Roll ups, IBC, and the Bond Markets

Transcript

[Music] foreign [Music] awesome let's get started everyone it's uh it's nice to see you out there my name is Brent I'm the founder of Umi and I'm going to be giving a talk on Cosmos ethereum and the bond markets so who here loves ethereum I'm sure everyone here loves ethereum I

love ethereum though I also love Cosmos as well my background is prior to this I was the head of strategy at tendermint the creators of Cosmos and subsequent to that I launched Umi which is the largest lending protocol in the cosmos ecosystem we're also being considered to be the official money market of the cosmos ecosystem via the Adam economic zone before all that I was an early employee at consensus I helped build the company from 20 people to 1200 the early days traveled the world of Joe Lubin in terms of promoting ethereum uh tried to get ethereum listed on centralized exchanges like coinbase okx uh Hawaii Kraken poloniex just all the exchanges as well as trying to get

Enterprises like JP Morgan to utilize ethereum and throughout that experience you realize that the cosmos and ethereum ecosystems have a lot of similarities and I came to one major conclusion that Cosmos and ethereum are meant to be friends and it really clicked for me one day uh when I was putting together a dinner at Devcon in Osaka back in 2019 where we sat down with vitalik Justin Drake Danny Ryan along with Jay Kwan zachimanian Chris goes Chango and myself and we talked about how IBC can be used for cross-shyard communication for ethereum 2.0 shards this is a talk that vitalik and jayquan gave on interoperability between

ecosystems back at Devcon 2019 in Osaka Chris goes also gave a talk about IBC and ethereum 2.0 AT ECC a few years ago back in 2020 as you know noma's a sponsor of this event this year and then giorgios from Paradigm also tweeted about how IBC can be implemented in solidity which just goes to show that there's a lot of cryptographic similarities between the cosmos ecosystem and the ethereum ecosystem to a point where let's say if ethereum 2.0 never really launched you'd have this sort of eth 1.5 thesis or eth 125 Vision where you have data availability shorted execution environments and Roll-Ups and the more and more you look

at this eth 1.5 Vision the more it looks like Cosmos to the point where you can even think of Cosmos as sort of this blueprint for where ethereum can go towards a note uh John Adler he said at one point that we live in a multi-chained world and this is an important concept understand in order to be successful in this crypto ecosystem you need to embrace multi-chain thesis because eventually we're going to have interoperability we're going to have seamless movements of assets from one chain to another we're going to have homogenized execution environments that can execute in parallel and we're going to have scalable architecture basically able to onboard a lot of assets from The

Real World into their crypto ecosystem take an example from the development of Internet when darpanet was first created you had a bunch of intranets and things didn't really click until you had the internet that was connected via a common communication protocol called TCP and that's what sparked the uh the the growth of the internet blockchain needs to reach that stage and it needs to have that TCP moment now I am a capitalist at heart um I do believe in public goods I do believe in open source infrastructure I believe in open source code but a lot of these these ecosystems need to figure out a way to make money as well um prior to crypto I spent over half a

decade trading bonds I'm very familiar with the debt Capital markets um and the the bond market is the largest market in the world and it's the foundation for the overall Capital markets and you need to build many Frameworks around these for example you can do uh cross chain bar new lending imagine leveraging assets on Cosmos buying on ethereum leveraging assets on ethereum bonding on L2 uh leverage the national no two barn on Bill L3 essentially creating this Omni lending Hub of activity of just constant usage between different chains this is possible using a lot of these Crossing Technologies also consider the concept of the time value of money So In traditional Finance you price

opportunity costs based on a yield curve or term structure interest rates in which you price opportunity costs and crypto that is also possible you're able to use things such as proof of stake rates as well as liquidity mining as mechanisms to discuss to describe opportunity costs and also create a time value of crypto assets and I'd say in building out these future ecosystems you need to take this into consideration as you're valuing the next generation of crypto and third off I believe in a multi-chain bond market so fixed income assets need to move seamlessly between different chain ecosystems so yields can be distributed between one ecosystem to another this will this will dictate the foundation of how we move the next set

of values into the crypto ecosystem back to that tcpip intranet versus internet example as blockchains come together they're going to form the basis of being able to establish a market such as what I just described now in order to get there you actually need a few things and I have a proposal it's a it's a very um a nuanced proposal but I think that two of the biggest most popular development ecosystems in crypto uh have a lot of a strategic alignment that that they can achieve and here's my proposal what if Cosmos and ethereum were to emerge and I don't mean merging the actual chains I mean merging the development environments merging the

developing road maps merging the technical road maps the technical timelines and figure out more alignment between Cosmos ethereum I'll give a few examples of how this is already happening so look at uh Roll-Ups via the op stack so right now you're able to launch your own l2s via op coinbase A6 and z are already doing this uh starkware and ZK sync are allowing you to launch l3s uh this is already happening and this idea was championed by the cosmos SDK where you're able to launch your own L1 does that sound familiar oh how about this uh you also need a communication protocol so l2s l3s they need a way to send asses back and forth bridges are not the safest

solution Bridges you've seen billions of dollars get lost in Bridge hacks because a lot of times they can gravitate towards centralization they can be proof of authority networks lock and mint mechanisms exposed risks um instead it's better to have an underlying communication protocol that integrates directly into the state machine to allow transfers of assets so Cosmos has already built something uh for this it's called IBC um it's basically a module with the same machine of one chain that relays messages to a module in the same machine of another that acts of this transfer authentication ordering layer that separates out the application side of the protocol from the communication side of the protocol what this means is that you're able to transfer assets between different chains very fast and very effectively and this is something that

