Celestine Sloths, Alloyed Assets, And Hyperbitcoinization with Sunny Aggarwal

Transcript

welcome back to the rollup I'm Andy and today we have a second episode with sunny aall the founder of Osmosis we talk about incentivization about the recent nft Community launches of sloths as well as mad scientists we talk about some of the design choices of osmosis and the modular thesis and we dive deeper into some other the technical understandings for the current modular ecosystem Sunny's got a very interesting way of presenting himself and loves to be polarizing very fun to talk to we really enjoyed this conversation and I hope you will as well welcome back to the rollup our second episode with sunny from osmosis here with Rob we just finished majja March and yeah a lot to talk about we actually got yelled at

pretty bad by the osmosis Community for not including osmosis in the map so I apologize for that it's okay don't worry we still love the roll up yeah nice man leads to another now we do a full podcast episode in reparations [Laughter] that's how that got scheduled okay that makes sense yeah literally I think it's very very uh I don't think anyone disputes the fact that that osmosis is modular so we can come out and clear the air now um and we'll we'll get a little bit deeper into like the modular monolithic the different ideologies the different Tech Stacks uh that are prevalent in modular

and monolithic a little bit later but I think Andy has something that he wants to talk about first I mean yeah what's going on in the cosmos Community nft Land I think that this modular sentiment was so has been so bad basically because honestly it's just a reflection of the Celestia price and and so Celestia's just been down only for a couple months and then we get this like random nft mint on stargaze which actually has this capability before we get into the sloths the sloths were minted on stargaze but you could there was this interesting backend Tech that was able to be uh enabled I think through skip um which made this mint super easy maybe we can

just start there what how did that happen so I'm gonna be U I'm G to reveal some uh you know I did not actually buy a sloth so I did not actually participate in the Min but but uh I believe what skip did was like you know uh skip has built a product called skip API that kind of does like you can do like trans it allows you sequence like a bunch of steps to do on a bunch of different Cosmos chains all in like one step you make one transaction and it kind of like it goes like Boop does something here so what was happening was you can with Tia on Celestia chain in a single transaction it made it so it would like send that Tia to osmosis swap to stars on osmosis send the Stars to

stargaze and buy the nft using that those Stars so it was doing these like multiple steps all in like so you can basically you minting an NFP on stargaze just by making a single Celestia transaction which was like pretty cool I know uh agoric and Dean are working on this like orchestration idea it's a similar concept yeah and it was so easy it was a Friday night I was just resting uh I think I went out the following night for a little party and that that Friday night I just see some tweet and and I'm sitting here with a buddy he's more of a crypto curious guy and and I'm like yo we we got a miny so you know we minted a couple and for him all he had to do was send some some Tia from

coinbase to Celestia click a button and then click mint and for him it was like it was a two-step process took about five minutes and it was super easy yeah exactly I know the stuff that gor doing is that they're actually like making the dev around this even better like you know you will be able like a developer who wants to do a cross chain interaction they'll be able to just like write these as like each step is just like a single line of code where it's like okay send from here to here the next step is like Swap and this next step is it and and and then it will like you can like it'll make it very easy to like handle the fallback like in a line of code like oh if fail like do this like it so they're making it what

orchestration gor team is doing is making it very easy for a developer to like write these cross chain applications I'm sure like the stargaze team had to work with the skip team to make that ux work properly the orchestration will make it so any developer can just start doing this quickly and easily yeah so it seems like the sloths which are now up like 400x from mint they flip bad kids today on the day that we are recording this which I know has ruffled some feathers um but it seems like they're kind of branding as like this like modular Community which I think that the ma Community really needed I think that Celestia price action was just not great in the last couple months and I think that people are needed some sentiment boost and yeah I think it's pretty good timing yeah um yeah you know

I will say that it flipped on flooor price but the supply is lower so it hasn't flipped on market cap yet but uh yes it's definitely it it it's really just good to see like uh you know I feel like we've had stargaze is this nft platform and like it it's basically had one success so far right which was like bad kids right and like you had there are other there are honestly some like really cool other nfts on like stargaze that I feel like don't get enough love like there's this one I really like called pixel Wizards which it's like uh it it's an idea that I had for like a while I was telling someone about it like I want to like create this like nft that you link to a coin price and then the NFP like changes em motion based off

of how the performance of the coin is doing that day and I always had this idea like just a little fun side project and like oh you should check out this pixel wizard thing it does something similar where and I was like I very cool but I don't know bad kids got all the love and like all you know all the attention but it's like you know now we actually with like the sloth and then there's this project on Osos is called mad scientist like I feel like you need to have more than just one nft class uh collection right you we're starting to I think we're gonna see like nft season now in Cosmos like so what's the story behind mad scientists here because I'm a little late to the party here yeah so mad scientists is really fun because so the story behind it is okay there's this

project called backbone Labs uh they you know came from the Terra ecosystem and they kind of what they are really interested in like nftf which is something I've always been pretty interested in and that's how I kind of got in uh got in touch with them originally but they have done a very I think very very cool idea for how to build like an LSD uh ecosystem so what they do is so okay most lsds right they like usually take like a 10% Like take rate off of the staking rewards right that's like that's somehow just become the industry standard that's what stride takes that's what Lio takes Etc um and on something like stride like you you know the stride token gets 10% of the

