Helius CEO Mert Mumtaz breaks down Stripe and Paradigm's Tempo L1: legitimate move, but 'payments-only' claims won't hold up permissionless

Get bezel. com your bezel concier is available now to source you any watch on the planet. Seriously any watch. Uh we are excited to talk to Mert. He's taking a couple minutes out of his busy day to break down the latest L1 for us.

So we will bring in Mert from the Reream waiting room whenever he is ready if he is available. I know his last minute. Mert, how you doing? Thanks so much for taking the time. I know it's always crazy with the time change, but Okay. So, so I want to pitch you something. Okay.

Blockchain for yapping so that we can get specifically we want more yaps per second. Yeah. People say TBPN coin, but why not an L1? Yeah. Yap YPS is what we're going I I feel like you're not that serious with what you do. I could beat you in my free time. May maybe I should just uh go up against you.

What do you think about that? In in yapping? No, no, no. in crypto in in your main thing. It could be my side thing and I could compete with you. That sounds like a great plan. Anyway, the force. Absolutely. Thanks for having me. I'm uh just hanging out in my F tier city today. You guys are in your F tier cities. Yes.

Thank you. You inspired me. You inspired me. That was a we we love that first post cuz it was just it's the perfect post. It's like how how do you get a bunch of people to agree with you and a bunch of people to disagree with you in the same viralate? I think I might do a tier list every day.

Yeah, you created an a new meta. Yeah. Fantastic. Uh anyway, uh take us through like what what actually launched um and and uh what if you can give us like a steelman and then and then your kind of uh your kind of argument. I'd love to just kind of like get up to speed on what Stripe and Paradigm are doing here.

Uh and then kind of understand some of the trade-offs. Sure.

So uh I'm guessing people have all read the announcement but basically it seems there's a new blockchain called Tempo and they they they're messaging in such a way that it's an independent company with Paradigm which is a VC firm mostly in crypto or really exclusively in crypto and Stripe has the first investors as a team of 15 uh led by Matt who uh co-founder of Paradigm uh very very good investor and uh they're basically building what's called a layer an L1 blockchain um called Tempo and it's going to be focused on payments and stable coins.

Um and so there's a few and and we can go quite a few different directions here. So there's a few controversies around it. Um you know, for example, this is the fifth or maybe sixth payments L1 or uh chain that has been announced in the past few months.

Um, it has some parallels to something like uh Libra back in the day from Facebook. Yeah, I was gonna ask. Um, yeah. And then the one other thing that got some heat, uh, is that it's it's an L1 instead of an L2. So an L2 for people who are unfamiliar would be basically a smaller blockchain on top of a bigger blockchain.

So generally an L2 is on top of Ethereum, which everybody obviously knows of. Um, and Paradigm traditionally has been very Ethereum ccentric, not exclusively, but very Ethereum ccentric. And so for them to uh create an L1 instead of an L2 Ethereum um turned some heads as well. So there's there's a lot there. Okay.

So um yeah, I mean that like I know very little about this, but the obvious one is like most of these problems seem solved by Circle and Salana.

like we've seen a lot of these like big but I mean just in just in this idea of like like there seems to be a serious player from my perspective that's taking stable coins seriously and there seems to be a player that's taking transaction seriously the I guess given given that you're building in the Salana ecosystem I guess like some of the push back that I saw from you on the timeline was was that you know complaining that that uh or not complaining but in the original announcement post they shared that They shared an example of like during Trumpcoin launch, you couldn't run payroll or or something like that.

Um, and were basically saying that like we're not going to be able to rely on on something like a Salana. You were pushing back and basically saying that like there's a lot of reasons that you would want to create a new L1.

Like there are real reasons that you kind of laid out, but uh transactions per second would would or or sort of scale uh maybe is not one of them. Yeah.

So to be clear, I think like if I'm just to put on my objective hat, um I think it's certainly a good move and I think if I were Stripe, I would probably do the same thing. Um I don't think I need to pay rent to anybody. I can just create my own chain.

Uh especially if I have somebody like Paradigm helping me and a world-class team, then I want to own the full stack, right? And I think that's totally fair and the distribution, everything that comes with it.

Um, now there are some misconceptions here, which is mostly what my post was about, which is like the second you bring blockchain performance and scalability into it, um, now you're kind of playing a different ballgame, right? So, for example, this idea of a payments only chain, right?

