‘Aave v4 Will Unify Cross-Chain Liquidity’ - Stani Kulechov. Ep. 555

Transcript

we were expecting to maybe get the same amount of value because obviously fi had a really big peak but what happened more recently is that it got a lot of more traction there's somewhere between I think 13 13 above billion wor of uh value locked over the past years the stakes are growing in terms of what we're actually having in defy in terms of value how much we have to secure and also how incredibly well the space is growing still being very small the reason go exists today is is because a they had from time to time liquidity crunches to avoid this conscious we could actually have a protocol owned stable point that could be minted into

these pools for users to borrow against but what's important here is this liquidity premium is actually and pricing the liquidity is the answer to these types of a situations that happen in Cur because welcome to epicenter the show which talks about the Technologies projects and people driving decentralization and the blockchain revolution I'm Sebestian and I'm here with my co-host FICA erns today we're speaking with stany kulicha who is the founder and CEO at a labs and avara we'll be diving deep into the recent av4 proposal and what that means for the protocol and also talking about Defi and the future of decentralized Finance in

general before we do though uh I'd like to tell you about our sponsors this week this episode is proudly brought to you by nosis a Visionary Collective committed to fostering and expanding applications for a decentralized future nosis is at the Forefront of innovation with nosis pay circles and metry revolutionizing open Banking and creating a superior form of money with Hashi and novpn they are building a more resilient and privacy focused open internet are you seeking a robust L1 to launch your project well look no further than nosis chain enjoy the same development environment as ethereum but with significantly lower transaction fees and with a robust network of over 200,000 validators nois chain stands as

a credibly neutral and resilient foundation for your application governance osis is driven by nosis Dow where everyone has a voice in shaping the Project's future join the nosis community today by participating in the nosis D governance form you can deploy your project on the evm compatible and highly decentralized nosis chain or help secure the network by running a validator with just a single gno and lowcost Hardware embark on your journey towards decentralization today atosis doio Cars one is one of the biggest node operators globally and help you stake your tokens on 45 plus networks like ethereum Cosmos celesia and dydx more than 100,000 delegators stake

with corus 1 including institutions like bitgo and Ledger sticking with corus one not only gets you the highest years but also the most robust security practices and infrastructure that are usually exclusive for institutions you can stake directly to corus one's public note from your wallet set up a white label note or use the recently launched product Opus to stake up to 8,000 e in a single transaction you can even offer high yield staking to your own customers using their API your assets always remain in your custody so you can have complete Peace of Mind start sing today at chorus.

one cool stany thank you so much for coming on again I mean I had to like talking to you two legends um it's it's it's always a pleasure thank you so we're here to talk about Ava V4 today there has been a number of proposals that just very recently passed um before we dive into that um can you maybe walk us quickly through the evolution of ABA V1 through three well yeah it's um it's definitely been really really um I would say been long journey um so as some of the listeners might might know and um I

started uh building decentralized Finance um in 2017 2016 already kind of like thinking of ideas and uh what to build and and what's important for um uh the ecosystem as a as a product um and and what came out of that was was a um project called uh e land shed for ethereum uh lending and I had this idea that um if you can actually swap assets um on chain you could also use those assets as a collateral um and borrow against as well and also earn yield um the way I started was more of like a

peer-to-peer setup in a market um because mainly lot of these assets were very low liquid and there wasn't this a concept of pulling yet but later with with Unis fob and a lot of the Innovation pulling assets became a more of a common thing and um we iterated into a uh protocol which is essentially uh a a pulled model where you can get liquidity access to liquidity right away um and then use whatever you supply as a collateral to um draw basically borrow any other um asset and the difference between what you pay for uh supplying so receive as an interest as a supplying

and pay for borrowing then it is your different cost uh difference cost there um and looking at each deployment uh we had I guess itan was more of uh experimentation I was still um studying in University I've I've been I've been builder for quite a long time I built authentic and um various uh web applications back in the rubyan rails and web 2 um uh era and uh I think AA protocol was something that evolved um as a kind of like a ideal way of of actually um gaining onchain liquidity

and when we launch I I think uh our expectation was that maybe the protocol will have 10 or 20 million wor of value in the smart contracts and um with based on like the tvl mtic metric of value lot in um and end up ended up having several hundred millions and by the V2 our goal was to basically create a better protocol and being more Capital efficient more um risk management tooling um and that ended up being um what we expected to have maybe few hundred million became a protocol that had few billion worth of value and then V3 which is our most recent um uh

development of the of a protocol from over Labs um we were expecting to maybe um get the same amount of value because obviously defi had a really big peak um but what happened more recently is that it got a lot of more traction um again and we have all these different um Network deployments that the community developers are um deploying in Al B is now over uh 13 different uh markets um there's somewhere between I think 13 13 above billion worth of uh value locked um so it just showcases kind of like how over the past years the stakes are growing in terms of uh um what we're