staking rewards from all of the lsds that stride does which is you know it's a pretty good investment probably it's probably the one of the best ways of just investing like osmo and stride are probably the two best ways of investing in the cosmos ecosystem as a whole because one gets all the volume the other gets the staking rewards um but you kind of like end up you know as stride grows and grows they have like over like you know over 10 lsds at this point right I think like the community like they have to choose where do they put liquidity incentives and like where do they like you know Focus their limited marketing and attention right what backbone did was something cool where they said okay for every LSD they

launch they're also going to launch a nft collection um and what's going to happen is the that nft collection is going to get like 60% of the protocol revenue and then backbone's native token it's called Soul s o l um it gets 40% so what's happening is but now what you do is you have this like really passionate like set of like community members these like nft Community nft communities tend to be you know much more have a lot more vitality and stuff and so they're going to go and like promote LSD within each ecosystem so you know they have one on uh you know migalo called migalo whales

they have one on kujira called the Kiran they have one on uh Tera but so they basically built this one on osmosis called The Mad scientists and so you know there's an LSD that they have for osmo it's called B osmo and mad scientists are going to get you know 6% of the staking rewards from from from B osmo uh and so this is like it's cool because now you actually have an nft that actually has like real yield uh on it um and then on top you know and then kind of what happened was by by doing this like mint on osmosis you know osmosis just is us you know it's it's the most active community in in all of Cosmos right we have the most users like

daily users most transactions like all that right um and so they like osmosis mad scientist ction was just like a runaway hit where so they used this we built we designed this protocol called stream swap a while ago it's meant to be this like Fair auction mechanism um and so we designed it but then we gave it to another team called omn flick to actually just like build out um and so there have been a bunch of stream stops already like uh you know I think and they they're used for token Launches on osmosis and uh I think over 10 at this point but then this one was just like a runaway hit where like so so what they did was they created a token called lab and they they sold it via this uh stream

Swap and then the lab can be burned in order to Mint the nft so it is sort of just like you're really streaming you're auctioning off the N the nfts eventually but via this stream swap mechanism and I think like it did almost like 2.5 million osmo or something was like uh or 2.4 million Oso like participated in the in the Stream swap so it's like one of the biggest like nft uh you know collections I guess mints in in in in Cosmos now and then since then the last the mints actually open up next week so since then the lab token has just started you know permissionless and has already been trading on osmosis and it's also like I think like 3x or

something since then um so yeah it's a you know fun you know I it's exciting because it's like the first nft on osmosis but it's also cool because it's like using a lot of like mechanisms I've personally been interested in for a long time like you know Fifi tokens to represent a collection like the lab token using stream swap uh using this like LSD like uh protocol under like like real yield fft so I know I just think it's one of the most interesting nft experiments right now we uh we spoke to tun uh from Gauntlet about the value of cruel uh thesis in in the modular stack and just a little bit of prehistory right it it used to be before

modularity that you had value AC crewing either at the protocol level or at the application Level and it was just like flowing up the stack or down the stack but then I think the conclusion that tun and Andy and I reached was that in the modular world in the cosmos world the modular World value accurs to the users and so we can see that very very clearly in these nft in in nfty like as there's real use cases for these protocols and these products uh they earn fees and then that interest and that value tends to acre back to the users and I think nfts are a great uh tool instrument if you will to to capture that value in the hands of the users and so it is really cool to see uh some of the cost saving

some of the protocol generated Revenue um as a result of these products end up flowing to the users and then and then it's in the users's hands it's like it it it is just much more peer-to-peer it's much more like you know it's like the people who are using the thing are the ones that are reaping the rewards and I think that's the way that it should be another thing is actually I think the somewhat of the IL liquidity of nfts makes it almost a better governance item than like fungible tokens because you know like it's almost like a private Market thing right where like you actually want nfts feel a little bit more private markety where like the way of buying and selling them is yeah we have these marketplaces and they're

getting more sis but they they're still more similar to like OTC stuff actually than it is to like an amm and so you actually want the people like doing governance of protocols to have this like little bit more uh lock in so I'm actually curious to see if we'll see more things like this where to like projects do uh like you know governance is actually done by an nft series rather than by a fungible token it's it's also more a akin to a uh uh nation state governance structure it's more like one person one vote uh and so I think there's some very uh

different voting and governance dynamics that come as a result of that that type of governing structure yeah it's like identity as well it's like you your identity it's your person yeah I think uh daow which is like the like most popular governance tool in Cosmos like I think it's work it's going to be rolling out nft like base Dows like pretty soon so um yeah that's pry exciting so I know the Mad scientists are using this other one called Enterprise that was uh built by like actually by tfl um but yeah so they they'll be using that for like the the Govern like government nft Dallas basically so I I think that will grow um there's also a product that we're we

kind of another like one of these uh you know idea we had that we like gave to another team to work on called fractal which is for fify uh nfts uh so it's like you know you'll you'll be able to create a token like a a token that tracks the value of like the floor price of bad kids for example so that way they can be like traded more I think part of what made Labs uh like uh mad scientist fund was like the liquidity of like being able to buy and sell lab was very easy um and now there's a game that a lot of people are doing of like oh do I keep my lab tokens for the liquidity or do I burn them to mint the nfts and get the yield from the LSD uh and so like

