Antonio Juliano: dYdX – Decentralized Perpetual Exchanges #479

Transcript

This is epicenter episode 479 with guest Anthony Giuliano. Thanks so much for having me. Yeah, welcome Anthony Antonio. Uh welcome to episode the show which talks about techn technologies, projects and people driving decentralization and the blockchain revolution. I'm Brian Crane and I'm here with Felix Luch. Today we're going to speak with Antonio Giuliano. He's the founder of Dydx. Uh DYDX is the largest uh crypto derivatives exchange or decentralized uh derivatives exchange. They have about 1.2 billion trading volume per day. It's also the largest uh layer 2 application on Ethereum right now running on

starkware and uh I'm sure a lot of people have seen some months ago. They've also announced that they're going to build their own cosmos chain. So that also got a lot of attention and so lots of interesting things to touch on. Thanks so much for joining us. Yeah, excited for the conversation. Cool. Well, I mean let's start at the beginning like how did you get into crypto and what's the story of how you started DYDX? Yeah, absolutely. So I got into crypto in 2015 when I interviewed for a job at Coinbase, which was my first job right out of college. I kind of got to Coinbase differently than most people in that I didn't really know anything about Bitcoin or cryptocurrency at the time.

It was just one of the like 20 or so companies I applied to senior year of school. Um, and I was kind of just more interested in finding a really high quality startup. But went I interviewed and all these people seemed really smart, really awesome, and really excited about this random thing that I didn't understand in Bitcoin. So I was like, okay, what the hell? like I really want to work with these people. Seems like an awesome opportunity and a great company at least and they all seem excited about this thing. I really get it, but you know, I'll take a leap of faith and and kind of at least spend a year or two working there. So went out to San Francisco, worked there for a year. Um I was like the hundth employee or so at Coinbase and it was a really awesome opportunity just to get a chance

to have a great front row seat to kind of see what was happening in crypto at the time. There are a lot of really great people who since then have gone on to do really awesome things at Coinbase. We were fortunate to be, you know, by far one of the the biggest and kind of only one of the legit companies building in crypto at the time. So, bunch of other really great people in crypto would come and talk to us. Like we had Vitalic come and talk really early. Um Joey Kug, the founder of Augur, come and teach us how to build smart contracts. And it was a really kind of pivotal time in crypto um in terms of that was right around the time back in 2015 early 2016 when Ethereum was launched. Um and I think it took all of us a while to wrap

our heads around what's possible with Ethereum. Um and I remember kind of learning from Olaf and Fred about hey what is gas? What are smart contracts? Uh what is solidity? Things like that. And again, I didn't really get it, but I kind of took a little bit of a mental leap of faith because there were clearly all these really smart people that were excited about it. And I kept looking into it. And then I think at one moment it just kind of clicked for me. Oh, like this is just Bitcoin, but you can build programs on top of it. And it sounds kind of simple now. And I think once people have understood it more on mass, they can explain it more simply. Um, but it it really wasn't obvious to people at the time. But once that kind of clicked for me, I realized this was just a

totally new paradigm of computing where for the first time you can write these programs that execute totally autonomously, totally deterministically and without being controlled by anybody. And I was like, ah, aha, this is something that's fundamentally new. Like there must be something someday that this can be useful for. And I've always been really entrepreneurial. Um, I really wanted to start my company even before my own company uh even before going into Coinbase. And I was pretty transparent with Brian and everybody else on the team about that and they were super supportive. Um, and then after Coinbase, I I briefly worked at Uber, but then uh started DYDX in mid 2017. Um, and actually the first thing I started when I tried to start my own

crypto company was not DYDX. Um, it was a search engine for decentralized apps. And not a lot of people know this, but I built this out in early 2017. And I tell this story because I feel like I learned something important in it. Um, so I tried to build a search engine for decentralized apps using kind of the data that was on the blockchain to inform uh kind of the ranking of decentralized apps. But the problem was there were only like 10 decentralized apps in the world in early 2017. So what's the point of a search engine if there's nothing to search for? Um, and the point of the story is I really learned the importance of timing in building products and building companies. like maybe someday it'll make sense to build a search engine on

decentralized apps, but certainly not in early 2017. So, I kind of took a pause on that and I thought about well, okay, what could I build that would actually be useful in crypto right now back in 2017 and back then and still to this day, the main thing crypto is used for is trading and speculation. And that was right around the time when the very first decentralized exchanges were just starting to come out. Um, things like Zerox, things like Kyber. So I took a look at that and I was like, "Wow, this actually kind of makes sense." Like you can build an exchange that is just code um and people can use that rather than centralized intermediaries and that has a ton of benefits in terms of censorship resistance, in terms of transparency, in terms of security of funds. What's

coming next after that? And if you think about finance as kind of a stack where you have to build the things lower in the stack. So things like money which in a decentralized sense could be things like Ethereum and Bitcoin and stable coins and then you build exchanges after that. So things like Zerox and now unis swap. Kind of the last step in the stack there is more advanced financial products and those are things like financial derivatives margin trading and that's what we set out to build in DYDX. So that's kind of the journey. Um, and we've been at it since 2017.

Yeah. Awesome. That that's super cool that you found that niche there and I guess obviously became one of the big players. Uh, we also wanted to just generally for the listeners to get an overview of of what are actually the the DYDX products right now. Maybe you can like kind of elaborate a little bit on that. Yeah. So we have one main product and it is a financial derivative and it's the most popular type of financial derivative that's traded in cryptocurrency and specifically that's called a perpetual contract. A perpetual contract is a type of derivative contract that as per the name never expires. It's perpetual kind of goes on forever. Um, and the reason these are so popular in ter in trading cryptocurrency

is because they're really accessible to kind of the audience that trades cryptocurrency in this kind of proumer retail trading audience that's global. Um, and we have built these into decentralized finance and kind of the way that they work is you can point a perpetual at whatever you know price you might want to point it at. And specifically you could make a perpetual for Bitcoin. You could make a perpetual for Ethereum. You could theoretically make perpetuals that are pointed at pretty much any type of asset that you might want to trade. Um, right now on DYDX, only perpetuals are available for cryptocurrencies. So, kind of just like the top markets on Coin Market Cap. And these perpetual contracts, though they

sound advanced, they're actually really critical and integral to the crypto markets. And they're by far the most traded product in crypto. So about twothirds of crypto volume is traded through perpetual contracts um and only one-third is traded through spot which is kind of like a fancy word for just regular old buying and selling. So these things are really popular um in centralized exchanges. They were popularized by BitMX and now are available on Binance. Um they had been available on FTX, but RIP for that. Um and now uh they are available in DeFi as well through DYDX and a couple other decentralized exchanges.

