Why MegaETH Is Delaying Its Token Launch After Going Live on Mainnet

Usually there is this unwritten rule of crib neutrality as far as teams themselves staying somewhat removed from the actual buildout of the application layer.

I think myself, we all basically looking back at history and come to the realization that that's very much a losing strategy.

I think our focus is on building a really great blockchain and, more importantly, applications which will hit users that aren't on CT and who didn't even know they could benefit from blockchains, but then they will and they won't even know that.

Hey everyone, welcome to Unchained, your no resource for all things crypto. I'm your host Laura Shin. Thanks for joining this live stream.

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Today's topic is Mega ETH. Here to discuss is Namik Mudarolu, CESO and founding team at Mega ETH and Amir Almmani, head of ecosystem at Mega ETH. Welcome Nomic and Amir.

Thanks.

Hey Laura, how's it going?

Great. Excited to chat with you. First of all, congrats on launching Mainnet on Monday. How do you guys feel about it? And why don't we start with you, Nomic?

Great. I think we've been working on this for a while now, and it's always been an idea in a lot of people's minds, right? This level of performance, this particular trade-off, this particular architecture, achieving this level of low latency in production.

And it was an idea in my mind until just a couple months ago when we went on to the frontier mainet and when we did the stress test and now as we go into public mainet it's quite exciting I think to be able to bring this level of performance the Ethereum ecosystem and have it live in production.

So it's exciting. We're bit tired above is it's very exciting.

And air how about you?

Yeah, no, I mean that would thor right out of my mouth. Right now I think it's really about level setting expectations as well.

Very much a marathon, not a sprint. And this is very much the start of the race, too. So, we're just getting the foundational plumbing set up in place, making sure that all the teams are prepared for full deployments and then excited for what people will start to get to play with over the next couple of weeks.

I already have a lot of mafia teams start to deploy and just again indexing heavily on net new experiences on chain that are uniquely unlocked by real-time shade.

I need to ask you because obviously this is happening in this broader environment of crypto kind of you know having this fall especially after 1010 even another plummet last week on February 5th and you know that day we saw Bitcoin you know plunge from 70k down to 63k in one day there's all these rumors about somebody blew up something happened like you know so you know I'm curious like Even just looking at the price of beef itself, it's down 35% in the last month.

So I wondered, you know, there's been obviously some last minute changes also with your launch. So just talk about, you know, how you were thinking about navigating this launch in this environment.

So without the doubt it's been a volatile few weeks and it effectively forced us to ask ourselves say hey how do we optimize for the success of me right when you have scenarios where absolutely everybody wants to kind of you know close their laptops for a few months and you know touch some grass it it becomes difficult to build flywheels and we need flywheels bills to effectively validate the mag ecosystem pieces.

I would say that a decision we had made a long time ago for better or for worse was that the the era of infrastructure for the sake of infrastructure is over and we need to have a proactive role in cultivating and facilitating a vibrant application ecosystem.

Now if there's a dev spiral the applications don't matter anymore. So what we did is we basically you know course corrected the ship a little bit and implemented what we think is a way to enable application and protocol growth and have that directly aligned with you know you know the the general growth of the ecosystem as known by USD.

Yeah. And just to like adding to that point too, it's always about optimizing for the longevity of mega east. What do we need to do today such that mega will be here thriving five years from now, seven years from now, 10 years from now.

So we're playing much longer term games, and every step that we we we take is again a step in the direction of the the five, seven, 10 years as opposed to how do we just draw a bunch of attention today and then eventually fizzle out over time.

That's that's something that we think is generally net negative not only for ourselves as as a chain but also just the applications that are being built on top of mega. So sometimes you have to go with the slow cook.

Yeah.

Yeah. I I have a question for you guys about that later because yeah there's kind of a a certain sense of intentionality that I'm noticing in a lot of your decisions.

But why don't we go through some of the choices that you're making first before we get to that question. Um well let's just actually even just talk about the basics.

