Bridging The Cross Chain Gap With Squid Router

Transcript

What's going on everyone? This is Robbie Roll Up. Welcome back to the Roll Up. We are pleased to have Fig on the channel today. Uh Fig is co-founder of Squid. Uh Fig, it's great to have you on. Um Uh before I start rambling too much, uh how are you feeling? Hey Robbie. Yeah, feeling good. Excited to be chatting and um Yeah, I'm uh I play in Australia and uh in European time and Yeah, it's cool. the chat. Yeah, so so maybe we can start with like a first principles sort of approach here. Like Squid um is doing lots of uh like routing and cross message

cross-chain messaging. Before we get into Squid in particular, maybe you could kind of like build your mental model for how you see the multi-chain world at this point. Yeah sure. Yeah, so how we got to this point? Um I guess it all started with Bitcoin. Um Bitcoin gave us ownership, digital ownership, and the ability to transfer money around and keep keep a an account of something. And then Ethereum came in and made that programmable.

So you do everything uh you can program rules into your money. Um and then you can also create these systems that don't have No one can cheat, not even the owner of the game or you know, the even the government can cheat. Um and with DeFi summer in 2020, we started to see like the possibilities of this and like everyone got super excited. We saw like thousands of applications and startups being created, but like immediately the almost immediately ran into the scaling issue. Like I remember transactions were pay I remember paying like $250 for a curve transaction or something. and I at that point it was just it was almost surreal. I You would

obviously never do that now, but um we had the scaling issue, and we had all these ideas. Everyone wanted to like be creative, build new things, but um the way we decided, well, at least the ecosystem is going towards doing that is through rollups and through app chains. Um alternatively ones like Solana, Avalanche, rollups like Arbitrum, Optimism base. And I remember in that 2021 season everyone was um going to these new environments, these new rollups and app chains to explore the new ecosystems and like find out what it's like to have a 2-cent

transaction again. Or, you know, chasing incentives around. And every time you went to a new one, you had to think about um how you were going to get your funds over there. Um you had to understand how this new chain worked, download potentially new wallet. And you had to bridge funds over there. And bridging was always this, you know, in crypto every time you go to a new website, you don't know if it's going to be a scam or not until you've actually like successfully done your transaction, right? So, every time you tried a new bridge, it was another um you know, really scary experience, and you know, people like we're all a bunch of nerds, and it was taking us like days to, well, at least

hours to just work out how to get our money around. So, there was clearly this need of we have programmable money and ownership, which is like amazing and exciting, but we need to scale that so that we can run like any trade in like the world's whole trade system um using this infrastructure. And what that ends up looking like is hopefully or probably a bunch of rollups and some other chains working as well. Uh a bit like you've got, you know, AWS manages thousands of servers.

Um you got Google Cloud, people run their own servers. And then you have the internet connecting all of them so that um they're running almost like a single system. When the user goes to a website, you put something into the, you know, the search bar or the URL and maybe it hits hundreds of different servers at once just to get your action done. And that's what we're trying to do with cross-chain um is this almost internet connecting all the blockchain and rollups up. So, when you do an action, you don't have to go to a new website, um try out something that you've never done before, or even go into the code and touch the infrastructure yourself.

You get this internet-like experience where you just open up your app, you do an action, and maybe maybe it touches a DEX on one chain, then, you know, a lending protocol over here, and then it buys an NFT, it does a payment, something else. Could be as many things as you'd like, but it all happens in one click and without you ever knowing that all of that infrastructure is working for you. So, it's really like um the I see the cross-chain space is as this like UX layer on top of um on top of all of this in scaling infrastructure that we have for blockchains.

And I think we're getting really close to to now enabling that next level of of like fully scalable apps to be built um and like maintaining good user experience. Yeah. I I love the premise that Bitcoin gave us programmable money. And I think from that, like, this whole So So, then the the natural next step in that sequence is like, well, money is a lot more than just cash sitting in your wallet. So, so Bitcoin sitting in a wallet is good. It It builds a strong foundation for programmable money.

But money is also fluid in the in this entire, you know, money is part of the economy. So, we had like this this programmable money that could sit in a wallet and then the natural next step was building out the rest of this programmable economy. And then Ethereum came along and was like kind of the kind of Ethereum kind of lets you do that. It kind of lets you build out these like economic Legos, money Legos, that you can fit together for economic functions, whether it's lending or it's borrowing or it's trading.