Do you rely on like uh I guess some sort of price feed oracles for that? And like how how does DYDX solve that? Are you using chain link or some other kind of Yeah, so perpetuals do rely on price oracles even centralized perpetuals rely on price oracles more or less or index prices. And the way that that works on DYDX and pretty much every other legitimate perpetual trading venue is you take the prices of a given asset on a bunch of different exchanges and then you kind of take the median of them which kind of removes outliers. So you might look at the price of Bitcoin on like Coinbase and Binance and whatever other exchanges are the most liquid and have the most trading volume. So right

now we do use chain link price oracles. Um, and then as you alluded to before, the big thing that we're building right now is the next version of Dydx called Dydxv4. And in that version, the price oracles will kind of be built directly into the validators themselves on our Cosmos chain and there won't be any external price oracles. So, chain link now and then eventually our own later. Also, we're going to definitely get back to V4. I think you you kind of alluded to it a little bit already and and obviously um yeah how how like the product is very accessible the perpetuals but do you can you like

expand a little bit who are the users of of DYDX? Yeah, absolutely. So there's two main classes of users that we have. The first class of users is crypto institutions and these are hedge funds that are trading crypto. There's a lot of different types of them. Um, I'd say kind of the two main types of crypto institutions that are most actively trading right now are kind of native crypto trading firms. So like crypto hedge funds like uh Wintermute um or something similar to that. Um and then there are kind of more traditional call it Wall Street trading firms that have really gotten into crypto trading in a big way. So like a Jump Trading um or Tower Research or others. Um, so that's

kind of one big class of users and most of the actual volume does come from these institutional users, but that doesn't actually necessarily mean that they're more important than the other class of users. The other class of users that's big in perpetuals and therefore also on DYDX is kind of proumer crypto traders and specifically international crypto traders um who make up the bulk of the derivatives trading market especially in crypto. Um, and these users are just regular old individuals, but they are kind of more sophisticated and demand kind of more advanced trading products than most crypto traders. It's not your friend that bought their first Bitcoin yesterday. Um, it's kind of somebody that's either for a full-time gig or kind of on the side likes to

basically day trade um or kind of trade with more advanced financial products like perpetuals. Um, and these users are actually the most important users. Um, not to say that institutions aren't important, but most exchanges build first and foremost for kind of these proumer users. Um, because they're the source of most of the quote organic taker volume on the platform. Um, and that's kind of the the most valuable volume. Um, so you want to make sure the product is really excellent for those users and they have all the tools that they need to kind of maximize their returns. Um, you know, maximize their risk management and and all of that. And then crypto is actually really different in terms of its market structure than traditional finance. In traditional

finance really almost all of the volume comes from institutions. Sure there are some proumer like retail traders that trade in the traditional markets through things like Robin Hood but they make up a very small portion of the overall trading volume. Um in crypto it's completely the opposite where a lot of the trading volume does come from retail basically. Um and then the institutions will follow around wherever um most of the retail volume is. So if you're an exchange or an exchange protocol, kind of the name of the game is attracting more of that volume. Um but we've also really intentionally set DYDX up to be a platform that is really accessible to institutional traders as well. And that's something that I think is pretty

novel for a DeFi platform. Um because we've really intentionally tried to make the the technical trading experience on DYDX similar to a centralized exchange actually because that's what the users are used to trading on. Um so like there are API endpoints that feel really similar to a centralized exchange API endpoints and that makes it much easier for a lot of these institutions to come and trade on DYDX as their first fora into DeFi. Um, and fast forward to now, we've actually been really successful with that. And pretty much all the top crypto trading firms are trading on DYDX now. Um, as for a lot of them as their first thing in DeFi. And I think that was a really intentional thing we tried

to set out and do. Yeah. I mean, I I'm I'm uh somebody who's, you know, I guess a long-term crypto investors, but not not a trader, right? So I I I've mostly been the sort of you know spot volume type user but I was you know like uh you know did some like put on some trades on VIX before because I wanted to you know try it out before a podcast and I have to say it's like so smooth and intuitive and like yeah super straightforward. So I think that was really uh really nice user experience really nice flow.

Yeah, I'm glad to hear it. And that's been something that's been an intentional choice as well, like I was mentioning before, is trying to make the experience again feel like just a regular old trading venue. And that's actually pretty hard to do from a technical perspective um in DeFi. Um but doing things like being a really early adopter of a lot of these new technologies. Um like you mentioned it before, but currently we're by far the largest app on layer 2. Um, and then fast forward to the next thing that we're building. We're going to be building Sovereign, our own basically blockchain for Dydx. And all of that is kind of centered around the the user experience.

That I I think you've kind of alluded to like a bunch of stuff that like maybe it's a kind of a larger question here. What What do you think are the main things that you did right and that allowed DYDX to get so successful? So I think one of the first things is that we were early actually. Um and that gave us kind of a lot of time to learn and build and iterate. Um kind of gave us more shots on goal to build the right thing and and build in a really iterative approach. But if you are really early, and certainly we were when we were founded in 2017, and I think even now DeFi is in the really early stages, you have to combine that with a really long-term approach towards what you're building and kind of just the

internalization that what you're building really is not going to take off probably for like 5 to 10 years plus. And I still think that's the case in DeFi today. And I think a lot of people don't build with kind of that long-term focus. And that's probably the reason like 75% plus of kind of call it new ventures and new markets fail. So I think that was probably one of the first and biggest things. Um I think this focus that we have on building a great product experience was really useful as well. Um and then just building a really strong core team and especially a really strong technical core team. Um like we again have been building smart contracts for over five years at this point. Like I don't code so much personally these

days um but I coded a lot of our early smart contracts along with some of our early engineers. We set a lot of the paradigms for how smart contracts are built. Um, and I think it's also this mentality that we have of risk- takingaking um, from a product perspective. And I think what I mean by that is like we've made a lot of bold choices um, from a product perspective. And I think we've executed on them pretty quickly as well, especially in in crypto terms. So like we've been talking about, Dydx is currently on layer 2, and I think it's been basically two years now that we've been on layer 2. Um, I know it's gotten a lot more popular recently, but like we were on L2 before people were really even talking about it

and that was a really intentional choice and we did that and the previous L1 contracts were kind of sunsetted. Um, and that was kind of risky, right? Because we had something that was working on layer 1. Um, but we went out and we felt strongly that this new technology could give a better product experience because it can process way more transactions. you know, in our previous version, our users are just getting absolutely hammered by gas fees. Um, the latency is way lower. So, Brian, like you mentioned, now our product can feel just really snappy, kind of again more like a centralized product. Um, but kind of being that trailblazer and when there hasn't been a really great example of a previous project building on some

of these new technologies that's gotten a ton ton of adoption, I think can be scary because a lot of times just in in life and in company building especially, you feel like you have something to lose. It's like, okay, we have this like thing that's working and we could build on it more iteratively or like, okay, let's just like wait and see what happens with layer 2, for example. But instead, we've just really put our foot forwards and be like, "No, like we believe this is the best technology and the best product that we can build." Um, and I know we're going to talk about it later, so I won't get into it too much, but I think this is a similar mentality that's caused us to make a relatively controversial technology choice in our next version, which is to kind of abandon L2s almost at the time when

everybody is like finally hyped on them. Um, and move to our own blockchain. Um, but we can talk more about that. So, I think it's that mentality and then also just the experience and capability of our team to go out and and execute on a lot of these things that really have never been done before in crypto. Cool. Thanks so much. So, I I have kind of like the the sort of the correlary question on this one. Um, I mean, what are the biggest mistakes you made and especially mistakes where you feel like, okay, here's like a deep lesson that you've learned and something that you're approaching in a different way now?