you know I think people are like kind of debating what what what they're going to do um and so and it's the same thing with the sloth sunny it's like there's this new airdrop meta of like oh bad kids were included in a couple of these token launches now the speculation has gone kind of red for the sloth and for other nfts um you know it's implements this game theory of like buying and selling and holding and when is the shot going to be taken and wallets and different wallets and yeah yep yep yep so yeah I'm curious you think about that though like like is that met as something that is from a protocol token distribution marketing expense perspective is Distributing to nft communi something that you think is a

wise strategy I think so I do think that nft Community shouldn't be based off of the expectation of airdrops I think that like that just you don't that's not like bad kids never was like done as like oh the expectation is that there would be airdrops right it was like it was just like a honestly I think out of all a lot of the N class series I actually just this sounds really like cheesy but I actually did like the art I think it was like it's I think it was fun because what you could do is you can like look for the one that looks like you and you you like find that I think that that's what kind of what made crypto punks pretty cool as well because you like look for the one that looks like you

um and so uh I think that it's and then it was nice that like a community formed and then people are like oh this is a good Community onboarding tool let airdrop to it right I don't think communi for like real communi Forum around the expectation of airdrops yeah I agree I mean we've been like Ming a lot of like modular steak Tia Etc but I think that we're going to I personally will stop trying to to do too much of that because it's just this Community who just wants free money versus like the understanding and the underlying idea but that's what's that's like what's going on in the modular thesis right now the modular environment is like you've got this double-edged

sword and we talked about this with AIT from uh justtin you know AIT tripathy the personality we talked a lot about this he's like modular appeals to like these like OG research like Giga braines like in the governance form people and then you've got like this other side of the sword which is like this like staking idea where all these people are staking for airdrops and there's like this like governance and it's just kind of like this like meme culture as well and I I think there's something to be said about like onboarding both ends of the Spectrum in terms of like growing a community yeah exactly so uh you know I think I think like I said I think nfts communities tend to be

more passionate than like funable tokens because you know yeah so I think they are great Community onboarding tool and like a a like a set of missionaries that can promote that like I said that's what I think backbone did well which like oh you have an nft per chain that will then go that Community will go promote your nft promote your LSD within that ecosystem yeah yeah yeah I mean it's gonna be interesting to watch play out um another really interesting kind of event that's been going on is Salon has been pretty congested so we've got this general purpose salana single state machine the kind of the epitome of of Monolithic has gone

against sharding throughout their entire road map has stuck steady to this upcoming fire dancer upgrade but then we we get this Camino air drop this Wormhole air drop we get this or farming thing happening and all of a sudden we've got a lot of failed transactions and yeah I mean what's your thoughts on the current situation there um is salana rollups going to come uh could they learn something from the cosmos model or the ethereum model um so to be fair uh I think like most of the current issues on sana's stuff has to do with like their P2P stack more so than like the chain itself being congested this is in my

opinion has always been a bit of a I don't know I think the salana P top stack has actually been something that I've been I've always been a little bit worried about uh just the way that they don't really have a mem pool in the same way that most blockchains do you kind of just like broadcast your transactions to validators and you're you're you know every validator is almost effectively being dosed constantly because everyone is trying to submit transactions to them like extremely fast so I I believe that the current issue has actually was mostly due to like a bug almost like in the P2P stack implementation where it's not just not designed for like these high you know PTP forms um but you know that being said like I do think that

eventually like salana will like I I just don't think one blockchain will ever meet the demands of everything right and like it what part of the what's annoying about building on like a a generalized blockchain is that like you know you have someone else's another application gets super popular and it makes your application like unusable or like or way too expensive right the nice thing about like osmosis is like hey if dydx suddenly starts getting like a ton of vol like transactions and like you know that doesn't affect trading on osmosis um so no matter what I do think that like you will have to like major applications will always need app chains

I think that that's that's the thing I think generalized purpose blockchains are useful for prototyping or like you know go initial go to market like launch quickly but and I think the dydx is the ultimate like you know it's such such a good example of like the evolution of of applications right dydx was originally a smart contract on ethereum then they kind of turned into this rollup stack but then eventually like okay we need full control of our stack and so they kind of build their own op chain um but I think salana is doing a good job at being this like Bo I think sana's definitely done a really good job at building a smart Contracting environment and ecosystem um and eventually it will just they'll have to start building app chain now that would be cool if we start

I will we start seeing actually we do have an svm app chain right pith pith net is I guess the first salana VM based app chain pith uh decided to fork salana and they like they're running an svm basically so uh yeah maybe we'll see more and more svm based op chains I wouldn't be suris eclipse is coming eclipse is like ethereum rollup using svm a little different but yeah but it's still not like s to ethereum no yeah it's going to be general purpose yeah talking to the monad guys cuz we have to rule up we're like sovereignty own your block space don't have to depend on uh you know Billy Bob Joe who's who's your neighbor who just his Lemonade Stand just got a bunch of business and now

your chocolate bars are just can't sell them like we're trying to get we're trying to get out of this mental model and get into like a sovereign block space model talking to to the monad guys about this but they're like well you know we think that we're going to be able to scale um regardless and I was like No we're going to need some some monad l2s or app chains as as well and then they end up asking me and I'll pose this to you as well it's like do you have a mental model for app categories where uh customizability or sovereignty is like really needed and really good and also maybe like not so great or bad even um when it comes to types of applications I think best example so one is I think the biggest thing is do you

