Exposing Binance's Listing Fees | CJ Hetherington

TRANSCRIPT

David Hoffman:
[0:03] Welcome to Bankless, where today we are talking about centralized exchange token listing fees. There has been some drama on the crypto Twitter timeline as it relates to probably one of the more important subjects when it comes to the release and liquidity of founder on tokens, newly launched tokens. This drama got started when the founder of a prediction market project on Base released the details of an offering that he claimed he got from Binance about the token listing fees for what it would be required to launch his token on Binance. This token doesn't exist yet, but it's in the project of a TGE. And apparently, the token listing team at Binance sent this individual, this founder, CJ, who you're going to hear from on the podcast today. They sent him their offer of this is what it takes to get listed on Binance. And they did that before they sent him an NDA. And so he just released the offer on Twitter. Now, everyone knows that there are centralized exchange listing fees, and everyone has murmured about the gargantuan take rate that Binance charges startups about their tokens. If you want to get listed on Binance, this is what you have to pay. I don't think these deals are cookie cutter. I think every deal is kind of made based on the facts and circumstances of the project. But broadly, people understand these things to be very, very large.

David Hoffman:
[1:28] We've never really gotten confirmation or details or like explicit truth about

David Hoffman:
[1:33] what a deal like this looks like because no one has released this information. But it seems like because of a slip up on the Binance side, the NDA was not sent and therefore this individual was free to disclose on Twitter in public what exactly that deal was. And the deal was So egregious. This particular startup for Limitless, CJ, was charged 8% of the total token supply and $250,000. That was the offer.

David Hoffman:
[2:02] CJ, sounds like he's not taking it. And instead, he just took that offer to Twitter and be like, look, Twitter, look what they are asking for, which is kind of egregious. Now, Plenty of founders have taken this bet. And I asked CJ why he thinks that is. Why give, you know, 8% of your total token supply up to Binance? And the calculus behind that. And, you know, the conversation is pretty important. CJ seems like he's a pretty big on-chain maxi and thinks that like, well, does Binance really need to be charging these things? And is this even good for founders at all? And if you are a founder that believes in your project, why would you give up 8%?

David Hoffman:
[2:43] And he does illuminate that the calculus does shift if you're a founder who doesn't believe in your project and you are trying to join Binance and kind of just getting cashed out. Overall, that's kind of the theme of the drama on crypto Twitter over the last 48 hours. If you go on to crypto Twitter, CZ and Binance are explicitly naming this startup founder, kind of a big PR mistake from Binance. And it's like the 800 pound gorilla in the room who owns all the liquidity kind of going after the startup founder on base. And so it's entertaining at the very least. And I think this is also a very important discussion for liquidity and fees when it comes to startup founders trying to find liquidity for their new token to attract investment. It's a pretty important conversation. I think CJ does a great job giving his perspective as a founder and just giving his advice to other founders in the space who are also going,

David Hoffman:
[3:39] like him, going through some of these conversations. So before we get into the conversation with CJ, and in addition to everything I just said, we're also going to talk about Limitless, his prediction market startup on base. We're going to talk to some of our friends and sponsors over at, with that, let's go ahead and get right into the conversation with CJ. I'm here with CJ from the Limitless Prediction Market. CJ, how are you doing, man?

CJ Hetherington:
[4:00] Hey, Dimit, how are you? Thanks a lot for having me on the show.

David Hoffman:
[4:03] You are the main character today, at least over the last 48 hours on Crypto Twitter. How do you feel?

CJ Hetherington:
[4:11] I definitely don't want to be the main character, so that's not necessarily a bullish signal. Maybe that means I should tone it down a little bit.

David Hoffman:
[4:22] Okay, so for listeners who aren't on Crypto Twitter, there's been an ongoing conversation about the role that centralized exchanges have in providing liquidity to tokens, especially when it comes to listing fees. And this concept of centralized exchange listing fees has kind of been this like nebulous topic that no one has ever been really able to define because no one knows what the true listing fees are. And, you know, Jesse from Base will go on Twitter and say, Coinbase has no listing fees. And then representatives from Binance will be like, Binance has no listing fees. But then in the background, anyone who's ever talked to a founder is like, oh, yeah, centralized exchanges have totally have listing fees. When Jesse from base says that, I kind of believe him. I don't really have that same sort of relationship with Binance or I don't really know anyone in the Binance world. But like everyone, everyone talks about the magnitude of Binance's listing fees. But no one has ever been able to put numbers behind them. Like, what are these things? What are the actual fees? Now, the story, as I understand it, CJ, is that you have a startup. It's Limitless. We're going to talk about Limitless, a prediction market on base. and you are exploring your TGE, a future incoming token,

David Hoffman:
[5:43] A sale round was going around on Kaido. And so I would imagine you talked to Binance about like, hey, what about getting my future incoming token listed on Binance? And it sounds like, as I understand it, they sent you the listing fee information, but they forgot to send you the NDA that would legally bind you to not disclose the listing fee information. And so then you just put it out onto a tweet and everyone on crypto Twitter was like, we finally have the numbers. And the numbers were like egregious. It was like 8% of the total supply of the tokens plus like a quarter million dollars fee on top of that. And so finally, for the first time, we all were able to like look at these numbers and be like 8% of a total supply of a project. Holy hell, that is a lot. I'll pause there and give you the microphone in case I got anything wrong or in case you want to add any color to that. But I think on behalf of the crypto industry, I think everyone's kind of like, hey, thanks for publishing, for posting that information. Would you have any color you want to add to that?