should be shared with the ethereum ecosystem in another reason why I think the road rats are merged third let's consider sequencers so sequencers right now are fairly centralized and one idea for decentralizing them is to use a bft consensus protocol and that's something that the cosmos ecosystem has also developed it's called tender men it's it's been developed since 2013 2014 jayquan and vitalik are on some of the same panels back in the day to talk about development of these protocols it's also a lot of the research informed Casper and so from all these Vantage points it just shows that we're building with the same cryptographic Primitives and it exposes a ecosystem where we should be trying to achieve this super

chain thesis basically an environment where these development road maps and timelines are emerging and the developer ecosystems are working together to build a uh this this homogeneous Network at Umi we're already doing this so take Ojo for example Oho is the first Oracle built as a blockchain it is a universal Oracle a price speed that allows the the access of any blockchain or any D5 protocol to to access smart smart Oracle price feeds so by using IBC queries a price feeder custom relayers uh indexers websocket API as well as a smart Oracle price feed

we're able to instantiate A Whole New World of price information for the Oracle ecosystem so Ojo is currently the official Oracle of Cosmos it's established in the Beats head and Cosmos but it's directly integratable into EVMS l2s l3s side chain architectures alternative base layer Solutions rust based chains as well as move VM based chains so from this Vantage Point Ojo intends to onboard several new real world assets into the crypto ecosystem new price feeds essentially onboarding billions of dollars of new price information into the crypto ecosystem to allow more use

cases throughout the world we're also building taboo so taboo is The Interchange super app it is the official interchain Mobile Wallet right now in the broader fintech and banking World 72 percent of users are Mobile in the developing worlds right now there's a lack of computer usage everyone prefers to have access to their banking directly in the palm of their hands uh through taboo you have a universal UI to access all of your crypto instead of having to switch between one blockchain to another you're able to access everything into one universal interface you're able to have all your defy applications and all your crypto

applications on one uh one on one user interface and this basically gives you a command center to access crypto basically an aggregator that combines dexes D5 lending nfts staking stable coins all in a universal UI for you to access and taboo is just another example of we see the cosmos and ethereum ecosystems colliding and interoperating we see a world where you can have all these applications in a university UI instead of just using a wallet for just simply signing your transactions a note on staking derivatives so staking derivatives are a very important part of this ecosystem and the next bull runs proof of stake will be a a key component

of how we view crypto and it will Define the future of consensus for how distributed systems would would operate and so similar to in tradpy where you're taking US dollars or Fiat currencies depositing them into an instrument and access to interest rates you're able to take proof of stake assets deposit them into a proof of stake protocol access staking derivatives and access the proof of stake rate these rates are a very powerful Concept in our broader Financial world is a rate essentially dictates what is known as an opportunity cost or a way that you discount cash flows a way that you define time value and so by being able to take proof of stake rates and for example create time franches of these and structure them for

example you take a proof of stake rate structure it for one month two months six months 12 months uh two years five years ten years 30 years you're able to create what is known as a proof of stake term structure of interest rates or term structure of proof of stake rates effectively valuing the time related to these staking assets so imagine a world where you're able to go for example long the 10-year bond short the 10-year staking rate this creates Arbitrage basically new markets that crypto and traditional Finance can interoperate in and it all requires a homogeneous new super chain thesis a note on stable coins so stable coins and bonds are really two sides of the same coin the only thing that separates a bond

from a stable coin is actually the time between them and so you already see this transformation maker down uh recently they purchased a billion of U.S treasuries you see more tokenized treasury platforms integrating directly into D5 protocols you have amms where you can trade between treasuries and stable coins and different yielding assets this is the future and this is where the next billion dollar markets are going to come from basically a a yielding ecosystem where you're able to see an inter-related network of staking yields as well as interest rate yields all coalescing into a unified Network a note on uh the financial market so prior to crypto I spent over half a

decade training bonds and you don't really get disillusioned by the financial markets unless you spend a lot of time on a bond trading desk because at the end of the day what you learn is that the source of all the alpha the source of all the the value that's generated a lot of times is from a lack of transparency it's from the opaqueness or the black box system that you're working in and nothing it was nothing was more motivating to join crypto where you have a decentralized open source transparent system than to experience some of the the Follies of the traditional Finance world so a lot of this motivated me to want to join crypto and establish more open source Frameworks

the last note I'll leave you guys with is real world financial markets we already see it coming uh BlackRock Fidelity Vanek they're all establishing Bitcoin ETFs and they're all bringing real institutional Capital into crypto the next few bull cycles might be semi-regulated but the the main takeaway I want folks to get is that I believe that all financial markets and I mean all financial markets will eventually move to crypto and blockchain considering that it's a more effective open source settlement layer it's more powerful than what we see in traditional rails this is the future and in order to achieve that Vision like I said all financial markets eventually moving into

crypto and defy you need different chains like Cosmos and ethereum to work together you need a interrelated development ecosystem and you need to build in the same directions on that note thank you so much for your time I really enjoyed speaking to you guys have a great conference everyone I'll be free uh later to answer questions but thank you so much and have a good one [Applause] foreign