Yeah, I think one of the biggest mistakes that we made was earlier on in the company and again, we were able to recover from it just because we were so early in the space. Um, but back in 2017, kind of the space just felt different. Like ICOs were rampant. Um, and basically what everybody was doing at the time was publishing white papers. Not really building products, but more publishing white papers. And maybe I don't know if people like in crypto these days remember what white papers even are because luckily they've fallen out of fashion. But basically what white papers were were kind of uh long uh like researchbased documents like an academic paper basically uh saying what you're going to go out and build. And these things would be like ridiculously

complicated and the white papers would basically be like okay here's our like 50page white paper and we're going to build this whole thing. It's going to be perfect. Um and then we're just going to ride off into the sunset with this perfect product. But that is not how product development works. Um and I think we weren't as guilty of this as some other people were. Um, but we were guilty of it to an extent too. Like there was a DYDX white paper early on and kind of worse than that, I think we spent basically too long building the first version or two of the dydx protocol. Um, I think the the first one took us about a year or a little over to build, which again is fast. Um but we have good developers and and like the problem with the first version was we

were just trying to consider like every case we were trying to build a really general protocol general meaning like you could do a ton of different types of things with it rather than having a really specific use case for the product and that caused us to build a ton more features. And this is a really common story not just in crypto but in product development in general. oftentimes you go out and you're really excited about something. Um, you build out the early version of the product, but you add way too many features to it and then it ends up like 90% of those features you don't even need. Um, so you're like, why the heck did I spend so much time building this first version of the product? But the story here is it's really important not to build something kind of for the future, but for right now. Um, and I

again I think that kind of resonates with the story even the founding story of DYDX that I told earlier. I think too many people in crypto kind of build for too far into the future. And that's not to say that the future is not important or that we shouldn't pay attention to it because we are super early and we need to know or at least have some like guess about what the future could hold. It really impacts the decisions we make right now. But like that being said, like the only thing that matters when you're building products is building the best possible product for right now or maybe like for the life cycle the next year or two of the product. Um so I think fast forward to now uh we have hopefully taken that more to heart and are really trying to build again the

best possible product for right now. Um and I think we've learned our lesson. Yeah, I think what I wanted to talk about a little bit is kind of the competitor almost to to this order book design that that you kind of pursued a more traditional look that that definitely also had like a big success moment with unis swap. So basically automated market makers or AMMs at probably at that time right when when you were building the the first or second version of of DYDX they they really took off because that was kind of something that seemed like needed at that time for uh in in crypto. Now I guess yeah it seems though that a lot of things like AMMs came about because of

the limitations I guess of the of the blockchains to scale for order book. Um, I guess what what I wanted to ask is like what's your general thoughts on kind of AMMs? How do you see them? Is it like kind of something that's just there in passing until everything is like order books or do you do you think they have like a a space in the in the ecosystem? I definitely do think they have a space long-term in the ecosystem. I maybe not maybe proven is too strong of a word, but I think that the success of Uniswap and a lot of the other ones at this point has proven that they are really useful and they are here to stay.

Um, but I think they're kind of targeted at different use cases than order books. And I want to kind of take it back to one of my previous answers in terms of answering the question, why are we building order books rather than AMMs? And I think it really starts with the users that we're targeting. again uh specifically the crypto institutional traders and the crypto proumer traders. And these traders really demand again like I was mentioning before some of the more advanced trading features things like limit orders, things like stop orders, market orders, um and all of that. And you can really only get those things on an order book, at least as kind of a first class citizen. Um and also traders really demand kind of really deep liquidity. Um and just like

a lot of these trading firms are not going to be so much out there at least like market making on automated market makers as they are um on order books. So it was really again kind of deciding what our goal is. And our goal at GYDX is to eventually meaning far into the future maybe like five plus years from now become one of the biggest exchanges or exchange protocols in crypto um and really not be satisfied with just kind of being relegated to some niche markets in crypto. And I think that's really informed what we've done in a big way.

We're quite literally tackling the biggest markets in crypto. like just Bitcoin perpetual trading in crypto is like almost 50% of the entire crypto trading market. So kind of by definition if you want to be one of the biggest crypto trading firms you have to play in the biggest markets and we feel this is the product experience that we need to play in those markets and kind of target the users that at least right now are are forming the bulk of the crypto trading volume. I think AMMs can be really useful um specifically they have been really useful in a lot of ways on providing liquidity in more longtail markets and I think that is really important and that's something that was uniquely enabled by unis swap and and other AMMs. Um so it's definitely something we're tracking long term. Um and I'm not saying in any way that like

order books or AMMs are like objectively better than the other ones. Um, like I think it's possible at someday like you could even see an AMM on Dydx. We're not currently building that, but I'm certainly open to it long term. I think they just kind of serve different use cases. Um, and again the the use case and specifically the users that we're targeting right now, I think an order book is a much better fit for them. Um, and also like one of the challenges with building order books on a decentralized exchange is from a technical perspective, order books require much much higher throughput than automated market makers. Probably on the order of like a 100 to a thousand times more throughput than automated market makers do. Because if you think about what's

actually happening on an order book, it's mostly just market makers, which are crypto trading firms, which are placing automated orders to trade on the order book. But it's not humans that are doing this, it's bots. And these bots are placing multiples of orders per second, oftentimes up to thousands of orders per second. Um, and this is just much higher throughput than kind of an automated market maker needs where with an automated market maker, you just like click once to deposit into your LP position and that's basically it. Um, and that has been again one of the things that's driven a lot of the technical decisions that we've made with DYDX. Um that's the biggest reason why we move to a layer 2 and also the biggest reason why on the current

version of DYDX uh we operate kind of what's called a hybrid exchange where there's some centralized components to the exchange and some decentralized components decentralized components of course being the smart contracts that custody user funds and operate the protocol but the centralized components being the order book and the main reason for this is because it requires really high throughput. This is actually kind of the main thing that we're solving in dydxv4 where we're building kind of the very first decentralized but off-chain order book that can serve on the order of a thousand uh order places and cancellations per second. And we're really only able to do this because of the technical decision um that we're making to build on the Cosmos chain. Um and yeah, we can we can definitely go a

lot more into that, but I'll kind of stop there for now. Let's do it. No, this is perfect. Let's let's go into that decision. So you mentioned the decentralization of this kind of order book and matching. Um were there other reasons uh for the switch or was this the main one? I'd say that's probably the main one. I think there are definitely other positive tradeoffs for building your own chain. probably um the biggest other advantage besides just the order book which I'll talk more about is the sovereignty of the chain which kind of sounds like a fancy word but basically it means that the entire chain is yours right so you can do whatever you want with it it's like you can have the