These kind of like mercantile functions start to fit together and then you can use the programmable money sitting in your wallet and you can program it to do certain things. Like you can program it to earn interest or you can program it to service this counterparty for other people's trades. And then from there we started to build out this programmable economy that was made up made of programmable money. So, I I want to dig into like I'm still I'm still I think I'm maybe like those who are watching like are trying to break into this like interconnectivity space because I think the premise of of Bitcoin with

programmable money is easy to understand. And then I think the the one to two of a programmable economy is also relatively intuitive. Mhm. But then the next step is like the infrastructure piece. And I've also heard we were on a space um with the founder of Connects and he mentioned how a lot of these blockchain projects are inherently infrastructure. And I'm curious if you if you have a similar opinion about the state of these blockchain apps and how they connect together.

Um because cross-chain, as you mentioned, is the UX layer. And then we have this infrastructure running in the background that kind of like points our uh transactions to these different chains and these these Lego these progr- money programs that are running on separate chains. Mhm. So So so maybe we can reconcile like uh the infrastructure pieces that connect this together with the pieces that are ultimately consumer-facing. Like what in this space is everything infrastructure or are there certain applications or

projects that are are not, you know, that all of the all of the infrastructure is what they're running on. They're not They're That's not what they're focused on. Maybe we can reconcile this this difference between infrastructure and whatever else, you know, exists in this space. Yeah. Yeah. Yeah. I'd agree with Arjun from Connext, um if that's who it was. I I think most most of what's in the space right now is infrastructure. And even this UX stuff in cross-chain is still effectively it's infrastructure that allows you to build really good flows.

Um And then that's the magical question, right? Like what's the use case of crypto? Like what's the what's this thing that we're building towards? I think one like use case which is um is proven is the Bitcoin one, which is just owning currency or owning value on the internet. And DeFi, I think, is also fairly fairly proven. So simply just owning value, trading for something else. Maybe depositing it, if you're lucky, but just that very simple sending value around and swapping it is a proven use case I think. So, there are some you you see the wallets for example are almost like bank accounts.

You have all of your balances and you can send them to your friend or you can trade as if you were trading on the stock market. Um so at least that use case is there. Um I mean cross-chain is a perfect example for that because like you have these wallets you imagine someone more like new to crypto might have in their wallet that supports Avalanche, Ethereum, um probably like the arb token, BTC, and they for some reason like without cross-chain infrastructure, the wallet might have been able to let you swap between ETH and USDC, but it wouldn't have let you swap between AVAX and ETH because they're actually different chains.

And that's like a point where you're almost you just get this like dead end where cross-chain opens it all up and suddenly the user just they don't have to care they're on different chains. They just swap between AVAX, ETH, um BTC. Um and you talked about the the infrastructure pieces. So, bridges I'll just quickly explain explain how I see bridges. Um so blockchains are just these um they're these environments. It's like a it's like a country. If you tell like always says that, right?

Um and a country has its government, has its own rules, and then it has its own currency. And in order to make a um trade between two countries, you need some kind of agreement between them. And a bridge is essentially that. It's like a a cryptographically proven agreement between two trustless trustless environments, so two different blockchains. Or if you can't make it completely proven, then it's some other there's other some some other form of trust like um some of the uh you could have a blockchain, for example, like an entire blockchain, which is just almost the adjudicator of this inter-country trade, international

trade. Um, so there's a few different architectures for bridges. Um, maybe we don't go into them now, but um, behind the scenes, those are doing a lot of work, um, just verifying that money is being sent between countries. And then in the wallet, all the user needs to see is like my euros have been converted to USD, or in the crypto world, like my my ETH has been converted to AVAX. Yeah. Yeah, I I'd love to dive deeper into this architecture, because there's there's the design that has been proven to work in the trusted environment of this like before we had programmable money, there was still we still have this traditional financial, you know,

ecosystem and economy. And there's kind of these economic functions that help the economy run smoothly in in that world. I think in the crypto world, in the blockchain world, we see a lot of the inefficiencies that occur in the traditional financial ecosystem on a daily basis. And then we are working to solve those, you know, regularly in this in this DeFi and blockchain world. Mhm. So, so I'm I'm curious like the there are functions that that have been proven to work in that traditional financial world, and I think when we kind of re-architect this new financial economy, like we want to take the pieces that

work, and then scrap away the pieces that don't work. So, Mhm. one of the things that I've I've kind of like became more familiar with, and I'm I'm DeFi native, so I was kind of learning these these traditional financial concepts as like to fill in my my overall financial knowledge. So, I I kind of learned the DeFi first principles first about decentralization and then I have learned some of the more functional pieces of the traditional economy a little bit later. That's through through my lens.

I I started to become recently familiar with like the separation of order flow and liquidity. And in the traditional financial model, there's there's brokers who broker liquidity and trades to to the orders that are that are coming through their platform and then those orders end up settling with the liquidity that that lies on the exchange. So, great example of this is you have and I might have I might have kind of kind of messed that explanation up because these concepts like are not super intuitive to me, but as I understand it, you know, we have something like IB, which is International Brokers.