CJ Hetherington:
[6:49] Yeah. So, I mean, the first thing I would love to say is I really respect CZ and I really respect Binance. And, you know, I really hope that this is a window for not only Binance, but for centralized exchanges in general to be open to constructive feedback from the community. Like, yes, I'm a builder, but before I was a builder, I was a community member. I think it's very important that this feedback is heard by centralized exchanges. And I think it's very important that if centralized exchanges want to exist five years from now, that they, you know, really take heed and start to adopt, you know, more sustainable and fair and equitable models. In terms of the situation, like what happened, I mean, in terms of the NDA and all of that. Well, FOMO is, you know, I mean, you probably understand a lot about this in your capacity as a venture investor. FOMO is a very interesting emotion that drives us to do very wild and unprecedented things and.

CJ Hetherington:
[7:50] I mean, during the token 2049 was a very wild time for Limitless. I mean, coming from like six months ago where almost nobody wanted to fund us and I was having a very hard time trying to secure funding for the future of the company. Right now, we had our Kytos sale, which was like 200x oversubscribed, like 200 million in community pledges. And then also venture funding round, there was like 2.5x oversubscribed as well.

CJ Hetherington:
[8:23] And so I think that, you know, I didn't apply for any Binance listing. I didn't submit any due diligence forms. I think usually what happens is projects engage Binance through their listing application or through their due diligence form channels. And if I'm not mistaken, as part of the due diligence forms, there are some kind of like confidentiality clauses or something like that. But the situation between Binance and Limitless unfolded a little bit differently. And I would say it was probably driven by FOMO in that exchanges are looking to list tokens that generate demand and trading fees for them naturally. And so I think they were potentially just excited and open to work with Limitless. And that's why, you know, we kind of had this situation where the proposal was shared without, you know, any confidentiality agreement in place. Now, I don't actually begrudge, you know, Binance for doing that. In a way, I actually respect their hustle. Like, you know, we're a startup, right? We appreciate like moving fast and, you know, not getting tied up in like red tape and like corporate processes.

CJ Hetherington:
[9:41] So I appreciate, actually, that they did that. And I think the reason, it's not right to say that, you know, this information has never been made public before just because of confidentiality agreements.

CJ Hetherington:
[9:55] I also would say that, you know, and this is something that, you know, we maybe don't want to admit, you know, necessarily, but it's not only centralized exchanges that are at fault here, right? I mean, there are also a lot of founders and market makers who have kind of been part of this process and part of this like, you know, manipulation and extraction games. And I think like this is kind of, you know, a well-kept secret in a way that this is how these things work and how they operate and how they play out. But honestly, Limitless is not really interested in that. And, you know, we're not in the space for that. And I think, you know, you're the same as us in that way. And that, you know, we're building on-chain apps and marketplaces because we believe in the power of them and what they can actually do. And we don't think that giving away a huge percentage of supply and rationalizing that with kind of a mega dump on retail is actually the best way to move this industry forward. And probably that's why we've been able to share this information. And I really hope that this is a turning point for the whole space. And like I said, I really respect CZ and Binance for everything they've done so far.

CJ Hetherington:
[11:18] But the current status quo, if we want to make it as an industry, in my opinion, is not good enough. And we need to level up. And, you know, at Limitless, we have a very, like, open, hard feedback culture. I mean, with each other, with my co-founders, with our team. And that's, you know, what helps us to improve and get better. And this is something that we would like to see applied more broadly to the industry.

CJ Hetherington:
[11:42] Especially when essentially real hardworking people are skin in the game that we're talking about here.

David Hoffman:
[11:49] Yeah, it's probably worth highlighting why this fee is allowed to exist in the first place and why founders historically have taken this fee.

David Hoffman:
[11:59] Whereas just like liquidity on Binance, which is also distribution, distribution for your token is incredibly valuable. It can add tens, hundreds, perhaps even a billion dollars of market cap onto a project. And so, you know, what's 8%? Of a sacrifice if you're going to add 100 plus million dollars to your potential market cap.

David Hoffman:
[12:21] Granted, it might be a deal with the devil over the long term, but like so many founders are trying to just go from zero to one. And maybe they think that that 8% token supply listing fee to Binance is the way to just like to get ahead. And also to Binance's credit, like as you've highlighted, you know, Binance as a single institution has probably brought more people into crypto than anyone, anyone ever, not even close. And so, you know, they have helped grow the industry, distribute the industry, make the industry safe, you know, haven't lost any customers funds. And so like, we could go on and on and on about the value that Binance has brought to the table for the industry, which is why they can say, hey, like 8% is the entry fee of your total supply of your token. That's illustrative of the value that they are bringing to the table. I think what we are thinking now is like the value is starting to flip and it's starting to be more extractive than than what should be fair. And perhaps one of the reasons why this open secret has remained pretty well behind, like we knew as an industry that these fees exist, didn't really know about them in detail.

David Hoffman:
[13:35] And like, why is that true? Well, Binance has no incentive to illustrate how much of a fee that they are taking, how much cream they are just cutting off the top. Founders probably don't want to disclose that they gave 8% to Binance like they did that. Like that's kind of like, you know, they just don't want no one in the inner circle, like market makers, they don't want to talk about how much of the share of the token that they received either. No one wants to really reveal these details. It's not in anyone's best interest. And so this secret kind of just stays quiet, stays a little bit mum, even though everyone on the outside kind of knows... The contours, the loose, broad contours of what's happening, no one really knows and no one's really incentivized to kind of like give up these details. CJ, when you posted the tweet with like kind of line items of just like 1% of tokens go to this, 1% of tokens go to that, $250,000 goes here. I'm assuming they gave you an actual document. Why not actually just release a document itself?

CJ Hetherington:
[14:39] Well I did in the end I did in the end share it was in the Telegram group chat actually a very crypto native way of sharing a proposal and by the way I do believe that there was room to negotiate.