validators um do different jobs you can have their incentives be different like their incentives are more aligned with the protocol right because on Ethereum like there's no notion that Ethereum validators should care about like unislop or sushi slop or like whatever else. There's like tons of stuff running on the chain, right? Um, but on our own chain, it's like all the validators are dydx validators. And just as an example, that actually can help you if you're trying to solve certain things like dealing with me, for example. Um, but back to the kind of critical portion of the decision, it really was what I was mentioning in terms of the throughput that's needed to serve this product that we felt like we needed to build in a decentralized order book and kind of the

decision as we thought through it. Um, so we effectively wanted to replicate what we have right now more or less and improve on it hopefully. Um, but replicate it for the most part but in a fully decentralized way. That was always really core to the ethos of what we're building and and was always the plan. Um, so we took a we kind of looked at we have what we have right now and we saw okay on dydxv3 there are currently about a thousand order places and cancellations per second and actually if you kind of look into the future with some of our ambitions that's pretty low for an exchange like if you look at something like a Binance I'm sure their throughput is orders of magnitudes higher than that but at least for right now let's like try to be satisfied with a thousand operations per second and

again kind of replicating the performance that we have in DID XV3 right now. Um, and we took a look around and we really keep an open minds about what technology we're building on, which for some reason is like kind of controversial in crypto, which I don't understand. Um, but like we really don't care like what technology we're building on. We just like want to build a great product. So anyways, we took a look around at all the different chains we could build on. Um we looked at things like Starknet, we looked at things like Optimism, like Salana, obviously like Cosmos, even other chains. Um and the core question we were asking is can this given chain support the throughput that we need? Um and ideally support this

throughput with really low or ideally no gas fees for placing and cancelling orders as well. So again, if you think about the use case that we're trying to to solve for, it's really at least on the maker side for for market makers to be able to cancel and place orders really quickly and cheaply. Um, so we took a look around and we were like none of them can even close to support like a thousand places and cancel or like transactions basically per second with low gas fees. Um, uh, I think L2s right now have a lot of promise and I do think they'll improve a lot long term, but again to pull back from one of the things I said before, really the thing that we want to do is not build for like 5 years from now. It's to build for now and like the next year or two. Um, and

currently L2s aren't really able to support, you know, that order of transactions per second. It's more like if you just literally go and look like this publicly available information like the transactions per second of like optimism and stark net um is kind of on the double digits rather than like the the triple digits right now suffice it to say um and Salana like was a contender and we did sort of seriously consider that. I know there's a lot of like Salana FUD right now, but for what it's worth, my two cents is that Salana is really novel and important technology um that is working really well. Um and it's certainly legit and something that we considered. Um and they can support a really high amount of transactions on their layer 1 right now. Um but I think

the whole chain is roughly around a thousand transactions per second. Um and we don't have all of the chain to ourselves, so that wasn't really a huge option either. Um, so we kind of looked at building our own chain and it's not so much that Cosmos in it of itself is way more scalable. It's actually not. It's probably on the supports on the order of like tens of transactions per second, which is a pretty far cry from a thousand transactions per second. But it's this core concept that we gain in sovereignty that really unlocks building things that are new. And the new thing that we're building um is a decentralized but off-chain order book.

It's effectively an order book that doesn't exist on chain but does exist in the network of the validators. It's kind of similar to like you know when you send a transaction and it sits in the meool for a while before being committed to the blockchain. It's effectively using like a mempool like structure to store the order book. Um but that's cool because the mempool is way higher throughput like orders of magnitudes higher throughputs than consensus of the core chain. Um, and you don't have to pay gas for it, which is sweet. Um, like you only have to pay gas when things are included on the chain. Um, but that's totally fine and things are only included on the chain for dydxv4 when a match happens. Um, so it's kind of like

this unique product that we had where like the transactions by far the most popular ones are just placing and cancelling orders, but only about 1% or less of the orders that get placed actually match. So if you kind of map that to the throughput that we have with like the memp pool which is like thousands of transactions per second um you know that's totally fine that satisfies our thousand transaction per second goal at least to start and then map the actual matches that happen which is on the order of like 10 per second to the throughput uh constraints of the onchain protocol which is like on the orders of 10 per second tens per second um that works as well. So that's effectively what we're building in dydxv4. Um it's something that's pretty novel and I don't think at least has

been built or at least been used at scale in in a production way before. So we're pretty excited about it. Um we're getting pretty far into the development process of dydxv4. We have a internal test net version that's up and working and sort of placing orders on it. Um there's still a good bit more to build. Um but we're pretty excited about uh what exists so far. um and what it'll be able to launch with at some point. Um I'm curious, what are the the other implications of having validators run this matching engine? You know, aside from now it's no longer one company, but it's like a bunch of different entities,

but like you know what what what are the kind of other maybe positive or negative side effects of that? Yeah, I mean I guess it depends in terms of what you're comparing it to. Um, so obviously it's like way more decentralized um than what exists on DYDXV3 right now. Obviously way more decentralized than than a centralized exchange. And I think there are a lot of different aspects to it. One aspect is who are the validators and how many of them are there and like how decentralized is that network. um that network is certainly not going to be as decentralized as like the validator set of Ethereum itself. Um but I think it can be much more decentralized than kind of uh at least from a censorship resistance perspective

than kind of the the sequencers that exist on like a L2. Um so I think we can get to a really good level of decentralization to start um and and something that'll only improve and and grow over time hopefully as the protocol continues increasing in volume. there's a lot of considerations, right? So, you have to start worrying about MEV um in a fairly big way and that's not unique to DYDX. I think that's a big consideration on any decentralized exchange. Um we're still looking a lot more into this from a research perspective. So, I won't go too deep into it right now. Um, but I think we do have some pretty interesting novel ideas and kind of the design space of MEV, if you will, is a lot better and a lot more open when you control the the

validators themselves from from like a network perspective. Um, so I think that gives us more tools to be able to tackle uh, MEV from like a protocol perspective. Um, so I think that's a pretty big consideration. Um, I think it's also probably maybe obvious but worth stating like when you build this uh matching engine and you build this order book and the entire exchange in this decentralized way, you get a lot of the benefits of decentralized exchanges in general in terms of things like transparency. Now the order book is entirely open. Everybody can see what's on the order book. It's like provable.

