DeFi Leasing with Ivan Kostov & Metodi Manov of Nolus

Transcript

we're live my guests today are Ivan and matoti of nolas they are respectively co-founder and D5 strategist at nolas nolas is a cosmos SDK chain offering defy leasing it's an exciting new D5 product what's interesting is it allows djens and other you know non-degenerate people to do under collateralized lending out of uh beyond that it does also um has a number of other D5 products that they're starting to build um today we're going to be discussing the mechanics of the protocol also the product and the roadmap I'm also dying to find out why they think defy adoption relies on centralized Services before we get started make sure to hit the like button hit the notification Bell And subscribe to get notified when I go live

every week and remember that none of what we discuss here on the interop is investment advice I'll select to disclose that I am an advisor to nolas if you enjoy this content please consider sticking with us we're live on fmos Quicksilver on osmosis and on Juno just look for interop in the active set my guests Elon and matoti are coming up next right here on the interrupt foreign [Music] hey guys thanks for coming on the

podcast thanks for having us pleasure to be here thanks for hearings yeah I'm really looking forward to diving deep here because you know on the interop we do a lot of technical content we do a lot of like protocol stuff but we don't do we haven't done a whole lot of products and like this is a an interesting D5 product that I think um could be interesting for the cosmos space obviously uh as uh there are more and more D5 protocols being built on Cosmos I'm interested in understanding also like how Nola's how you see it inter interoperating and interacting with the broader uh Cosmos C5 ecosystem but before we do that maybe just tell us

a bit about yourselves and what your background and you know how you became to be uh working on this project yeah well um let me start here I'm Ivan I'm one of the co-founders here at Knowles um from let's say more than uh 15 years I've been working in a waterproof financial company and I have a lot of background in marketing in marketing automation digital marketing and from let's say the last maybe five years I've been doing product development and this is my current Vlog here at namas so uh this is my personal background uh I've been

deep into crypto since to 2017 uh there then I was involved in a in one Ico project and which kind of like my fire for crypto and so what decentralization can do to to not only money but however to generally ship the the focus of centralized entities and create a democracy uh in terms of uh I don't know you name the industry industry but I guess the impact is enormous basically what I'm doing here at the

team uh is things such as technical documentation infrastructure support basically I'm helping out with whatever I can as much as my expertise allows it I joined this team right after I graduated from University so it's like my first full-time job so to speak yeah and yeah it's I got into crypto a bit later so it was uh around the beginning of 2021 but I really had the chance to dive deep into D5 and loved researching about various kinds of protocols to part in various kinds of ecosystems and uh and basically I'm at knowledge I'm doing uh

what I would be either way doing in my spare time I guess so that's the great part about it cool no thanks for coming on and uh and you know this it seems like you guys have a really solid team building this product um so I'd like to talk a little bit about credissimo and you know that that fintech company that sort of web 2 fintech company that you mentioned and what it what it is and what it's been doing and and how it started pivoting into doing more D5 and crypto products because I believe it's also behind or at least it's affiliated with another uh lending platform or something like that yeah in well actually the big part of of

the team that currently are working on knowledge we met at kuvichimo we worked there together for uh many years and uh uh the company helped us uh spun this idea and bring it almost to life so this is the actual involvement but however there are separate entities meaning that producingo is a web tool lender that has a regulated business in Eastern Europe as well as in uh uh South America and technology is something that it's just spent off part of of the team that that actually helped growth critician also yeah okay got it

yeah so there is no like actual tangible relationship now it's sort of sort of like a spin-off from from the team got it um so you know something I mentioned in the intro earlier is that you know you guys uh were saying before the show that you think that you know defy adoption comes through centralized Services can you expand a little bit on that and um you know how that uh how that thesis uh fits within the vision for nolas yeah sure so uh as you know currently like many hardcore D5 fans are strictly against any centralization factors in defy so they want everything to be fully non-custodial like they uh

the smart contracts don't have any centralized elements and they're basically open and free to use to uh by anyone but uh one thing that probably many people don't consider is that the device still in its early stages right so there is there are still many people who have uh yet to do to use anything uh crypto related let alone default defy nfts and uh of this uh non-custodial wallets so all of those people they have more or less habits that are you could say different from the the habits of um even semi-experienced defy users so you you