actually having in Define terms of value how much we have to secure and also how uh incredibly well the space is growing still being very small uh but still exciting to see how things have been um evolved and that's basically where we are now and the V4 is something that where we want to build a lasting protocol which should be the last like a major uh iteration but I give you a little bit of warning because every time we are building a new iteration we think it's final and we don't need to do much changes a year goes pass or two and we're still you know finding things that

we can do better uh new innovation and it feels like whenever we say this we still have some work to do in the future ah Stan you and everyone else I think this is happen this is what happens to our bits so um let's let quickly just say on V3 before we deep dive into kind of what you're planning for the future um so you guys have a stable coin called go that works similarly to Makers die um there was recently an escalation between maker and ARA regarding the use of certain collateral can you quickly um walk us through what happened and why it escalated no it's an interesting topic

because what happened fact is that from the maker Community um there was an initiative to to actually use uh ethena uh eusd which is essentially kind of like a onchain Yield Fund where the collateral is in this different centralized exchanges and you're capturing the uh the yield of that um that type of activity that um the um the stable C had in the underlying uh model now uh the model is very interesting and the project is extremely interesting um and got a lot of traction but obviously it's still very new um and what we saw from maker is that uh there was this uh

initiative to actually mint uh a lot of Dy against this collateral um which basically meant to the extent of um um couple of billions warts uh over the uh shorttime um Horizon so this is kind of like interesting because from um AA protocols perspective and the AAL and respond perspective holistically the the the avidal and risk management has to go and is seen through asset by asset perspective and risk parameter perspective so this changed the risk profiling of um make itow but also specifically uh die with this initiative

so it's it was a question of um the conservative uh die as a and maker as a system is basically taking more uh opportunistic approaches and that risk should be repriced and there was a lot of discussions in the abow how to reprise this risk and also signal of uh change of a risk profile within the AL the protocol and and and greater uh defi community and that was essentially like what what was it all about um and I think that the the the actual question is that um the the the underlying collateral itself uh could be in maker

at some extent that the way it's for example to some extent in as of today in rb3 but it's a question of magnitude and risk profiling as well so that's the kind of um series of events that uh that happened so makers deployments are actually just deployments of the ARA V3 contracts right so kind of do you think the difference between Meer and uh and ARA at this point is kind of just risk appetite in in terms of underlying collateral or where where do you see the differences yeah I mean the tech that we usually build build from the aabs uh perspective and and the tech I see in

wider AA Community um it's very U Innovation driven so even things like go uh the underlying technology go stability module and compared to what exist today out there we usually don't Fork directly code uh what we do we actually figure out things that are could be improved and and innovate on on top of the existing status quo um so do you think that they vary different type of uh technological risks and over time they mature especially more air pairs come so kind of like the last Bastion of risk um and I think this just doesn't apply specifically only to a and maker

but in general the whole uh defi ecosystem is is is the risk management on um the underlying assets so what is actually backing all that activity all those borrowings or or mins of go or or die and so what is the kind of like a last standing uh collateral there um and I do think that maker risk profile has changed um since if you go back in for example in a couple of years obviously d3m a module where you can print maker into different uh protocols that existed quite a while and that's been very useful for the a um protocol as well uh but essentially what with the way to think about these two different

protocols is uh there's two different risk management uh communities that are seeing risk differently and this is important because uh previously um you know everyone was relying upon D and and maker and there was so much vested interest because it was uh one of the main projects on ethereum in defi the main St decentralized stable coin and now there's options and and I think this optionality is really important because um it allows the the a um risk management Community to decide what direction to to take go for example and monitor as well what direction the maker Community takes uh die and reflect

towards yeah I mean at the end of the day it's all about communities and how uh decentralized governance uh decides about what risk parameters uh you know the community wants to accept for in this case um the the collateral Types on their protocol um yeah let's uh let's talk about V4 I think this uh is quite an ambitious uh proposal to move as you said toward Wards you know what might be the final version of of a I I have doubts about that I think there'll be uh further versions and possibly more Innovation uh but uh yeah what inspired this uh this development of V4 and can you maybe just uh uh give us an overview

of some of the main things that A4 innovates on uh with regards to uh like V3 yeah I think I think two important um I would say categories of of innovation pretty much is consistent with with all of these um other protocol releases um there's a focus on risk management and and the tools that the protocol um enables regarding risk management um and the second is capital efficiency um yeah and also um in V4 we have these two categories um as well that we focus

quite a lot and a lot of these features are actually um improvements of existing way of managing risks uh bringing more flexibil flexibility as well uh bringing more Capital efficiency uh but there's two additional U categories and and one of them is actually um related to both risk and capital efficiency which is a pricing component so for example um given the way the a market is is built um it's actually built in a really userfriendly way so users can come and Supply different kinds of um cryptographic assets that are um eligible and then pull the liquidity