Um, in terms of security, like the security of the network is, you know, proportional to the decentralization of the network. Now, um, everybody can see the rules of the chain. Everybody can see where the funds are. So, things like what happened on FTX would just literally be impossible on an open protocol like this. Um, and then a lot of the really great access that you get with a decentralized exchange as well in terms of it's much easier to to use from certain perspectives. It's much easier to build things on top of it. Um, and you can kind of build this open network that others can contribute to and can build on top of. Um, so I think it's a really big step forwards and I think it's also unique in the sense that we're

kind of really directly trying to take on from a product perspective what exists on centralized exchanges. Um, and I think we're trailblazing like technology that hasn't existed before that hopefully is making that more possible over time. And we're not intending for or even expecting for this to kind of go out and uh be one of the biggest exchanges in the world on day one. But I think it's a really good kind of building block to to move forwards with. Um, and we always try to keep a really long-term approach towards what we're building. Um, and our goal is to, you know, from a protocol perspective become one of the biggest exchanges more on like a 5 to 10 year time horizon. But this is really the best possible product we feel we can build right now.

So maybe just another question on this. So you said like you see the cosmos chain scaling to you know like you know tens of transactions in terms of like uh you know onchain transactions and then you know supporting kind of thousands or thousand transactions. um how far do you think this can scale with the this sovereign cosmos chain and what do you think are the most important I don't know changes or directions that uh you know need to happen for you know to reach like a higher scale of it yeah so in terms of order of magnitude I think there's definitely like a 10x improvement that we can get probably

both onchain and offchain at least um from just like tuning things basically. uh you have to when in computer science in general if you think about scalability you think about bottlenecks okay like what is the bottleneck that's causing you know my maximum off-chain order uh sent to the memp pool to be like you know a thousand or 2,000 or whatever it is and I think one of the biggest things that we found so far that's been a bottleneck is the message propagation which sounds like a fancy word but it's basically like so okay you have like a network of a bunch of validators right and then when you send a transaction to the network, it first gets sent to one of them, but then it has to like propagate to all the other ones in the network. So, it's like validators sending messages to each

other basically. Um, and that right now on Cosmos uses a pretty standard technology. Um, this has actually been one of the big things we've noticed Salana has been focusing on to achieve improvements in scalability is their message propagation. Um, so there's some learnings that we can take from there and some learnings we can take from elsewhere. And again, it's cool because we can literally build like whatever we want, right? Because we control the like what we're building is like the software that the validators run. Um, so we can change things like the message propagation. Um, and I think that can is just one example of something that can lead to I don't know exactly what it's going to be, but probably like potentially a 5 to 10x improvement in uh scalability.

um things like just improving the CPU usage of the validators themselves um can improve a lot the onchain scalability. Um so there's a lot of different levers that we have and a lot of them are pretty technical honestly um and pretty like low-level programming but I think it's cool and again similar to my answer on me you just control a lot more of the stack um so you have a lot more things to play with in terms of improving throughputs over time. Awesome. Yeah, I think obviously like also um building this Cosmos chain means you become kind of part of this Cosmos IBC ecosystem. I guess first of all maybe one question also like in terms of

you're building like um kind of modifying the stack there a bit. Is there also something you're like that other Cosmos chains could could use like from from what you're building? Maybe that that would be first question. Yeah. So in terms of IBC for those who aren't familiar, it's basically a bridge more or less. Um that's kind of built into Cosmos natively. Um but it's fully decentralized. It's much more secure than than other types of bridges just because it's kind of again built more into the blockchains themselves than kind of like on top of it. Um and we are integrating with IBC in a big way. Uh, one of the exciting things that we helped to push for uh is a launch of native USDC on Cosmos. And the way that

they're doing this is kind of interesting. They're basically building uh it a sovereign their own blockchain that will run uh USDC and potentially other things as well. Um, but we can still on the DYDX chain use this native USDC because you just IBC it from uh the native what's called the Noble chain um that they're building over to the DYDX chain. Um it's also cool because um one other example that we're literally building right now and probably going to be using um is for onboarding. So you might ask or try to solve the product question like how do you get USDC from Ethereum to the DYDX chain? Um, and we're going to integrate with things like Axelr um to be able to do this. Um,

but it it's cool because you can use Axelr as a bridge, but at the end of the whole thing, you can end up with native USDC, which is much more secure. Like you don't have to worry about like bridge hacks or anything like that. And the way that we're doing this is you effectively use like AxelR to bridge Ethereum USDC to actually Osmosis USDC. Cosmosis being just a separate Cosmos chain um that operates a DEX. Um then you do a swap on Osmosis's new stable swap feature for uh Axelr USDC to native USDC um which will also exist on Osmosis. So now like the user has native USDC then you use IBC to move that native USDC from Osmosis um over to the

noble chain over to Dydx. Um, and that at the end of it and and all the you like this sounds complicated, but all the user is really going to have to see or know for this is like, you know, click deposit like 10 USDC and then like all this magic happens in the background basically. Um, but it's again cool technology and I think shows the power of composability with things like uh sovereign blockchains. Um, and I think this is a really good early use case of it. Is there also a use case that you would like tokenize some of the positions that people have on DYDX so that they can then maybe use IBC to like let's say if there's some sort of lending chain or some other kind of chain and they want to like move it

over and use as collateral or does that not work because you have to be able to liquidate on the DYDX chain itself? I mean it's possible like yeah we've considered that uh before. or we probably won't build that initially into the chain. Um, but I think we've kind of talked about like dydx using other things that's made possible by composability. And I think at least so far we haven't been quite as focused on like other things using dydx as like building blocks for composability. But that is something I'm excited about for the longer term. It just hasn't really been a major focus right now. And that's still intentional because again like if you just like listen to what I'm saying and like the things I talk about is like

mostly like let's just build like great product experience and like try to make it great for traders on DYDX. Um so that's been our main focus. I think one of the underappreciated parts of composability with DeFi though um like people talk about like financial building blocks um on chain and I think that is really cool and again that may be a focus longer term but one of the things people don't talk about as much is uh kind of the composability of just applications that are built uh like frontends basically that are built on top of the apps the decentralized apps themselves. Um, so things like the new DAP browser inside Coinbase, I think is a great example of this where now you can use Uniswap. Um, hopefully at some

point you could use like DYDX from directly inside of Coinbase. And this is really something that's uniquely made possible because the underlying building blocks are open and they're just technology. Um, and now Coinbase has unis swap integration and this is unique, right? This is like really fundamentally different than what came before. like Coinbase is not going to have like a FTX or Binance integration, right? It's like doesn't really make sense. They would just build the thing themselves. Um, but from like an access perspective, it's really cool that a lot of these decentralized apps are just code, so they can be plugged into from like a interface perspective into a lot of these different types of products.

And I think that's personally I think that's going to be like a big narrative over the next couple years as well and something I'm excited about. Yeah, that's super interesting I guess because right now also the main front end is kind of DYDX trading now like do you also I guess yeah people can interact with this Cosmos chain or like the contracts there and and integrate that or how else do you like do you imagine there will be like other frontends built by other parties and and how do you kind of help people? There could be other front ends built by other parties for sure and I think that will happen again like with dydxv4 all of the code that we're writing will be open source and you know licensed to be available by effectively like whoever

wants to use it. Um so that means like even just for the the front end that we or other parties develop um that will be open source and like that could easily be plugged into or like whitelabeled into some third party application or like independent third party could host a version of the front end. There could be multiple versions running um and I think that improves like access and censorship resistance. So I think all these things definitely will happen. Um, and I think they're again uniquely enabled by this concept that it's just technology and it's just like open source code and anybody can run it. It's not like you need permission from us or anybody else.

