The End of Wrapped Tokens: THORChain's Native-Asset Edge | Chad Barraford

Transcript

because we can do things that nobody else can do like cross chain for example like do it well not just like wrapped assets and all this bridging [ __ ] but literally working with the layer one assets that is like huge right it it changes our mentality of how we think about blockchains to be these like isolated islands that exist across different you know separate universes but rather in a single ecosystem a single World a single blockchain system with all these different kind of citizens of this world in a matter of speaking and they're all there and participating in the same D5 protocols as everybody else right and that becomes a much better system if you ask me

what's up everyone welcome back to another episode of zero X research a show brought to you by hexins one of the most hardcore security teams in web3 pioneering in ZK and novel cryptography hexins is trusted by some of the most uh complex protocols in crypto today such as polygon and their zkuvm mantle risk zero Lido one inch and more you'll hear about them a little bit more later in the show but if you're coming to permissionless be sure to stop by their booth at 8 32 if you're interested in getting a quote and be sure to mention Xerox research for a free web 2 pen test today is August 28th and we got a great interview lined up with Chad beriford from Thor chain but before we dive into

that we do have a special offer for that permissionless conference that we're hosting here in a few weeks if you use code 0x30 at discount you'll get 30 off your ticket that's going to be a lot of fun so if you're going to go be sure to hit us up on Twitter and we can be sure to link up for a beer now as always we're joined by two blockworks research analysts Xerox pibbles in Ren to discuss the latest Market happenings uh pibbles why don't I kick it over to you for your hot seat or cool throne yeah so I've got a hot seat this week and it's balancer they had a major vulnerability in their pools and I think they've lost like close to like two million dollars of tvl that just got exploited but they also handled it

really well so they notified everybody about it as soon as they could and their emergency stop dial was able to mitigate 80 of their TV out from getting exploited and they definitely like just saved a lot of users they still haven't released a postmortem about it but it was just a good indicator that emergency sub Dallas are basically the only solution we have right now for when things like this go wrong it's actually a really interesting point because the I don't know the specific details of the balancer emergency now but it was good to see in this case that they could actually pause funds because in the recent curve exploit with the

Viper re-entrancy attack the curved subdial is actually useless because they couldn't prevent like um LPS from withdrawing capital from their pools which on the surface seems like a very obvious and good thing right because if you can't prevent people from withdrawing Capital like there's no way for me as a as a user or an LP in this case to like put my capital in this protocol and then you know effectively a centralized entity you know locks this this my Capital within their protocol um and that's kind of the vision that we've always been trying to build in D5 is this open Financial system uh that doesn't prevent this but in the case of an exploit you know the curb developers and the subdial uh the emergency sub dials I got very aware that having this

open could lead to a larger exploit and like pausing withdrawals would actually prevent the exploit from being as bad as it was giving these you know the actual white hat team the time needed to save this Capital uh so it's like this really interesting Dynamic of like yes I think more people would agree that decentralization is really what we're after and that's the world we want to build to but like there's almost this gray area right now of yes that's like the end goal we want to build towards but is that really this should be should that be the starting point that we're at um so it was good to see that the sub down this this case could actually save the funds but I don't know it's kind of like this interesting dichotomy of should everything be maximally decentralized on day one I feel like

people are slowly coming to the realization in crypto that no one can ever write perfect code you can have 10 different security audits by the best auditing team you can be in deployment for like three or four years you could have gone through like tens of villains of trading volume and there is so probably like a attack Vector that one may not be aware of so yeah I agree with both of you that in my view emergency sub-dials especially where all of the sub-dial members or like the voters that can sort of turn it on having dogs are known they have a very like pure defined set of actions and like sort of uh incidence response fan is a net benefit given how many exploits still take base on a

day-to-day basis and I wouldn't be too surprised if this is something that's more widely adopted throughout crypto um similar thing for rate limits I feel like we may see some experiments with weight limits especially for exploits in the next God knows like how many months or years I don't know if this is possible but like a simple very limited saying like an individual wallet address should not be able to withdraw more than 10 of the protocols tvl per hour or something like that I think would be very interesting to see in action I agree with you there and it's interesting because you said people probably are coming to the realization but the reality of that is that's really users where most developers would