Let's just think about this for a second. How can you possibly have something that's a payments only chain, right? A blockchain is by definition something that's permissionless. Meaning anybody can just come on and do anything that they want there.

So if you just say we're going to be pay for payments only, that's not going to actually happen unless you enforce that somehow. And generally the way to enforce that is twofold. One is the chain can be not true and complete. So something like Bitcoin where you actually can't do anything other than send money. Mhm.

Um the other is you can permission the chain which is actually what's going to happen here uh for when they first launch.

Now they did say they have plans to make it permissionless in the future but I think that's going to prove out to be much tougher because the second you make something permissionless you end up getting all sorts of degenerate behavior of people launching Fartcoin and all these different things.

Um that imagine buying imagine buying fartcoin on tempo stripe checkout one click one line of code to launch a new memecoin. Uh yeah, it seems like they they would want to avoid that. So they will be going more permissionless.

Functionally, do you expect Tempo to have a token like a that trade like a liquid token itself in the same way that uh like Salana does or but but uh from from my understanding so like base is like a blockchain but it doesn't have its own native token that's fluctuating in price. Correct. Mhm. Right. Yes.

And um part of the reason is because Bass is an L2. So it's one of those smaller chains that settles on Ethereum. And so you would just use Ethereum. It gets a security from Ethereum is how you would um like say that how that works.

With an L1 though um security is quite important because it's you're building it from scratch. You can't rely on Ethereum or Salana. And so the point of the token is going to be to bootstrap in general for a blockchain to bootstrap node operators, right? So people are actually securing the network.

Now, if the validator set is permissioned at first, which it will be, and they say uh that it's going to be design partners, so I'm guessing like, you know, bigger banks and some of the bigger companies, then you don't actually need a token because it's like proof of authority, right?

Uh it doesn't have to be proof of stake or proof of work. It can just be proof of authority. Um and so, and then they also say that gas fees should be uh paid in any kind of stable coin that they denote. Uh and they're going to allow for multiple stable coins. So that is better UX, right?

It's not a volatile um gas token. So I don't think they actually need it um at first. I think it will be important if they actually want to become permissionless um going into the future. Okay. So the permissionless thing is something that they can uh drive for the long term.

um if they just wanted to optimize for something that they control and has high throughput, couldn't we get a a scenario like temp Postgress or something where they could just uh use Postgress or use like traditional non non uh decentralized uh computing to actually just move money around faster?

Is there I I I guess my bigger question is like is there a regulatory angle here where they get something that they can do something with crypto rails that they couldn't do with just a traditional database, right? Yes.

So that's actually a really good question and like could they just become a bank and say we we are a bank. We have US dollars and when you go into your US dollar bank account, we you can move it around and our banking infrastructure runs 24/7 and runs on a great data center that's really fast.

And yeah, it's not permissionless, but why do why why don't you trust Stripe? Like Stripe has never done anything for you against you. Like it's fine. Trust us. Yeah. So, this is where the conversations get quite blurry.

And this is something I talk about very frequently, which is the second you have to permission the block space. Um, then it's unclear what really separates uh this from an actual blockchain versus something more like like an actual database. Yeah. Right.

Um, and now there are some benefits of blockchains that are still apparent even if it's controlled.

So things like transparency, auditability, um universal like standards for that blockchain and also like you get the you know the approach of progressive decentralization which is to say you can iterate towards PMF fast but then as you get more traction you can slowly decentralize certain things.

Um this is what L2s today are doing.

So there are some benefits and like you know if no one person is controlling that infrastructure right assume you have let's say something like 21 validators and they're all giant companies uh or payments companies across the world different jurisdictions and different you know requirements then I think that can be interesting um but I think like to be completely honest I think permissioned blockchains aren't really blockchains um and like it starts looking super um drawn on out when when we when we get there.

Like we've tried a bunch of these before. Uh like JP Morgan already has one actually. Oh, really? And and and a few Yeah. And a few other companies. JP Morgan said, "I want I want my blockchain to be off the chain. " There we go. Yes. Uh can you talk to me about uh about uh like uh payment onboarding?

I I think of Stripe as a dominant web 2 payments company. I think about Stripe Checkout, massive footprint. Uh, Stripe Link, massive. Uh, just the amount of companies that have Stripe somewhere in their payment stack is immense. And so, but I was I was noodling with Jordy like how how does this actually work?

If I go to a website that's powered by Stripe and I have normally there's like a credit card field and then it just says, oh, well, we also take Tempo and I'm like, what's Tempo? Like, how do I get that? Do I need to go get a Chrome extension for a for a wallet?