CJ Hetherington:
[14:55] And that that was also expressed and so potentially you know the deal terms could have been improved somehow, I think that But centralized exchanges almost rely on the fact that a lot of founders are not very familiar or very well-versed in liquid markets. And they kind of use that through their advantage. And I would even go as far as saying that the way the proposal is structured, it's kind of inherently pretty confusing, right? Like you have to just like kind of sit for a minute and understand exactly like, okay, there is this percentage there. There is that percentage there. Then there is a cash fee. Then there is a security deposit. it and kind of piece it all together. And, you know, I would probably suggest that that is also kind of intentional. And I think that. A lot of founders actually don't know what they're getting into with the kind of deals that they make with centralized exchanges. And like, you know, they just probably assume like, OK, that's like what it costs. And, you know, that's it. We actually, you know, we want to go with a different approach. You know, we believe in like on-chain capital markets, on-chain capital formation and community building and kind of driving acquisition and activation of our product through skin in the game and co-ownership with the community.

CJ Hetherington:
[16:21] And we think that, you know, centralized exchanges need to, you know, if they want to, you know, last, they have to become a gateway for the on-chain world. And not just kind of be this almost gatekeeper, right, which is, you know, using, you know, this this flow to extract maximally and, you know, like the situation that just happened with this like cascading like liquidation event. I mean, it's impossible to blame anyone directly for that, but I don't believe that that was kind of healthy or ordinary market activity. You know, in some cases, like liquidity was completely vanished from different order books.

CJ Hetherington:
[17:11] And I think that there was pure market manipulation and it was a pure orchestrated assault on retail. Yeah.

CJ Hetherington:
[17:20] And, you know, there was the case where Hyperliquid has been reported as having the most liquidations in terms of like dollar amount. But it's also kind of, you know, another well-kept secret that centralized exchanges under-report their liquidations for the sake of like community sentiment. And I truly think that moving these markets on chain makes them more transparent and makes them more fair and equitable by default. And that's actually what we believe in and why we're here. We don't just want to recreate the same wall gardens from the traditional financial system, but throw in a few blockchain calls here and there. Because that doesn't actually meaningfully upgrade anyone's life or the underlying infrastructure.

David Hoffman:
[18:12] Yeah. And really just to add on to that, you know, Binance has a number of like trophies, like relics, like golden gooses that they get just because of how dominant they are. Like 80, 85% of like total volumes are on Binance's bot volumes and also derivative volumes. and when that happens like there are just like a number of like second third order consequences effects that Binance gets to enjoy. One being the very high token listing fees like if you have all the liquidity you get to charge very high fees two a lot of like startups and even like Ethereum protocol development considers like sex-dex arbitrage like what that really means is like the price on Binance versus the price on Uniswap And we are considering the price on Binance versus the price on Uniswap. When we think about, when Sorella Labs thinks about how to design their DEX, or Unichain is thinking about TEEs and going at 200 millisecond blocks to go very, very fast. All of this, much of this is motivated by the fact that Binance has pricing power.

David Hoffman:
[19:23] Price discovery of Bitcoin, of ETH, of any material asset happens on Binance. Because it doesn't happen on chain. And like where are tokens getting listed and where are fees being paid? Being paid to Binance, because that's where liquidity is, because it's not on chain. And so like in 2025, the year of our Lord, 2025, like centralized exchanges still have so much bargaining power because price discovery and liquidity is on Binance, is on Binance. It's not even like a sex versus sex illustration. Like if Binance went away, would it go to Coinbase? Maybe.

David Hoffman:
[19:59] But it's really just like Binance versus like, I mean, they have Binance Chain, but even Binance Chain doesn't have the volumes that Binance has. So like price discovery moving away from Binance and centralized exchanges and formulating on-chain is just good for everyone because then the whole system is auditable. The whole system is transparent. You know, what are Hyperliquid's listing fees? Pretty sure it's zero. In fact, I think you actually can get paid to list the tokens because you get some of the trading fees. And that's like, that's what we're here to do. That's like, yeah, you like you should get paid to list your token, not the other way around, because that's the nature of what on chain is like there are so many different on chain applications that should be competing for CJ for you to like list your token on hyper liquid or base or whatever. There's no question there. But like, what are your sentiments about that?

CJ Hetherington:
[20:48] Yeah, for sure. I think that fundamentally all markets will move on chain. Of course, I'm excited about prediction markets, but I'm also excited about perp markets as well. I think they're a great way to continuously price real world assets as well as crypto assets. And yeah, I think we're really at a turning point. And I think centralized exchanges like Coinbase are kind of making really welcome steps forward here because doing things like putting Aerodrome inside of their main application and giving users access to Bitcoin lending that's built on top of a DeFi protocol. I think this is very much the way that the world is going. And I think it's very much like kind of get on board or get left behind kind of situation for a lot of the current incumbents. And also, I mean, in terms of, you know, what you mentioned with Binance having a monopoly on flow, I mean, I would also take a look at the Korean exchanges, like, you know, UpBit and BidHump. I think that there is also a lot of users in Korea who actually don't use Binance.

CJ Hetherington:
[22:05] I think from our Kaito cell perspective, around 30 or more than around 30, 35 million of the total pledges actually came from Korea, which was the largest for any single jurisdiction. And so there were a lot of users, retail users, and retail flow in regions like Korea who don't even use Binance.

CJ Hetherington:
[22:28] And I'm not sure that the market share is 80 or 90%. At least for perps, I think it's more like 60%. And I haven't actually checked it recently. I know Hyperliquid has been doing a really good job. But I think in general, you know, like you mentioned, arbitrage, because you have like very much kind of Pareto principles here where a small number of customers drive the majority of like volume and revenue. Like Jump pays like $15 million per day in fees to perfect exchanges or something crazy like that. Obviously, they're making way more than that, but also one of the core ways that they monetize is from trading spreads across different exchanges, right? And so I think that's why we always kind of do see multiple venues emerge with deep and comparable liquidity and open interest.