need to make your validators do more like in Celestia you need they needed to make their validators do all this like data availability stuff right and like so okay they needed to modify their chain thorchain they needed to make their validators run these like Bridges to bitcoin ethereum and all this stuff so they needed their own app chain um you know uh dydx they want to make their validators run like the order books in the mempool right they need their own validator Set uh so I think these are the kinds of thing like anytime you need your own valid Set uh you need your validator set to provide an oracle for something right like that these are things that you want to use like I think app chain makes a lot of sense the other

is if you want to have like very opinionated uh block block production uh rules where like something like let's say on osmosis we can say like hey a block can be produced but we're going to like execute these not in the order of transaction inclusion but we're going to like take a block and we're going to scan through it look for all the like liquidity ads first then we'll like uh execute swaps and then we'll go through and execute all the liquidity removals right and so this is like okay by like be you can't do these like sandwich attacks and stuff uh by doing that or maybe we want

to take all the trades and execute them in a single batch uh trade right so uh if you want to be very opinionated about block execution block ordering rules that's another use case so what are the kinds of things that want to make use of these right like so I gave some examples of like you know making validators do more is if you need to do oracles or they need to run Bridges and stuff like that I think dexes are obviously one of the ones that want to like will want to uh have very opinionated uh ordering rules um you might have like something like stargaze right you maybe right now they don't do that but like in the future they might say hey we want our validators to run like IPS pinning services that like help you know pin

these uh nfts similar to like you know to be a validator on R weave you have to provide a certain amount of storage capacity to the network similar to like you know SL providing certain amount of data capacity to the network so it's like Stargates might be like hey we're going to build a nft like data storage uh platform right so it's like that's run by the Val so I don't know long and and so those are like things where you need the custom custom app chain now when you just need your own dedicated block space is just you know as soon as you're a big enough application that you you you know you don't want your business to be disrupted by another like popular product that that makes sense

right like um yeah so I think like there's all sorts of Roose cases why someone might want to have their own option yeah and you you touched on uh the opinionation of of your of your validator set and and it kind of it's another benefit to running your own sequencer and I don't want to like make an argument or too heavy of an argument to like run your own sequencer because I think we are trying to get to a place where we're running decentralized sequencers or even shared sequencers um but I'm curious as to like once you know as we kind of like see the benefits of of running your own sequencer you can have this opinionated uh way of of ordering and sequencing transactions um and then you can also

internalize a lot of the revenue that you that you generate from from The Ordering of transactions do you think we get to a point where the the shared sequencers have some sort of like viable use case uh or are they just not customizable enough to allow chains to order the transactions in the opinionated way that makes the most sense for those chains yeah so um I've like I think shared sequencers can eventually like add more rules logic to the sequencing system that like allows you to do that eventually but like it just gets more and more complicated to the point that it stops becoming it

becomes a blockchain in and of itself like honestly Suave kind of got to that point like flash bot they're like they're like okay we're gon adding more and more rules s thing like oh okay we're just putting an evm inside the sgx at this point like we're making our own like kind of blockchain at this point um and so yeah you can do that but like okay now you're now okay what is there ex to ordering rules within within that so uh I I don't think uh I I think shareyour can provide some more rules as they add more logic to it but I've thought through a lot of like s cases in osmosis where like we don't want that to happen like here's a here's a you know

like like I said I I kind of mostly think in terms of Osmosis like what do we need for our product but like we with this functionality called threshold decryption which is like oh you want to make it so uh the validator said decrypts transactions in in a certain situation but you want to make it like if an oracle update is delayed what you want to do is tell your validators don't decrypt these transactions until you get an oracle update then process the Oracle update first then decrypt the transactions um it's like a kind of kind of encode this set of rules in like a shared sequencer will be like very complicated relative to trying to just

do it on you know your own and like what's the point of using a shared sequencer I actually don't understand why you wouldn't just have your own decentralized sequencer yeah I mean I think the argument is around cross domain me cross cross chain Arbitrage types of interoperability um I mean that that's the argument Atomic execution amongst different rollups in the same block on the L1 well if you want Atomic execution now you're not even to start sequencing you need like Atomic roll back and stuff right and that's like you're basically building a single blockchain at that you're building a multi-threaded blockchain at that point you're not building distinct rollups anymore if if the execution of your if an another

chain wants needs to roll back a block a transaction and you need to wait on that before determing finality you're no longer a a unique op you're a parallelized blockchain which which is fine Atomic inclusion Atomic inclusion could be a better term Atomic inclusion is fine but I'm not sure what or there's a I'm not sure how much I'd get to right like Atomic inclusion because if a blockchain has like my blockchain has rules of like just because a transaction is included doesn't mean I'm going to process it the way you think right because like I said maybe osmosis is reordering the the the execution like uh what what order things it executed in so

inclusion gives you some guarantees but it doesn't give you like guarantees of how it's going to execute but I think this is important because it's the fragmentation problem like this is what this is like like the reason why the sloths mint did so well was because you were just able to go from Celestia to uh stargaze and the fragmentation problem was solved you know and I think this is like one of the big like uh Hills with the modular thesis in that Cosmos is basically the Cosmos Hub has been dealing with and all the app chains for for the years and now we're seeing all these ethereum app chains are going to start to basically deal with is like this fragmentation problem I want to touch on Osos alloyed assets but before we get there um maybe talk us through