Um and that is essentially a front end for the liquidity on say the Nasdaq. So, if I'm looking to place a trade for you know, one share of Apple, I might place that trade on You know what? So So, let's let's say I'm placing a very very large trade. Maybe I want to buy a million shares of Apple. So then I place that trade on IB. Mhm. IB is then going to route my my order to Nasdaq and the Intercontinental Exchange and you know, a whole bunch of other like ex- exchanges to fill that order with the liquidity that's resting on those those exchange order books.

Mhm. So, like you like combining this this traditional financial mechanism with some of the concepts that we think about in in blockchain as these almost like these like domiciled countries, I I tend to think like we'll have kind of these app chains and maybe we can we can get into like what the UX and the infrastructure separation is. Like we will have this UX that receives order flow and then there's a series of economic functions that either exchanges or money markets or or you know, other infrastructure types of pieces that are able to like settle and

you know, kind of perform these economic functions. We'll have kind of these brokers that are able to send order flow for whatever reason to these different economic venues to perform those functions. Yeah. Yeah. Do you want me to I can explain it? So yeah, so I'll try to build up some kind of mental model. So we've got settlement like you said in the traditional system. Settlement is essentially you have two parties and they've agreed to trade their money. And then the settlement is like actually exchanging the money. Like you have usually some kind of third party like an arbitrator or an exchange broker like whatever you might call them.

Different lots of different ways in the traditional finance system of doing it. But generally you need some kind of umpire to do the the transaction to settle it. And the beautiful thing about crypto is that that arbitrator is is the blockchain. And a block is enough is all you need to settle a transaction. So it's it's like instant. Um and then the other beautiful thing is that there's so many different ways you could potentially different types of trades, different like derivatives, different financial agreements.

Um even just sending money, swapping it what it like lending. All these different things can be programmed like in code rather than needing another new like complex arbitration system, you just have this single blockchain, one place where you can like do any any type of settlement. And the then you get into the cross-chain world, you have two different countries, and you need international settlement, you need some kind of like who's the who's the person who has the final say if something goes wrong. Like one person doesn't give the money and the other person does, then you need some kind of like who is it? Is it like um the UN or something, but there's

there's way that's ways they do it in the traditional system, but in crypto, that's where cross-chain is. It's like you can do you can do cross-chain settlement um using these different verification methods that we have. Um and so you once you have this, you can settle anything, you can settle between anyone. Um then you're able to like build up um this user experience which can actually use lots of different systems at once. So like what we do at Squid, for example, we aggregate different sources of liquidity. So it might be um you know, sometimes it's just simply a wrapping contract, which is where you

can you can wrap like either a stable coin into another stable coin or ETH into a stable coin or you can do a swap on a DEX. Um you can use a lending pool, you can where do sourcing other types of liquidity as well. And because it's all interoperable with like with cross-chain, with the blockchains running underneath them, the user can get their intent executed across all of these different things at once. Um like you said, if they have like a million-dollar trade, we can split it up into like 200K goes here, 100K goes there.

And it's really easy to do in comparison with the finance system. Like imagine you'd need to build some like crazy bank account that like plugs into NASDAQ, plugs into like the Brazilian markets, like plugs into like a pawn shop in in Europe. Like with crypto you can actually do that. You can just access everything and get the best price from anywhere. And you create this like perfectly competitive market which allows you to allows you like small innovators to win if they've got a better product. Like everything is is working better and like that's that gets me excited about crypto.

Amazing. And and it's built for super scale. Like like you said, if you were to plug in, you know, take you can use IB but take any any of these brokers. Like, you know, they can plug into the NASDAQ, they can plug into maybe couple of other exchange. But they can't plug into that pawn shop in Georgia. They can't plug into the to the like commercial bank in in London or the the you know, uh retail um money market in Indonesia. Like they they just don't have the vastness of connectivity that that crypto and blockchains do because

of their programmable nature. Yeah. Exactly. And like there's there's an argument that like the the photos would say in the traditional markets maybe you don't want that because um can you trust the pawn broker in uh this place. But in crypto you can generally can. Like you don't have to trust anyone. That's part of the thing. And then the other thing is this is the tech this is like very tech industry. It's it's less fraud. So, you know, tech time and time again is a place where simply like two two really smart people from like who are nobodies are able to build something which is actually useful and like improves like maybe the like liquidity or the user experience for everyone. So,

is this nice sort of it is the end kind of environment that benefits from that. Um that real openness. And you know, we've we've already seen it with with DeFi and hopefully now with roll-ups and up chains um we'll see it even more. Like we can it's it's built to scale and hopefully the the gas prices will stay uh stay fairly manageable for all of us. Yeah. So, the the that makes that makes a lot of sense. Um and yeah, on your on your first point about, you know, whether or not you you would want to connect to the pawn shop in, you know, Sydney. Like