probably agree I knew this from the start right and most developers would probably agree you can't write bug-free code that's just the the fact of the matter uh and we see this in web 2 too too uh you know the liquidation company Kroll that's overseeing block five FTX and I think in maybe Celsius but I'm not positive there they actually got hacked now their database of user data got exploited and you know of course this is not quite a financial thing this is more so a privacy thing in data privacy now they know the list of names and the value held by each of those individuals in these liquidation proceedings so it's not just crypto that experiences this but being that you are holding Financial wealth in this case in these protocols

and in these smart contracts it just makes the stakes a little bit higher yeah hopefully home addresses weren't leaked there too that would be a little bit uh disconcerting but I'll keep my fingers crossed there I think that's a good spot to hop into my cool throne for the week this one's a little bit stale because we record the intros on Monday but I think it was last Tuesday coinbase announced that they took a stake in circle um so basically circle is going to retain the full governance rights and you know issuing slash burning of usdc so they're kind of their own governing body at this point beforehand there is the Centra consumer and that's going to be winding down that was established around five years ago or so and under that agreement anyone who is within it which included coinbase they earned the

interest earned on the underlying collateral uh based on their pro-rada share of usdc originated on their platform so that stays in place coinbase will still earn 100 of the underlying interest Revenue earned on usdc on coinbase's platform but now they'll also get 50 of all interest income earned on all usdc outstanding so obviously that could earn a ton of money for coinbase the company um pretty big development and it comes at a time when usdc market cap is literally down only in usdt market cap is at basically an all-time high ever since the usdc dpeg back in March of this year so pretty interesting development it's going to be kind of

cool to see how it affects coinbase's earnings I don't think it's going to have any material impact on their Q3 earnings but I think it goes into effect in Q4 but correct me if I'm I'm wrong on any of this guys but does anyone have any takes there the only Trend that you mentioned is such a good thing to point out since the start of the year uh usdc has lost about 40 of its market cap or about 20 billion dollars and now sits just around 24 25 billion and this is like a really important important metric to track because U.S investors are going to likely onboard through coinbase and thus beholding usdc so it's kind of like a decent way to track the value flowing in and out of at least through crypto from the U.S side which ultimately it's

a quite a large Capital Market if it's the largest Capital Market so it is an important uh indicator in some regard there I mean I tweeted this chart out the other day and I can't remember who was that responded to me but it was just like a great back and forth of yeah sure like that's a really important chart but if that's all you're investing based on you would have missed you know a 50 to 70 move off the lows which is a great point but I think a lot of those lows came from like large liquidations during the FTX implosion and now I just have this like totally total different liquidity landscape and in comparing the two times so I think we're going to need to see a bottom in reversal in that chart before we can really be excited about a bull market in my opinion but I think this is

a great way to to take a step in getting there I think usdc is kind of finally you know there's these two these two powers in Jeremy alaire uh from Circle and of course Brian Armstrong from from coinbase and I just envisioned them sitting down like in a dark room with like a 30 foot long table each one at either end and having a conversation of like all right we're moving this thing forward and I know in that conversation what does the usdc sitting on base count as is that on platform for coinbase or is that on off platform and therefore being earning revenue for for Circle itself rather than for coinbase and I'm super curious to figure out where the that discussion landed because you can imagine I think we've talked about this on the Pod before so I'll try to keep it

short but if you could make base the L2 its own little safe haven for usdc whether it be like gas free transfers or rebates for gas transfers or anything to encourage holding usdc on base you can imagine this little Safe Haven there and of course that just starts racking up the the fees that coinbase ultimately earns from the uh the interest earned by the collateral so really excited to kind of get an answer towards that and I don't know when we're going to get it but I'll be watching I heard from sources that that Jeremy and Brian conversation was mostly about fire and saying hey I'm bother than you can you give me a Dodge Equity stake in a circle um but anyway on a more serious note I