So obviously you know as you mentioned we're launching in this environment in terms of the market but the other thing that happened before was that Vitalik Bddhan published a blog post saying that Ethereum was not going to focus as much on this rollup ccentric roadmap. It was going to try to scale the layer one.

he counseledled, you know, for teams that are building layer twos that um, you know, you would want to focus on features other than scaling. And I wondered, um, how that also affected, you know, things about your launch or like how you were thinking about how to position your chain.

I think it was actually um, you know, lovely to hear, as absurd as that sounds. I I remember we've we've had lots of conversations with other people in the Ecosystem and obviously the layer one should scale. It's just not additive if for Ethereum.

In fact, when when the made his article, he made a he basically described what a layer 2 should be moving forward. And what the basic simple statement is something that Ethereum alone can never become, right? Structurally, it's impossible for Ethereum or really in our opinion at least any one to achieve some of those traits.

And what does that look like? Um ultra low latency, hyper specialization of the architecture. that's great for app chains enshrinement and opinionated decisions that you know a credibly neutral layer one could really never make and in my opinion he also said extreme amounts of scale that the L1 will never achieve.

This is all kind of how we decided to build mag in the very beginning, right? The reason why we built on on the furium as much as we love ETH is not because of like a unbridled fanboyism towards Vitalic but because the design choices we had made which was built a truly performance first architecture offload consensus to whoever does consensus best.

Ethereum L1 does consensus best and that allows us to build you know a very opinionated performance first architecture because we were able to settle on Ethereum and in in my opinion in many ways the Talik's article kind of validates at least our decisions on how we went ahead of our architecture.

Now he still has a lot he says a lot that we need to strive to become. We're not a stage one roll up today. um even when you take DA out of uh out of the equation.

But I I actually think that it was a beautiful moment because in some ways it's like, hey, let's cut the crap and you know, if you're layer two, you need to build something that justifies you making these design choices that are basically not necessarily the same as what Ethereum stands for.

Amir, do you want to add anything?

I mean, just hit the nail on the head there. at the end of the day just very much validated the entire thesis of Mega ETH. Um and also just our general approach to to building out the chain in the application level as well.

We've been priding ourselves on only possible on Mega ETH. If an application doesn't actually harness the unlocks of Megat itself if it's something that can be easily ported over from another EBM compatible chain, then that's just a massive disservice to user to their actual users.

So people should be taking advantage of the technical unlocks here. And again, we've just been very unapologetic about it. We're here to centralize block block production, decentralized block verification and take throughput and latency to to a level of scale that we haven't seen yet, and then we're just going to continue to march in that direction.

Yeah. So talk through some of those specs for any you know builders listening um any users who've been frustrated by poor user experience. Um go ahead and you know just talk a little bit about what you think um technically you've achieved that other side.

You want it? Go for it.

So, I mean, I think that the stress test we performed on mainet kind of paints that story. So, I remember a few months ago, while we're still on test net, I was discussing some of our performance numbers. We were hitting two gigas per second.

And, um, this very smart individual was basically saying, "Hey, like there's no way you're going to have that on mainet, right?" because we've lived in an era where everyone was able to stay like super high test net numbers and that never really materialized right but like effectively what me has done is me has chosen to fully centralize block production with the decision being that the security guarantees of settling onto Ethereum are sufficient for users.

What does that mean? means you know you can if the sequencer fails you can take your assets back down to the L1 and over time we'll be able to make those guarantees even stronger and what we get in return is 10 millisecond block times that's really really really fast TLDDR feels great feels like you're using a web two application Google actually has done a lot of research on what are the latency levels which are positive and additive to attention as opposed to order numbers where you kind of lose a user and any scenario we're talking 500 milliseconds or above.