in uh in in our opinion you need elements in your system that cater to the needs of those people as well so that they will be able to join and by having those people join naturally they join with liquidity and uh this uh this is of course uh uh what might be necessary even to shape new products in defy so if you think about it from that point of view it's uh centralization really matters uh to D5 and uh it's not uh yeah it's not all bad yeah I mean it is until uh until your you know your platform collapses uh but

um but yeah of course like a lot of people I think you know probably I mean I I don't I don't know exactly right like what are you know I feel like I should know this but like what how many people are using crypto through centralized exchanges versus D5 I think you know like FTX uh probably played a big role in um in creating in moving more of those people towards D5 hopefully uh but yeah the on-ramps that that that uh that centralized Finance currently provide and the user experience for the moment at least is in many cases much better than you know the user

experience like you you really do have to eat glass when using D5 especially if you're doing you know more complex things thankfully that's getting better and you know I think that teams like yourselves that have a lot of you know experience in building solid products in web 2 are going to bring that experience over into web three the thing also is that Protocols are getting better developer tooling is getting better all around those things are getting much more easier to use we have better custody Solutions we have better uh just better tooling around like you know web uis and stuff like that so that I'm you know we've seen like a tangible uh Improvement in the user experience over the last couple years and it's only going to get better

so yeah let's let's talk about notice a little bit um so so nolas is a is a defy uh leasing protocol that's the way the website describes it um can you explain what that is for those who might not be because I mean like most people think of a lease they think well you know I'm gonna like lease a car or something right so I'm like essentially you know paying to have access to this car until I have to give it back or something like that but how does that apply to finance and specifically to divide yeah actually uh the the whole concept of numbers came out from from the general idea of how uh leasing Works in uh on regular financial markets as you as you get the example uh most people uh think of it as a buying

an asset that they can can use so while they repay the loan for it so the whole concept behind those actually is almost identical with with uh lease on regular markets for but it's transferred to to what three and to defy in in a management actually it provides the users the ability to leverage their positions without the additional risk of let's say uh High liquidations uh liquidation triggers and the risk of uh uh uh not only losing their money but also having a much greater exposure in

terms of what they provide as a down payment or what normally crypto users think as of collateral when they take a loan and yeah these are the two main constants here that actually knows will provide much more uh assets that people can leverage their Holdings uh with a much lower liquidation risk so part part of the product is being able to have under collateralized lending so can you describe how nolas achieves this and and then you know typically so I guess maybe coming back to what most people are used to like

most people are used to using a money market like Ave like compound where um collateralization ratios are somewhere in the you know one like 200 percent right so you put in let's say like you want to borrow uh usdc like you put in like 100k worth of if you're going to be able to borrow half of that in uh usdc or any other currency right that implies having an oracle that knows the prices of these assets all the time and then there's a liquidation threshold where essentially if prices fluctuate to an extent where that collateralization ratio begins to um to to be too too small um then that initial the the uh the the

the the assets um that were put up as collateral are sold at auction to pay off the borrowed assets to the to the lender so that's like status quo that's what most people are used to in crypto that use D5 um how does how is nullus different like describe the mechanics here and perhaps also you know how a user would interact with nullus actually it's fairly simple simple because we've Twisted the model around for example in in in the example that you gave you actually said you're providing you're providing a one 100K in terms of collateral you need for uh and you can borrow up to let's say uh safe LTV around 60 out of it meaning

that you borrow uh you know 60 000 denominated in the the currency that that you're looking to borrow um what knowledge actually does is it gives you the same option meaning that you can provide your uh collateral uh in uh if let's say you're again in 100K however you can borrow 150k on top of this collateral but uh the whole amount of the loan and the the amount that you've provided we call it a down payment because it's not actually only a collateral are locked into a position what we call a defy lease position and both the down payment and

the loan act as collateral on on the on on the whole position meaning that the actual loan to value ratio is again around 60 percent however uh the liquidation risks are much much lower compared to the current current market average for example if you go to with an LTV let's say on compound or another or any other lender currently you will be fully liquid related at the price drop of it with let's say 35 dropping in it on on knowledge what will actually happen is at around 40 percent dropping the price a partial liquidation will trigger that will only uh collect