that they need so effectively you can utilize pretty much your portfolio on whatever you need to to borrow can repay it's really flexible the the the experience there is um relatively uh simple um but also intuitive um and you don't need to go to separate markets and and kind of like you know put it into another place put like let's say uh another asset let's say off it to another place and and then borrow from here and here and monitor all these positions and and and um manage them right so so that's kind of like a one uh uh part of it so because you can do this all this activity in one same Market um it also

means that um whenever you supply a particular asset that is um uh yielding so let's say you supply uh usdc um it also means that you're earning uh based on what users are borrowing that asset out and it creates an interesting uh scenario for the users because it means that usdc is priced across the protocol um in in a one I would say price regardless what is the user's risk positions how much they're adding risk whether they they're not adding that much of a risk and we wanted to change that so we wanted to change the pricing in a way that it reflects how much risks uh these users are

actually bringing into the uh protocol yeah and that's the new category and another category is the um governance overhead so the way we are thinking about the whole protocol the architecture um it's more modulized it it means that you can fix different parts uh without actually needing to upgrade the whole protocol uh the code base uh it gives a lot of flexibility U there but in this category we also want to minimize the governance overhead so how we actually can um create let's say liquidity layers that are um immutable um or we can create different kinds of parameters that are immutable um or time base where they only affect from from

the moment uh proposal gets into execution and new positions as as an example so these are the kind of things and I think a lot of these new categories are really optimizing uh the existing really good uh product and and also removing the overhead on governance which basically means uh maturing the protocol is getting more matured and the technology getting is getting more matured and reflecting to that right and uh I noticed you didn't mention the the Unified liquidity lar I think this is actually one of the most interesting aspects of B4 is uh pulling liquidity from all of the different markets that a

is present in uh this is an an interesting interoperability challenge I think that you guys have solved with um this this portals product that You released some time ago what are the main architectural challenges and and maybe changes from V3 uh that folks will know V4 um with this new UniFi unified liquidity layer and maybe we can then get into what the unified liquidity layer actually offers um users on a high level um we are going too much into technical specific uh specification I think one of the challenges is that the AA version tree

um is a little bit built in a more like a monolithic model um meaning it all the main kind of like ingredi ingredients of the protocol are very interconnected um and if you have significant changes that you want to change for example the borrowing logic um maybe you have changes regarding to um you know a liquidation model um you will have to go kind of like into the core protocol layer and make those changes um and upgrade a a code base that might be affecting um 12 to 14 billion wor of value in a smart contract upgrade now uh we haven't

seen those type of upgrades uh that many at at this level but as Stakes are going high and more value is locked in in these uh protocols that is something what where we have to mitigate also risk and and the way we think about uh unified liquidity layer and also this new modularized architecture is is that the unified liquidity layer is is a way to capture uh liquidity into one specific um like a pool or or or layer and everything else can be connected to that uh liquidity so that ranges from for example a um uh borrow modules that might differentiate amongst each other

um updating the borrow logic um it can be a changes to a liquidation engine different kinds of um uh modules that might affect might be also like a portal module that manages the uh minting and burning a tokens between um different networks for like a cross chain type of a um um use case and I think this is the fundamentally different difference between what we're doing in V4 and previous versions so what we want to actually create is that um as a for example Community developer you can work on a specific module improve that specific module or create a

new module and by governance process it can be plugged into the architecture as well and you can this way iterate faster so you can change this different modules without actually affecting the whole uh core uh pool logic and this also means that this allows institutions and other entities even create their own uh liquidity layers and somehow manage them as well um and this brings a interesting new opportunity for institutions for example to to create something on towards their own uh use cases maybe let's go into detail as to how the unified liquidity layer handles uh risk profile of assets across

different uh chains in the market you were talking about risk earlier and how we risk um borrowing and L sorry how we price borrowing and lending on different assets uh does the unified liquidity layer sort of create a like a single uh price for an asset across all these different markets or is there a way for users to specify and Target um certain types of assets uh that um you know may get them a better raid or like a worse off raate depending on what chains those are on so unified liquidity layer um what's amazing about it it's it's simply a it's simply a place to store um value um the the actual liquidity and and the

accounting of that liquidity that who and which users it belongs to and also um there's a connecting points into these different modules so it's it's as simple as that um and you can also register your liquidity into a liquidity layer um without actually supplying it and keeping it for example in a uh gnosis save uh as an example which means that you won't be able to lend out your uh funds but you will be able to uh borrow against and it's something that is an interesting feature from um institutional perspective or uh mitigating that type of um um lending risk but essentially all these other

modules for example uh what is the interest rate curves um what are uh pricing mechanisms and everything else it's is outside of the unified liquidity layer and they can exist um obviously between different n works and to give more um details about um what what what you mentioned said about the the pricing um so we have this new feature called liquidity premiums um and the way it works is that with liquidity premiums you you as with your position um it's priced um the the the asset that you're borrowing is priced with the position that you create so we can take an