It actually disrupts a user's flow and sense of what they're doing. So it is really really fast from a UX perspective. It is a massive unlock for hyperefficient DeFi, hyperefficient AHFTs. it's allowed us to have partnerships with pairs like chain nump where we're able to enshrine oracles and provide really really powerful data feeds and it has immense capacity right so on this stress test we at one point did 55,000 transactions per second while also having the chain live for end users like ourselves to be able to play a bunch of low vacancy games so we we had a game where you were a rabbit who had to cross the road and there were cars that were hitting you, right?

And like effectively if the chain if you weren't able to communicate if the sequence turned back in time, you get hit by a car and people were able to have really high scores, right? Up to like a hundred out of pure scale while we were spamming the chain of just an insane amount of transactions.

So it also has a powerful capability component and capacity components. Now that's not necessarily a problem for a while because we need to get user activity up there but it does give developers certain guarantees right while we were doing this level of transaction activity we were four or five times cheaper than other B rollups right which were doing like let's say 80 to 100 TPS and then again that's because we decided to use INDA as opposed to EDA a long time ago which to be frank we got in a lot of trouble with the E folks for but we just thought it made sense given you know we were we were optimizing for something that other LTS weren't optimizing for.

So I'd say that's what the value propositions are consistent block space and very low latency and for users we've been cultivating applications for a very long time a can yeah and I mean like double double clicking on the the the applications coin as well it's about expressive applications we're not here to have very surface level already understood experiences living on Mega so for us the fact that there are virtually no gas constraints allows us to build these very expressive kind of hats that people are familiar with when it comes to interacting with centralized systems.

So that's the kind of experience that we're looking to bring on chain. But again that is very much a a a longer share process. It's just a matter of creating the sandbox for people to actually start playing in to get to that level of expressiveness.

Yeah. Yeah. And it talk a little bit of more a little bit more about that expressiveness like so you know Nav gave the one example of the game but what are some other types of apps that are possible that wouldn't be possible in a different L2?

Yeah definitely. So um I mean when it comes to say um uh having a fully on chain roadblocks or anything that requires real-time responses when it comes to social interactions um having a fully onchain social media platform for the first time um those are the type of experiences that people are familiar with when it comes to interacting with a typical AWS app.

Okay, I'm using Instagram. I can interact with my friends, get instant responses, get actual streams of information without even having to wait more than 10 milliseconds.

Now imagine that same exact experience but living on truly decentralized rails. Those are the type of experiences that we really want to eventually march towards on Mega. Um so yeah, it's just a matter of allowing for those unlocks to begin with.

Um and then us eventually kind of just try to tackle it head on. I tried to convince the team um to do Omegle on chain with force chats because you could actually do it on Mega B because we were worried that like it'd be a Pandora's box of sorts.

But it's for because Chris Dixon was saying you there's this whole drama, right? Calamani was like referee's dead. It's a lot less interesting than we all thought it would be. And Chris Dixon's like no it's actually not true. He's actually still super excited. It just hasn't happened.

Mega's classic use case which I think 99% of listeners here will be interested in is without a doubt DeFi, right? Like it's it's it's beautiful for DeFi, hyper efficient, right? Like unbelievably low latency.

And there's a very clear pros for that and our architecture proximity markets and sequencer rotation effectively and that enables minimal endto-end latency for users. It's similar to how FX markets used to work back in the day.

So that's probably what most people want to hear about, but I think we're also for better or for worse still somewhat optimistic about a larger web prefsis. And our opinion is the reason why it didn't happen is actually because the block space was not truly abundant, right?

Like um all of these L2s would still the second you're having like 50 transactions per second, 100 transactions per second, you would end up in a lot of trouble. And the other app alternative was like an app chain where you break atomic composibility.

So we have a bunch of games. We have a couple people trying to build very ambitious experiences. But I think what ties all these apps together is that they're built for consumers first and foremost.

So we have teams going after payments. We have teams going after gamified options trading. We have teams who have built fully on Pokemon games. So there's actually a range now. It takes longer than you know I we were me and we really tried our best to have like this big amusement park experience day one of mainet.

