Bitcoin is Making a Comeback with Matt Ye of Lorenzo

Transcript

I mean Bitcoin is great for now and I think Bitcoin will be forever even if you don't do anything so Bitcoin will still be there for like decades or even centuries or even longer and if it ever changes to POS I mean the mining machines Market is probably collaps overnight Cosmos is a good technology so uh I have to admit that having Cosmos SDK is just making everything easier for us and having IBC to be interconnected with the other one just making things a lot better as well but while in a Bitcoin space it's actually to mobilize idle Bitcoins and to encourage them to be put into good use and into a more liquid [Music] state welcome to the interop I'm here

with Matt yay he's the founder of Lorenzo protocol Lorenzo is a Bitcoin liquid staking protocol built as a cosmos chain So today we're going to be talking about the Resurgence in interest in Bitcoin Co particularly with regards to Defi and also how lenzo works the architecture and how it's leveraging Babylon if you enjoy this content please consider sing with us we're validating on a handful of networks and remember none of what we discuss here on the inop is investment advice and of course nebula Summit want to remind you that NE Su is happening in Brussels on July 12th and 13th it is the Premier modular and Cosmos conference happening during ECC expect over 600 participants 80 speakers ERS from the modular ecosystem Cosmos

and Beyond and we'll also be talking about Bitcoin there and hopefully maybe maybe we can make it happen maybe maybe Matt can also join as a speaker tickets are still on sale you can get your tickets at neb. Builders we also have investor speed dating so if you're looking to get funded and want to meet VCS go to neb. builders and apply for investor speed dating hope to see you in Brussels Matt thanks so much for joining me today yeah pleasure is all mine really happy to be here thanks for inviting yeah you know what we haven't really done so much content on bitcoin here on the interop and I really wanted to get you on uh to you know not only explain like what is Lorenzo what does it mean for for defi broadly but just understanding a little bit more of the

uh this this Renaissance of Bitcoin I'm losing my words here yeah the Bitcoin Renaissance I think there was even an event at eth Denver which we both attended called Bitcoin Renaissance hosted by uh by Babylon um they're doing another one I think uh this year so there there is this this uh this Resurgence in interest in Bitcoin you know why is Bitcoin making a comeback what's what was the Catalyst for this uh this new renewed interest in Bitcoin particularly Bitcoin l2s leveraging Bitcoin in defi Etc yeah so I think there are there are a few different reasons right so first of all Bitcoin is supposed to be playing a like a b way bigger rol than it is doing as of today if you think about

like the total market cap Bitcoin is like more than half of the entire industry so it's just like a an elephant in a room that uh people knows it but just haven't figured out like a smart way to really put Bitcoins into good use so that's kind of kind of the problem here or the situation here for a very very long time so the reason why this year it is like becoming the thing is that so A few things so starting from last year there's been like inscriptions and a few different assets could be issued on top of like Bitcoin Network and get people to think about actually Bitcoin can do a lot more things than just uh you know just like storing values and keep it as a gold on chain and also uh for example the ETF pass for Bitcoin as well which gives like the

market a clear signal that the so I mean the mainstream let's say Wall Street or say like these uh financial institutions uh and these big Corps they're accepting uh Bitcoins as a mainstream assets which also creates a very good ground for people to think about okay what's next if everybody agrees this is a legit currency uh this is like the the next uh biggest smart money so and also given how big the market cap is so how what are the reasonable next steps how can we put them into good use right so that's a market to go to and a lot of people started working on it so that's also another another good thing and uh and I think Bon plays a very important role to to acting as a catalyst in here is that so with like bablon actually I'm I

mean like if you want people to put BDC into good use you you have to like first you have to educate them and also two you have to incentivize them right so what are the what are the return you're going to get what are the rewards you're going to get like why you should be doing that so bom provides a very good uh solid uh risk-free yield sources that uh stakers could actually gain yield and risk-free yield by mobilizing and utilizing their Bitcoin liquidity so this is actually like a very good thing layser very good fun fundamentals so then web the liquid staking on top of that to free this part of liquidities and distribute into distribute the liquidity into all kinds of ecosystem then the whole kind of workflow just makes whole lot of more sense than that

yeah what are the technical improvements on bitcoin if if any that have made all of this possible like the the inscriptions but now this you know this this wave of Bitcoin l2s Babylon uh Lorenzo like H how is this possible now or it wasn't possible say like four or five years ago yeah I think there are a few uh like very very important updates uh in the like upgrades in the last uh few years and also month as well so I think the two biggest one is the S WD upgrade which allows like a bigger uh storage for each block for you know in op return space which you can put into more data so that allows inscription and

many others uh good things to happen the other thing is like the uh tpro upgrade and also tap proo scripts so with tap proo scripts is actually enhanced it's not still now fully T and complete but it enables like more programm abilities on top of Bitcoin which I think uh also bablon is benefiting from it as well so then they could build uh more complex systems on top of that yeah yeah okay and then there's this uh you know we we were both at this um this this Bitcoin event also in Hong Kong a couple weeks ago and people were telling me about uh this new thing called concatenation you explain what that is and how it enables new features on bitcoin yeah so I mean I'm not like truly an expert expert expert on on this

opcat so uh the reason for that I I think the value in it is so first of all it's like a the abbreviation of concat concatenation so it basically like combines like different uh contacts into one so if you like go through all of the operation instructions in a Bitcoin scripts or native scripts it's uh in most cases it's like binary input so you have this operator and you get like only two inputs with that right so it's pretty much impossible for you to uh for you to kind of having like infinite have like list or like having like a very long kind of data input into it it's not uh readily possible for you to do it immediately on that but uh with opcat you can actually combine like longer