I wanted to ask like one more question on this whole like Cosmos chain L2 thing. Uh, I mean I think you were very like clear articulate like sort of explaining the you know your rationale and around the DA DYDX and how you guys made that decision. But I'm cur and of course right now this is like big debate and I think I I I have a sense at the moment there's like some narrative again gaining momentum that you know ETH is the settlement layer and it's the ultimate thing and the L2s and everything will be there and of course you do have also this uh more thesis around sovereign chains. So I'm curious like how do you see this play out and are there particular types of

applications or use cases where you think there will be more fitting in one world or the other or do you do you think that there's more it's more going to actually go into one direction? Yeah. So I think maybe just zooming out a little bit like one thing that muddles a lot of these discussions and I think causes people to just yell at each other and say different things basically is time horizons in term and what I mean by that is like okay you could ask that question but like what time horizon are you asking that question on? Are you asking like okay what should we literally use and literally build if we want to build the best possible product in a year or two from now or are you asking what is crypto gonna look like 10 to 20 years from now and those are very

different questions I think again like the thing that we really care about in terms of what we build right now is the first one in terms of what can we literally use to build the best possible product right now um and it just would have been it's like literally impossible for us to like build the product that we wanted to build on top of like an L2 for some of the reasons that I talked about before. Um, and you know, I'm not I'm not sitting here saying that like everybody should build their own sovereign blockchain. Like that's not at all the case. Like there if I were building like a unis swap or like an NFT exchange or something like that. I would definitely just build on like an ETHbased L2 almost definitely. Um, and there's different use cases for for

different things. And I think rollups do show a lot of promise long term. Um, I'm really excited about like Starkbased rollups, uh, long-term like ZK proofs basically. Um, we're we're literally like the biggest user of them right now in the world. Like we're the biggest use case of like ZK proofs in the world by like transaction volume probably like anywhere. Um, so I'm excited about them long term and they literally work. Um, but there's a lot of limitations. And I think one of the big narratives of crypto, um, and I've been in crypto for like over seven years at this point. Um, is that things take longer than people think they're going to take. Um, and that causes people to kind of get into

this like hype and bust mentality where it's like, okay, let's like take L2s as an example. Um, yeah, they they work right now. Like they're great. Like we're using them. Um, are they everything? Like, do they do everything? Like, no, absolutely not. Like, and are there like answers to how we can make them better long term? Like, yes, absolutely. Um, and great people are working them like Starkware and Optimism and other teams. But technology is really hard and like especially emerging technology is really hard and those problems are not going to be solved in the next year or two. They're probably going to be solved in like 5 years or 10 years or maybe even 20 years from now um for some of them. So I I think if you look at technology on different scales, you'll come up with like different answers of like what's most likely to be

the thing that dominates long term. I think we've kind of seen and it's actually been surprising to me too um this kind of narrative of okay, everybody like started on Ethereum basically at least for smart contracts and now there's been kind of this explosion to like a bunch of other chains. um like there's uh Polygon, there's Salana, Avalanche, I don't know, there's like at least 10 of them that people use these days. Um and I think that'll continue for probably the next year or two, maybe three at least. Um and then I think we'll probably see like a consolidation more towards like the ones that are really working long term.

What are those winners going to be? Like I don't know, like maybe I have some opinions like I'm more excited about like ZK based roll-ups and potentially some optimistic roll-ups than other things. Um but there are a lot of open questions there, right? Um let's just take like an obvious one like actually roll-ups don't do very well on censorship resistance right now because they use like a centralized sequencer. Um the sequencer sort of being like this service basically that runs the L2 rollup and publishes um the the rollup chain back to the base chain like Ethereum. But for all of them basically there's only one right now for like optimism and starknet and and that's a problem. And like people are working on solving that. Um like I've talked to

Starware about this, talked to optimism about it. Um it's a hard problem. So it's probably going to take like some amount of years. But if you think about well okay from like Dydx's perspective, we really care about uh open access and censorship resistance. Um, so you know, we actually think in a lot of ways like what we're building on dydxv4 is going to be more decentralized um, from like an access perspective than if we were building on like an L2 with a centralized sequencer. Again, is that going to be the case forever? Like no, probably not. But like that's functionally the reality of what we're building on right now. Um, so I think it's important to just kind of take a step back and like think about like different time scales when you're asking these questions as well. And I feel like

most people don't do that. Yeah. I think it's super interesting that you guys have been like remaining so adaptable and kind of switch through the versions. Like you can even see it, right? It's now V4. And it sounds like you're not kind of saying that there couldn't be like V5 obviously and and something else. And obviously there's always like some sort of migration involved uh from the the previous product. Can you maybe expand a bit how it will be in V3? I guess it will keep running and we before will come up and maybe also like how you plan to do this migration but also maybe some sort of tips of of how to like do such a migration for other uh people building maybe on the wrong stack right now that

want to like do a similar thing what what what you have learned doing it for so many times already. Yeah, I mean I think there's different approaches to it. Um, I'm more a fan of not so much like forced migrations from one product or protocol to another protocol. Um, but more just kind of like launching the other protocol and then people can migrate to the new one if they choose to do so. And I think this is similar and kind of akin to how like a uniswap v3 versus like a unis swap v2 was launched. And that's going to be a similar approach to what we take with dydxv4 as well. Um so dydxv3 will continue to operate for a while at least. Um and then dydxv4 will at some point be launched and then these things will

probably run in parallel for some amount of time. Um there will be some process by which you could move your funds from dydxv3 to dydxv4. Kind of touched on that a little bit with the deposit and like the bit bridging process I was talking about earlier. Um, but I think that's kind of been the best practice is just to allow users to use both. Um, don't so much worry about like migrating like a live system because both number one, that's actually really really hard to do from a technical perspective. Like if we take an example of like the Ethereum merge actually like they didn't run both in parallel. They just like literally upgraded all of Ethereum at once um to using proof of stake over proof of work as a separate example. Um, but I think a lot of the technical

complexity and the reason it took so long was because they tried to uh upgrade an inplay system. Not saying that was necessarily the wrong choice for them, like it would have been really complicated, right, if there are two versions of Ethereum running. Um, but it does make it harder. So, yeah, it's going to be two versions running in parallel with hopefully some good product experience for moving funds over. Yeah, totally. Cool. And then I guess yeah we what's interesting right there is the DYDX token obviously um and that will probably I mean it already has like certain utility and I guess that utility will extend when you uh transition to V4. Can you talk a little bit about you