this I would say um much more amount of the one that you've provided as a down payment payment and taken as a loan uh which will be the first one that sorry that that you are going to uh experience as user the next one will be much higher uh in terms of uh price drop and I guess the the last liquidation should appear somewhere around 70 percent in the drop of the actual price so in that sense uh knowledge is much safer compared to any other alternative however the funds that you take as long and you provide as collateral AKA down

payment are both locked into a smart contract until you fully repay the loan but that's not actually bad because those there are real fonts underneath every position and those funds can be utilized throughout the whole uh duration of the loan okay so let's maybe just give an example here so for example uh let's go back to the eth example so we we put up say about a hundred thousand uh in well let's let's talk about Adam because we're talking about a cosmos chain here but let's say we put up 100K in atom uh in collateral uh and we want to borrow uh you know osmo for instance we can

um uh we can borrow up to 150 K in osmo um like what where is the is there a yield generation that happens here such that we can repay that loan um or like what are the strategies here that a user would Implement in order to repay that loan or have the sort of is it a self-repaying loan or is the idea that you know you repay that loan through some other news so yeah if we go with your example if you kind of provide as a deposit 100K word of atom you would uh and you want to enter an exposure on osmo let's say Yeah in in in the case of novus there

are lenders right and there are borrowers lenders provide stable coins only so if you're a borrower such as uh you're coming with uh 100K of atom you can borrow stable coins right from because that's that's the only option on the protocol but what happens in the background is that through IBC and need to share accounts these stable coins and your atom Deposit they travel to osmosis which is uh would be the primary Decks at launch and they will be both uh and the atom and the USC will be swapped to osmosis right so now you have like a position in osmo tokens and since we'll be also utilizing uh uh at launch liquids taking their with this such as

SD atom SD osmo you could you could liquid stake your osmo position now that's in your basically your release position and you can earn from the yield because SD osmo is exposed to to be able to do the staking yield of osmo so if that yield is greater than the interest that you own then you have like a self repairing loan that's how it is now folks okay so you said something interesting here that I think is like a a novel uh uh compared to other money markets is that lenders can only provide usdc or stable coins sorry uh as um as lending assets so as a borrower I can

only borrow um stable coins is that right you are borrowing stable coins but under the hood uh there is a flop that is involved in every opening position opening that will swap the stable coins to the desired asset that you want to lever [Music] and both your down payment and the loan are then swapped into your osmo position right okay and why is it such that only

stable coins can be lent into like what what about this sort of credit account uh makes it such that only stable coins can be can be lentened so yeah basically when you lend stable points and the borrow comes and borrows Stables to be swapped through to a desired asset basically you lock the price of the assets right so you can use the appreciation afterwards to repay your your loan basically or from what I also mentioned with this additional option of you in some cases relying on liquids taking derivatives and this additional yet so this is uh like the reason so in a sense this kind of uh

resembles a cross chain margin uh long position of an asset but with the addict flexibility of that asset in the position big used elsewhere so being used for your generation right okay so just walking back through this you know one one puts up uh a deposit in in like Adam For example they're going to borrow usdc or some other stable coin could be IST or or any any uh any interchange stable coin um in the back end there's you know they may want to actually be exposed to osmosis um they will the the system will swap uh we'll make a swap for osmosis and then

those osmo can be liquid Stakes they can be generating yield that yield is paying back the loan and then in the end once the loan has been repaid um the user is left with essentially you know that that position that their initial deposit in Adam for instance and then you know also the position that they borrowed because of because they were able to repay that loan but they've kept the initial uh the initial borrowed position actually yet they uh when the user replace they get what what's in the position and that's the osmo tokens in our example right so they provided atom but this atom together with the usdc

borrowed has been swapped so basically when you repay what you owe you get uh you get the Assets in the position except I I think you're muted sorry yeah so what are some of the particular issues that might come up here uh that don't um typically come up in traditional

lending markets as we know them in crypto so are there any um sort of like externalities that this this type of uh leasing Market uh creates that we don't see in other lending markets and like one thing that I see for instance is that the assets themselves as a user like the assets themselves they have to be in this contract at all times I think you you can't move them somewhere else and so from a user experience perspective it's like a very different experience than you know being able to borrow funds and then you know you know invest in a Saft or do whatever right um so that's that's one thing are there any