example where you create a position where you supply only eight and you borrow usdc so for example today you will be paying uh a certain price for uh usdc but also a person that is uh supplying let's say more riskier assets that are eligible in the protocol and borrowing usdc they're paying the same price so I don't know if you remember there was um over a year ago this uh uh scenario with uh CRV where basically the curve founder had a big position in a and and basically the Dow started to offboard the uh collateral uh by mitigating the uh loan to value ratios liquidation

thres thresholds and effectively the the founder went to other protocols with which later today as as of today recently um suffered actually bad Deb because they they took those positions to their uh protocols but what's important here is this liquidity premium is actually and pricing the liquidity is the answer to these types of situations that happening Cur because what you can do if if a position is borrowing the same usdc and they're providing more risk or the market conditions Dynamic market conditions changed uh significantly um we can add a liquidity premium uh much more higher so basically

even if you keep the position in the protocol you're paying more to the protocol and to the Dow for that uh position and then it's up to the user to to take that additional cost or living out of the uh protocol but this also means that actually if you're just supplying uh e and you have the most Lan SC at all you're effectively paying much lower rate than the average because you're essentially having the mo the lean in uh position within the same market and architecture wise um we are not segregating these uh pools from each other but it's still in the same market and I think that's the

beauty of it is that you can do all this activity on the same Market but we have a way to price the user's position based on how much they're providing risk into the protocol and whether there's sufficient reward for the protocol how does this pricing work is it algorithmic or is it something that you kind of need an underwriter function for technically speaking it's essentially just a delegation on the contract which means that it can be a fixed logic and that can mean for example certain asset could have a certain parameter um which is the risk premium parameter and I think that's the

way to start um in the first iteration but of course because we have this amazing uh modular architecture it it also means that that that type of a pricing module could be changed to something um or asset specifically change for example that reflects actual market conditions uh so for example if um an asset um uh decreases in liquidity that could um automatically increase the the premium and this is the beautiful thing about it is that you mitigate so much of the governance overhead of actually managing these parameters where they could actually be automatized

between certain specific accepted range how do you think um the liquidity layer will benefit uh go um so kind of if you look at the go market cap today it's about a third or so of the D market cap do you think get S to benefit from from uh this unified liquidity yeah I think go uh is quite interesting because Eno as a kind of like a as a as a I would say like um infrastructure within our ecosystem is is really fascinating um so when we think about going General and and and the benefits

the the reason go exists today is is because a had from time to time liquidity crunches and there was an idea that we had that to avoid this crunches we could actually have a protocol owned stable coin that could be minted into these uh pools for users to borrow against uh to avoid the liquidity crunches and while we were thinking of this idea we realized that actually one of the benefits of of go is in compared to maker die um back in the days is that when you supply your assets to AA protocol you earn on the collateral while you're boring go so you have this kind of like a capital efficient

um stable coin and on the a a protocols perspective it also brings to the users predictability on uh interest rates which is a great feature especially when all the markets are on variable uh rate basis and when we look from the a protocol perspective what's the benefit of of go it's quite exciting to look at it because um go doesn't have uh LPS so at the moment you don't Supply into the AA Market go it will change in the future uh with cross chain go first in arbit room and uh down the line also will be available in uh in mainnet but

because go doesn't have these LPS it means that the reserve factor which is uh the way to collect um a a dow revenue from the protocol it's actually 100 instead of like 10 that is in usdc so just to give you a magnitude of the Revenue um 100 million for of go meant that um brings equal amount of Revenue to the alow as 1 billion uh usdc and that's remarkable because that Revenue then Cascades into building and innovating more on the community side and on the technical stack and also figuring out different ways to to reward uh users and in the V4 perspective

obviously with with liquidity layers there can be different facilitators that me directly go on onto these liquidity layers that can be then borrowed out but we have in V4 We have basically multiple features that kind of like make the go integration more seamless with the protocol um you have go soft liquidations which is kind of a feature that the um um CRV USD um pioneered so basically you can sof liquidate uh your positions uh in go and and wise um Versa you can get paid uh interest uh for example in go on any asset that you have

so that can be done um directly under the hood on the on the protocol and there's couple of like technical improvements but V4 will bring the integration between go and uh the other protocol more kind of like a tily it together I wanted to ask also about the the how this changes the ux or how does it improve ux uh for a users so like maybe walk us through an example here um like hypothetically you have a user who's on uh polygon and has collateral on eth L1 uh and and they want to borrow against that collateral uh on polygon on on the