CJ Hetherington:
[23:24] And I do think that as more and more retail flow and attention actually comes on chain, which is very much bottlenecked by regional regulations and on-ramping infrastructure and stuff like that, I think as these kind of barriers are slowly broken down, we're going to see more and more users on chain and we're going to see less and less need for these gatekeepers. And that's what I'm like deeply excited about and yeah I just hope that, exchanges, not only Coinbase, but other major exchanges can also be like open to this constructive feedback and can embrace the on-chain world and the kind of revolution, I would say, which is happening.

David Hoffman:
[24:10] Are you worried at all, CJ, that you kind of have like kicked the hornet's nest? Like there's a 800 pound gorilla and it's called Binance. And now Binance doesn't like you. And they've made some like PR blunders along this path here. but nonetheless, you've picked a fight with CZ. You've picked a fight with Binance. Does that scare you at all?

CJ Hetherington:
[24:32] Like I said, I really respect CZ and Binance for everything they've done for the space. And 800-pound guerrilla fighting with anyone generally is not a good look for the 800-pound guerrilla. And so I probably would not recommend to keep engaging because I don't think that it has gone so well so far.

David Hoffman:
[24:58] Your limitless is built on base. In your tweet where you disclosed all of the deal structure for the Binance listing fees, you concluded with, and this is why I build on base, throwing a very favorable bone to Coinbase and base and Jesse. Can you just illustrate that, give that a little bit more color uh what has been a what's been what's it been like being a builder on base

CJ Hetherington:
[25:25] Yeah i mean like even if we just like abstract away like all the context and like absolutely everything else um and i just compare just the, The experience of what Coinbase would ask for a listing and what Binance typically asks for, that was just a pure comparison that I wanted to make. I know that there have been some tweets online, like the Andrea Krongia from Euron1, or XEuron rather, that was saying that Coinbase had charged him millions back in the day. And then you also have people saying that they were listed on Binance for free and all of that. And I think that probably both of those instances are actually true. And I think we're just saying that like, yeah, probably that is true. So why would we give you 8% of our tokens then?

CJ Hetherington:
[26:21] And yeah, in terms of base, they've been really supportive for projects that are building like natively on base. And we've kind of seen this pathway where, you know, you have the Aerodrome, like on-chain launch, price discovery, fast follow with the Coinbase listing. And yeah, they literally don't ask for anything. You know, I can kind of confirm that, at least if you're a meaningful part of the base ecosystem and you actually, you know, build something that matters and have real users and bring value to the ecosystem and community in some way, which I think it should be all about, right? So it's like...

CJ Hetherington:
[27:05] I just don't understand the calculus unless you are trying to go out there and dump a bunch of your tokens on day one, which fundamentally we're not trying to do because we actually believe in Limitless long term. And so we're not trying to just generate a bunch of liquidity from a Binance listing and kind of sail away into the sunset. Now, if that is your goal, I understand, you know, the calculus behind why you would do that. But for us, we're like, we want long term value alignment. We want to be part of an ecosystem, which believes in, you know, all of the important, you know, values about crypto, about decentralization, about building on chain. And like, actually, we want to be here for the long run. And if we think about this from a more longer term perspective, then earning 8% of supply for a day one listing on Binance just isn't a good calculus.

David Hoffman:
[28:10] I don't know if you have, I know you're pretty early on your TGE process and all of that, but I don't know if you have like a plan or a roadmap. I think like if I was building a base app, an app on base, I'm approaching my TGE, it would be something along the lines of do the TGE, put the token into Aerodrome, seed liquidity, and once it's in Aerodrome, it's available on the front end of Coinbase. Now, it's not listed on Coinbase, but nonetheless, like retail consumers can find it on Coinbase and purchase it on Coinbase using an external wallet. Maybe it's a little bit more cumbersome than if you just had got listed directly on Coinbase. But nonetheless, it's pretty sick to be quote-unquote listed on Coinbase on day one just via Aerodrome.

CJ Hetherington:
[28:53] Is that your plan?

David Hoffman:
[28:55] Or are you just still kind of formulating this idea?

CJ Hetherington:
[28:59] So we're definitely preparing for a fully on-chain launch and fully on-chain price discovery. And that's kind of our strategy and I believe that we'll set a new precedent with this and many will follow. But on the other side, if you are building a meaningful app on base, you absolutely can get a day one Coinbase listing. I'm not talking about Aerodrome, I'm talking about Coinbase listing.

David Hoffman:
[29:27] The real listing with real market makers?

CJ Hetherington:
[29:29] For sure, that's on the table. So if you actually build a meaningful app on base, you can be listed on Coinbase on day one and they will support you. So it just depends on kind of, you know, your preferences and also how you think about design. And again, you know, there are a lot of bad actors in this space. And, you know, even like a lot of tokens and communities suffer because of, you know, bad deals that are made between not only centralized exchanges, but also market makers. And so I think that the launch strategy and the amount of, supply, which is kind of, you know, dead on day one, is a litmus test for does the founder of this, you know, product or company or community or ecosystem, do they actually understand liquid markets or not? Because if they don't understand liquid markets, then the chances are that, you know, they're getting fucked by market makers, they're getting fucked by centralized exchanges. And in the end, that translates to retail ultimately facing the hardest consequences.

David Hoffman:
[30:43] Yeah, yeah. I do want to get into Limitless and just like kind of pop open the hood of Limitless and see what's under the hood there. But I have like one last question on this whole like listing drama. There's a thought out there that like Andre from Yearn, when he created the Yearn token, it was the coolest thing since sliced bread back in 2020.

CJ Hetherington:
[31:07] Oh man, what a time.

David Hoffman:
[31:08] Yeah, crazy time, like very nostalgic. And so then he earned that like Binance listing for free because like everyone wanted to trade your in anyways. That's not the typical case. The typical case is probably something closer to your startup where you have a relatively new startup that's gaining traction and a like a Binance listing would actually be a huge win for your startup. And so the founder is like considering doing that, considering paying that fee, paying that 8%, maybe it's higher, maybe it's lower. You said it potentially is up for negotiation. In theory, you could negotiate it down. But then also in theory, you could see another startup being offered like, you know, give us 15% of your token supply. I don't know, something like that.