how you're uh approaching this fragmentation problem from the lens of Cosmos as well as broader space and and kind of um why you think the alloy assets is the solution or a solution yeah I mean just really quickly to mention on the sloth thing like you know these chains didn't need a shared sequence or a shared validator set we like it it was operating on sesia osmosis and stargaze all those have independent valid you know I think this like cross chain composability is mostly a a higher you know this the whole world runs on asynchronous programming right all of web development is done asynchronously we don't need web servers running on the same we don't need different websites running on the same

server in order to get like the composability we have on the web right we have apis and all this sort of stuff um and the same thing going be for blockchains right you don't need the entire world all applications running on the same blockchain to get like the level of composability that you're looking for and that's kind of what like you know a goric orchestration is trying to like do make the ux of it a lot better um so anyways uh like yeah so you mentioned like uh fragmentation liquidity fragmentation so you know today on osmosis uh there's you know when we like Bridge Tia or Adam right we use IBC which is this like extremely native

bridge and we like kind of uh it's directly done with like between Celestia and osmosis like and so we kind of like just when we label that we just call that Tia on osmosis because it's like the natively bridged uh IBC like go but when we going to get assets from eum right osmosis doesn't have a direct IBC connection to ethereum yet today right and so there's different bridges that we can use uh you know basically two years ago in osmosis we had this like Great Bridge Bake Off where we could kind of it was the four main competitors at the time it was Axel Wormhole Nomad and gravity and they were all kind of like competing to become the canonical

ethereum bridge for osmosis and you know governance basically decided to vote on Axel as the canonical bridge for eth on osmosis so that means when you bridge eth from ethereum via ax to osmosis when on our site it just shows up as e right um but there are like other Bridges out there we have Wormhole as well and so what we had to do is we came up with a standard of when you bridge eth from Wormhole to osmosis it shows us eth dowh but if you bridge but now and this these are non-fungible assets right and so you

know because the ux was focused around Axel liquidity incentives were focused around Axel that's what got most of the traction and liquidity but now we're in this like situation where it's like okay what about like bridging eth from polygon to osmosis right that's also not fungible because you know if you want to get the right way to get E from polygon to uh osis you have to bridge it from polygon back to main net ethereum and then to osis what we did was if you try to bridge polygon e we've labeled it as polygon doe. axle so it's like the source chain the asset the bridge now the problem is we have like all these different types of ethon

Osmosis it's like it's kind of like really messy um and they're not none of them are fungible with each other we could go ahead and like build up stable swaps for all of these but it's like okay where's that liquidity just going to magically come from this is why we came up with this idea called alloy assets where we say hey the canonical version of eth on osmosis will actually be a basket of underlying eths so this is actually what like someone like coinbase does in the back end right you go on coinbase and with eth you actually have the ability to deposit withdraw eth from a number of different l2s right and like that's because what happening is coinbase on the back end is

they're just like maintaining inventory of eth on different places and allowing you to deposit withd draw uh from all of them so that's what all happen on osmosis let's say for the sake of example let's just say we have two Assets in our alloy it's eth VI Axel from Main Anum and eth Via Axel from uh polygon right and so let's say what what governance has the ability and the canonical eth is the lp share of this basket right it's um but what we what governance also does is it says hey it allows us to put caps on each of the asset based off of like their risk level uh so what we could say

is like hey eth from uh polygon it can make up a maximum of 5% of this basket because you know that that version is taking on polygon Bridge risk right on top of aular Bridge RIS while you know the direct one is like removing one of the bridge risks but that 5% capacity that it has allows us that if someone wants to like deposit eth from polygon they can just bring it in and add it to the basket as long as it's not at the cap yet and it will just mint uh the alloy e so we have these like Max caps on each asset and we have have rate limits where we say hey a percent like the the

composition of this asset can't increase by more than this percent in a 24-hour period so let's say it's 50% right so polygon e makes up 2% of the basket right now it can't go up to more than 3% in a 24-hour period this is to deal with like you know Bridge hacks or something like that where it can cap the losses and not cause this like run on the banks it lets everyone at least you know redeem on like cents on the like get the same hair haircut discount rather than C this like bank run out of the system um so yeah so that's kind of what H so so the idea is that like okay will for eth will'll support like you know

the Axel Bridge from like ethereum but maybe we'll also if governance wants to say hey Wormhole has proven itself over the years at this point so maybe it's okay to like add Wormhole as another bridging option what it also does is it gives competition to axela that drives bridging fees down for for the user right so now people can choose which one which bridge is cheaper do we want to use Axel or Wormhole we still get the same asset on the osmosis side right but now we can also expand like deposit withdrawal functionality from all of these different ethereum l2s very cool and I think that the name makes a ton of sense because like once once you even if you go into like the the chemistry of an

alloy it combines two elements from the periodic table once you combine two of those metals or two of those elements you have an alloy um and so that's that's what's happening with eth in this case you're taking polygon Bridge eth you're taking Wormhole bridged eth you're taking eth from here eth from there and you're composing all of those together into a single alloy eth and you know a fun one is H on osmosis like I said because it's canonical it's just called eth but when you you these acids will also be IBC to other chains and so when they're on other chains they'll be labeled as Al e alloid eth but it's like Alo like all eth you know yeah so maybe a silly question but what happens if like the majority of the