datas into it I think the value for that is so before that in input you can only have like one data but wow with opad it it makes it possible uh for you to do like a list of data into the input so every programming languages it will have like the row data type and also the list of the data type which like that's pretty much like how do you uh you know pass down more complex data and also utilize more complex data in your program so I I've been like doing some like brainstorming with the team to see like how how can we utilize that for uh briefly but we like we all agreed that there're going to be it is going to like enable great products on top of that yeah someone was telling me that actually concatenation also somehow

enables uh new maths to be comp computed on bitcoin I'm not I'm not sure like how that works exactly I I think which is also true because if you think about this right so what is like I'm not saying like Bitcoin can do machine learning on top of that right but what is machine learning basically it's just like a matrix uh times Matrix or like a tons of Matrix times Matrix plus some you know activation uh functions so on on a very like naive level so that's something like that right so actually any Matrix can be expanded into a longer list right so it's it's just pretty much the same thing right so once you can have like expand from one single data onto a list of data technically you can enable even machine learning and all of

these linear algebra on top of that so this I would say it's like a it's a huge Improvement I agree with that yeah cool so what's the sentiment amongst conservative bitcoiners not us not to say Maxis but uh yeah people who are more conservative from the perspective of you know keeping Bitcoin simple and uh um keeping Bitcoin say pure what's the sentiment with regards to you know all this Innovation happening on bitcoin amongst that um subset of the the Bitcoin holders and and enthusiasts yeah so I I personally think a lot of things is like either you progress or you slowly die so I think

that's that's kind of my take on that so uh I mean Bitcoin is great for now and I think Bitcoin will be forever even if you don't do anything so Bitcoin will still be there for like decades or even centuries or even longer so I I'm not saying like if oh if you don't uh kind of having smart Bitcoins you don't have like Bitcoin l2s Bitcoin is going to disappear so I don't think it's really going to happen so this is one thing but also two we need to actually uh I mean like the decentralized finance is always progressing right and also they uh like the combination of tra finance and also crypto has been started for a while and keep getting faster and faster you have like deeper uh like Mingo between like traditional finance and also crypto as

well so the thing is that like the world is always evolving is always like moving forward and the question would be like where do you see like Bitcoin fits into the picture right so I think like for now it's said like very good opportunity is that Bitcoin is still the first thing most people think about in terms terms of cryptocurrencies and also given its huge value and it's like whole reputation and the consensus in everyone that this is like pretty much the foundation of the whole cryptocurrencies and also web 3 so there are a lot of like attempts trying to like connecting dots right connecting Bitcoin with all of the different dots in different Industries and try to get things to work so this is actually a very good Trend to help people like to help Bitcoin not

just to live but also to expand and to dominant and to like collaborate to enable in like all of this different ecosystem but if you just say okay I'm I'm out of this I mean you might be fine in the next three to five years that say Okay Bitcoin is staying out of this Bitcoin is staying out of that Bitcoin is staying out of everything but eventually there's going to be some better Technologies to totally replace uh Bitcoin eventually so I'm not saying like your Bitcoin is going to worth nothing but it probably want like keeps performing as good as you would expect so I mean you should be like embracing uh changes and embracing Innovations on top of that um Bitcoin can only keep being greater uh when the com like the people working around it is getting

better yeah I mean I I you know agree with that uh pretty pretty wholeheartedly I think that you know Bitcoin and and every crypto protocol needs to continuously improve um and the fact that you know the fact that Bitcoin enables this the fact that it is possible that we have gotten here I think as a permissionless protocol you know people should have zero problem with that you know the fact that it is possible and that people are leveraging existing existing Bitcoin architecture and infrastructure to you know create built Bitcoin l2s uh grow uh BTC F do liquid staking with of Bitcoin is you know it look I mean like if

Bitcoin comes out of this really libertarian sort of uh ideology then doing and doing things on bitcoin and innovating on bitcoin should uh shouldn't Ruffles anyone's feathers because it you know it's not harming anyone else and uh it is simply you know the uh the expression of people's ideas and um and opinions about how Bitcoin should should uh should evolve so I like that's that's sort of my my stance on it what are the what are the different approaches to bitcoin l2s that you find interesting and H how important is liquid reaking to the success of the Bitcoin L2 ecosystem yeah um first of all let's talk about the bigger picture here right

so um I I I I fully support like getting uh Bitcoin to be smarter and getting Bitcoins to be involving more kind of financial interactions or any other kind of Innovations right so that that's a part that I agree and uh but I also don't think a lot of things should be happening uh right on to uh Bitcoin um I'm saying like it should be but also it might take much longer time than most of people would expect so it needs a lot of like very dedicated very small like a number of very small changes uh to be like one stack after another uh and also we need to have this consensus uh among people to agree on making these improvements because like Bitcoin has been too big and also you have like all sorts of different people working around

it and even like holding their lifetime savings having their lifetime savings on top of that so uh it's actually like not so uh easy to reach consensus among everyone on where do they want to go so there's like you're were talking about like you know hundreds of millions of people holding Bitcoins and they each of them having different opinions on what they think Bitcoin should go right so they should be like so any improvements it's pretty difficult to convince the majority of them so this is like one thing so I mean L2 as a solution is actually more uh fragile like not sorry more agile on that so they could actually having more flexibilities in terms of like trying different

