Namik Muduroglu: Token models incentivize selling over holding, governance structures in DAOs are failing, and regulatory fears stifle innovation

Key Takeaways

• Many tokens are flawed because they incentivize selling rather than holding.
• Current token models disproportionately benefit founders and investors.
• Concerns about securities laws are hindering innovation in revenue-sharing models.
• The shift from investment to short-term trading disrupts token holding incentives.
• Bear markets encourage more experimentation in the crypto space.
• The current governance structures in DAOs have not proven effective.
• Locking up allocations can help startups grow into their valuations.
• The idea that crypto projects can operate without responsibility is nonsensical.
• Long-term thinking is essential for founders to succeed in the crypto space.
• The BGD team has been crucial to Aave’s success and innovation.
• China is reportedly using bot farms to reverse engineer AI models.
• The intersection of large language model inference and robotics will emerge rapidly.
• AI can rapidly analyze large codebases, speeding up security research.
• The geopolitical landscape surrounding technology is more polarized than anticipated.
• Human greed is creating a feedback loop that prevents necessary alignment of AI technologies.

Guest intro

Namik Muduroglu serves as Chief Strategy Officer and founding team member at MegaETH Labs. He previously worked as a Strategic Business Developer at Consensys. At MegaETH, he has shaped the project’s launch strategy, including its oversubscribed $20 million seed funding round backed by Vitalik Buterin and Joseph Lubin.

The structural issues in token economics

• “Most tokens are structurally broken because they incentivize selling rather than holding.” – Namik Muduroglu
• Brian Flynn’s viral article highlights the race to the exit in token design.
• Current solutions like lockups and buybacks are seen as band-aid fixes.
• “He basically says it’s kind of you know band aid solution doesn’t actually solve the underlying issue.” – Namik Muduroglu
• The future may involve governance models with direct revenue distribution.
• “His proposed fix is… 100% of protocol revenue governed by token holders.” – Namik Muduroglu
• Founders and investors benefit disproportionately from current token models.
• “Founders and investors have double dipped for too long.” – Namik Muduroglu
• Insiders have benefited too much from the status quo, which is now changing.
• “Insiders were eating too good with the status quo that’s gone now.” – Namik Muduroglu
• Concerns about securities laws hinder innovation in revenue-sharing models.
• “People are afraid of going to jail for or getting fines for securities laws.” – Namik Muduroglu

The impact of trading behavior on token economics

• The shift from investment to short-term trading disrupts token holding incentives.
• “Everything has gone from being an investment to a trade.” – Namik Muduroglu
• Projects need to provide clear incentives to encourage long-term holding.
• “The only way to solve that is figure out a way that people want to hold your token.” – Namik Muduroglu
• Without clarity on equity token differences, investors remain hesitant.
• “Until we have clarity on the equity token difference… people just aren’t willing to underwrite tokens.” – Namik Muduroglu
• Bear markets encourage more experimentation in the crypto space.
• “Bear markets where you get more experimentation.” – Namik Muduroglu
• Current governance structures in DAOs have not proven effective.
• “A DAO will solve that you don’t need the law… it just hasn’t worked out that well.” – Namik Muduroglu
• Structural overhang in token markets makes pricing difficult and opaque.
• “It becomes very difficult to price it becomes opaque.” – Namik Muduroglu

The challenges of governance and regulation in crypto

• Locking up allocations can help startups grow into their valuations.
• “It’s better to lock people up and give yourself a chance to grow into that valuation.” – Namik Muduroglu
• The idea that crypto projects can operate without responsibility is nonsensical.
• “The idea that like we’re just friends hanging out in a discord… is nonsensical.” – Namik Muduroglu
• Investors often buy into projects for quick profits, not belief in the project.
• “They’re buying because if you get in they can sell at two x 10 x to a 100 x.” – Namik Muduroglu
• There is hope that the crypto industry will create real value after hitting rock bottom.
• “I’m praying that at this point we finally hit rock bottom.” – Namik Muduroglu
• The behavior of market participants is driven by incentives.
• “Incentives are the thing that drives behavior.” – Namik Muduroglu
• The ecosystem’s focus on short-term token flipping is detrimental to long-term development.
• “The ecosystem’s desire to sort of go full bore on the flipping of tokens.” – Namik Muduroglu

The role of long-term thinking in crypto success

• Long-term thinking is essential for founders to succeed in the crypto space.
• “You’re not gonna end up being stanny… that’s worth you know $500.” – Namik Muduroglu
• Many founders who raised funds through ICOs ended up failing.
• “There are plenty of people who stuck around and built things and it still went terribly.” – Namik Muduroglu
• The ongoing governance tension between v3 and v4 of the protocol is significant.
• “This is much more about v three versus v four.” – Namik Muduroglu
• The BGD team has been crucial to Aave’s success and innovation.
• “Most of the revenue v three generates today is driven by the bgp code.” – Namik Muduroglu
• The current regulatory environment makes creating a DAO seem unwise.
• “Why on earth would you go and create a dao now.” – Namik Muduroglu
• There are significant financial claims associated with the organization.
• “My assumption is that mark knows what he’s talking about.” – Namik Muduroglu