other sort of things that users should expect when using nullus yeah I guess the biggest downside is that they don't actually receive any uh um any type of loan that is available in their wallet right from the from opening their position however uh this is part of the model and again if we if we have to compare it with say perpetuos or margin trading on some centralized exchanges they actually work the same way you provide a sort of a of a down payment or a collateral and you you level it up afterwards however in terms of what knowledge provides it's pretty much a lot more on top of those entities

because there are actual actual tokens in every position that can be leveraged through different strategies the one that we already talked about is just the one that we'll be starting with however as long as the protocol can liquidate uh its position on time and don't incur loss for Borrowers uh we can utilize every single EU generating protocol that's available currently on Cosmos and not only in customers as well hmm and the idea here for uh for nolas to also uh sort of propose strategies within the platform that

um that allow for this yield generation or are users free to you know compose their own yield generation strategies how do you see that Yeah so basically uh so if a user would be able to use ever like every strategy out there that wouldn't be safe for the protocol first the protocol would need to allow that a certain position be used in a certain strategy and the cool thing about Cosmos in general is that it's Cavalry governance focused right so you could uh you could pretty much uh let the community decide well and discuss whether a strategy is Meaningful

meaningful to be added and will be safe to the protocol and who is the one who's uh taking those decisions those are the NOS stakers the the ones that are providing security to the to the network so it's pretty much uh a choice of the community to whether to yeah it's a at such an option and whether it makes sense okay cool yeah which brings me to my next point so nolas is is an app chain it's a it's a sovereign chain that will have a validator set and on-chain governance um it also has the NLS token which is the governance token

um can you talk a little bit about what other utility functions this token might have is does it have any function also in terms of uh you know generating yields for for users that are leveraging the platform are they generating yields in an LS token um will they be like yield farming on this token in addition to that and um yeah how do you anticipate this um yeah I mean we can talk a little bit about the governance later but I'm curious about you know about governance and you know governance has been you know it's useful I think for making certain types of decisions other types of decisions perhaps uh when you know analyzing complex D5 strategies maybe uh Community governance may not be the best

uh the best way to to determine whether or not a strategy is safe for the platform so how do you anticipate that um you know how do you anticipate that sort of playing out in the future yeah yeah let me talk about the utility of mongolo San Mateo can go with the government so the whole concept of uh first having our own app chain was to um have a token that can actually be more useful to the protocol in many different layers for example the way we've designed the uh our layer one is that it actually on every transaction done on it we extract part of of of of

the fees uh through in towards the protocol and this is one Revenue stream that has been created for for novice and those this Revenue stream will actually incentivize different uh participants in uh in on the novels ecosystem for example if you land stable coins to the protocol you you get rewards in analysts as well because uh from from the this Revenue stream that I just mentioned there will be a enough uh I would say enough liquidity in other words that that will come naturally from from library transaction that are on on the

protocol for every lease that interest is paid and uh uh there will be a small Revenue stream again that that that will again have due one one one thing that that it will be doing it and it will be buying that the Anna was token from the open market market and again Distributing it towards different parties that are participating in the ecosystem and last but not least uh uh stake actual stakers uh on on the blockchain will receive much better uh much much better rates in terms of what they're generating as yield in on State under stable points and much better rates or what they're receiving

as I would say interest for borrowing uh Define these positions yeah and to contribute uh to to the and go back to the governance uh Factor so yeah uh NOS takers providing security to the network and they are the ones that are uh basically voting on various proposals that are uh that are coming up and but it's not uh it's not like uh uh the the all possible yield strategies are there to be uh just voted yes or no it's uh

these still need to be implemented first and of course discussed uh in detail before uh um basically a new smart contract for instance is uh is the the post is deployed on the on the Chain so uh if we outline it that way uh every every uh step of uh the whole of the change development uh is dependent on governance but uh it's still you still need to kind of uh um include that functionality before beforehand do you do you see

um perhaps like sub-dials being a a a relevant mechanism for you know for instance like having a like a committee that would review defy strategies that um would be tasked with effectively testing defy strategies before they get um implemented on the protocol or do you think that you know like on-chain governance with all the validators is and and Staker and delegators of course is is like the right way to um to implement uh you know strategies at the at the protocol level so basically what your your suggesting