Technologies um and also to like having like different solutions for different apps and for different kind of utilities that they have this is like the right way for Innovation that's what I see so I think the thing for Innovation is that there is like the greatness cannot be planned right you cannot say okay this is the best technology you know it's going to work this is going to be the great uh greatest thing for the next kind of centur it's just not going to happen so basically uh what I always suggest is that you should have more experiments so you should have like all kinds of different uh people trying different solutions until like the market tells you in a retrospect say okay this is the best technology this is the better one in terms of the some of these aspects so

we also like encourage to have like more more experiments and to have more different solutions uh to try it out until it becomes like the fact which one is better and which one is worse um so L2 provides a very good ground for that for testing and also we do see like hundreds where even like uh thousands of different l2s been popping up or trying like different things to do so I uh that's kind of the I think that's just kind of a better way for Innovation and I'm pretty happy to seeing that to happen um and in terms of like the technology all of these l2s are taking um I think like different ones are trying different things so uh a majority of them are trying side chains and using PDC staking in one way or another and

band is in in a lot of that and I'm very positive on that I think that's one of the the correct approach to go that and I fully support that um but also I see some other approaches say like bit VM uh bit VM is also a very promising uh technology in the long run uh but like given the current status is I think it's slightly uh difficult for you to build a fully performant kind of L2 on top of that uh given my latest kind of status on that and also arbitration takes very long time and it's almost impossible to reverse transactions like the same way you would probably do on op chain as well if you like op Stacks if you see some of the wrong transactions there so it's still pretty early but in a long

run I'm like pretty bullish on that as well um and there are some other like CK days or like tpro consensus based Solutions out there uh I think each of them would have a good chance but like I said um I would always say like having experiments and test it on a market until you really figure out which one is the best yeah I think that makes sense you know my my what I was saying earlier is I think like I I I think that any any form of innovation on top of Bitcoin using the existing Bitcoin uh stack um is like fully permissible I think I like I think you know people should be able to leverage the existing technology stack in Bitcoin to do whatever they want on top now like the changes to bitcoin and

coming the consensus around changes to bitcoin is like a different topic and of course that takes much longer because of bitcoin's culture around around like very conservative changes uh or conservative approach to making changes but you know if people want to leverage uh you know whatever like the block space is there there's a block space Market um if if people want to build l2s that you know store some kind of some kind of like checkpoint data in the Bitcoin block that that shouldn't ruffle anyone's feathers uh even the most conservatives um you know so coming uh coming around to something that Sunny said on I can't remember which podcast but he was on a podcast recently where

he he argue that Bitcoin would become a POS chain in some time I think he was talking you know in the decades uh certainly not in the next couple years but uh wanted to get your thoughts on this and um when I when I heard that I was like what like this is this is an insane idea um but yeah what what's your thoughts on bitcoin becom a p chain uh I'm I mean like it's one of the possibility but also like I said uh you like in a previous uh like topic is that it's actually very hard to reach consensus in a in in a Bitcoin community and every I mean I mean like even every small changes like uh op cat has been so controversial I mean opcat has been like

initially like in the in a in in in the design of Bitcoin like by by Nakamoto right so like it's not like a new design but also enabling it takes how how long do we have now like 15 16 years already before uh we are still like discussing that like whether or not we should enabling it so even this is like one tiny uh change it's like so hard to reach the consensus among everyone of them um if you talk about in a super long run uh let's say let's in like more in 50 years or like in 100 years um I think there is like a way higher chance that Bitcoin could be like totally different from what we see today uh because like given the Computing Powers has been like millions of of Times

Higher and also we have way better kind of Hardware softwares and everything so then the problem for for Bitcoins like uh u high latency and also Low Pro programmability will keep getting like like getting keep getting like even worse and getting like more attention onto it and until at some point I mean you need to have this pressure to get people to to consensus on something and to push forward to solve the problems right so I mean when there's like no social pressures on that there's like no competition with Bitcoin and people are always like okay I'm fine with what we we're like today it's like a country where you have zero enemies outside so it was like okay it's fine I'm like pretty happy with what it is and I mean we're going to have like different

thoughts and whatever but only when like your country let's say your your realm has been really threaded by some like you know big problems and then people could unit it together say okay now we'll have to we all have to kind of find a solution for this we have to solve this we have to be like United and then say okay what's the solution here I mean maybe POS at a time will be a a good solution and just say okay let's go all the way POS or you could say there could be some better Technologies at a time and say okay let's go after that technology to to save our our Bitcoin realm save our Bitcoin Kingdom so that will probably like that story line will probably makes more sense to me but if not so as you can see today so any small

changes could be uh pretty hard to push forward uh even like I think like something like op cat is so simple and so useful but still so much control like versal uh control versies around it yeah yeah are you familiar with anyone that's seriously researching Bitcoin POS is this like at all a topic that people are spending time researching uh for now I think uh no and uh especially a lot of the Bitcoin miners uh I think I think the the nature around that is like the Dynamics around that is so a lot of these like Bitcoin Miners and also their mining machines and also the