think one of the things I think about is what would it take for usdc to sort of regain Mock and share compared to tether right tether's been making moves every quarter they put out an attestation where they're making one billion in raw profits recently Paolo sort of tweeted about their energy efforts in I forgot which country and it looks pretty crazy it seems like you're making really heavy investment there and I think the wild card for me I know this is a bit of a meme term is real world assets you look at most of like the sort of tokenized bond offerings whether that's treasury bills or something else most of that occurs to usdc rather than usdt and I think we have to remain cognizant that a

large amount of uact is still on Tron and I don't think any of us in the western world has a clue of what really goes on I'm trying to be very honest um so yeah I think we'll slowly make the way there in terms of USC being like uscc being the institutional sort of stable coin of choice and I think another thing that may be partially playing into this UST market cap dominance is gambling I think in the terms and conditions of uscc it's pretty clearly stated that gambling is one of the things that's not allowed to deal with you as you see if I'm not wrong um and obviously gambling as a use case has took off uh in the bear Market with

projects like a little bit and others and so that could also be a partial contributor to usdt's sort of Market Capital Performance over usdc yeah that's a good call out run I actually didn't know that thing about gambling but it's hard for me to pick out like what will turn the needle like when does usdc market cap start growing again I mean we've had a bit of a rally uh throughout the year so you'd actually expect stable coin Supply to go down but if you pull up a market cap chart it literally looks like it's pretty pre-programmed like just constantly down into the right so it'll be interesting to watch what turns that around but Dan I know you got a cool throw and kind of closer related to this so maybe I'll kick it over to you for that yeah yeah it kind of bleeds into the idea of usdc

and uh Circle and coinbase ultimately reaching agreement because what that does is enable usdc to come into the cosmos a core core piece that needed to happen almost like a prerequisite for a dydx to launch its AB chain and whenever you'd actually just post a governance proposal live uh into forms at least that is basically just talking about the a the official migration for the token to move from an ethereum smart contract as an erc20 over to the app chain itself so you know they recently commissioned the construction of a one-way Bridge contract that will enable this migration so basically the users would deposit their tokens and then that would ultimately get read by the validators on the dydx chain and allow for the minting of new assets on the app chain itself

and this is really just a good sign of progress in the migration to the app chain I think it's like a healthy signal that we can probably expect a Q4 time frame launch for d by DX uh the on-chain vote for this proposal is expected to get pushed uh in the week of September 1st so just a few days from now and um yeah like I said it's really just a natural migration something you'd expect to see and ultimately like this has to happen because the dydx token will be the governance token as well as the staking token and gas token for the dydx app chain itself um so ultimately here kind of excited to be getting closer to the dydx chain launch which is a huge moment for the cosmos

ecosystem as a whole this is the first time a major brand has shifted to an app chain and it's not only big for the cosmos ecosystem but it's huge for the app chain thesis if dydx can take this moment and prove that this construction of their platform is the best product for the its users and the best operation um as a as a crypto protocol as a whole then I think you're going to see a lot of other Pro protocols really be like okay dydx has legitimize the app chain thesis and proving in real time that it it's working you know maybe that means they get more users they get more traction or even something more you know Financial like well they're actually creating Revenue that's flowing back to the stakers and the token actually has a

purpose being a staking and governance token rather than just like a meaningless governance token we see uh with a lot of smart contract based uh D5 applications so huge huge test really excited to watch it go forward and again this is really just like a healthy a healthy signal that everything's uh moving the right direction yeah I'll also comment as the TX ta experts say there's a bullish engulfing Candle on the dydx weekly and it's thanks to these winter meet proposals so we will be following it with a close eye for the rest of the month do you guys know if the V3 deployment will stay operational if it's going to get deprecated you'd think they'd want