is a smaller committees that for uh beforehand uh uh kind of testing out a given strategy yeah like it could be like a sub-dial like it could be like that the it could be like the the the token holders for instance I mean like you know Cosmos the cosmos chain has been talking about this for instance for like in the context of item 2.0 and like Juno and other chainsaws and similar things where you know you effectively have governance rights over electing some sort of board that um that makes decisions on behalf of the community for like very specific or very um yeah very very specific things where you know deep understanding and knowledge and and like industry

experience is necessary is this something that you guys have considered in terms or that you would consider uh such that you know the safety of the protocol is maybe held in the hands of um of experts rather than you know I don't know I mean like there there may be benefits also to just having dgens voting on what strategies uh what strategies this is definitely something that uh we're considering that we address deeply so uh of course it's not as I mentioned it's not like uh digits simply voting yes or no to include something that uh is there it first needs to like be

thoroughly reviewed and you can of course uh integrate such a committee uh and have the basically those teachers vote on first of all yes that committee is uh is uh kind of uh um capable of taking such a decision to for uh for us and uh of course from there on you can pretty much uh kind of uh Define stricter steps in the process of uh from the call idea generation about uh uh yeah a certain new generating strategy to it being live and change so it's certainly an option cool so what kind of strategies have we

talked about um liquid staking and and those that as a yield generation strategy it seems like a very safe strategy and in many ways probably a very uh profitable one since many chains you know especially after they launch have fairly high yields on staking what other kinds of strategies or more complex strategies would can we expect uh to be implemented on nolas you know either at launch or or later on like you know as as a defy strategist what are you what are you thinking of in terms of like maximizing returns and and also I'm interested you know how how you consider cross-chain strategies to be playing a part here because I think that

cross-chain strategies are probably where you know there's a higher risk but they're certainly also potentially higher expected returns so yeah first of all like in terms of uh launching and MVP yes liquids taking derivatives would be direct launch in terms of at uh as the atom and St osmo so this would be like the only uh yield generating option that we have at uh launch ready and uh in terms of additional strategies yes uh it's uh uh first of all this true cross chain vision of Cosmos is still at at its beginning and we're like basically one of the first protocols uh to actually um kind of uh materialize that Vision

via IBC and interchange accounts and uh if uh there there needs for example there could be like uh certain liquidity provision but uh as uh as a strategy but yeah those are simply ideas that can be discussed in details and uh various risk parameters can be also outlined as well to strategy because it's in our model it's pretty important to that the protocol has uh access uh to to the funds that are in a lease position so if the strategy itself has a certain lockup period in the background uh that that's problematic for for example that's just

just a pure uh generally speaking uh yeah that's it so um yeah but and let's not forget that the fire on Constance is relatively young and it still currently heavily developing so I guess more options will come to mind uh once more Protocols are launched their products there are a lot of different products that are currently being developed and we are looking forward to start working with them um I just want to point out here one interesting thing that matto mentioned for the design that the design platform that we have taken and it actually utilizes heavily interchain accounts which is I guess the broader vision of

what customers should be should be communicating with different customers change should be communicating with one one another and yeah I think we're we're the way we've designed Technologies in uh in a manner that it can relatively easy uh on board uh integration with different chains and provide additional value for the changes as well as the the chain itself will provide an additional value formulas as well so we are kind of a total a model that can work in a symbiotic matter with not only uh permissions at once but rather permission ones as well very cool

um one thing that I was thinking about just as you were speaking earlier or mentally is uh the the asynchronicity of cross-chain transfers and basically message passing between Cosmos chains does that um what what kind of implications does that have on the strategies that you might Implement right because you know if if um if if a liquidation needs to happen and assets get locked up or or are you know are tied up in in a series of cross-chain transfers that are taking longer to uh to unravel uh how does that

affect you know the liquidation process and are there mechanisms there because with ethereum we don't really have this problem right you know you can you can have a position and you know you can initiate a transaction and then you can unravel a bunch of you know different positions that are locked in different contracts in the same transaction but Cosmos it's a little bit different um yeah yeah so as you mentioned basically the chain of uh events that are uh happening in a true cross chain world can be quite long and this of course increases the time until uh let's say a liquidation right so e you're uh basically your in that case your Oracle should be responsible to take into account the uh