Ala Market on polygon or at least on the polygon chain how does that work for the user and like in the background what's happening to those assets where are they being sort of locked and more importantly maybe like who's paying for the gas fees um because we haven't talked about this but the the orchestration of the unified liquidity layer I believe is still happening on um on ethereum Main net um so maybe just describing like that user flow and uh what's happening in the background there yeah and I can um it's also like a the kind of like a subsequent iteration of the unified liquidity layer which is the cross chain

um version of the liquidity layer with the portals and what is effectively means is that um the the a as a protocol can actually move liquidity uh between these different uh deployments um and that can be iterated to cross chain positions effectively you could you could technically then uh keep your collateral for example on um ethereum mainnet for example eat and then you can draw uh for example go on another Network portals is just a a simple feature of um minting and and burning um unbacked um a tokens that then are subsequently uh backed

right away and they kind of like a keing component of this feature is having um caps of how much you can actually do that and and what's the purpose so the the original idea of the U portals was actually to allow uh third parties to come and get some sort of uh credit line up to certain point uh to be able to to to use portals um it it's a tool for for bridging as well we see um the idea for for portals um also kind of like an I would say a way to move liquidity very fast uh between networks um I personally

believe that maybe most of the users will um they might have their liquidity in one specific network but you will have users that are uh operating in in in multiple networks and it's going to be um very useful but for from like for for me like the the the most exciting actually um ux part of of the whole V4 and and this works with with the portals and unified liquidity layer is the aspect of the vaults um and smart accounts and and it simply means that for example if if you want to supply uh liquidity but you don't want to uh

Supply the assets into the liquidity layer for some particular reason one you don't want to to get the funds lended out to you want to um uh see the collateral segregated from the other parts and then you want to keep it a three you want to see it in your um uh let's say smart account so what what we're essentially doing is that you can see your um you can you you can reg register your collateral um in the protocol but you don't need to supply it so you can keep it in your nosis save and then you can draw uh the liquidity uh against it and and obviously this is

like a really uh interesting thing because you you don't really need to put your assets into the to the protocol and you can keep them segregated um and this is also opens up some interesting institutional um use cases as well you can provide some attestation to uh a that the liquidity is in a contract it might be locked there U that that liquidity is that the the position is backed by something even though it's not uh in a pool on the protocol yeah exactly so that's the the the key difference um it's it's mainly of a kind of um for for some some users

it feels uh more intuitive to see those assets um in their right basically smart accounts and then you can still borrow without having to kind of like we don't seeing your assets leave and I think that's a um interesting thing and then obviously using smart smart accounts itself is a big ux Improvement because that enables things like for example gas lless and signless transactions and bunch of other uh interesting um things that can be built upon that eventer cool um stany can you talk about the role of real world Assets in our V4 yeah there's there's um obviously the

the the segregated wult applies also to the uh um real world asset uh type of a use case um and could be very useful uh way maybe there's some sort of extension of like tokenization tokenizing storing your on wal borrowing against um what I'm excited quite a lot about the um V4 is that it allows to have with this new V4 liquidation engine it allows to have um uh liquidation strategies so typically the way these Protocols are uh lending Protocols are built is that um when when liquidation happen there's

certain rules uh for that and and that might be for example um you have a liquidation bonus that happens when a certain price range is hit and the Liquidator keeps that portion um it might be uh DD auctions as an example but what liquidation strategies actually allow is that you can have a a different type of uh uh liquidation strategy depending what the asset is and why this makes uh sense is that not all of these assets that will Ex exist on chain will have the same uh liquidity profile or the same uh Redemption um time period or

or profile as well for some and most of the assets that are um listed today their Redemption profile is really similar where you can go and swap the asset on a secondary exchange and uh replace it and and you you created a successful liquidation the protocol is Healy but in more kind of like a real world assets of chain assets there might be for example a time period of like um uh two windows a day once a day every couple of days where an asset for example the undering asset you can redeem it uh liquidate it take the proceeds and uh return it to the protocol so these type of um liquidation

strategies allows to on board um this type of assets where for example you have to you have some sort of like a Time component uh involved and that's where I'm um very excited about um as well and of course like combined that with the idea of segregated vaults it's quite of appealing for an institution to to consider using a yeah absolutely so mea da also has a very a live rwaa offering um can you can you compare that to kind of what you will be offering yeah I would say that most

likely obviously depending on what direction the Dow chooses um on the rdba um to proceed with but I would say that there's going to be a lot of similar uh profiling but with the the um with the aspect of liquidation strategies that extends to new type of a use case or things that for example didn't exist as a collateral because you know let's say in institutional context Bitcoin might be stuck somewhere uh in a custody for I know 12 hour 12 hours so you can't liquidate right away um so those kind of scenarios so I would say

that what we're trying to achieve is that um capturing the ability to technically support the existing use cases um and RW operations but at the same time um innovating to support anything that is um new or assets that that they don't have yet um a a similar support in from like technical uh perspective so there's going to be a little bit of similarity but hopefully we see also new exciting use cases with rwas with with the V before and obviously go by itself is really helpful because that um go Works