Like theor theoretically theoretically it would just have like a it would just have like a generic pay button. Okay. And then it wouldn't be tempored necessarily at all if you stripe branded and you would connect your wallet and you would with something like Privy. So the first time I do it, I set up a wallet.

Is that is that roughly the use? But but but the the interesting thing is like more and more and more and more young people just have digital assets. They have wallets that they can actually Yeah. the the way I can and by the way like each fintech company kind of has a different approach on this.

I've worked with a few of them and there is no like universal standard but with Stripe they wouldn't say um pay with tempo because tempo is just like in this case the name of the database right like it would be they probably would abstract that away. Yeah. Um it's like Fed wire or something.

It's like something that's under the hood like pay with fed wire doesn't make any sense but like there might be some fed there might be some a that's happening behind the scenes when you pay with your credit card you just say we accept visa.

Yeah exactly I think the first case is going to be B2B um meaning like crossber settlements. Sure.

um like that's super useful for international companies for example y um remittances things like this um and then like I think things like Shopify pay and and all these different things that actually have some maybe Stripe integration or Coinbase pay um will also use it but like at most I can see it being like pay with USDC um but but I don't I don't think the blockchain will actually be really in the implementation at all it'll be abstracted is my guess yeah uh how how should we like judge the succ success of this project in a few years.

Like is it should we assume that the goal here is progressive decentralization? Like in the best case scenario, the the vast majority of transactions on the Tempo chain are pay truly payments related. It doesn't turn into a memecoin chain.

And and also it's it's becoming more decentralized as measured by the what is it the biology coefficient of you put out some posts. Yeah.

Then the Nakamoto coefficient I gave Bology the credit just for coining it I think but the Nakamoto coefficient of like concentration of validators we ideally the goal here is a ton of distributed validators no one owns 51% and uh and and the majority of the payments are are are payment related just transactions on e-commerce websites and remittances and crossber payments is that the goal that we should be tracking towards so the way I would do it is first of all is it actually solving any problems in doing finance better than it has been done before, right?

Like is it actually making the experience for merchants um better? Are they getting better margins? Um how easy is it to do crossber things etc.

Like the UX and the actual product need I think especially when you're in crypto realm u is something that gets overlooked but like Stripe is obviously probably the team to uh take this over the line. Um, so that's going to be one.

And then once you do that, then you you can start asking these questions that are more serious, such as, okay, this technically works, but how does it actually work behind the hood? Like they say it's a blockchain, but is this blockchain controlled?

Can I actually secure my funds here, or can this one company actually take it away? Uh, right. Uh, and so like what you said about progressive decentralization, I think makes a ton of sense.

Um, and then you know, you'll want to look at just basic numbers like what is the amount of stable coin flows going in and out of this thing? Um, is there like decentralization of stable coins? Like is it just USDC um or is it Tether as well? Um, maybe Stripe does their own stable coin.

So there's a lot of interesting um approaches with this. And then I think um what's going to be interesting is like if it's permissionless, which I don't think it will get there for a while. if it does become permissionless, does the scale benefits that they say um actually do they actually hold up to reality?

Um and I think that part is going to surprise a lot of people because I think people are not ready to understand how crazy degenerates get on blockchains that are permissionless uh and how to actually scale those systems.

Um but I mean I've seen some [ __ ] Um, and so I think I think uh if if it remains permissioned, then I think they'll do it. But like that's the big question for me. Like how do you actually um do this in such a way where it is only for payments? Yeah.

When you talk about degenerates doing crazy things on on permissionless blockchains, you're not just talking about a bunch of people showing up and like aping into a particular token. You're talking about somebody setting up like a bot that's like programmatically interacting with the blockchain at an ultra high volume.

Is that correct? Oh yeah. I mean like take all players in HFT and just like mix them up with like random British sneaker B kids uh and then with like some random like Russian me farms and like it's just it's all out war.

I just want to get to a place as a as a country and and and and the crypto industry broadly where the next, you know, whoever's elected in 2028 that they can launch multiple coins of the size of Trumpcoin at once and make sure that payroll is still running smoothly during that during that time.

So that should be the goal. So anyway, thank you so much for thank you for filling us in here and yeah, come back on as there's more news. We will talk to you soon. Catch up. Thanks for having me, guys. Cheers. Up next, we have Harish in the reream