to keep it live because I mean if people want to use it like go for it might as well generating plenty of fees and then as a follow-up do you guys happen to know if that fee Revenue generation will accrue to the dydx treasury over on on Cosmos I feel like this thing's going to be pretty messy honestly Sam Martin thinking critically I actually don't know and if I was taking my best educated guess here uh I would say the Stark net uh version will continue to run for the near term with the plans of deprecating it um you know running a centralized sequencer is not cheap so I can't imagine that they'd do that for no reason and I think they'd ultimately want to start putting all the activity on the new app chain plus like you know

obviously Market making is a huge piece here so I'm sure they'll be next to no liquidity on on the Stark net deployment as well on that note I I wonder how much like infrastructure market makers have set up for this sort of new app chain and how much that differs to dydx V3 I would imagine that there is some sort of effort needed to migrate it over and it isn't just like I click a button and I change my wallet you know like net to Cosmos and like my market make works perfectly fine there but similarly on the trading side of things I think one thing that people have been paying attention to for Dy dxv4 is Mev and sort of how the community is going to deal with I guess Mev or validators who are

partaking in Mev there's been like a few proposals out there I think the most notable one is in academic paper by chorus one I haven't fully understood it yet um but so far it seems like the solution is basically the community will have like an open transparency dashboard they'll be able to see which uh validator is like sort of on average capturing like a larger spread or in some sense taking more Mev from Traders and then going from there um I had I don't have a like fully thought out idea of whether that's the optimal solution but it does seem like that's like the only solution being proposed right now um but definitely will be interesting to see if more sort

of like prop taxes or Texas as a whole move towards the app chain and DUI dxv4 would sort of be a first iteration of how these applications May deal with me yes all 27 of Mev idx I actually there was a cool uh I think uh effort dropped in our analyst chat today I think uh osmosis is doing some cool Mev stuff with with Skip and that plays into your joke Pebbles I follow that Mev bot too on osmosis that shows all all thirty dollars of daily Mev but nonetheless kind of cool to see him actually trying to like capture and internalize sex to decks arbs and and you know embedding it within the

protocol itself so I'll be watching that closely as well yeah I think that's a good time to transition to the last hot one of the day and this week I have a crucial which is base optimism and sort of coinbase for lack of a better term last week it was announced that base as part of its commitment to decentralization and sort of contributing to the op Collective we'll be donating 15 of sequencer profits or 2.5 percent of sequence of Revenue to public goods funding or more or less like the optimism Collective to spend so in those two numbers you can sort of imply that they're expecting a 16.7 sequence of profit margin but in reality sequence or profit margins are much

higher than that already today they probably hover around 30 and will probably go even higher after eip4844 goes live hopefully sometime in queue for this year and in return base or coinbase specifically is getting 2.75 of office supply this is going to be vested over six years I think there are certain terms and conditions attached but those weren't made public so as of today that amounts to roughly 180 million dollars in op it'll be interesting to see that appear on coinbase's balance sheet and how that is reflected today you know like today coinbase has a roughly five billion dollars in cash it wouldn't be

too crazy if five percent reward coinbase has one billion dollars in RV tokens and Trad by analysts are sort of wondering how do I price this on the balance sheet um but I think one thing that I wanted to note was that this feels this kind of feels like ethereum's version of the cosmos Hub you know like Cosmos Hub makes deals of consumer chains in return for sort of added data provided security These Chains return a certain portion of transaction fees mevs office whatever they just passed some of that Revenue back to the cosmo sub and it kind of feels like the exact same deal here you know I think people are asking like how controlling this super chain is going to be and I

think that's a very fair question will you sort of like be forced to adopt to a certain standard like will you be like Community shamed if you don't give more than like 10 of your sequence of profits back to the optimistic Collective if you don't donate to public goods funding you know I feel like there's a lot of interesting social dynamics that we'll see as the op stack grows which to be fair it has grown pretty significantly in the past half a year or so you know you have Ava you have live uh you have like all vpnd forecasts are coming over coin and it really seems like the office stack or ecosystem as a whole is kind of slowly taking off and then there's a whole host of other governance issues