in a way that um there's this concept of facilitators that can be created to to me go against some sort of a strategy and that could be also real world assets um that can be anything that uh fits the Dow's risk profiling yeah well I mean maybe taking a step back on our RW a little bit here uh which asset classes do you think are are uh most likely to really take off in the next like 12 months and which of those like you think will have a significant impact on a markets I would expect treasuries to

keep growing um and and see more initiatives to bring treasuries on chain I think um there's a little bit of a uh slight stagnation of the growth because of the yield on chain is higher than what treasuries um are providing at the moment but it provides a really nice uh diversification for anyone that is holding uh a portfolio on chain on chain yield portfolio um being able to earn on treasuries but also diversify their yield sources and also risk uh profile um I think tokenization of money market

on is going to be um also a a growing aspect uh Black Rock has been doing uh pretty nice uh job there with the the B um tokenization and in in a fund uh that they have so I would expect that growing quite a lot um centrifuge is is doing a great job on tokenizing credit uh I mean they ogs in the space and and keep always um iterating and and bringing you um assets on chain um so I think those type of uh shortterm depth instruments are going to be uh quite popular for the next uh I think 12

months okay stany let's uh change gears a little bit so you guys expanded onto a number of evm networks with Ava V3 um in the ab full proposal you guys actually talk about expanding to non M networks as well and kind of introducing a central hub for accessing aror and go I think the rationale why you guys want to do this that's pretty clear to me but can you talk about how you think you're going to achieve this yeah so the way I think about it is that um we'll see a lot of uh uh l2s where they're growing their own

ecosystem and need a financial layer and when you you need a financial layer you need The Usual Suspects um obviously on the defy side for for actually technology infrastructure um execution uh in terms of um ongoing support um but many of um being able to create a financial later that supports whatever the use cases are on those networks the way I think about these l2s and EVMS and non evm EVMS is that they're kind of like they're they're all their own cities um or like countries orations and um a lot of cities they actually need banks

financial infrastructure and to support every thing they have in their economy um and that has been the case with um a so far and we have Community developers that been able to deploy across multiple networks with these um evm deployments which have been like a really big um um expansion I mean a is is um leading in for example in in base which is now focusing more and more defi um and it's amazing to see they're also coinbase bringing like more and more of um like their business or thinking at least towards um an onchain uh future to some extent um the way I think about non EVMS

is that it's kind of a expansion but obviously you have a different Tech stack so which is good and and which is also like creates complexity so good parts is that there might be things that are uh helpful for let's say defi from security standpoint um for COD implementation um but it's also a new language a new implementation that requires uh a lot of effort and um the way we think about expansion is that we can go so far with EVMS but there's big communities around um these deployments where which which which exist in the nonm uh

ecosystems um obviously that means writing codes from scratch um and I think that's the way to uh think about it so we just have to think uh these implementations we we have now uh are in evm implementation and how to get it into um anbm implementation and it's obviously is not as easy as copying pasting um it's actually uh a work of trying to figure out how to build in a completely new environment with a new language and whether to make that type of um uh effort uh in the first place but I do think that it's really important to kind of like keep these options open and treat EV non evm

ecosystems also as users that are coming into space and then obviously that bridges into the wider of ecosystem which direction to actually go um there's also discussion whether a should be an L1 because just the matter of like dvl there is um I personally think that uh there is argumentation behind of that but I do think that obious roots are on ethereum um and being able to support the ethereum ecosystem um have ethereum alignment uh is beneficial for for the a uh protocol in the a but there should be bridging towards these uh newer communities that are also focusing on

onboarding uh newcommerce and we just want to win in the sense that we get to see more of blockchain implemented into more mainstream and seeing more users and I think that's how we think but yeah the hardest part is actually fighting the code and ensuring it's safe yeah there's there's a lot of like to unpack there first maybe uh which ecosystems are are you guys like looking at as potentially being your your first steps outside of the evm ecosystem we've looked quite a lot um uh into move based ecosystems uh and rust so those are the the kind of like a main

um areas um and obviously that's where uh our head is at at the moment so it's actually where and I think it's a lot where the future is going towards in in some sort of uh Ross Direction um and we want to also um ensure that we have enough knowhow onrust um whether it's an implementation or some sort of buend services we build um and kind of like a have that uh approach as well but yeah I think there's going to be more um information about concrete plans of um how we think about the expansion to non EVMS right so it sounds like it it's

it's not simply just a kind of copy paste deployment but there's more thoughtful consideration as to you know the specificities of those VMS because I mean on like on movement for example uh movement does have like an evm interpreter that it converts down to move to the move op codes you guys are thinking about actually rewriting the contracts in the native languages and maybe making use of some of the unique features there on those blockchains I think so because the the interesting part is that all these non EVMS they they decide to build non EVMS um also because they have some sort of a concrete uh Direction they want to take