eths go to zero like AAR eth goes to zero Wormhole eth goes to zero and gravity Bridge e goes Zer or there's bridge if there's a bridge hack and and yeah like one of those goes to zero or M yeah let's say one of them goes to zero what happens is the first rate limit will get hit probably because people will rush to like get out so some people will get out out whatever that whatever how whoever can but as soon as the first rate limit is hit governance will be able to say hey it it puts an a new Max it says it can declare one of these ass some of these assets as uh you know distressed assets basically or corrupted assets and what that means is the percent of that asset cannot increase at all in the

composition so now that means two options happen one everyone can redeem assets from the but they have to take out their proportional share of the corrupted asset so that means now okay everyone took the same haircut right now like you know let's say five one of the one of the bridge assets that made up 5% of the alloy got destroyed right now okay yes this whole thing goes to like you know everyone has to take the same 5% haircut on their on their on their deposit um the other option is it allows an insurance provider like like you know maybe it's the bridge teams or osmosis governance with an Insurance Fund where we can say hey we're going to like swap out all of the corrupted asset for like

an uncorrupted asset so that way we can like you know we can we can restore the peg of alloyed eth what are the knock on effects of proliferating osmosis alloy assets across the cosmos honestly to be honest we haven't thought that far we've mostly been focused on it from an osmosis perspective but you know it is I guess makes osmosis a little bit more like Central I guess in like the asset issuance on a lot of the like in a lot of chains um and I hope it just improves the ux right where it's like it I I I think actually one of the problems is that like by choosing a bridge provider it's it's weird because right now like if you can canonicalize one Bridge

provider it does two things one it gives them sort of a monopoly that they can charge like pretty egregious fees sometimes which is not okay and two it also just like you know you lock off Partnerships right like other Bridges have like different communities that they have access to they have access to like capital and liquidity and all this kind of stuff and you're basically like saying like oh sorry we're only working with Axel right which is like you know that's why why limit yourself to only working with one partner when you could work with multiple and like bring on and so I think that will actually so really I think what it'll do is that this will actually bring in more liquidity into into uh Cosmos as a whole but like isn't Noble doing this for usdc why

don't we just let them do it for eth and and all and all the other assets so usdc is a special magical case because it is a centrally issue usdc is a hub and spoke system like asset but the the Hub chain is like circle like C Corp right and Circle C Corp like like mints and burns on all of these chains and what was happening was before and circle brought cctp which allows a before to go between chains like the native issuance you needed to uh like you know work uh have a circle account cctp made it so a normal user can like burn usdc on

ethereum and mint their usdc on Noble there's no such thing as cctp for eth right like noble can't just be like Oh I'm going to Mint eth out of thin air and like there would just be Bridge right what what makes Noble special in circles in usd's case is that you know they did this like business arrangement with uh Circle right but that's not you can't do that with eth um and so actually the first alloy we're doing is with tether because even though tether has issued a native Cosmos usdt uh via cabba um there they don't have a cctp right now and so there's basically like no easy way for a user to go between

tether on ethereum and and Cava tether right the only way to do like the way we did it was two ways one we did otc's or two you go to like a centralized exchange like like bitfix right you go to bitfenix and you say like Hey we're depositing e tether and like we want to withdraw Cava tether but what is what is bitfix doing the same in the back end is the same thing as what we would be doing with alloy assets right um and so it's like why don't we just build that in into the decks itself um so yeah so with now with usdt on so because the Cava usdt is like using IBC it's probably does has less Bridge risk it will probably make up like probably

90% of the alloy but 10% of the Aly will still be usdt from ethereum and we're also working with another bridge to bring usdc usdt from Tron and so you know you'll be able to deposit withdraw from all from both of these sources when it comes to lping a DEX poool or just using these alloyed assets one would assume there's like more Risk by using the alloyed assets compared to just using one of the Native assets is there going to be like like how you compensate people for taking the risk of using alloyed assets yeah so I mean liquidity incentives will be focused around the alloy assets so that way they're by uh with these liity incentives they're kind of being compensated for like taking on some of that risk and I

would actually say like the risk is a little bit I wouldn't it's not as clearcut as saying it's higher what's what's different here is let's say you have five bridges in this alloyed asset yes you're taking on the risk of five Bridges like there's more chance of a corruption but the result of a corruption is lower is safer right like it it's it's a diversification thing right where you're you're actually like if one Bridge gets corrupted you lose 20% rather than if oh the bridge you chose to hold gets corrupted you lose 100% yeah but it's like who's the who's the bank who's the insurance it's like on an exchange it's like you can always count on

binance you can always count on you know whomever if something happens right whereas it's like you know you're you're diversifying sure but like as we learned from the past you can't just diversify you know three good and two bad and call it a A+ CBO and then the entire mortgage crisis happens like we have to kind of think differently about the risk and at least give some consensus for taking on that risk yeah so I mean I do think that osmosis should be working on building up an insurance fund right like a a portion of all trading revenue does go into the community pool and that uh should be that like we're actually going to make a proposal about this that should be set aside as a community like as an insurance fund to help same I mean that's how binance plugs these gaps as