that optimism has to deal with right uh one of the Vlog articles talked about different houses one is a token house one is a citizen house sort of like a Duo token governance model that night of first suggested a few months ago wanted to write to vote one is the right to veto any before that has passed um and yeah it just seems like there's a lot of interesting governance dynamics that are going on in optimism yeah I really like the uh the law of chains that got released and um I think this combined with just everything else that's been going right for optimism this summer is like op is actually sitting at like a Justified valuation in

my opinion when you compare it to other things like it's it's fully diluted to Dallas now half of Solana is fully diluted at all and I think that's fitting and I think you could flip that if you wanted to yeah I strongly agree with you there Spencer and I also just think the most important takeaway here is the precedent like obviously base alone like three million dollars or so annualized and money going back to public goods funding for the optimism Collective like yeah that doesn't really move the needle but if you have 10 or 50 or 100 different chains on the op stack and they're all giving five to fifteen percent that could really amount to a lot and I'm a little skeptical about you know us folks on the internet's ability to actually effectively allocate this

capital for public goods funding but I think it's a cool attempt to at least try it a hundred block chains I am so bearish on it it's not gonna happen that's ridiculous and there's no intercross there's no native interoperability solution that gets me so mad because we're going to end up in this such a fractured ecosystem when we're on the cusp of having working ZK Tech and I know optimism is building Canon which is going to be their solution to kind of swap out the not even existing fraud proof mechanism for uh zero knowledge proving and there's still a lot to be to be figured out there like with you know we can barely run approver in an efficient manner right now let alone actually decentralize this process but I really I'm just so curious in my head like okay

let's say you just picked up all the the um the chains that are you know brand new listed in the Ava Lyra World coin Etc that are all building in these optimism stack and let's just say that was happening on a ZK stack it doesn't even matter which one I have no interest in picking a winner but one that like building with the cks ACT gives you the ability to have async composability across all these chains making value transfer happen without any additional trust assumptions which is a very important feature you are not now like having to rely on third-party Bridges you're offloading that risk onto the users um so I just I I get a little stuck there because all right now we have 100 different Roll-Ups and it's a pain in the ass to get from one to the other and

you have no composability between them just doesn't seem like a great end vision for me um that's that's that's really where my concern is now but I Sam I know you feel strongly about things changing so I want to hear the rebuttal every time yeah I mean I don't have a stronger battle but I guess I would just ask you you know how many teams are announcing their L3 deployment on this ZK stack XYZ not calling out ZK syncs actual ZK stack but I mean just if you look at the actual pledges and commitments and things that are actually happening it's happening on the op stack and an interesting thing that came from the uh the law of chains as they call it is the requirement to basically support shared upgrades so I think the the main goal

that they're trying to accomplish here is just aligning everyone trying to build public goods funding so they can like actually find problems of these Solutions and then making sure that everyone has the ability and accessibility to the tech that you know it actually funds and getting it upgraded to every single chain that's using using the op stack so I don't know I just generally like their approach better but not to say that um their approach to scaling is actually better on a technical level yeah you're absolutely right about where the attention in building is happening and I actually I'm trying to figure out this more precisely but to me there still seems to be some like technical blockades around with like building on a hyper chain in the case of zk's uh ZK sync or some of these other ZK Solutions right like we haven't seen anybody do it

yet at all and I really wouldn't like trying to trying to dissect into why I think we've talked about this on the Pod before but like ZK syncs ZK stack for example they still have the timestamp issue um they actually just put out a report that that is expected to begin being fixed in September but it takes about 50 days to catch long story short but it takes about 50 days for the upgrade to get pushed live so starting from September 1st add 50 days you know in a month and a half two months later that's when you know it'll actually be fixed so then things that rely on a times Tamp which is basically any liquidity mining programs for example and many other things as well but that's just a very easy example then they can actually start to deploy there and like exist on

these chains so like the info still doesn't seem like it's really there yet um which is kind of interesting you got two different models like you have the optimism model it's like get the users get the chains get the attention and then figure out everything else like from a technical standpoint whereas the the ZK teams are going figure out the tech stack and the users will come so it's really going to be fun to watch these uh two different approaches kind of play out in real time yeah definitely I agree with you Dan but I think that's a good place to end it we're actually gonna hop into the interview with Chad bariford the technical lead at uh Thor chain Dan unfortunately isn't able to make it but uh you get Matt this time so we'll see you over there all right everyone we are joined today by Chad