David Hoffman:
[31:50] And a lot of, like I said, a lot of founders take this bet. They just take this gamble that like, okay, this is an acceptable trade. This is like positive EV for me and that's why I'm going to do this. The thought is that because of so much of the token supply goes to like, you know, inside of the Binance ecosystem. And what are they doing with that? In the fullness of time, they're selling it. And so that's 8% of sell pressure that your startup has to overcome in order to survive. And so, yes, you get the liquidity, you get the day one pop, maybe you even get the year one pop, but anywhere between 5% and 15% of sell pressure is hard to overcome. I don't know if you have any, again, Limitless is pretty young in its TGE arc, but I would imagine that that would be, Thank you. Almost destructive for projects, for many projects out there. Just like, can you overcome 10% of your supply getting sold before, like in the first one to three years of your startup? And like, maybe this is just like actually kind of a trap that maybe founders think that it's positive EV, but it's actually negative EV in the grand scheme of things. I don't, again, I don't have any experience here. I've never listed a token, but I don't know if you have any thoughts on that.

CJ Hetherington:
[33:02] So, yeah, so this is pretty rough. But it's, you're right. It's impossible for this to be like positive EV. Like, I mean, of course there can be like insane amount of, of buy pressure, which, which does happen for, for, you know, some, for some tokens. I think like Solana probably is a great example of like an absolute kind of home run, like from, from zero to hero and like random test of time. Right. But like the thing is you're expecting, that founders are actually thinking about this game from a two or three year perspective in fact what they're doing is dumping on day one so the calculus the founders the founders market makers, founders so everyone.

David Hoffman:
[33:54] So the founders in on it

CJ Hetherington:
[33:56] Yeah that's what I'm saying That's actually when you understand that the space is even worse than you thought it was. And that's why. And so if you go and you look at my mentions over the last 24 hours, the founders who are backlashing me for this are guilty. And the founders who are, you know, supporting, exposing the truth are much more value aligned, like with you and I. But probably collectively we have, they say, I'd never meet your heroes, right? Like collectively we have higher expectations of people than what is the reality. And the reason why this calculus makes sense is because they're dumping on their want, right? So however they structure that is very much a gray area. But that's why people are taking these deals because they are also dumping, right? So this is positive EV, but in a sense, it's almost like blood money, right? It's positive EV for a specific founder, but at what cost to the community?

David Hoffman:
[35:14] And that's why I'm trying to be for a smaller circle of people and it's negative EV for the long term of the health of the project.

CJ Hetherington:
[35:21] They're not thinking about like two, three years, can we recover from this? They're thinking about like, can I buy another Porsche next week? And that's what I'm trying to call out here. You know, I want us to be aware of that and I want us to be open about that so that we can move the space forwards and kind of drain the space of these bad actors.

David Hoffman:
[35:44] Okay, okay. So yeah, it's not just, It's not just Binance charging good actors an egregious fee. It's bad actors who are also saying, hey, I don't care about that fee because by the time that that chicken comes home to roost, I'm out of here.

CJ Hetherington:
[35:59] Yeah, and that's what changes the calculus. So when you think, well, truly, that doesn't make sense, that's why it makes sense. Because- People are worse than you think. I would say.

David Hoffman:
[36:14] Yeah, if anything has, crypto has taught me anything, it's that people are worse than I thought.

CJ Hetherington:
[36:19] Yeah, exactly. And that's what we're trying to call out here. And when you see people going against us on this, probably now you clearly understand why. Because we're not just going against the centralized exchanges, we're going against bad actors in general.

David Hoffman:
[36:35] Well, CJ- Of which there are many. Yeah, it takes some grande cojones to go after Binance and CZ. And so I think at the very least, thank you for the entertaining 48 hours on Twitter. And then also hopefully thank you for what can be hopefully a turning of the ship moment for the crypto industry. Sometimes we just need details and we need information for us to all be able to like, yo, we are all looking at this. We all know that this is true. Everyone else knows that this is true. Now, let's adjust our strategy broadly and let's not continue on down this path and let's do something different. So if that's what gets catalyzed as a result of these, just the last 48 hours

David Hoffman:
[37:20] on Twitter, that would be a huge level up for the industry as a whole. So, uh, for the very large role that you played in that, uh, just thank you. Thank you for doing that.

CJ Hetherington:
[37:30] Yeah. Thank you for, for supporting. And, uh, yeah, I think, uh, I really hope that like from this, we can, you know, from this transparency and from kind of like ripping off this bandit, we can start to rethink, you know, token designs and the relationships that centralized exchanges have with the on-chain world, like from first principles,

CJ Hetherington:
[37:50] so that we can move the space forward.

David Hoffman:
[37:52] All right, let's get into the second half of this episode. Let's talk about Limitless, man. So Limitless is a prediction market. I think when I say the words prediction market, people are going to think Polymarket or Kalshi. How is Limitless different? What should people know about Limitless?

CJ Hetherington:
[38:06] Well, Limitless is Limitless, first of all. Nice, nice. I think that we are the simplest way in the world for users to get access to high leverage. What I mean by that is they don't have to learn about liquidations or funding rates or configure stop losses or learn about options pricing Greeks. So the learning curve for Limitless is very, very insignificant in that everything that you need to know to get started is inside of a single mobile optimized page. Right now, we focus on daily and hourly price markets. So it's basically like, will Bitcoin be above this price in one hour? Or will Tesla be above this price in one hour?