and they want to focus on some sort of a um kind of like um Propel propeller in their uh ecosystem for some it might be for example being able to get uh low cost on transaction so might be for example par realization of of transactions some it might be that they have benefits already of shorting um some might be just basically certain type of activity uh in their ecosystem um that is basically tailored for somehow more um consumer mainstream um I do think that rust uh based and moood based um approaches are interesting and it provides really interesting tooling

as well from how to think about the actual implementations uh from a security standpoint so they all offer a little bit their own pecularities and it brings also a lot of complexity at the same time because we have to think from a complete New Perspective of these implementations pecularities of the uh um the non evm environments and and the changes we have to do uh and a isn't really uh the most simplest protocol it's really um quite um uh on architecture and and and and and it's a lot of work yeah I I can I can see how that would be a lot of work to to rewrite all

those contracts uh in in rust or move or some other language uh coming back to this um you know this sovereignty topic I'm really quite curious to understand how you're thinking about this here because a has become one of the largest protocols in ethereum largest lending protocol by far uh in all of crypto yet you know the cost of using ethereum uh for for users and um and the uh the sort of you know challenges that you guys need to deal with regards to me and and and other uh issues that come with using a generalized purpose chain you know could easily be solved by building your own chain which would allow you to have

specific policies around how you capture ABV uh doing things like uh onchain oracles and like all these other kind of support functions that EV validator provides you know dydx went down this this uh this path um I don't know what the kind of status of the maker um chain idea or I know at some point they had discussed maybe doing the maker chain so like yeah just maybe getting your thoughts on like how you think about sovereignty um for a and like what that means you know as as being sort of ethereum aligned um what that means for protocol yeah um obviously I think are there as a communities always kind of

like more towards a align and doing whatever is best for the a uh community and and the the future of this protocol and its um principles obviously like creating more access to finance uh transparency and and just better uh execution and I do think that um if there is a network uh which is in in the plans and the question is whether that is uh what kind of pile2 what kind of U differences it really creates uh an amazing uh design space um because I do think that assets should actually yield how how wherever users are holding them

um so users can subscribe to certain type of pH or choose not to um and being able to have have a of a network it actually means that um there are a lot of benefits where the network can be um tweak and adjusted towards uh being very driven by D defi behavior and transaction um and I think that's a really powerful thing to do I I do think that whatever the avow chooses in terms of likeing the implementation um I do think that even that design space should be as simplistic as possible um and just to prove what actually a defi specific of a network as a

liquidity Hub can actually do and benefit for the users especially the newcomers that don't really mind or care about specifically what network they are but wants to tap into a good brand and a a good product um and with the cross chain liquidity layer benefit from all these uh movements between deployments of a across different um networks so what I think is going to be um fascinating is to figure out that uh Delta uh in design space that is going to be really powerful for the a users and the whole ecosystem uh here and I think there's a lot of benefits that

could be uh created within AA Network so zooming out when you think about um defi or open finance or however we call it then in the year 20 30 what will that look like and how will AR's role look like within that ecosystem yeah I would say that's um it's a great question I think the idea of the AA 2030 um proposal which essentially includes a completely new brand identity um you know taking a into a more kind of like approachable uh fresh um look with

the V4 bringing new innovation bringing a lot of flexibility modular architecture uh pays um not only a good way to um build iterations but also support institutions as well coming into the space and I think that's what's going to happen over the next uh years and obviously AA networ bringing efficiency and um to the whole kind of like a organization of capital and TBL across these networks with cross chain liquidity layer I think just looking the upcoming years um we have to have infrastructure that is actually really

really um ready for adoption um and and I'm thinking about mainstream adoption institutional adoption and being just a infrastructure that can be used in many different ways uh with a with AAL um or whatever that particular use case uh is so I I think the the idea here is that defi is definitely you know better way to organize finance and financial infrastructure but it will take a decade to actually mature because it just needs that maturity um to scale and then thinking about the um aaps uh role

we want to build the things that we we we think are necessary the avow is growing there's more contributors there technically technical and non-technical contributors um it's probably most interesting that out there at the moment um all the way from from the um early def5 uh days so effectively hopefully the Ava Labs kind of like moves more towards other types of initiatives that might be supportive um for the Dow uh or the a ecosystem but the actual technical architecture is solved to the point that if there's any changes in the future that needs to be made they can be done

very locally without upgrading the whole uh system um I think a lot of inspiration of of uh the Linux uh ecosystem kind of like whole way of how things work in Linux foundation and how different people people can work on different parts and being able to kind of achieve that where certain team can focus on optimizing liquidation strategies certain teams can be focusing on improving borrow modules um and and so forth I I think that's the kind of like a big Vision here and obviously governance minimization uh to the extent that governance can be really much an overhead and I think when it becomes an

overhead it it removes the kind of design to to to people what we basically try to go away from um and as a matures uh some of these parameters can be immutable uh down the line and reduce that governance overhead so I think that's the kind of a picture I would love to see H how do you see the future of stable coins evolve I think it's a price point question so the lower the price point the more adoption we see and also the ux tooling I actually think that um for stable coins especially to get it getting them into payments uh a validum

