layer-two bridge, like, HOP... Or connects or something, I can provide ether only and get ether fees and provide liquidity that way.

• 44:04David Hoffman?

  So I get to hold my ETH, um, hold my ETH position, but also getting ETH fees and also potentially yield farming, hop tokens along the way. So question to you is like, what are the volumes that our people are seeing? Is it a largely ether being transferred over or is it stable coins? Like, what's the distribution of, of, uh, fees that are being collected by the protocol?

• 44:25Speaker 01

  Yeah, but by far, um, ETH is our biggest bridge. And, and so, you know, liquidity providers can definitely, um, you know, uh, provide liquidity with ETH and HETH. So, you know, pretty much no risk of impermanent loss, uh, because you can always claim your HETH on layer one for the underlying ETH. So yeah, it's a great way to just get straight yield on ETH without having to like expose yourself to like impermanent loss that, that, you know, if ETH goes up, you'll end up with just a bunch of stable tokens. And then, you know, second is USDC, uh, USDC is like a hugely dominant asset. And yeah, we, most of the stablecoin volume is, is from there. Um, and you know, USDT and DAI are a little bit, uh, smaller.

• 45:10Speaker 01

  But yeah, I mean, I, it should be interesting what the yields look like after the, the token is out. I think, uh, right now there, there's a, you know, big chunk of liquidity in the pools. Uh, I think a lot of that was, uh, folks kind of like, uh, hoping for, for this airdrop. But now that it's out, you know, there, there's gonna be, need to be some incentives if, if the community wants to like, keep these, uh, LPs around.

• 45:34David Hoffman?

  And do you know the rates that people are getting for supplying ETH? Is there, I don't know if there's like a, maybe a Dune dashboard or an analytics that we could look at, but is there like a, um, uh, what's like the average yield that people are getting on their, on their ETH?

• 45:47Speaker 01

  Yeah. So, so you can see it right on our, our site, you know, hop exchange. Um, it'll, it'll, uh, when you go to LP, it will, it will show you, um, the trading fees. And then also, uh, if there's a staking pool set up, it will show you the additional staking rewards. Um, and right now, you know, because there was, um, you know, folks like, like hoping for the airdrop, the yields aren't like super attractive, uh, but, um, that's because there is a lot of liquidity. There's outsized amount of liquidity for just the trading fees. Uh, but that's going to change really fast once, when, you know, if the community decides to, um, add some additional incentives there.

• 46:26David Hoffman?

  So now that this token is already out, do you think all these like disgruntled farmers that got cut out, are they just gonna like migrate to connects, which hasn't done their airdrop yet? And so they're just gonna go and retroactively farm like the next layer two bridge?

• 46:39Speaker 01

  It's possible, but you know, we're gonna be pretty, or you know, we'll see, but like I'd imagine the incentives will be there fast and, and, you know, people, I don't think will move too fast. And one thing I forgot to say is that the ETH rewards on Polygon and Ossus chain, those are both incentivized right now. And I do believe that the yields are pretty juicy.

• 47:03David Hoffman?

  Lovely, lovely. All right. Well, we'll get some links in the show notes so people can check out those yields. And then of course, as layer two season progresses, like optimism token came out, hot protocol token came out, connects has explicitly stated their token is coming. And I can only guess Arbitrum's token is coming out, like just zooming out over the broader like Ethereum ecosystem. Do you subscribe to this being like the major catalyst needed to instigate a L222, layer 222?

• 47:33Speaker 01

  Yeah, I think so. You know, I think like, especially like the optimistic role teams were super concerned when they were launching because like people were so desperate for cheaper fees and like what they were bringing to the table. But from a security standpoint, I think there was a lot of concerns about like just having a flood of, of, you know, liquidity move over and, and, you know, before things like got really battle tested and played out. But I do think the teams are feeling super, a lot more comfortable than when they launched and, and, you know, like obviously optimism is ready to incentivize things already. And, and yeah, like

• 48:16Speaker 01

  there's just so many flywheel effects here. Like, like if optimism starts really creating juicy incentives on their chain and we see like others do the same thing. And those are competing with each other. And then we see a lot of activity move to layer two. And so now if you're on layer one, you're competing with. Uh, you're competing on block space with other layer twos and layer twos can use block space so much more efficiently. Uh, so now you're like even more likely, you're potentially more likely to get priced out of layer one. And, and you know, even more incentives to move to layer two and that flywheel uh plays out. So I, I really do believe it. Um, and, and this is an incentive that'll kick it off.