this uh uh basically time period as well and not uh just let's say the the price that it's at the moment so yeah you could pretty much twist that and actually in our system uh in our Oracle mode it doesn't like take into account for example the uh the auto price of an asset that now but the price that uh would happen after a swap is performed for instance so so you could pretty much uh yeah use that as an assumption first and then uh build up on top your security model interesting yeah and and are you considering also let I mean obviously you know IBC transfers are seem obvious

or you know IVC connections but you're also considering go you know using XLR for instance to go get yield on you know ethereum or on Solana or in other platforms is this ultimately like the longer term Vision here is to be able to interoperate with you know all sorts of ecosystems given the interoperability Solutions of course yeah that's the the reason that we're aiming at um and uh however we want to start with uh let's say first uh integrate or or all the native Customs change that uh we can uh communicate with and create additional value for noise and again for

for the for for the changes change as well but on the long on the long run uh one General Max is passing that XLR are providing uh uh goes through let's say a more mature State we'll be looking to uh can start the same kind of communication with DVM chains as well yeah this is our broader vision of of how cross-chain communication should happen and we we are really able to listen on IBC and the General market passing in in general because this is the inherently going to be the next TCP protocols that we used on a daily basis and we don't even know that we're using them yeah yeah I can see

that I mean currently that might you know that that might cause a problem because transfers and message passing between say ethereum and Cosmos can take a while I know that there are protocols that are building on top of Axel or like squid that are um trying to you know improve the time there by basically having intermediators to take up the risk while that transfer is being being settled on ethereum um you know this was also the case I think for connects uh in the case of nomad um but but yeah the the the the asynchronicity uh just increases I think once you start going over um you know going over those boundaries um but I think certainly those things

will get better over time there will be like layers of abstraction that separate you know the end user or at least the you know the sort of transaction that's that's happening that is being settled and and the underlying you know state that might update a little bit later because there will be you know parties that are sitting at the intersection of these two uh chains and and settling that transaction and taking on the the risk um yeah very this is all really cool I can't wait to get my hands on this product and and start using it um you mentioned that you're you will be supporting St uh assets so so uh so stride staked uh liquid state assets are

you also so that I suppose it's a partnership you have a stride or you you have an integration with them are you also considering other liquor staked assets like Quicksilver or or any of the you know native liquid staked assets I know that like on on evmos they want to do their own liquid state assets and I think other chains like well obviously you know um osmosis has their semi liquid stake asset with the super fluid staking uh is this something that you're you would consider for the future to diversify you know the types of Super Six assets you have and what would be the benefits of doing that yes of course so first of all the benefits would be that it would be reach out to

more communities more people that are relying on on those assets but you need to take also into account the liquidity that's that's in the pools right so currently stride uh has uh SD atom and St osmo are the richest in terms of liquidity so and that is a pretty important uh for a given lease position because uh basically uh they uh if the price of course uh drops uh it would need to be liquidated and the more liquidity you have the safer it is and uh of course once once these other assets mature in liquidity uh and the data will consider adding them to the system because yeah as as mentioned the

creatives relativity depth in particular recipe great yeah that would be great to to see other uh liquid seeking providers and other Integrations as well I'm sure there'll be many more in the future um yeah let's talk a little bit about the um you know let's get into the the technical bits a little bit so nullus is uh cosmoasm chain I was looking at the GitHub earlier like all of the logic is built in cosmoasm um as a you know as developers building a blockchain product uh maybe just talk a little bit about why you decided to build this on Cosmos and as a as a

cosmos chain um what were the benefits of leveraging cosmoasm over building your own go Cosmos SDK modules and I'm kind of I kind of already know what the answer is going to be here but just reinforcing my Cosmos and bullishness yeah I guess uh the the the short answer for cozumos and is rest and it's a pretty powerful instrument people for language and uh combined with uh with a wasn't bien and Cosmos in in our scenario it's uh really I would say secure but rather versatile uh option to build smart contracts uh

um on it I pretty much like to give one example here when we talk about solubility that it's on solidity It's relatively easy to build smart contracts but it's relatively hard to build secure smart contracts so that's this is not the case with uh because it wasn't because it's the other way around it's relatively hard to go through the compiler and compile your smart contracts however once compiled it's much more safer compared to um any multi maybe two out of five contracts on on building solidity and regarding this stack I guess