Bitcoin p uh these are kind of very fundamental thing for the Bitcoin like ecosystem in general um and if it ever changes to POS I mean the mining machines Market is probably collaps overnight so uh a lot of them were probably not not happy to see that happen so like I said even uh if like this POS thing is going to happen there are a lot of kind of groundworks and a lot of like fun mental changes we'll have to see before to enable it to happen uh but for now I think the most of things I see is just to expanding the op code uh of like uh Bitcoin scripts and also enabling more more programm abilities that would probably uh be easier so I mean honestly like for me I

think if we can like just adding like more op code on bitcoin safely uh in a decent way and then you can build like a more uh general purpose virtual machines on top of that that would probably be the common denominators for everyone so it's not that risky and also improves programmability greatly and uh that's something feasible at least uh for everyone to agree um while POS if there is like like you know significant fundamental changes I think that's also possible but I mean we'll see like how the dynamic dynamic changes uh before it happens yeah yeah I think uh I think we'll be long and gone by the time that

happens um so what um yeah what's Lorenzo so we we we've talked we've hinted a little bit about what Lorenzo is as a as a liquid staking platform yeah for for Bitcoin what does that mean I think people in people's minds liquid staking for POS chains just it's like a concept that makes sense that they can um that they can understand but in terms of Bitcoin it's it just feels like such a departure from liquid saking and POS so how does that all work and how does Lorenzo make it happen yeah so um it's kind of it's kind of interesting I think like eth and and the Bitcoin in terms of liquid staking the Dynamics there is totally different is totally different so if you look at East so East is a

liquid assets already basically you can East for everything on ethereum chain and for like having uh East staking on like on a financial way is just to providing you to incentivize you to lock up uh East so that uh it just like don't keeps like uh it keeps like inflating and it just don't keep like East for losing its value right so in a way so uh like staking East is actually a way for you to lock up liquidity right and also like liquid staking is just another thing to like release that uh locked up liquidity to do some like Downstream stuff it's like a yield bearing it's like a e yield bearing asset investment that you can hold right this is one thing but for Bitcoin like staking and

also Bitcoin liquid staking it's kind of very different situation is that a lot of the Bitcoins are like they're already idle they're not liquid at all it's it's it's un like East it has been like liquid in the since the beginning it was created and then uh you want them to be in a lockup state right so to to like to reduce kind of inflation the impact of inflation or to balance inflation and things like that but for Bitcoin there's no such an inflation situation and a lot of the Bitcoin are are like has has been idle like for decade so it's not really uh to lock up liquidity but it's more like you already in an idol State you are already ill liquid why don't you

like incentivize I should be incentivize you into doing something great right and what is like liquid staking in this context is that for all these put into like staking uh btcs we're going to issue like liquid staking tokens which are smart contract based assets on all of these different chains and to really like to mobilize liquidities from idol being uh active and being liquid and being used in all of the ecosystem so in the let's just like to to to to summarize that so for East it's more like to lock up liquidities to balance inflation but while in a Bitcoin space it's actually to mobilize idle Bitcoins and to encourage them to be put into

good use and into a more liquid state so the situation is totally different yeah no absolutely that makes sense I mean like the equivalent I guess if you were to think in a in a sem like in semantic terms the equivalent the real equivalent between liquid state eth say and like the equivalent in Bitcoin would be to have some sort of a liquid token that represents mining shares let's say like uh the shares in a minor that are generating yield like you would have a token that represents these shares but here you know Bitcoin is not being used like the the liquid Bitcoin on the liquid on the Bitcoin network is not being used to secure the network uh and so it's not locked and so you don't have

this uh the same problem as you do in proof of stake chains where you can choose to stake your assets to combat inflation and generate staking yield or you can choose to utilize your assets in in defi um so the the the sort of like different semantics here are are are obvious why are we calling it then liquid stake Bitcoin if it's if the if the if theit coin is not being staked you know is that an appropriate term to describe this this thing that's you know at the at the base layer very different than on PS chains uh yeah so I I think the the here the thing is that comparing to like different sit like previous situation is that so previously so there's not enough

like incentivization for you to use rapor Bitcoin even I mean if you see like wbdc WBC does not provide you like good incentives for you to wrap them and also put into a liquid state right so what would be a better way to mobilize them is actually if you think about the real uh the liquid staking assets it's actually not just about the BDC principles but also it covers the part for like the potential yield from different kind of yield sources right so I mean if you say like okay like wrapping it into smart uh like tokens like smart smart contract assets is not uh interesting enough to you and now we have some like rewards and incentives for you to do that right so the RT is in a sense it's like a BTC Bond right it's not just have the principles and also

having the yield I mean if having WRA a token is not interesting enough for you then why about like how about like the principle plus the yield so this should be like a more interesting thing to mobilize liquidities into it so this is like one thing and also that's why we have like this two token standards like dual dual token like kind of systems we have sbdc representing the principal part and also we have yat to represent the the future yield part uh of the of the of the system basically all right let's get into that let's let's get into that that that dual token model so there's the the lpt token which is the liquid principal token you just mentioned and the yield uring token where is this yield coming from and um yeah how should people be

thinking about like holding these two tokens how they interact with each other Etc yeah so uh I think the yield comes from like two two different major sources one is from like say bance staking right so if you just say okay here is like one chain let's say chain a so chain a is taking BDC share security and also it provides yield for like the stakings so this is where this yield comes from right this is like one thing and also two another way we think about it is that like we could actually having some strategies in terms of staking let's say there are 300 like different chains for you to stake to or even more let's say like 3,000 like chains for you to to stake to the same way as like there could be 300 tickers uh 3,000 tickers that you can purchase on the