• 48:57David Hoffman?

  Yeah. And a, a nuance here that's important to unpack is that back in 2020 or in 2021, layer twos were just not ready. Their infrastructure was not refined yet. And, and really just the story of 2021 was alternative layer ones beating layer twos to the punch because layer two tech wasn't really developed yet. Would you say that the state of layer two tech is ready to onboard? A bunch of liquidity, a bunch of users, a bunch of transaction volume uh without having any like major hiccups? Like, is there any sort of insights you know about what's going on with the layer two teams?

• 49:30Speaker 01

  Yeah, I think so. You know, um, you know, as far as security goes, like I think they've, they've done a good job. Um, you know, like there hasn't been a hack of, of, you know, the optimistic rollups. And, you know, I do think that there is um still progress being made as far as like uh decentralization and, and fraud proofs and uh, you know, whi- which is like, kind of allows you to not trust uh what's known as like the sequencer who, who's kind of moving stuff along. Um, but you know, knowing the teams like, like they're, they're, you know, all super committed to, to like being truly decentralized, being, you know, really uh not having any trust involved.

• 50:15Speaker 01

  Um, so you know, beyond that, the user experience is amazing. Like, like I, I, you know, if you haven't messed with, with one of the optimistic rollups, like just going from layer one Ethereum where you make a transaction, you're waiting 10 minutes, you're trying to guess at the gas you want to use. You go to layer two, you make a transaction, it's just a set fee, you don't have to think about it. And it gets confirmed immediately. It's like, almost like a web two experience where you make a transaction, you see the effects and, and um, yeah, I, I can't imagine um going back to layer one after, after. Moving over.

• 50:46David Hoffman?

  Yeah, if you have not used a layer two, which I imagine a lot of the viewers have because you know, that's what hop deposits you on. Still though, if you have not yet used one, you gotta do it. It is pure magic. Chris, I'm sure you're a busy guy. Your airdrop just got launched. I'm sure your discord is just in just a very like energetic place to be right now. So I want to let you get back to the very, very busy life of a post airdrop team. But first, some final questions for you. What's next for hop? Like, what do you think? What are you going to have to go do like right now after this livestream ends? And then what do you guys focus on over the next few months?

• 51:21Speaker 01

  Yeah, so so right after this podcast, you know, we're focused on kind of reviewing the the reports that are being submitted, getting ready to actually, you know, get the Dow live, get the token live, allow people to claim. And then, yeah, you know, turn it over to the community. That's going to be super interesting. See people kind of step up. We're, you know, taking delegates right now. So if you're interested in, you know, participating in hop governance and want people to kind of delegate their voting share to you, please apply on our forum and, you know, we'll help promote you and everything. And yeah, beyond that, you know, we're, you know, excited to see where the community takes it.

• 52:04Speaker 01

  We have some thoughts as far as like next iterations of hop that could be really interesting. Yeah, just excited to see where it goes from here.

• 52:15David Hoffman?

  Amazing, Chris. Well, I do believe that layer 222 is on the horizon and it's because airdrop season is back on the menu. So thank you for being the number two layer two token, layer two related token to come to the table. I'm really excited about this coming revolution of the layer two Ethereum. And of course, I'm going to go do some hopping myself after right after this. So Chris, thank you for coming on and explaining the the launch of the hop Dow for us.

• 52:40Speaker 01

  Thanks for having me, David. And yeah, super excited as well. Should be a fun year.

• 52:43David Hoffman?

  All right, Bankless Nation, you know what to do and you know what you're about to hear. Crypto is risky, DeFi is risky, Layer 2s are also risky, and so are bridges. We know bridges are risky. You can lose what you put in. This is the frontier. We are headed west, and we are glad you are with us on the Bankless journey. Thanks a lot. Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcasts, and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content,

• 53:26David Hoffman?

  and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where we summarize the week in crypto and other fantastic content. Thanks, everyone, for watching and being on the journey as we build out the Bankless Nation.