But sequencing really is a it's a really tough time. So eventually founders just want to have a lot of these dependencies sorted on mainet than to be able to gradually deploy. But you know for better or for worse we are optimistic that like some of the web free p thesis can come back especially when it's being pronounced true media.

Okay. Yeah. I mean it it really feels like um there I mean I know that I said I'm gonna ask you about this later but if I look at other chains um it sort of feels like for them just getting to the launch was the thing but when I look at how you guys are approaching it feels like you are realizing that's day one and so you're kind of like setting yourselves up for more long-term success.

I think just just from yeah just looking at the different choices that you're making. Um but I did want to ask a little bit more about some of the other features of the team. Um so you know you talked about this concept of proximity markets. Can you explain more you know what that means and like you know why that is a feature that you um you know are talking about for me?

Sure. So I think collocation is the name of the game for defi and we we are we the data is proving that sort of like you know at least the slaughter ecosystem our our opinion is you know don't shun away from market realities find a way to make them equitable and democratized so the idea of proximity markets in the simplest form is hey if there is activity on me knock on wood we're trying our best then there's valuable order flow on me Instead of having all of that privatized, build a system around it where people can bid to colllocate mega sequencer and that value is distributed in mega tokens, right?

So they'd have to spend mega tokens to do so. That's the that's like the simplest form of proximity markets. A lot of this stuff is, you know, a bit out in the future because it requires there to be a demand on the chain, right? Like people want need to be wanting to do stuff on Mag and that's what Amir and I are spending our days on now.

Yeah. And then like just to that point as well, the need for economic activity. I'm sure the next natural question here is just going to be around mega the token. For us, everything is kind of taken from like a very first principles approach.

We we want there to be real utility for mega day one. So for that to happen, what actually needs to take place? For us, it's making sure that there's sufficient onchain activity across all of our DeFi applications, across our consumer applications such that we can justify the existence of Mega the asset.

So that's something that we're working towards. That's very much the impetus for the KPI model that we've started off with and something that we plan to continue to build on as as time passes.

Yeah. Yeah. And um so we'll we'll get to that in one second. I just want to like lay a little bit more of the background here. So um Amir, you actually came on the show to talk um forget when [snorts] this was but before about how Mega E also decided to launch its own stable coin. is powered by Athena and obviously that was part of a bigger trend of the blockchains that were doing that.

Um you know but I've seen you guys talk about this as being a big focus you know for liquidity uh you know revenue generation on mega eat. So you know explain like why um and how you're giving the stable coin a prominent place.

Definitely. Yeah. No. So um at the end of the day like the the idea behind USDM itself was to rethink what economic models can actually look like for ch for infrastructure projects as we understand our infrastructure today heavily commoditized.

You can have some sort of mode to start but performance itself can't be a long-term mode. For us it's a m and at the end of the day there's no mode and something can be commoditized then the revenue model more or less just trends to zero.

For us it's how how can we actually have something that is sustainable that is synergistic with our application level that's not something that's cannibalizing our apps and something that also is passing some value back to users in the terms of the user experience because if you look at typical chains today a lot of the value that gets passed to the infrastructure is coming at the expense of the user experience in the form of priority fees network congestion etc.

For us, when it comes to mega itself, it's always thinking, okay, first in, first out. Keeping gas fees as close to 0.00001 cent as possible, and again, allowing for these novel experiences to actually reach escape velocity.

That's usually the issue we end up seeing when it comes to to chains that have what feel like successful applications. At the end of the day, you have everything living on the same state layer. They will eventually start to step on each other's toes.

And again, one success ultimately comes at the expense of others. And then at the end of the day, all that value still finds its way to the infrastructure. But for us, it's okay, how can we find a way to retain value here while also making sure that these applications are positioned to succeed.

Um, and that came in the form of USDM itself. So USDM is going to be something that again adoption is very much predicated on us realizing our vision of 10x applications on Mega. When I say 10x applications, I'm saying experiences that are truly 10x relative to what people are accustomed to today.