NASDAQ market then which one do you want to purchase right so uh another uh way to do it is like you could actually stick to some you know delegate uh strategies which deploys like BDC sing on behalf of you under some kind of strategies or under some rules it's something similar to like mutual fund or like an ETF right just say I don't know any of these like 3,000 POS and you are an expert I'm trusting you I'm giving you like lending you my BDC you do your own like Discretions on that you deploy my capitals and you give me a higher than expected yield so that's also like another sort of products on Market as well so for the yeld part like I said it could be uh either one from like roll stakings if you want to like do your own

homework make your own sanities on that and decide like pick which uh hand pick which chain that you want to stay to this is like one thing or it could be from like delegate to some strategies that you think that makes sense or someone else is doing the work for you and doing the research for you and just like waiting to you're just like waiting for for the yeld to come so these are like the two two types uh of the yo that in my mind okay we're going to come back to to this a little bit later when we talk about BTC f um I I want to I want to dial into the the architecture here a little bit so you mentioned Babylon and um you know Lorenzo leverages or at least I think it's even built on Babylon I guess we could say uh how does Lorenzo

leverage babylon's infrastructure and yeah then we can get into the architecture of the protocol yeah um so the reason like we are living on Cosmos first of all is because custom ssdk has a very cool technology and enables a lot of cool features on top of that and also two the second most important reason is because boblin is living on top of that as well so it's easier to get connected uh to Bon so um yeah so two things like how sbdc has been minted so pre-launch of babone things are a little trickier is because like we want get sbdc to be out so we are not actually like waiting until the staking to boblin actually happens before we issue stpc so uh but after Bon is ready stbc and also like lpt and also yat are only

minted when the the staking transactions has been confirmed from Babalon and uh when the message has been sent to us that's like the only case when we start to maintain lpt and nyat so this is one thing and also when we do unstaking that would be through uh through Bon as well so Bon is pretty much like the the switch here I I I stake I un stake I collect the yelds so basically it's like the the gate in the middleware for everything like that to happen and also two uh for collecting yield so right a point like maturity I you say when I in stake I want to collect all of the yeld has been aced within this yat right so I want to I just like I just want to get

it right so then the reasonable thing for that is uh how how do we like you know honor uh the yeld part right also the yield is going to be distributed from boblong chain and we're just going to get it and also redistributed Pro to all of the all of the Y token holders there yeah okay got it um so let's let's talk about lenzo's architecture so you mentioned it's a cosmos chain um what went into your like I I like to ask this to you know protocols that are building on Cosmos is and is what what what went into the decision-making process that led you to choose Cosmos uh as the preferred architecture to build your chain I mean there's

there's a number of stacks that you could have used why did you pick Cosmos yeah so first of all Cosmos is a good technology so uh I have to admit that and especially like if you are in a in a modular space so most of the I'm not saying like most of the like a number of like the top players in the in a in a in a in a modular space are actually all like stemming from uh stemming from Cosmos SDK or even previous Cosmos ecosystem projects so Cosmos SDK lays a pretty good fundamental for uh for for uh modular stacks and also more composable uh like blockchain setups as well so that's something like we really want to see so the incentives

for that I think the reasons for that I think like three main reasons right so one is good technology um we are not just uh you know having interoperability and leveraging kind of BDC share security but also on top of that we need to build some like evm based uh smart contracts and also we need to change a lot of the you know system setups to enable our BTC native token so having customiz SDK is just making everything easier for us and having IBC to be interconnected with the other one just making things a lot better as well so this is like one thing it's like very easy to to development so though building a chain is no easy work we've been building this like but we managed to achieve building it in half a year plus the prodal living on top of that so

like huge like kolos to Cosmos s and Technology setup if without that I don't think it's possible to build a whole thing in half a year right so this is one thing um two is that uh we uh like having like bablon share security is definitely important I mean boblong technically could be a totally separate chain uh like not to be related associated with anyone else but since like BBL is already there and also having IBC it's actually the best way to you know leveraging BDC share security to like pass down it to all of the e system so this is actually like a uh like a good achievement uh for on the both sides I mean like for for Bon that finds the good the best interoperable

network and for Cosmos it also like got wired into like the biggest Innovation uh I think for this year is to have BDC share security it's like a just great achievement great partnership being bued there so but for us we happy to be a part of it so we can leverage both basically we can have like CMOS and also we can have BDC share security we can have both in this network and also three in the long run I think what the future uh of uh of like the btc's uh kind of like the bitcoin's future or the Bitcoin l2's future is going to be like I think the thing is going to be like this so they're going to be like all kinds of different l2s and each of them were doing like all sorts of app chains right so each and every of them would just

like do some things uh on it um like limited things before like one giant uh kind of L2 could dominating everyone so before that there there always going to be all sorts of different like l2s but uh and also these become eventually become very important yield sources for platform like us right so if we want to encourage like more stakers to start staking we need to provide like different what like different products for them to stake into and different yield opportunities for them to invest in their Bitcoin liquidities and with like a more Diversified ecosystem of Bitcoin l2s that actually provides better like more options and better options for people to like provide their Bitcoin liquidities and contribute their Bitcoin liquidities so I mean having Cosmos SDK to enable that and uh like

immediately leveraging BDC share security and also leveraging St BDC in the ecosystem as liquid uh liquid like currencies like BDC based currencies on that this is actually the easiest way uh to you know having like an ecosystem like to having a a universe of different like Bitcoin l2s uh being created and also um yeah and uh and and also there will be like interconnected with each other through IBC and the cosmos Hub so it's just kind of great so thinking about Bitcoin shared security and and the shared security landscape generally yeah uh Cosmos feels like it's it's going in different directions so on on one side we have um igen layer and eth restake eth security