CJ Hetherington:
[38:52] Now, because it's a kind of vanilla prediction market in that it trades from like zero to 100 cents throughout that timeframe. If you look at like Bitcoin, for example, You might have a basis point move in underlying Bitcoin price in 20 minutes, but you might have bought prediction market shares at like one cent and they went all the way to a hundred cents. And so we call this implicit leverage and that there's not a margin lending in a traditional sense, which is very high, you know, leads to a lot of liquidations and also has high chance of manipulation as we saw recently. Yeah. These are fully collateralized swaps, but because of the time decay and the kind of binary payoff structure, it means that, you know, retail can get access to potentially, you know, very high returns. Of course, there is a lot of risk as well, and I think users are comfortable with that. But, you know, instead of having to go on this like years long hero journey of like trying to figure out how to trade and like losing money anyway.

CJ Hetherington:
[39:52] All the user has to do is come to Limitless on their phone. They can be like hiking a mountain or in the metro or in between sets at the gym and all they actually have to do is pick a side right and picking a side is a fundamental human behavior we love to pick a side we love to support a football team or like be a fan of like a music group and this is something that comes naturally to us and we get emotional and defensive and fiery about um and you know all the user has to do is choose like above or below so for example will Bitcoin or will Tesla be above or below this price?

CJ Hetherington:
[40:26] And you'll be surprised the amount of conviction that a casual user can build in any of those arbitrary statements. But you'll also be surprised that some of the extent of the payoffs and the amount of returns. I mean, just yesterday, I posted a screenshot on X. Someone made 5,000% ROI on an hourly market, betting that B&B will go down after these tweets.

CJ Hetherington:
[40:53] And so it's very, very simple for average user to get involved in this thing. And we think that this can be a giant new derivatives category that will drive trillions of dollars in volume in the coming years.

CJ Hetherington:
[41:05] And something else that's interesting is we just did a kind of analysis. We're exploring to build like a suite of structured products on top of these kind of price prediction markets. What we found is over a 72-day period, if you'd held Bitcoin, I think you would have been down around like 5%. If you invested in a covered call strategy using Deribit options, you'd be up 3%. And if you invested in a synthetic covered call strategy that accumulates limitless prediction market shares instead of options contracts from Deribit, you'd be up 49%. So not only can we give this super simple trading experience to casual users, but if users don't want to trade at all, we can also give them access to kind of high yield products where all they have to do is, you know, deposit stable clients and be done with it. And then also, you know, after this like, you know, crazy cascading liquidation event, which happened where we actually saw, I believe, more liquidations than we ever saw before in crypto, which again is, in my opinion, this is an orchestrated assault on retail and this is pure market manipulation. But we actually saw that Deribit, who Coinbase has just acquired for like $3 billion or whatever.

CJ Hetherington:
[42:24] Actually, it was cheaper and more efficient for you to come and bet on daily Bitcoin price using Limitless than Deribit, which is a $3 billion entity. And so, you know, this kind of is an upgrade and a very kind of new kind of market structure that we're very excited about. And we're basically focused on like leading mainstream adoption of this around the world and particularly right now focusing very much on the Asian market. So regions like South Korea, Hong Kong, Taiwan, et cetera.

David Hoffman:
[42:58] I want to understand a little bit more about this mechanism. So I'm on the page, right? And every hour this updates, right? And so right now we are six minutes past the hour at the time of recording. And so right now there's a baseline Bitcoin price of $111,146. So that's the price to be above or below. And right now we are basically at that price. So $1100,146 is the price. Oh, we just popped up. Now we're at 1100, 163. And so right now, like a share on will it be up or will it be down is about 50, 50. But you're saying like when it goes down, when it goes down very, very low, it might be the price between a yes or above or below share would be dislocated to like maybe 90, 10, 95, five. And that's where the leverage comes from. Is that how it works?

CJ Hetherington:
[43:45] Yeah, exactly. So like, again, we talked about FOMO earlier and how that drives people. Another very kind of powerful behavior is fear. And I think that, you know, as you mentioned, it's pretty close to the baseline. Now, imagine it was close to the baseline, but there was 30 seconds to go instead of 50 minutes to go. Oh, I see. You know, with that time decay, that's when things start to get, you know, a lot more kind of fun and wild and crazy. And we start to see those kind of more exceptional return profiles.

David Hoffman:
[44:18] You were talking about comparing purchasing Bitcoin spot, purchasing Bitcoin on Darabit, holding Bitcoin on Darabit, or doing this through Limitless. But these markets turn over every hour. So how would I be a Bitcoin investor if this market closes every hour?

CJ Hetherington:
[44:35] We also have daily markets and weekly markets, monthly markets. It's just that hourly and daily markets are by far our, I mean, I would describe them as kind of self-sustaining atomic network trading communities where we actually see like self-reinforcing network effects and people just kind of have a huge demand for these markets and they keep coming back for these markets. Like our week one retention is over 50%.

CJ Hetherington:
[45:02] And so, and we don't have like push notifications. Yet. Like we're a startup, right? We're trying to build as much as possible, as fast as possible and test as many assumptions as possible, as fast as possible and as few steps as possible, but ultimately it takes time. And so we're far from perfect. You know, we have a far from perfect product and like, we don't even have basic things like function notifications or email marketing, or we didn't introduce like gamification yet or social features. And we have very compelling retention just because users fall in love with this kind of content form factor and they keep coming back and they keep wanting more of it. And so I think there's really a way to go in terms of improving like limitless as an offering and the core product experience that will kind of strengthen these metrics and this retention and engagement level even more. And at the same time, as well as kind of improving the product and trying to make it more sticky, we're going out and we're trying to solve much deeper liquidity for these markets so people can trade in larger sizes. And this is kind of an ongoing, like snowballing process. Like just had a great meeting today with one of the largest like trading firms in the world. And we're actually going to be the first prediction market that they're integrating with. And that's super exciting, but more on that later.