bariford one of the core developers of Thor chain uh Chad thanks for coming on again I think you're one of our only repeat guests actually it's an honor there we go I love it well there's a lot of exciting things happening in Thor chain right now so I wanted you to walk us through just kind of at a higher level like what is door chain lending you know you guys are claiming zero percent interest no liquidation loans that's kind of like the headline offering but if you could just go into a high level overview that'd be great yeah so lending is a brand new protocol we just launched on our on our Network um there's what makes it very unique and very different is a whole host of things uh you touched on a few of those things

being the fact that it's no interest rates uh and that there is no uh liquidations at all and if there's no expiration on these loans it's really good but it's also what makes it very unique is that it's like the first like cross-chain lending profile uh protocol specifically for non-evm chains like Bitcoin Doge Litecoin Even Adam you know like just all these other assets out there that are not really touched by D5 in general now have access to an actual decentralized lending protocol for them fully validated fully transparent like all that stuff but like that in itself should be a huge news story just the fact that you can now get a decentralized loan on bitcoin yeah absolutely and I was also hoping

you could just kind of give us a another high level overview because like I mentioned we had you on like seven or eight months ago and Thor Chain's kind of unique in that as tvl scales it's security scales as well it's not really just a vanity metric so I was hoping you could kind of go into that at a high level as well just for context for the listeners so um so because Thor chain is a very different protocol than everything else you've seen uh it it is securing exogenous capital I mean meaning it's securing assets that are external to itself like Bitcoin like ethereum like uh Doge like Litecoin uh Bitcoin cash so forth no avax a bunch of different assets so because it's securing external jet like assets like those it doesn't have an infinite infant supply of security right like something within its

own equation some its own its own blockchain can just secure things arbitrarily because it doesn't need to secure things externally so we need to do something different right and what we talk about a lot in our in our community is talking about uh the um Economic Security of the network meaning that that the validators that run this network that that manage these assets or these external blockchains that they always have more to lose and they have to gain right just to make sure that they don't just like you know run a bunch of nodes you know one one person runs like a bunch of notes by himself or herself and then just like rugs a bunch of assets and like walks away with you know being a multi-millionaire and all this kind of stuff that's bad obviously right it goes without saying so what we do in

our design is to make sure that whatever assets these validators have access to they have bonded up with the Rune room being the base asset of our Network they've bond with more roon in value than the value they have to steal and that's a really really core concept of how a fortune is designed from the ground up to make sure that like that even if you get past all the code problems you get past all the the security measures we have in place you also have Economic Security as well something another layer to get past which makes it generally pretty pretty hard to do so I know for thorfi Lending it's a little bit complicated in the life cycle of alone like in the process of actually opening and closing it if I believe if I'm not mistaken there's actually eight

swaps involved or something like that and a stable coin called a tour so I'm wondering if you wouldn't mind just giving us like a high level walkthrough of what it looks like to actually open and Loan and close sorry open and close alone and uh how is this stablecoin used and why are eight swaps necessary yeah so um when you open up a loan with Thor chain you are starting with some sort of like real external asset right let's just take Bitcoin as the example layer one this is not rapid one this is like literally like layer one real Bitcoin on the Bitcoin blockchain and so you you send that asset from your wallet to one of the wallets that is that is owned and controlled by the network itself and the first thing the network does is it swaps that Bitcoin into room right

it's a little straight up little swap there so that's that's one trade right there then there's a second swap where it swaps that Rune into what we call a derived asset right which is similar to um a synthetic in a matter of speaking and so in that process it's actually burning that Rune and it's minting the synthetic right minting the derived asset so that is a a double swap in its first uh part to to deposit the collateral into the network right so now at this point the lending protocol itself receives what we call Thor BDC which is the derived asset so you start with layer 1B Bitcoin you double swap it from from layer one Bitcoin into roon roon into Thor BDC Thor BDC is the thing that you actually the network actually