If we if Nikk and I are able to kind of realize that vision and give the audience, give the users um experiences that have them coming back and obviously those applications themselves are using USDM, people will be fine taking on that additional friction um to interact with the app and use our stable point.

So it's kind of taking sort of a a reverse approach to sort of bootstrapping stables. Usually people would start off with here's the stable now let's find as many syncs as possible whereas for us mafia was always creating as many sinks as possible and then at the back half we're introducing a stable point that ties into these things.

So um again it's uh to my knowledge it's the first of its kind we it's still very very much experimental. We'll see how things unfold but that was very much sort of the the thinking behind USDN itself and general GTM.

Okay. And then um so you know you guys are also well known for having mega mafia and again I feel like this is just another piece of that kind of intentionality and making sure that you're not just launching a chain but a whole ecosystem but just talk a little bit more about that and how that works and um you know how you're bringing these apps to mega youth.

Yeah. So from a for a long time I think like we were we're very cognizant the fact that like we've made design tradeoffs right like you know Mega Eve can you know I I think the big meme on Twitter over the past couple weeks is like oh yeah you know all these alts are going to come out once now they were only twos because they're like regulatory cover on our end it was because we this is the only way we can have this low performance and the only reason for this performance exists is if it creates networking applications.

So from a very early age, we were like, hey, we need to try and find founders and try to get them to build cool stuff. And you know, it actually eventually evolved from being like, okay, you have real-time blockchain of really good capacity build that justifies me's existence to if you had no limitations on what you can build, what would you want to build using crypto rails, right?

Right? And that became the central prompt and that's how we ended up basically building mega mafia over the past few years. It would we we did a very ethereionesque approach to it. Right? So it was effectively like we try to find smart founders and work with them. No real expectations in the end.

We basically ask them to just use USDM. Um when the feast is just very much being like we try and do some sort of like capture policies, it it ends up not creating a genuine group. So we we we that was the basic thinking from mafia which was like we need to put the apps into our own hands and work with these funders because if we're not going to do it, we can't expect it to just show up day one of mainet.

I mean, we did it for a couple years and it was still hard to get lots of apps to show up. They want to main it. Imagine if we can do it. That's all.

And I mean, the the entire approach also is just like very antithetical to how people think about um the build out of crypto ecosystems, right? Usually there is this this unwritten rule of crypto neutrality as far as teams themselves staying somewhat removed from the actual buildout of of the application layer.

I think myself no make shoe we all basically looking back at history and and come to the realization that that's very much a losing strategy. Some of the most successful ecosystems today Salana Bay etc. there is this level of opinionatedness with how the core team itself decided to build out the ecosystem.

Um, so Mafia was very much sort of the the med game through which we're able to express those opinions and again it's some will hit some won't. Um, but it's very much a volumes game. There won't be a single app that will define mega. It will be a collection of apps and we'll just continue to be working towards making that kind of the vision be realized.

All right. So, in a moment, we're going to talk about your recent decision to postpone your token generation event. But first, we're going to take a quick word from the sponsors who make the show possible.

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So, at the last minute um before your mainet launch, you decided to delay the token generation event. Explain why.

I think you said it well, right? Um we are setting ourselves up for like structural success over the long run. Um and we want to make sure that Mega E is as successful as possible. So, there's a layer two.

Um, you know, very easily we're not being delay token because we never said we'd have a token live day one. Um, in fact, like I would say I don't know of any L2 that's launched a token day one. But regardless, the expectation that, you know, clearly some people had is that there'd be a token day one.

And I think that's a valid expectation. I wouldn't I don't want to like gaslight that assumption. Um but fundamentally like the way the mega token operates in our system is directly correlated to basically proximity markets and USDM day one and in the future sequencer rotation.