well right like they they have insurance funds built in so it would be like a similar situation here gotcha and then the other the other kind of matter at hand is like what Rob was getting out like like like how do we one really quick thing I'll also add that like the goal here is like I said is not to be like oh we're gonna add like 10 new Bridges like you know every like like random brid it I think the biggest value here is like um you to support bridging from more Source chain so even if we just let's say we don't even add Wormhole we don't add any new Bridges at all like to osmosis right it's at least we can use axillar to bridge from arbitrum and optimism and polygon and

base and yes what we are doing is we're taking on the native Bridge risk of those chains right like polygon has a native bridge arbitrum and Bas have and optimism have a native Bridge so yes we are taking a little bit more Bridge risk on but that's where like like I said I don't think it's like oh these are going to make up 50% of the each of these are going to be 20% of allo like each of these is going to be like you know just cap whatever we need in order to get the like deposit with withdraw flow capacity that we want yep even coinbase I'm sure every time they like people let's say a lot of people are depositing to coinbase on arbitrum they are rebalancing it right they're probably moving it

withdrawing it and moving it to mainnet e to holding it in whichever a safer way so like for example we're building our own the alloy that I'm personally the most excited for is the BTC alloy um because I think I just foresee a lot liquidity fragmentation coming in that ecosystem and so you know we we worked with bitgo to issue native wbtc on osmosis and so I think that will actually be pro at least at the launch will probably be one of the biggest uh components of the alloy on uh of the BTC Alloy on osmosis but then from there we can add like some capacity for like oh sbtc from stacks and tbtc from meso and like just enough to get these like

deposit withdrawal flows enabled while majority of it is still like the wbtc that most people trust at this point yep yeah that makes sense the only the only other consideration while I think that the uh aiming to solve the liquidity fragmentation is is is certainly the the goal of the current state of of crypto as just Cosmos in general you kind of get the the knock on effects that Rob was saying which I understand that that you guys may not be too f focused on that right now but once you have alloyed assets and users are trying to to do different things with them on different chains um you know there're may be a bit of like a rough around the edges user experience for users and also and uh the teams may have to uh may have to kind of

implement different uh I don't know like ways of managing these assets so um yeah there just the other kind of concerns that we're seeing yeah I mean traditionally what's happened in Cosmos is most of OS takes the lead of Osmosis on this kind of stuff like osmosis voted to make Axel the canonical Bridge provider and then like actually sort of became the canonical Fighter for all of Cosmos uh so I think the ecosystem tends to follow the lead of Osmosis here so um yeah and and one thing also worth noting is that alloying is also we have is implemented as a swap on osmosis so even though you're depositing into a basket

and minting the token it's implemented as a so like the ux of like going from e. axle to alloid eth is just like it's the same as just doing a a normal swap transaction so it will work automatically in like skip API and Squid and all of these uh intergrations will just be pretty like seamless how uh how does that change with eth to Cosmos IBC do do we still need alloy Assets in that case um ye I think that a lot of these Cosmos IBC ethereum IBC implementations like like you know Union and composable and

stuff they still have code risk right like when we think think about bridges there's two types of risks yes there's like you know Economic Security and decentralization risk like some of the biggest bridge hacks have been from that right the Ronin hack the harmony hack these are like like centralization issues right you had like eight notes turned four of them were owned by one person it's like yeah it's like okay that's one but the other is like CODIS the Wormhole hack was not a centralization bu that was a code bug right and it's like uh I think these new IVC implementations from these like honestly like unproven Dev teams right like very passionate but like you

know theyve never built a this is going to be one of their first production products and so I I think we want to still We're not gonna be like oh okay you know IBC you know composable has IBC tomorrow let's shift everything to using that because that could still have code bugs so I think what will happen is as people become more comfortable in these things they'll slowly increase the Caps allowed for that version of the asset in the alloy oh okay so so that's how that's how it could look in practice right is like gradually the there is native eth via IBC in the alloy and then gradually you kind of like increase the cap until

perhaps like we treat it as secure and then we entirely have eth native eth on on osmosis yep don't worry Sunny's not going full Justin sun on us we still got him boys he's safe and sound um s you brought up a good point kind of to end us off your last five 10 minutes or something um hyperbitcoinization Bitcoin on Cosmos Babylon uh namic no nomic just launched I think um yeah so maybe just can you give us the TDR as to what's been going on there where I think our our audience probably has a little bit left out there and um maybe some of the of the developments that you're seeing osmosis Etc yeah um

hyper boronization uh you know I started working on Cosmos to build the app layer for Bitcoin that was like my my goal uh I I was interning at consensus at the time and I was like really interested and all like all this ethereum stuff like wow you could do all this cool stuff on blockchains but it's like what what is this eth shitcoin like I thought we're building for Bitcoin um and so what what time frame was this like 2017 2017 okay so ether's definitely like much earlier in its life cycle than it is today right like at the time it was like you know eth was around for like two years or something so it was like uh and so I was like I want to for Bitcoin and so I saw Cosmo I learned about