and then we also have BTC security that's coming into Bitcoin uh coming into Cosmos and then the and then the cosmos Hub also has this shared security offering which is now calling partial set security and I think the long-term Vision there is to be a security aggregator uh for restate e security BTC restate security and and potentially other chains I mean like the Hub also provide security there what's the what's the endgame here like where do you see this all kind of coming together and how will chains benefit from these different security offerings yeah um and I feel like being an aggregator for different shares security Primitives is not really a bad thing I think it's actually a great thing to happen but also for these

like different chains uh I mean like I think it all I mean having security is just one thing but also two is like what's your assumption is so what do you want what assets do you want to secure your network and what makes the most sense to use that assets to secure your network I think a lot of things there is I don't think there's going to be like one asset let's say e uh staking or like BDC staking is going to like uh dominating like everywhere like everyone is going to be using like the same Primitives I don't think that's going to be the case right so for example if you're like an eel to if you're like an ethereum side chain I think it only makes sense that you are actually using ethereum to to provideing Securities for that because like you're whole

fundamental like your business model is actually living on the assumption that ethereum is functioning correctly I mean if ethereum like collaps even if or like ethereum has been like being hacked or being like you know like breached badly even if you have BDC Shear Security in your network it still doesn't make sense I mean Your settlement layer is broken basically like no matter how much BTC has been putting into our TBL it still doesn't make sense right so I mean the same way for btc2 as well so btc2 is building on the assumption that the like the BTC users and the BTC holder Community is like uh like using the systems like correctly and hoping to like you know just UT utilizing it like nicely and also uh you know getting like

this BTC to having like more functionalities so it makes more sense where all of these l2s are actually using BTC staking instead of ethereum staking right so but I'm I'm also like on top of that I also think like you could if like having some other assets to secure your network is an cheaper option or like an easier option for you to do you should also be doing that I'm not saying like you shouldn't be doing that let say we have like a uh like a BTC kind of staked uh system but also just want to don't put all of the eggs in the same basket so I and also I want to increase my tvl to adding some extra security at the same time you could potentially use some you know East staking you could use some atam staking

you could use some native token stakings it's not really a bad thing it's just like to to diversify and also to drisk uh any like single point failures uh in any of these asset stakings it's it's not really a big problem I think it's a it's a good way for you to think about it and also being to providing aors or like the general portals for all kind of assets staking and restak it's not it's like it's a great thing toen I think as well yeah things are getting really exciting I think on the on this front um let's talk about the architecture so you know we mentioned Co Lorenzo is a cosmos chain so you know it has validators it has the I guess like vanilla Cosmos modules yeah um but how is it different

from say a chain like osmosis or or an application specific chain that you know runs a front end and an application that doesn't interact say with another chain like Babylon and at the end you know Bitcoin yeah so um I think like interoperability is actually the biggest uh thing here is that so for Cosmos like any other Cosmos side chains is that you pretty much you're a scanone chain and you just like talk to the other ones like through IBC that's the thing but also for us we are actually like liquidity distribution center right so how this thing works is that first we need to talk to bitcoin so if Bitcoin like actually uh like enable like the staking actually happens on a Bitcoin we

need to confirm that and also we need to Mint uh liquid staking tokens on our layer and then we need to distribute them into like whole different like ecosystems right so we need to first talk to bitcoin and also we need to talk to all of these end chains that our liquid staking token liquidities are go actually going into like you know the destination for the liquidities BTC liquidities out there so I mean interoperability is like a really big thing I'm like really happy that IBC has been covered the most part in a cosmos ecosystem but for the rest of the chains in ecosystem we have to do a lot of these heavy liftings by ourselves and including communication uh with Bitcoin and verifying U information like that so we have like a cross validation systems

so first of all so once Bon is live we are going to like uh receive and also getting messages from Bon on what are the staking transactions and how much the stake with the details about that and also we have Rel layers connecting uh our chain and to bitcoin to upload all of the Bitcoin headers and Bitcoin block information that we can do cross validation so whether this transaction is really happened what all of the details is does everything lines up so only when uh everything matches perfectly then we going to like proceed with minting scbc and get it over to all of the ecosystem okay so you're receiving information from Babylon uh on on the state of staked BTC on the Bitcoin network but

then you're also checkpointing uh Lorenzo's blocks to bitcoin no checking like just checking like raw Bitcoin blocks on okay you're you're doing a secondary check in addition to the to the information that babon has to us that Babylon provides you also perform a secondary Check Yes okay but Lorenzo is not itself managing the locked assets on the Bitcoin Network that's Babylons that's Babylons yes yeah but also one thing is that so I think like uh uh one question I've been asked a lot I think it it's it's probably like easier to to explain

this so on a podcast is that a lot of people are saying like oh who's like the ownership of like these staked assets right so B sort of Ena enables like self custodial staking but for liquid staking it's actually not really possible to do uh self- custodial uh like liquid staking and the reason for that is let's say for example let's have like liquid staking self custodial liquid staking I stake uh let's say 10 BTC and I get 10 liquid staking tokens on the market and I just like sell it for like 10 Bitcoins and now I have 10 Bitcoins already and then whoever is holding this liquid staking tokens and they would say like I want to