So I mentioned that briefly have this a sequencer move it leverages a PA model. In all these scenarios there needs to be a baseline usage and activity on the blockchain right for the flywheel to be relative like to be truly successful. Again knock on wood. uh and we folded these three KPIs adequately gauge when Mega was ready for PG.

The three KPIs being one an applica free applications that 50K daily R for 30 days. So that's probably the hardest of all the KPIs to achieve. We obviously looked at like other case studies we think it's reasonable but if it means that there's apps that people are using.

The second KPI is a $500 million in USDM on the chain that creates a flywheel for the USDM app relationship and finally 10 MAFI applications deployed on that right and that means not gated but actually available to all users.

Any one of these free hitting would result in us deciding to PG. We thought it was fair to share all of this publicly as opposed to, you know, just saying something like soon. I think that's not very fair on me token holders and mega investors and we operated for pieces of maximal hierarchy.

Yeah, everything we're doing is because I mean we we believe in crypto world domination and we believe in like the token being a component of a larger system, right? Not necessarily just like rushing to get one piece of the pie out there and we thought this was a fair way to bootstrap the ecosystem to a place where it be ready and you know have Mega Eve grow as a result.

I mean what do you think?

Wait, you said it all. At the end of the day I feel as though a lot of folks kind of optimize too much for that short-term attention, whereas for us it's very much about setting the groundwork for real traction and real economic activity to to to exist.

Um, so as far as the KPIs themselves, it's it's a matter of making sure that people don't lose sight of what the product is and making sure that people are incentivized to actually interact with the product itself.

Um, I think again like token ends up taking up everyone's attention day one and it comes at the expense of what we've been building towards for the last two, three, four years. Um, so KPIs gave us an opportunity to get the applications in front of everyone, get everyone actually interacting with the chain itself.

Um, and then again it's from there it's it's just a matter of making sure that we do our jobs to to build something that is sustainable over the long run.

And tell me how you came up with those three metrics as the KPIs that you would use to trigger the TGE. Um, so you know this what about the $500 million um USM in circulation and that's like a um based on what was it a 30-day time weighted supply. Um then the 10 mafia apps that are fully deployed and then the um 50k USD daily and fees for 30 days on um I think it's is it any app? Any app on the shade exact or no it's three apps it looks like for 30 days.

Yeah. So yeah how did you you know what what was your thinking behind each of those?

So important to know it's one of many. So one of any if any of the KPI set megs and they were all directly think as downstream of what we really need which is activity on the chain right for mega to work for me to succeed people need to think that there's something here that's worthwhile that's that's really what matters here and again so what does that look like well we have spent a couple years facilitating and incubating a bunch of mafia applications.

We feel good about those apps. We want those applications live so everyone can use them. So that's one that's one user flow. But you never know when a brilliant founder shows up and just build something amazing. And that's great. You know, if you're listening, please do the play. And that's what the second KPI is designed for.

All right. So having any application be able to achieve you know basic fee numbers shows to us that hey there's demand for collocation there's demand for proximity markets and there is activity on this chain that's organic right and this makes sense and USDM was effectively mixture of both in all scenarios the business of USDM act as the fundamental flywheel the fundamental tie between all these different Mac applications in one another and we thought that having a baseline of liquidity would allow minimal friction for future developers to be able to adopt USDM.

We have a few dexes like we have a central order book that's the entire thing is nominated and paired against USDM brilliant founder and he definitely would love if there's liquidity for USDM. So all three of these KPIs I think great in my yeah and to the USDM point as well um it's not just a matter of $500 million of USDN and that's it.

Um at the end of the day we want to make sure that we're we're maximizing capital efficiency here. So we want that capital actually deployed into the ecosystem. So in addition to the $500 million in USDM supply, 25% of that actually actually has to be deposited into non-custodial smart contracts.

So be it into Avon, a when world markets goes live, world markets um and then again as more applications go live as well. So we we try to make sure that it's just not a um a headline number and that's it, but we want to make sure that there's real use actually taking place.

So, one other thing that I