David Hoffman:
[46:16] I think all prediction markets have to cross this chasm from being a like niche retail gambling platform for, again, very niche instruments. And that's where all prediction markets start. And then all prediction markets want to become a... Financial instrument that like is CFTC approved and Wall Street leverages because it helps them express a trade in a particular way. And they are pumping billions of dollars of volume through that one prediction market. And like Kalshi and Polymarket are on their way there, but they're not even close to getting that far yet of being like a Wall Street, like a financial instrument that Wall Street is accustomed to and is part of their like, you know, daily exercise and like daily routine and part of their overall broad strategy. Limitless, like I go on the website and be like, okay, like what do I want to gamble on? Do I want to gamble on Bitcoin being up or down over the hour? To me, like that looks like, oh, I'm just going to like have some fun at the casino. What is your conviction? Why do you have conviction that we can get Limitless to a like hardened financial instrument that Wall Street will be able to use? Why is this a financial instrument? and not just like a gambling platform.

CJ Hetherington:
[47:38] So I think fundamentally Wall Street, you know, will, will go where the people go ultimately, right? Love it or hate it. And our focus today is actually not on Wall Street. Our focus is like, I would say like on, on, on people, not, not actually right now in the U S, although we are building our licensing, as I mentioned, we're focusing heavily on Asian markets right now. And then in, that particular uh part of the world um but trading is so hard and so complicated like perps are hard to use um like and you know for you or i you know we may like sit and argue that you know they're actually not that hard or whatever but that's also quite a um i would say like out of touch position from the average user because it is hard for people to understand like what is an Artibuck or what is a stop loss or what is a funding rate or why they should pay it or why they just got liquidated. Like I literally remember when I was 16 years old and I discovered somehow BitMEX and I was like, wow, 100x leverage, like surely I'm going to be rich by tomorrow.

CJ Hetherington:
[48:47] And like I'm done with everything. Like I can get 100x more bang for my buck. Like what is the, where's the catch here? Right. And then obviously within about five minutes or maybe even one minute um i got liquidated and i can instantly oh okay like that's that's the cash like i got it okay don't have any money now like my money is gone right um and you know i think that trading product like i mean have you like um like robin hood is pretty good but like have you ever used like the european like brokerages um like did they suck man like they couldn't yeah i.

David Hoffman:
[49:22] Don't know i have no interest in using a european brokerage let me tell

CJ Hetherington:
[49:26] You but like if you try to build a bad product, you would build a better one than most of the, with the exception of, for example, in Singapore, they also have pretty decent retail brokerage products. But if you use integrated brokers in Europe, it doesn't even make sense. You can't even buy the SPY. You have to buy some obscure version of it that has.

CJ Hetherington:
[49:56] Pricing delay so because of the like european market hours or whatever it has like a one day lag on the actual pricing so if you bought based on news you actually would lose out right and all these kind of like um i would say like systematic um modes of extraction and of rigging the game against retail um and so like the trading experience like globally is like broken uh perps are like not that bad in comparison but they're still very complicated um if you want to learn how to trade perps though as i said you know you need to understand like all this stuff like funding rates liquidation stop losses order bugs um then like also options like i mean it takes a long time to understand how options pricing greeks work and what they mean and you know like how to trade different like you know condor butterfly strategies or whatever It takes a lot of time, takes years probably to master it. But as I mentioned, you can come to Limitless and instantly intuitively understand how to play and how to participate.

CJ Hetherington:
[51:06] And you can get started with a couple of clicks. And because we're building on chain, we have stable clients. We're instantly in hundreds of markets globally without having to go and grind licensing in each particular jurisdiction. And I think that's a huge unlock. And I think, you know, these factors together means that Limitless will actually build the largest exchange in human history.

David Hoffman:
[51:32] Yeah, big statement. So will Limitless always be focused on these pricing markets? Because again, not to compare you guys to Colesier Polymarket, but again, this is what listeners, this is what their frame of reference is. They go on to Polymarket and they see like, are the Seattle Mariners going to win the World Series like 37%? So like, you know, truly anything. So are you focused on these like pricing markets or like are there other theoretical markets that you haven't introduced yet? Or like what's your plan there?

CJ Hetherington:
[52:03] So I believe there is trillions of dollars in volume in price prediction markets only, right? Right now we focus on hourly and daily markets. Also want to introduce like five minute markets, one minute markets, 50 minute markets. We recently introduced like 30 minute markets, but there is a lot of experimentation to be done in terms of durations. There's a lot more tickers to be added. And then, you know, and so I do believe that that just by itself is a giant thing. Also, what we see is like users who like sports markets want more sports markets, right? Users who like geopolitical markets want more geopolitical markets. Users who like crisis markets or even it goes more granular than that. Users who like hourly markets want more hourly markets. Users who like daily markets want more daily markets. And so we kind of see like network effects forming for the specific like different categories. But look, like Limitless is a very powerful underlying infrastructure.

CJ Hetherington:
[53:01] And I certainly don't rule out expanding to other markets in future. But right now, we believe as a startup, you know, we can kind of kind of, have the best experience for end user by making a very concentrated bet on a particular thing that they like and want more of.

David Hoffman:
[53:21] How much like volume or just like user interest? Talk to me about the traction of Limitless so far.

CJ Hetherington:
[53:27] Yeah, we did around like 80 million in volume last month. We're almost at 80 million already so far in October. So it looks like we're halfway through. Yeah, so it looks like we're going to bug some solid growth. As mentioned, we have very compelling retention, like 50% first week. And also, yeah, we had around like 40,000 traders last month and this is kind of growing exponentially.

David Hoffman:
[53:58] Very cool. Congrats on all the success. I want to pop open the hood and talk about the on-chain component of Limitless. What is actually on-chain? There are USDC deposits and it's on base. But like what other logic is on-chain?

CJ Hetherington:
[54:16] Yeah, like all of the custody, all of the execution, settlement, and like resolution of markets is like a real-time price feed. I think another core problem with prediction markets actually takes a little bit of time to get your money back due to the whole kind of resolution games that are going on. With Limitless, it's much simpler, right? And the markets resolve instantly and people kind of keep going into the next market.