The complexities of Aave’s governance and token distribution

• Aave Labs holds a significant portion of the token supply.
• “A quarter of the token supply is sitting with the ave team.” – Namik Muduroglu
• The situation surrounding Aave is complex with various stakeholder perspectives.
• “The situation is actually quite nuanced.” – Namik Muduroglu
• The current situation with Aave seems to have escalated beyond negotiation.
• “I don’t think there’s a happy way out of this anymore.” – Namik Muduroglu
• Frustrations in DAOs stem from the complexities of working with multiple stakeholders.
• “Creates frustration and agitation.” – Namik Muduroglu
• China is reportedly using bot farms to reverse engineer AI models.
• “China apparently has been creating these bot farms.” – Namik Muduroglu
• The number of fake accounts used by Anthropics seems insufficient.
• “Only 24,000.” – Namik Muduroglu

The rapid advancements in AI and robotics

• The intersection of large language model inference and robotics will emerge rapidly.
• “We see the intersection of like llm inference and robotics hit us like really soon.” – Namik Muduroglu
• AI can rapidly analyze large codebases, speeding up security research.
• “The AI just like went to town.” – Namik Muduroglu
• There is a risk that AI could inadvertently perform harmful actions.
• “What’s the chance that he’s gonna just go try to log in.” – Namik Muduroglu
• The geopolitical landscape surrounding technology is more polarized.
• “The geopolitics of this is super interesting.” – Namik Muduroglu
• The transition to new forms of machine interaction is different due to AI’s nondeterministic nature.
• “We’ve got this like nondeterministic old math.” – Namik Muduroglu
• The fear surrounding advanced AI is rooted in its potential autonomy.
• “It’s really gonna have a life of its own.” – Namik Muduroglu

The ethical and strategic considerations of AI in crypto

• We should be cautious about giving powerful individuals autonomous agents.
• “Do we really want them to also have autonomous agents.” – Namik Muduroglu
• There is an inevitability to the integration of AI and crypto.
• “It’s just the way that it’s gonna be.” – Namik Muduroglu
• AI trading bots can inadvertently cause significant financial mishaps.
• “The bot messed up the decimals.” – Namik Muduroglu
• The rise of AI will fundamentally change how people interact with crypto.
• “It’s gonna be through agents and agents are not deterministic.” – Namik Muduroglu
• The economy might literally go to zero due to recent developments.
• “The economy might literally go to zero.” – Namik Muduroglu
• The acceleration of AI-related issues is likely to worsen before it improves.
• “It’s gonna get worse before it gets better.” – Namik Muduroglu
• There is a 30% chance of a fast takeoff in AI development.
• “There’s like a 30% chance of a fast takeoff.” – Namik Muduroglu

The future of AI containment and alignment

• We should focus on containing AI rather than trying to stop its progress.
• “The best place for them to focus their energy is on basically sitting there not trying to stop it.” – Namik Muduroglu
• We have no ability to control AI once it exceeds human intelligence.
• “We have no mechanism by which to reel them in.” – Namik Muduroglu
• Human greed is creating a feedback loop preventing AI alignment.
• “There’s like this feedback loop of like human greed.” – Namik Muduroglu
• There is a risk that unaligned AI could lead to significant problems.
• “If it doesn’t work out like oh well you know it’s over.” – Namik Muduroglu
• Polymarket is not profitable because they do not charge fees.
• “They don’t charge fees bro how are they gonna be profitable.” – Namik Muduroglu
• The prediction market space is filled with opportunistic behavior.
• “We will do more fuckery.” – Namik Muduroglu

The dynamics of insider trading and market perceptions

• Meteora has publicly stated they are no longer engaging in insider trading.
• “We’re no longer doing the things that we used to do.” – Namik Muduroglu
• When Zach teases something, it indicates he has conducted an investigation.
• “It’s to like force him it’s like to give himself a deadline.” – Namik Muduroglu
• The name ‘straw map’ for Ethereum’s new initiative is confusing.
• “Who the hell came up with the name straw map.” – Namik Muduroglu
• Concerns about potential insider trading related to project announcements.
• “People were basically like well whoever it is is gonna insider trade it.” – Namik Muduroglu
• Ethereum’s roadmap suggests it could achieve unprecedented transaction speeds.
• “You have like magical moon math ethereum that can do like a trillion transactions a second.” – Namik Muduroglu
• If Ethereum successfully implements its roadmap, it will be difficult for other blockchains to compete.
• “How there is any other blockchain that is gonna be able to compete with that.” – Namik Muduroglu

The challenges and opportunities for Ethereum’s growth

• Ethereum has struggled with marketing and communication issues.
• “It’s had a big marketing issue it’s had a big big comms issue.” – Namik Muduroglu
• A new generation of leaders is emerging within Ethereum.
• “There’s a new blood into ethereum the old guard is being nuked.” – Namik Muduroglu