I want to withdraw my 10 BTC at some point and you say the underline 10 BDC I am like having a self custodial I'm not just going not going to sign it I'm not not not going to give it to you right then the whole system is broken so you cannot having control of the liquid staking tokens being minted and also having the underlying BTC under control at the same time that sort of double spending so right uh like yes so for the staking part Baron has is locking it like BBL is locking up the assets it is providing the security and also slashing mechanisms on top of the state BDC and uh for us we are doing a delegate staking and also we're doing a settlement so whoever is holding the liquid staking tokens will claim ownership to the underlying BDC as well

it's not really possible to have all of the stakers to have like self- custodial rights it's just going to break the whole system okay understood yeah that makes sense um so who are the participants uh I guess like you we we we have the validators of course that are validating the chain and that are um are they like running a sidecar that that does this uh this verification of Bitcoin blocks you mentioned that Lorenzo is also verifying Bitcoin blocks oh yeah yeah yeah yeah so yeah we have like a separate uh decentralized smaller Network for rers so uh and basically in the future I wanted to be like fully decentralized that everyone could submit like Bitcoin headers information and

also block informations onto our chain as well so that we can do uh cross validations uh to compare it with the information bottle and give it to us so yeah okay and how does Lorenzo manage Forks so Forks on our own chain or Forks on on a Bitcoin chain on on bitcoin so okay this is actually going to be a a a a like a problem uh for us like or at least a situation for us so uh for it's just like a softw or like not not so important upgrades so as long as this is compatible with like uh this previous uh address uh spaces and also compatible with the previous like staking uh scripts provided by Bon we're actually fine with that so Aon is like fully compatible but if it's like really going

to be like a hard our hard Fork that a lot of things are going to be like totally different and also a lot of like whole Dynamics is going to change I mean this is not just a situation for us it's also a situation for let's say bablon for any of the liquid staking protocols for any of these L2 spy on top of it so this is going to be like a huge situation for everyone um I cannot just like uh just talking on some like you know like assumptions so I mean like having a for could be means like many different things right so uh it like highly depends on what the actual like Fork is but we as a like a community we as like a team we'll figure out a way to to deal with that I think I mean there's been a

couple of Bitcoin forks I guess not in recent history but in you know 16 to 17 uh like that era there was Bitcoin gold there was Bitcoin cash there was like probably a bunch of other ones that I forgot about that I sold a long time ago work itself as well uh LTC and some other likecoin and a few others um and and I think like well uh if you talk about the previous ones I mean like technically they're very similar to Bitcoins I mean if bobon or any other team's planning to do some staking mechanic isms on top of that I think it's not a bad thing right I think it's actually also like a good approach even uh to to to to do something like that uh and if there are some teams

actually doing that uh like BTC not necessar BTC like BTC Fork like staking on them we would happy to do like a liquid staking at some point if it's technically feasible we can do some like liquid staking prods on top of that as well yeah okay and did you guys have to build any custom modules for the Customs SDK to uh to make all this work yes we do yes we do so think about this so our native token our like lrz token uh for Lorenzo is actually not our guas token and utility tokens our utility tokens is actually sbdc so you have to like stake so staking and also unstaking we does not charge you any guest fees instead

all of your BDC will convert it into St BDC so that you can use it on our own chain so uh that's kind of just like one example right so in order to make it happen we have to change a lot of the underlying kind of Genesis modules and also Genesis blogs to make it happen so but that's just one of them we have like changed a number of modules just to yeah just to just to get it to happen yeah very cool so let's let's maybe switch gears here and talk about BTC fi um this is this is a an emerging space of dii that yeah uh is kind of separate from the rest of di what's the biggest challenges in terms of getting liquidity in BTC F but also

bridging btcf with the rest of defi let's say in ethereum DVM space and and all the other uh L1 blockchains do do you think that you the the future is one where we have sort of two defi ecosystems that are are you know not easily bridged or will all this liquidity sort of like merge together to form like one big uh defi ecosystem um I think in the fundamental uh situation here is that it's not going to be like fragmented so the interesting thing to see is like most of these Bitcoin LS you see today are are are already evm so people just don't tend to like reboot whale Wheels uh for like uh

for for execution layer so I mean there are good and bads I mean like I don't think evm eventually should be like everywhere and dominating everywhere as well but also so far it has the huge Network effect and also it's the easier way for you to acquire uh developers and also users as well it just it is what it is so so far and also like for the interoperability it's like very simple as well it's like just an EPM chain connecting to bitcoin l2s is nothing different from connecting to ethereum l1s uh like evm l1s or any evm l2s it's like essentially the same thing so uh I don't think liquidity is going to be like fully separated and also so I think the ecosystem will be like interacting with each other pretty frequently this

is one thing but also getting ethereum liquidity and also getting Bitcoin liquidity is a very is a very different story right and also that's why like staking ethereum is actually because like bit ethereum is like too liquid and you sometimes want to just lock them up so that they don't they don't lose value like they don't like deflate in their value so while um for uh for Bitcoin it's actually different so a lot of most of the Bitcoins are actually staying idle and a coin holders having a lot of concerns like if I participate would I lose my Bitcoin savings for my life and also even if I converted into some smart standards of BTC a lot of them are firsttime dii users like what does this application even means to me why should