David Hoffman:
[54:42] Right, I would imagine if I'm betting on like an hourly market or a five minute market, I might want to bet on continuous five minute markets over and over and over again. So you need to resolve very quickly so I can have my money back so I can bet on the next one.

CJ Hetherington:
[54:56] Exactly, yeah.

David Hoffman:
[54:57] And you get that from just price oracles?

CJ Hetherington:
[55:00] Yeah, exactly. We're using Pith Network right now. And they have a lot of different assets, like not only crypto, but also stocks, commodities, like gold or SPY or basically anything.

David Hoffman:
[55:12] Okay, so Limitless itself is bankless. It's a non-custodial platform, so everyone's self-custody. Everyone brings their own wallet. The price oracles are autonomous. And, you know, resolution, autonomous. So what, like, layers of trust are left inside of the system?

CJ Hetherington:
[55:33] Well, we have order matching, which is off-chain, just because it's a very kind of high-performance thing that's hard to put on a, like, standard EVM blockchain. So right now, order matching kind of happens off-chain, but all the execution, settlement, and custody happens on-chain.

David Hoffman:
[55:54] And that's the same for Polymarket too, right?

CJ Hetherington:
[55:56] Yeah, yeah, that's right.

David Hoffman:
[55:58] Yeah, okay. So you guys have a pretty much similar trust set up to like Polymarket where the like execution is on chain, it's non-custodial, USCC deposits. Polymarket doesn't have oracles because it's not price. And so they're oracles, you're like UMA, but that's only in the unhappy case. In the happy case, I think it just resolves. Sounds like a pretty similar trust set up to Polymarket.

CJ Hetherington:
[56:19] Yeah, with the exception that we have the kind of instant price feed resolution, but obviously we don't have the more subjective markets currently, so it's much easier to deal with. Yeah, yeah, yeah.

David Hoffman:
[56:31] This might be like outside of the realm of like what Limitless like focuses on, but I'm really into, I guess maybe in this way, it won't be. The conversation of censorship resistance and prediction markets, I think is actually pretty important to me and I think is under discussed in the conversation of prediction markets. both Kalshi and Polymarket don't let users spin up their own market. And there's plenty of good reasons why. But also there are plenty of good reasons why you should allow users to spin up their own market. Like prediction markets are truth speaking mechanisms. They're the connection of markets and truth. And maybe with pricing actually is like the asset pricing is actually the first, maybe a first prediction market where, you know, you could give users the power to like, Like, hey, there's not a market for this. Let's give that power to the users. Have you thought about that?

CJ Hetherington:
[57:24] Yeah, for sure. I mean, that's definitely a low-hanging fruit. Actually, when we started, you know, building and prediction markets, one of the initial assumptions we were super excited about was user-generated markets. Kind of like as a means to scale user choice and uncover like more information and kind of be like almost like an Amazon of prediction markets. I mean, I still see like companies now raising pre-seeds for similar ideas. I mean, there was one of them like just like a week ago or something. Um the problem is when you have long tail informational markets um there are no conventions about how you price those markets um except from using entire information right so like how do you price whether pdd is a rapist or not or if like yeah it's a pretty hard thing to price right yeah uh or like if like taylor swift album gonna like sell x amount of copies i mean like you can build models for that, surely. But there are no kind of conventions and there's also no way for you to like hedge your exposure because a lot of market makers like to run delta neutral strategies and kind of, you know, earn from the spread.

CJ Hetherington:
[58:33] And so that creates like a new set of problems, which is like, how do we actually kind of create liquidity for these markets? In academia, right, the assumption was always that you should pay people for reporting information. So because insider information is effectively how these markets are priced, put up like a pool of money that can incentivize people to come and report information to the market. And so it's very much like either like put liquidity and like lose like 99% or a good percentage of it from people who actually are better informed than you, or kind of subsidize this in some way to get it started. And so our calculus was like, well, okay, instead of subsidizing this forever, right? Probably we should look for like a more sustainable model.

CJ Hetherington:
[59:30] And as our own kind of creator of markets, we had a set of market was like, what will the price of Bitcoin be on Friday at like 4 p.m. Eastern time, for example. And then like my co-founder said to me like, oh, why don't we like test these markets daily to see if it boosts retention? I was like, sure why not like so on a saturday i created marketing like what will the price of bitcoin be today at 4 p.m eastern time and then we started to see that these were basically like kind of you know zero days to expiry options and there was a lot of latent demand globally for such products and then you know since then we also kind of branched out to hourlies and saw breakout like demand and traction for those as well um so it has been a very interesting story well cj.

David Hoffman:
[1:00:18] Well It's been a fun arc to watch Limitless grow.

David Hoffman:
[1:00:21] If people are piqued about Limitless, where should they go to learn more or go use the app?

CJ Hetherington:
[1:00:27] Yeah, just go to Limitless.exchange and start trading. Pick a side.

David Hoffman:
[1:00:32] Pick a side. Pick a side. That's a great line. And I mean, maybe they just want to learn more about you or I don't know if they want to go join the community, read the docs. Maybe there are some like prediction market nerds. Where else can they go?

CJ Hetherington:
[1:00:45] Yeah, like just go to Limitless.exchange and you'll find a way further.

David Hoffman:
[1:00:51] Well, CJ, thanks for coming on the show today. And again, appreciate all of the information that you've given the community on Twitter and also the app that you're building on base as well.

CJ Hetherington:
[1:01:03] Thanks a lot, David. Thanks for having me. And yeah, let's keep in touch.

David Hoffman:
[1:01:07] Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in. But nonetheless, we are headed west. This is Frontier. It's not for everyone, but we are glad you're with us on the Bankless journey. Thanks a lot.