might be a really good uh option because you can hit a really low price point for the transaction costs which is amazing and with things like smart wallets um account obstruction um embedded wallets even you can you can have uh an experience that is really smooth um stable coins have taken adoption in places where there's a lot of uncertainty Argentina is a really great example where stable coins have taken adoption and there's numerous other uh examples in I mean in general they work better like it's so amazing to send someone uh go and and then seeing it on chain directly that it the transaction

land that you don't need to deal with banks and figure out whether someone received whatever part it is it's just like kind of like the Middle where or like the the ends the the the the ends of the whole stock is is where it's broken the offboarding onboarding but once we solve that um I think we will see a lot of stable coin adoption and especially in uh payments so when talking about adoption you know one thing that I think about is just the um the the the demographics or the the kind of persona of crypto and Def users I think it's safe to say that the majority of liquidity in defi markets today are Crypt native users and

institutions but we haven't I don't think we've seen so much Crypt native institutional Capital using Defi and I think that I feel like there's a lot of uh potential here for crypto institutional debt uh to enter defi markets uh um specifically in the context of reaking where protocol own liquidity will be very useful to build out the the reaking um kind of Market um you know when it comes to protocol own liquidity and creating a more fluid market for for that liquidity you know a lot of those deal a lot of these deals now I think are being done kind of you

know uh manually with multi- sigs uh or perhaps even without multi- um what's the role that lending markets like a might play in um allowing a lot more crypto native institutional Capital to enter lending markets this is a really really uh fascinating question because institutions usually have their own kind of needs and requirements and we're still in a phase where uh the markets in defi aren't uh clear or strong enough for institutions to draw more and more

attention uh into it and for me to explain what I um am saying is that if defi is overly appealing um as a market and there is enough Clarity how to interact with defi there's tooling and everything um it's basically the institution um adoption will come just basically from from from as a market opportunity um and what I think it's um we're in a stage where institutions are describing kind of like their own preferences and needs and figuring out with their compliance teams and figuring out with their own kind of

like teams of how to manage you know funds cost risk and various types of uh new risk s because defi is a leap leap frog technology from existing Financial uh technology that we have it's just it's so much Advanced uh what we have um and I do think that people will still do paper agreements people will do a lot of uh simple boring stuff um in close does uh of chain but it really creates a a unique kind of like a global border uh market so once we get to a a point where we have more institutions doing

this experimentations with their own kind of requirements in collaborating with def5 projects like for example a maybe we see more and more excitement around the space and more education um but I do think that once we hit into a point where uh the risk profiling is acceptable and maturity is is acceptable for institutions we're just going to see more and more kind of like an inflow and obviously the more clear it is on how to interact from regulation perspective from tooling perspective um that will help um quite a lot so now we're in between where we see the most bravest um the smartest in

institutions uh the big brains actually here in Defi and trying things out uh building and experimenting um but we don't yet see actual this kind of like a high inflow um but I do think that will happen over time that's why I I mentioned earlier that it it will take a decade for defi um to get out option well um as we're nearing the end of the podcast here we've been a we've gone a little bit long uh I do want to just maybe Circle back to this V4 proposal um which I think you mentioned earlier

is uh has passed and that that the payload will be going on chain as we're recording this on on July 1st uh what's the next steps here and how can the AL Community get involved and um yeah what's your call to action to to the community yeah so we are essentially um building at the moment so our work um has started and our goal is obviously to to give ongoing monthly reports to the to the avad Dow and and explain the progress um and we collaborate quite uh a lot with existing Dow uh participants and and service providers uh in terms of

brainstorming and and different areas so I do think naturally organically some of these uh service providers or Dow members will gonna contribute to the uh V4 and obviously once the actual implementation is done the security contributors will going to contribute and then the risk contributors will contribute as well whereas they um have to set different type of parameters um a lot of these different strategies uh as well and kind of like the the economical pieces uh together and get ratifications uh from the Dow um so yeah it's kind of like a heads down um type of a uh phas for us uh but we're super excited about this because um

hopefully this moves all further in terms of innovation institutional adoption but also brings just better better tools and infrastructure for for everyone using defy so we're super super excited about this and also nice to see that uh the avidal has um lot of um uh blessing for us on on this proposal and we're able to do this and and build it so it's really appreciated cool well sty thanks so much for coming on the podcast once again and uh learned a lot today about a V4 excited to see a moving more into a cross chain multi-chain world and U

definitely like pushing the boundaries of of defy Innovation um so yeah thanks once again and hopefully we can get you back on uh in a couple months when a V4 is deployed and uh you know we'll have ample questions I think about about the progress there yeah definitely maybe takes more than a couple of months but hopefully we have a test net uh by then no pressure for us good fantastic thank you