know what's the token currently used for? How will it play with W4? Uh like yeah how will it interact there? Yeah. So, the main thing the token is currently used for is as a governance token um on the DYDXV3 protocol and similar to a lot of other D5 protocols, right, where anybody can put forward a governance proposal. Um people can vote on it and that's been going on in a big way in in Dydxv3 right now. Um actually, as a little bit of an aside, like one of the cool things that's been happening on on Dydxv3 with the token is pretty active governance actually. Um, and it's been cool because a lot of these trading firm type users that I was talking about before have been playing a huge role in

governance as well. Um, and I think that's something that's been exciting and I think we'll continue to to operate farther into the future. And this is a cool concept, right? Where like if this exchange or this exchange protocol can be controlled by the the users of the platform rather than like an independent third party like some random company. That's like a fundamentally new concept and I think will just align incentives a lot better between the users and the exchange itself and I think that's something that's sorely needed especially after FTX. Uh so aside over um but kind of talking about like what's going to happen with DYDX V4. Um so obviously it will be an independent sovereign blockchain and that requires a layer 1 token for the chain itself. Um

it's kind of undecided like which token is actually going to be used as the layer 1 token um for that chain. Presumably it would be the DYDX token, but that's something that you know still needs to go through a governance vote. Um it's not really up to me. Um but yeah, that layer 1 token would be used for things like staking to validators, pretty similar to like an osmosis or some other chain that uses proof of stake. Um it would uh you know have things uh like voting on the new chain um like receiving staking income potentially from doing staking um things like that. So it's basically the same thing except uh with the addition of of

staking and choosing validators which I think is exciting and is really important and is a core use case for the utility of the token as well. We also wanted to talk a little bit like zoom out a little bit uh and talk a bit more about sort of DeFi and CFI. I heard you say in another podcast that you think it might take around, you know, 5 to 10 years for DeFi to be able to like really compete with CFI. What do you think are the hardest challenges that have to be solved for that to happen?

Yeah, I think the biggest one is probably product experience still. Um, a lot of people talk about it, right? It's just hard to build a product experience that's on par with centralized products. Um, like just by the definition of the technology, DeFi is always going to be higher latency uh than than CFI. I think we can get to a point where it's like approaching the latency you might experience on CFI and things like Salana and Dydx have done a good job with that. Um, but it's challenging, right? and it's just harder to build basically anything in DeFi than it is to build in CFI. Um, I think the other thing that DeFi still really needs to solve is great product use cases. Um, and I I think we've seen some of them in things

like MM with unis swap and others like lending markets with compounds. Um, things like NFTTS, um, potentially things like, uh, derivatives, decentralized exchanges, but I think it takes time for a lot of these product narratives to play out as well. Um, let's if we just kind of look at something like NFTTS for example, like NFTTS existed in like almost exactly the same form for like three or four years. Like I know the founders of OpenC and they were building OpenC for like the longest time and like nobody used it basically and they had no volume um and then it sort of just blew up all of a sudden uh like in the past year and wi with basically the same product and why did that happen? I think it's mostly just like kind of the maturation of that

product took a little while and then it also takes time for users to kind of wrap their heads around what is this new concept and then you know these things kind of go viral. Um, so I think it takes time for that to happen. Like there's market cycles obviously and I think we see the biggest influx of new users in the bull markets all the time and I don't have a crystal ball like I don't know when the next bull market is going to be like if ever. Um, but probably it's going to be at least like a year or two from now. So you know that's going to take some time. Um, there's been just a lot of pain in the past year for all crypto companies and DeFi included in that with the the market downturn, right? in the FTX collapse. Um I think we've been

fortunate to have done a good job with like our balance sheet and just our long-term focus at DYDX. Um but some others haven't been quite so fortunate. Um there's, you know, negative regulatory headwinds and there's a ton for us to do on the education side to policy makers and regulators um to get them to understand at least first of all like what's going on and then for them to realize that there is a lot of positives even from their perspective um for what they're trying to accomplish that DeFi can offer. Like I mean everybody's like talking about this on crypto Twitter after FTX, right? It's like this is literally impossible. it could not have happened on a decentralized exchange. Um, so I think kind of making that story and getting

regular people more or less to understand and internalize that will take time as well. Um, I think there's just like one of the other things that I think is really positive is there's just a continuous influx of talent into DeFi and crypto and I think that takes a lot of time as well. Um, and yeah, I don't know. I think just all these things put together like finding product market fit, like regulatory education, like more talent, the users understand more. This takes time and it takes longer than people think.

Like the do you think the like looking back in a few years the FDX collabs will kind of have helped the DeFi ecosystem or or like how do you how do you see it right now? So what I told our team is I think it will certainly help DeFi in the long term again like the 5 to 10 year future that we were talking about but I think maybe it helps DeFi like a little bit like right now relative to CFI. Um but I think the damage it did to the overall space is so negative that probably you know plus and minus for for DeFi companies it's negative in the next year or two. um just with things like obviously the prices got hammered, the confidence that

traders and investors have in the space was super shaken uh the like negative regulatory headwinds that I talked about. So I do think it's going to be negative for the next year or two and we have to like prepare ourselves for that. Um but I even felt this personally too and kind of the day the FTX collapse happened which for me at least was the most surprising day that I've had in crypto so far. Um, it really gave me a ton of resolve and confidence that what we're building like has to exist at some point. Like I don't know, maybe I'm crazy, but like once you kind of wrap your heads around like what a decentralized exchange is or not even what it is, but like what it could be, you're like this is like better, right?

Like this is just has to exist like it's some form in the future long term. It solves a lot of these problems. um it creates this open like equal accessible financial system for the world. And you talk you like look at like a lot of the mission statements for some of these companies like if you look at the mission statement for like a Robin Hood for example it's like they want to democratize access uh to like I don't know finance or whatever. Um and Coinbase is at least for the longest time was they want to build an open financial system for the world. It's like how are you going to do that? Like just look at like the technology that you have available to you. It's like yes that's that's exactly what we should be doing but this is the technology that we should be building on uh to be able to

make that future possible and again I think it'll take longer than people think and people will be disillusioned right and I think people have been disillusioned especially with DeFi in the past year or two because and this happens with all these technologies it's always the same thing it's always like people are right basically when you start it's like we have the right idea we don't know exactly what it's going to be but it's like okay yeah we kind of get it at least for the people that understand that we can build these open financial platforms and that's fundamentally new thing like this is amazing like everybody should use this but then it's like oh like wait like this sucks at least for the first couple years like this is like you told me this is going to be a new financial system and I can like barely even connect my

MetaMask wallet to like this website like what the hell is going on here um but then you know after years of building and that causes disillusionment and in crypto this is even more negatively reflexive right because there's there's prices that are attached to all of these things and then the prices start going down and everybody's like, "Oh, this is like an even bigger piece of and like um it just causes these things to get higher and get lower than they probably otherwise would if everything weren't priced." Um, but I think it takes a while and there are hype cycles, but at least to me, like the FTX collapse really gave me a lot of confidence that this has to exist long term and it's something I'm excited to be at the forefront of helping to build.