I even use them what can I do with them so a lot of them actually don't have a very clear idea on how this thing should be rolling out so um so it just takes time like I said it just takes time so and also it takes a lot of kind of joint efforts so first you need to prove your project is legit and also your functionality is legit you are backed by reasonable people and reasonable Brands and also the methodology makes sense the technology makes sense um and also here is the uh what are the yield you can you can expect and here are all of the amazing things that you can do in this ecosystem we need to have like every single like dots to be connected before we can have like a big enough to be

convincing enough for lot the Bitcoin holders to actually participate into it and that takes time so basically yeah yeah and you mentioned before the show we we're getting set up you you mentioned challenges in redistributing BTC liquidity yeah can you expand on that a little bit and like what what is the issue here yeah so I think like before like BTC staking right so all of the Bitcoin assets has a distribution on all of the different chains let's say most of them majority of them like remains on the Bitcoin network uh and U like some of them are in ethereum some of them are in BSC some of them are in Arbitron and y y yada in know do like different ecosystems there and with BTC staking actually a lot of these BTC liquidities will be pulled from

different chains and different ecosystem and being like locked up and sted into the BBL on ecosystem so potentially you could see there are going to be TBL loss in all of the ecosystem just in this one the first step but in the second step is after staking has happened on bablon chain liquid staking tokens will be minted and it will be distributed into different chain ecosystems so if all of like these ecosystem they're doing things right they're embracing like Bitcoin liquidity like tokens then they should expecting they should be expecting a huge TVO gain because a lot of liquidities from the Native Bitcoin L1 are actually being unlocked and released into all of these ecosystem but if some of the chains they're like

moving slow and they're not embracing like the changes then chance is they could even even lose liquidity after redistribution so I mean all of these L1 and l2s are on this battle on acquiring like BTC liquidities and directing them into their ecosystem so that's the thing actually there yeah okay so essentially we the problem here is that what you're saying is once Babylon goes live wrapped BTC will go back um will will come out of ethereum uh salana um binance chain to Babylon yeah and that will pull liquidity from all these

other ecosystems I mean I suppose a lot of that liquidity is probably locked up in leverage positions right I mean people if people have BTC over on on ethereum for example it's probably not just sitting there it's probably like in an a uh in an a pool or something like that and there's probably other assets board yeah against it um how how quickly do you think this will happen for this traveling um cuz like you know personally I I have BTC over on ethereum but like it would probably take me a long time for me to like liquidate those positions get that BTC out move it move it over into into Babylon yeah so um I think like a lot of things are are haven't been finalized yet for example

how much yield like Bon could provide so let's say presumably like if Bon could provide like a 50% yod on a BTC I mean I think like majority of the BTC is going to disappear all of the different EOS system and all be going to B one right this is like one thing and uh if it's not so high like the Mobil the power of mobilization will probably be be somewhat lower so um and it takes like more time to withdraw from that I mean there are BTC like rep BTC btcb investment opportunities across all different ecosystems uh but it's really like the opportunity cting here right so how much you that your transactions or your uh Financial activities is going to provide you on this different ecosystem

and how high and also versus like how low risk boblong could be uh providing you with BTC staking so once the yield has been out and once the security has been proven uh like the risk-free kind of yield on bablon will become like a pretty obvious options at least I mean a lot of the not so uh not so high yield on ethereum or say the other ecosystem well facing real challenges there uh for like the BTC on the BTC business basically um so but how soon it it depends right so how fast you can liquidate like your positions how fast you can endake from your stakings and also how fast you can actually like converting is actually

easy pretty fast you just like Bridge it over or you could just let's say convert it in exchanges uh or let's say you could just like withdraw it from whatever the rapid DC standard providers so it shouldn't take that long uh it should be like between like a few minutes to a few days it shouldn't be taking that long but eventually yeah I think eventually it's it's it's just going to like like since the opportunity is there and the liquidations like liquidity is just be going to be pulled from different ecosystem and being put into the Bon chain like BBL on yeah I think I think in long term that makes sense um absolutely and uh let's talk a little bit about what's happening right now

with Lorenzo I know you guys made some announcements recently um tell people how they can get involved um how they can you know potentially uh put themselves in a good position to have an airdrop and what's the road map to main net so yeah we are we are actually on a beta net just do some like pre-launch preparations and testing our systems uh our system is safe uh but it's more like testing on like the user experiences and how do we like uh optimize the user flows and also optimize the whole operation and things like that so uh it's like mostly about that right so um we have like in this current features we have enabled a bobl on pre-launch

staking and we've been allocating some uh like score points for that participating into that so this is one thing and also two uh we only we are only like minting stpc the principal part for the staking so the yield part hasn't really been tokenized yet and uh it will be like tokenized uh in our next uh upgrade in a protocol which will be happening either later later this month or early next month so you're going to have like the yeld tokens being token uh tokenized and also we have been like partnering with some of our ecosystem Partners to building like exchanges uh for like both of these tokens right so these uh token standards this is one thing and also sbdc is supposed to be an omni chain assets so we'll be

interconnected with all of these other ecosystems to bridge like sbdc over to all of the ecosystems so uh we are starting with the uh Bayer and some the other like l2s and for these l1s is like uh like work in progress as well you should be expecting to seeing the interor interoperable networks being ready uh in the coming weeks as well yeah great and we'll uh link we'll link uh to the Lorenzo website Twitter and um the uh pre-launch staking announcement in and the beta announcement in the uh show notes so people can check that out um yeah Matt thanks so much for coming on the podcast it's been really great yeah I really appreciate thanks for

having me like uh and all these like thoughtful questions thank you