um we part of our team has a has a knack for rest from from one one point from and from the other is that we could completely separate the uh The Core Business logic from the blockchain itself and it can live on a let's say a second layer on top of the blockchain and which creates a and asynchronous development of both the blockchain and the smart contracts aka the business Logic on on top of it so this this is our uh this is our main driver for choosing this stack as I mentioned we're pretty bullish on cosmosm we're also also bullish on some of the new VMS that are coming out uh

and gaining Traction in the last year or so like which ones like for example move we will our my personal view is that movie can be a really powerful virtual machine cool and and [Music] um yeah regarding the the choice of building this is a cosmos app chain um you know that's you know it might be an obvious choice to you know people in Cosmos but it's not an obvious choice to you know I think just like people generally building who are looking for a platform to build on crypto because there are so many all you know Alternatives and I talk to teams all the time that are you

know looking to build like they have an idea for a product and they're like okay well we're going to build an ethereum because that's where the liquidity and the users are or we're going to build it on Solana because it's fast uh or like but you know like Cosmos is not an obvious choice I'm like unless you've been Cosmos peeled it's it's not always obvious what um what led you to want to build this as an app chain so yeah uh you could of course deploy a money market such as our general purpose blockchain right but you would pretty much lose on some of the benefits that you have so by being your own up chains or for example your token for for instance your token is the one uh that

uh you know in the case of an app chain it provides security to the to the option itself but it also can gain benefits from the underlying app like uh like on the app on top of it on the money market on top of it so in our case uh for instance analyst takers since mentioned they don't only get staking rewards but they get also benefits uh uh benefits for the money market itself right and also being an up chain you don't have to share blog space with other applications so in we all know in Bull markets when uh let's say uh pretty popular nft projects

begins main thing it can get pretty ugly for the chain itself and for the users of of the other uh of the other apps there so that's also another benefit that you don't get careful with with an upchain and with an option of course you can also control uh pretty much various parameters for instance we like we've tweaked the the minting module which is responsible for the inflation rate and also we've introduced a custom module such as the tax module that introduces additional Revenue stream for the for the token itself so it's a pretty powerful uh tool

environment yeah do you think that um this is a question that I think you know it's not obvious yet but you know there's this idea that app chains are essentially you know like app chains are possible now because the cost of securing an app chain is still relatively low so there's some estimates out there but it's somewhere into like three to five million per year in um you know in cost of infrastructure and staking rewards and stuff like if you consider like what a cost what it cost to run a validator set um I I feel like over time as the as as the

cost of security increases because these blockchains will become more and more um you know valuable right there's going to be like more value on these chains cost of Security will increase and running an app chain will be reserved to like a few very large ecosystem players and you could make the analogy that in the early 2000s it may have made sense for you know a medium-sized business to like build their own data center in the basement of their office but as the cost of cloud computing came down and you know the security um the sort of like security risks Associated to running your own Data

Center and the costs associated to that as those as those economics didn't make sense anymore it made sense to start moving the cloud and that's when you know most companies you know small and large started moving over to Cloud um I feel like app Chains Are Gonna probably suffer the same fate right so like right now it makes sense to launch your own app chain because we've got interchange security coming and like running a validator is fairly cheap but over time that might not be the case anymore um what's your long-term Vision here for you know sort of staying a sovereign like well first of all like do you agree with this thesis and then also do you know what would be in that case your like long-term vision for

um keeping that sovereignty in uh effectively justifying remaining and thatching because I mean you could have built this as like you know a roll-up or like some other form of um of application that leverages some form of share security but that has lower cost to you as a chain but you know sovereignty trade-offs Etc yeah you're absolutely right we could we could have actually deployed our contracts on every compatible chain that is currently available however metal pointed out a couple of things that we found found that are pretty essential for um for the design of the money market that they're currently building um on top of that I just want to add

that other benefits of uh having our own uh of Chinese that we have the full I would say um we don't have any boundaries in terms of how the technology can can scale from this point on onwards meaning because for example we have to utilize IVC as we already mentioned and for for the time being the only way to create an uh um an interchain account uh it will is if you have your own if you have your own network and utilize those the the ICA uh modules the the way we do it with our smart contracts because to if if we get