Awesome. Yeah, that's really cool. We do have like a question actually in the stream that is is somewhat related, I guess, to this whole discussion. So I think we kind of mentioned yeah you're building obviously the product on on this decentralized platform to to enable this future right that DeFi um of tries to promise now is there also like something you're doing I think you mentioned it briefly like kind of educating the regulators or like interacting with regulators something the IDX foundation or or someone is doing or are you like more focused on the product side and if if you're doing like what can you expand a bit and explain maybe what you're how you're approaching ing that.

Yeah, absolutely. So, just to be clear like the bulk like almost entirely uh the company and the project more broadly is focused on product and just building DYDX V4. It's important not to get too distracted by like any of these things in part in particular. Um I think you kind of saw that happen in a pretty negative way with FTX. like one of the biggest things like SPF was doing um for the year prior to the collapse is like talking to regulators and stuff and that wasn't necessarily bad at least from their perspective. Um but I think you saw some of the product progress on FTX stagnates um for a while because of that. So we're really focused on the product itself. Um that being said, as I mentioned before, I do think this is a

really important thing that needs to be done um going forwards. It's just critical that developers can build open- source software in a legal way um going forward. I think there's sort of this meme at least on crypto Twitter that I see a lot that's like oh just like everybody should be anonymous and like we'll all be fine and like you know who cares about the law like we're all just like move to some place they can never catch us or whatever. Um and like maybe some people will do that and like some people have done that empirically. I think it probably won't work for the bulk of people once like regulators actually start caring about this stuff.

Um, but like even if it works for a very few amount of developers, like the thing I said that we need before is like more talent into crypto, right? And it's like how are we going to get like enough developer talent into crypto if like the answer is like oh yeah, everybody's just like anonymous and like as perfect OPSSAC and moves to like Malta or whatever. Like it's not going to happen. like we're not going to build like this future that we want all want to exist and that we feel like is better financial system for the world unless developers can build these things in a legal way. So that's kind of just motivating the problem. Like I feel like it's important it's like from my perspective it's like literally impossible for us to build this future um without doing this. So I think it's

important um and we are starting to do this at DYDX. Um we're certainly not like the biggest player or like the biggest voice um for DeFi. There's a lot of other great people like the blockchain association, like the DeFi education fund. Other projects like I know Uniswap is doing a good job um in this in terms of regulatory outreach. Um I I think it's hard, right, because there's tons of different regulators and tons of different jurisdictions. Um for us, our team is based in the US, so it's primarily like US regulation focused. Um, so like we do go out and talk to regulators. Um, but the thing we've really started trying to do more of is going out and talking to policy makers, which like basically like senators or

like their staff or like people that are actually in government. Um, because I the kind of realization that we've come to and a lot of people have come to over time is that a lot of the laws that exist right now just like literally don't make sense for crypto, right? It's like uh let's maybe just take an example like an obvious example like a lot of the derivatives regulation in the US is based around transparency which makes a lot of sense right like you want to make sure as per like FTX that when you're trading on a derivatives exchange you know where the customer funds are right that's like pretty basic like we can all agree that that should be the case um so a lot of the regulation focuses around that and there's like all these requirements and you got to have like people and submit audit reports and all

this stuff like whatever um but in DeFi like it solves it. It's like go look on etherscan. It's like hundred times better than like any auditing or like licensing we could ever do. Um so like why the heck like do you have to submit like an audit report for where the customer funds are with DeFi? Like just go look at like Ether Scan right now. Like it doesn't make sense. Um, and there's like even worse than that, like a lot there's like just not a lot of way there's not any ways to comply with like certain regulations uh for a smart contract because the regulations just weren't drawn up with that in mind. So like you know realization too like we feel like it's obvious that there needs to be new policy um not just like new regulation for some of these things long

term. Um, and policy also is just like much more open-ended, right? Um, I think regulation a lot of times comes down to what literally are the laws. It's not really so much regulators jobs to like change the laws, right? More their jobs to interpret the laws and enforce the laws. Um, but if you're sitting here saying, well, like some of these laws just like don't really make sense, then you have to go to the root of the the problem, um, which is policy. And I think policy, unfortunately, takes a really long time, right? But we still feel like it's worth doing it because of the time horizon that we're building for. Um, and you know, we want to ensure that developers can continue to build a lot of these things in a legal way. Like specifically, I've I've done some

meetings with like staffs of various senators, things like that. Um, we have just recently hired a really great head of policy that we're excited about. Um, and I think it's it's great that there are so many third parties that are out there that are kind of making the case for DeFi to policy makers and that's absolutely important and should consider, but I think one of the things that hasn't happened so much um, but I think is really important going forwards is literally the people that are building DeFi to go and make a name for themselves and like go and be the ones that are out there like educating people on what what is DeFi? Like what like how could it possibly have solved the like FTX collapse? what are the risks like how should it be regulated um and I think just like starting that

conversation is really important and something that we have really just started thinking about at DYDX but I think will become more important over time cool amazing well final question and maybe a little bit like different topic so aside from DYDX and crypto what are you most interested in in at the moment Yeah. So, I I mean maybe in crypto. I don't know. I've just been working in crypto my whole career, so I can barely even think about anything else. Um or don't know that much at least. But I'm excited about NFTTS. Like I think NFTTS are something that's newer, right? Um and I think they probably will experience this like trough of

disillusionments every new technology goes through. Um but yeah, excited about things like OpenC and Magic Eden. um excited for a lot of the info work to continue on crypto. Um we talked about some of it, right? Just like the L2s continuing to improve. Um different L1s. Um and yeah, I mean obviously I'm excited about DeFi. Um I I don't have any like super hot takes for you because I feel like one of the things in crypto is people just get excited about like random stuff that doesn't make sense to.

Um, and I think there's only like three or four narratives that actually do make sense to me at least in crypto, which is like DeFi, NFTTS, like infrastructure and like data basically. Um, like I don't find anything else super interesting. That that's not to say like nobody should build anything besides that. Like I would not have included NFTs in that if you'd have asked me a year ago and I would have been wrong. Um, but at least for the things that are proven, those are probably the most interesting to me and I think we have a long way to go on them. Cool. Amazing. Well, thanks so much Antonio for joining us. Really appreciated how like succinct to the point like you know you kind of answered the questions and like went through kind of dydx's history and what you guys are

doing. super excited exciting and you know I'm really excited to see V4 what you guys going to do uh in terms of building that chain and also in terms of just you know pushing forward the app chain thesis the Cosmos SDK you know tendon like so many different things that I think are going to be like super exciting so yeah excited to see what you guys are going to build and how it's going to develop and hopefully we can you know resume that conversation at some point in the future, maybe when there's like V5 or something like that coming up.

Sounds good. Well, thanks so much for having me on and great conversation. Cool. Thanks for joining and thanks so much for listeners for tuning in and we look forward to being back next week.