the I I I would want the option to, right? Even if even if I don't, like I would I would want the option to in order to like connect to all any kind of financial institution that I would I would so choose, no matter how degener- or how how mega, you know. Um and then the the second point that you bring up about tech, like you know, that that I think just is able to like bring people together. It's it it kind of adds this like scientific like almost like more yeah, scientific, mathematical approach, evidence-based approach to scaling um that I think was lacking in kind of like the the

traditional business uh of finance. Where a lot of it was handshake deals. It was more maybe it was more about the people than it was about the money, right? Cuz I think I think I mean, I love people, right? But like if if we're talking about finance, maybe we want to make sure that that it it's about the money, right? So, like Yeah yeah yeah. picking and and choosing, you know, the right the right functionality to build into it like is is a matter of architecture. Um and then I think maybe the last thing that we could touch on is particularly at Squid um you know, what what you guys are

building towards and how your your how your kind of on the cutting edge of FinTech. Like we saw we've and we're kind of in still in this like hyper financialization of almost everything, social followings, identities. And and combining that with the technology piece of it, we're iterating on that very very quickly. So how do you see Squid fitting into like either the finance world, the tech world, or particularly within the the FinTech world?

Yeah, I mean, I think nice metaphors for Squid. Um if people are familiar with um Stripe, Visa, TransferWise all of these services allow businesses to connect and transact no matter where they are. Um TransferWise, or it's now called Wise, allows you to do foreign exchange. Visa actually has like it's own liquidity network and and connects into the in like into the wires of of sending money all over the world. It allows you to do payments obviously with with cards.

Um and that's how we see it with Squid. It's this um is this infrastructure which is for payments and also for trading. Like we don't actually have our own trading systems or anything. We just access liquidity like we were talking about. Um so as innovation and the best prices are, you know, improved upon in the ecosystem, we always have access to that. The sort of the whole idea is that we're we're not opinionated about that. We can always get the same price that if you could if you redid your research yourself. Um except we do it all in one click and in like under 20 seconds. So, we're trying to work towards this similar to web two experience where you go shopping

and you just buy a product with your credit card. Like in web web three, it might be buy something you by signing with your wallet, but as we get account abstraction and like more things like that, maybe just log in with your email and and you can buy. But under the hood, it's powered by Squid because maybe this application which you can buy um which you're you're buying something with or this financial product which someone is offering is on a different blockchain or roll up and um conversely, when you're building a a a fintech application, you don't want to have to choose to build it in the environment where the users are.

Um like maybe you're like dYdX for example, who we're working with, they probably wouldn't be able to do what they're doing if they just deployed it on Arbitrum for example. They have a really specific application. They've had to build a whole blockchain before. Except they didn't want to compromise on being able to access all of the users. Like there's you know, so many users on Arbitrum, Optimism, Ethereum mainnet. And what we're doing for them is they have built their app chain except all of the users on all of these ecosystems can still deposit into dYdX in one click. Um even from centralized exchanges, they can do that. So, it's yeah, it's really about allowing businesses to to like build the with the

best technology they want and still be able to access like take payments or access users from anywhere. I hope in this next cycle, we have account abstraction and um app chains like DYDX can handle fiat deposits. I think I think that's like a main very just like tall barrier for for normies to deposit liquidity because you know, they have to have a wallet, they have to get into like they have to have gas, they have to you know, have some crypto and then and then it all those are prerequisites to ultimately place a trade on on a DYDX type app chain.

Yeah. So, if we have the fiat onboarding rails combined with account abstraction and and then it's just and then you know, it's like it's like the chain it's like you know, we're unchaining this this like mega liquidity source for the entire rest of the world to access. 100%. Yeah, yeah, we're we're doing fiat. We're integrating with fiat as well. Um and it's ironic because we do you know, we spend a lot of our time adding chains but fiat is the biggest chain by like so many orders of magnitude. Um so yes, if we can get that experience really good to yeah, then then we're sorted.

Fiat is the biggest chain right now. It that's based. Yeah. Yeah, well maybe we'll we'll set a reminder remind me of this in 10 years. See if fiat is still the biggest chain by by liquidity. What do you think? 10 years? I mean, I think I think we're definitely earlier than we think. I'm not saying that to like hype, but 10 year Yeah, maybe 10 years we we have fiat like living on blockchains. Let's see. Yeah, stable coins could I don't know.

They that could that could confuse things. Yeah yeah exactly. Is that still fiat? Is that on chain? I don't know. Mhm yeah, yeah, yeah. Is it really DeFi? Yeah. Who knows? Find out next time on the world of defi.