Cosmos and I'm like oh this is it right this is how we build the app layer for Bitcoin you know a network of app chains Bitcoin is the original app chain it's meant for you know just for money and issuance and payments and it's like the Bitcoin asset just we just need to have the BTC asset be securely bridged off and be it'll be the money of every ecosystem of all blockchains and you know causus is the way we build that um blockstream was the one who came up with the concept of s Chained and never really like built anything with them so uh so you know then it took us a while to build the cosmos stack to where it's possible and then Bitcoin just like there was no demand for it right there was like no one using it nothing was

happening um and so you know I was always like pretty involved with the community but it was just like I don't know there was like a few like you know we called us like the Bitcoin progressives like who were like pushing for this Vision but it was just a very small like uh like contingent and like honestly what kept happening was like the our contingency kept like shrinking and shrinking over time as people got demotivated of ever seeing any change and like it would that contingency was shrinking over time and then ordinals came and just changed everything like ordinals then plus like Udi's like you know movement that he created but like the culture there there's there's a culture shift in

Bitcoin and I think like like there's there's like Vitality there now which is like really exciting and like uh know with like all the BRC 20s and runes and honestly most of the stuff is just like nfcs nfts and mem coins but now you're actually starting to see this have like Ripple effects where now it's like now you actually have people developing like Bitcoin l2s and stuff and like you know bit VM based stuff and I actually think like you know for the first time there's no lead maintainer of Bitcoin at the moment like um and I think like you know this is I think I think that like we're going to see like the core development of Bitcoin itself like uh change and that does not mean we're going to have

like smart contracts and stuff on bitcoin I think that's like we shouldn't have that right Bitcoin main change should remain simple but at least enabling the few Technologies needed to enable secure bridging right like opcat let's do op CV like 119 like these are the kinds of things that we need in order to enable like Bitcoin to be securely bridged and then from there we can like uh you know and so basically I think Cosmos is super well positioned for this right now because okay you know a little bit of tinfoil hat uh I think one of the reasons that like good Bitcoin Bridges weren't really promoted within ethereum is I don't think the ethereum mafia wants Bitcoin as a

competitor to e as money uh on in the Eos system um but I think Cosmos actually doesn't have that issue right I think that Cosmos we don't have a base money and so Bitcoin will be that base money of our ecosystem and uh I think that fits well with the uh with the outlaw Vibe of Cosmos Cosmos is very bad kids like Outlaw like censorship resistance like Bitcoin libertarian Vibes I mean so Babylon you know that that Babylon was actually my idea I I gave to David to like do like big I'm like hey Bitcoin reaking this is like the thing you know like uh and so there that I think that's going to bring a lot of attention you know meso is like a cosmos space you have Thor chain the

biggest Bitcoin Dex is cosmos space like I think Kos is just very well positioned I I my I think we should rename kmom to bitom I it's a slight branding thing but I think it's I think that I think that's an important thing to do um but yeah I think like Cosmos is well positioned and for us like osmosis we're trying to be like the place where a lot of these a lot of these l2s where like in we're helping them with their go to market and stuff and osmosis will basically be like the if you want to buy Bitcoin like buy into any of these Bitcoin l2s like this is the place where you do it and with alloy BTC this is the way how you move between the ecosystems if you want s SP if you have sbtc on stacks and you want

like BTC on botanics like you do that by going using the osmosis Alloys as a sort of stable swap between them and just taking a quick step back it seems like Bitcoin kind of ski cycle Bitcoin in 2017 you were working at tenderman we had Bitcoin cash hard Fork like the middle of that year and then we have nothing really happened in Bitcoin in 2020 and 2021 all of the action was defi on ethereum now fast forward to kind of like this cycle if you will we have all of this action all this this Vitality around around Bitcoin and scalability and what you can do with it when you were in at Enderman you were part of

this like small contingent why did you choose to build better build Bitcoin apps on Cosmos why didn't why weren't you part of that Bitcoin cash regime I mean I was a big blocker um during that fork time but like I I I don't know I I gave in and I'm like oh we lost the fight and like it's not worth forking off over like Bitcoin is the brand it's the flag it's like you know Bitcoin cash it's just just it's just another altcoin now right it's like yeah uh if anything like if you wanted to Fork off a Bitcoin you might as well just use ethereum at that point right it's like the you know

ethereum actually has the better technology it just doesn't have the Bitcoin brand and stuff right and the history and all that stuff so it's like you know I mean I I I I used to like be involved you know one thing is like I used to be like involved in every Community like I I I I I was involved like I used to go to like Bitcoin cash conference I spoken at Bitcoin cash conferences I've spoken at ethereum Classic conferences I've like spoken at Dogecoin conferences like I I go to everything so but yeah like but eventually the Bitcoin you know it's funny like the problem with Bitcoin cash is was it once you have a little bit too you know this is I like to look at um uh I I use like history of religion as a good Pro like analysis into like

how blockchain like things work and it's like Bitcoin is like Catholicism it's extremely like conservative and rigid but as soon as you have like a Protestant movement it like as soon as you as long as soon as forking off is okay you have endless Forks off Fork offs right so Bitcoin cash then forked into like you had Bitcoin SV that spun out of it then you had Bitcoin ABC that forked out of it that Community just like kept splintering and splintering to the point that it like became unrecognizable and I also just don't think that some of the folks that were like spearheading the Bitcoin cash Community I think they were just like not very political about it like they just did a

bad job of like like the way Jihan treated like they they were like sore losers basically I think that was the problem he has one of the best quotes of all time but I won't I won't say it on camera I will your mom if you want to or something like that yeah I think that's a good stopping point boys thank you for coming on sunny it's been a pleasure