deeper in this actually our smart contracts are doing the heavy lifting for creating interchange accounts to different networks and this will be pretty helpful in terms of that we can pretty much extend this functionality to different places and different changes on Cosmos and and going out again of the Customs system and um I guess this is one of the main reasons why we we opted this for for this design in terms of um maintaining our own validator set you're absolutely correct is it's not cheap and it's relatively hard to to set a good I would say good validator set and to

maintain it because it's costly but however being because being an acting we actually don't need like uh 100 plus validators on active on on our Network because the the load of transactions won't be that big and uh we will for example in the beginning uh have a much smaller set that should be sufficient for for for the system to run and have a decent amount of decentralization there and we can uh we can keep this um this set of let's say 25 or 40 validators in the next years to come while the the network itself matures

um one of the one of the the things that we actually thought about uh having this on the long run and uh being making it sustainable is actually making in the protocol itself as we already talked about the different revenue streams that we will be introducing from day one for for the chain think of it as that every new uh let's say yield strategy that we uh uh whitelist on on nullus or every new uh integration we do with novels that we will introduce a new Revenue stream for the protocol itself that will gradually create a treasury and this treasury can be afterwards subsidizing different parties not only participants

in on on the knowledge protocol itself however it can subsidize uh the validator set as well foreign yeah no that's uh that's cool and I mean of course like having uh being your own app chain that offers you know several like lots of benefits also in terms of um you know in terms of customizing the entire the entire stack like being highly vertically integrated economies of scale and everything um yeah I think it'll be interesting to see in the future you know of all the app chains that have launched in the last couple years and those that will launch also in this in the next few years I'm sure you know how many of

those are able to uh you know generate significant rep and enough Revenue to to remain sustainable and I think that Defy is probably the best candidate for those chain for for like for chains to remain um like profitable and and sort of remain uh app chains I think I think there are lots of app chains that uh probably will um will sort of either have to move over to some sort of shared security roll up um infrastructure if they want to remain you know if they want to keep stay

online or [Music] um or will will sort of um uh how to put this you know especially especially for smart contract chains like general purpose contractions I think a lot of those General smart contract chains will become app chains for their biggest use case and so um because there's just you know they're they're there are so many smart contract chains that are that are launching that you know have very minimal amount of differentiation right like one might have like some small feature or one might be Cosmos and one might be vvm in the end I think they're just

probably going to uh revert back to you know being an app chain for their biggest use case and and trying to be you know become profitable there but you know as a D5 platform I think that you're in a very different uh different category and certainly like it makes sense to be in that chain so yeah let's talk a little bit about the roadmap and what is the what are the next steps when can we expect nullus to launch and yeah um I can happily say very very soon as we are in the final stage of merging our latest iteration of development of our smart contracts there will be a certain period of time that uh once merge through our testnet we will

expose the whole functionality of of the novels the file is to users who are interested in testing how we could work uh how the the actual web application will will handle uh the D5 leases what do what will the UI be there and of course we'll be running a lot of testing in in a I would say almost production ready environment and if everything goes as planned we'll be launching Parish fairly soon great so two to three weeks no but uh yeah well if uh if you wanna if you want to stay tuned yeah uh you should definitely follow

nolas on Twitter it is what is your Twitter handle Knowles protocol yeah okay and we'll put the links down in the show notes for anyone who's interested yeah well guys thanks for coming on it's been really interesting to learn more about nolas and I hope that our livestream viewers and our audience uh are also excited about this product and uh yeah good luck on um as you move towards the launch thanks for carrying this important nice wishes together thanks app looking forward to speaking with you again in front of a live audience again yeah well

um as we wrap up here I also want to yeah thank our listeners for tuning in and for uh following and subscribing to the podcast if you enjoy this content please consider sticking with us uh we are live on EV on evmos Quicksilver Juno and now on osmosis and I would like to invite both of you to uh speak at uh well at least I would like to invite uh someone from the list to speak at nebular Summit which is the conference that we're organizing this summer we'll be announcing the date story soon and um it's in Paris and so um you know we'll we'll make sure that uh we'll make sure you get an invitation to that and also to our listeners do uh follow nebler builders on Twitter

because we're going to be announcing the dates next week in fact we're announcing the dates on Wednesday so thanks for tuning in and we'll talk to you next week