receives as the collateral and that becomes like the first two trades then at the next point now that we've received your your collateral say the collateral is worth thirty thousand dollars let's just say and let's say there's a there's a there's a CR of 200 or an LTV of 50 right now the network has to pay you your debt right and the network always utilizes your debt in the form of a stable we we call this tour and with our own network and Taurus is basically a basket of stables and a matter of speaking we have several stable coins on the network usdc you would say t uh die you know whatever that is and so the network utilizes these the the pricing of all of these Stables on its own network to figure out what the value is of of Tor right relative to the quantity

of room so it starts with by minting the tour it then Burns it swapping it into roon like minting the room the room then goes swap to some asset that you want to receive let's just call it uh usdc for example supported usdc and the uscc gets sent to you so in that whole process of opening a loan you've actually made four swaps in total two double swap to deposit the collateral a double swap to get the the debt out what you're receiving and then when you're doing when you're closing the loan you're doing this whole thing in Reverse you're doing double swapping back into tour tour gets burned right that's your your debt asset of the of the loan itself and then you're double swapping the collateral Thor BDC back into layer one BDC again and so when you

open alone you're going through four trades and when you when you're closing loan you're going through another four trades to make it all happen that's a pretty complicated hopefully I did an okay job explaining it that was great thank you and then I guess sort of maybe that one of the points of this process is you remove a lot of Rune from the circulating Supply that's the difference between the the notional value of the collateral and the actual notional value of the debt taken out so I guess if I'm not mistaken then as you know the amount borrowed increases more Rune is taken from the circulating Supply and burnt yes the the value the network has because in this context the network is is the lender like most of the time in D5 you have a borrower and you have a

lender and usually two people that are taking both sides of this kind of like this this relationship if you want to call it that so if somebody's putting up the ether the if to to lend and somebody's borrowing that eth on Ave or your compounds or something of that such but in this protocol the protocol itself is the lender not an individual and so how the protocol benefits from the scenario is that it just creates a lot of buy and burn pressure on the Rune asset so apparently when you are open up alone even if you were never even touching the roon asset as part of that process like you as a borrower you are actually creating a large amount of buy and burn pressure on the roon asset how do you think about the risk that if the roon if the price of Rune goes down uh

in when related to the price of the debt asset then potentially maybe more ruined would need to be printed to pay back the users lateral if that's if I'm not mistaken so are there any like Risk mitigation techniques or things that you guys are doing to help make sure that more Rune is actually burned than printed yes so uh there's a few things for one point we we capped this system right this is a new very novel an experimental concept and so we're not just yoloing into it like you know a lot of what D5 does in this industry and so there's like there's a specific low cap I think it's like one percent of the supply of roon itself so it there's no concern of it going to some ballooning some large amount of trillions of Ruin whatever the

hell it is in part because it's only uh um um capping the amount of loans that can be taken out to a small very small amount that's the first part the second part is we do have what we call the Circuit Breaker right and so the the supply of room today is 500 uh million Rune that's like the max cap right so it's hard cap so hard capped at that number and that still truly is true even with this with this protocol launching it's never been changed in the history uh actually technically the roon started off as a billion dollar uh billion Rune uh Captain was was half of it was burnt like two and a half three three years ago but that's that's not the point and so uh in the event that something happens in which case we start minting a

lot of room for some reason or cause the and the network gets to that 500 million like kind of marker what happens at that point is that the lending system itself is paused in terms of your ability to open new loans current loans can always be closed that's perfectly fine and any additional room that's required to Mint beyond that 500 million does not actually get mint it gets basically borrowed from the reserve and the reserve is like about I think it's about 30 or 35 percent of the supply of root is inside the reserve itself right and so that the Network's reserve and so we have this huge kind of backstop in that in that context as well but it's unlikely we would even get to that place just because of where we actually burn through all that just because there's such a small cap placed

on these things uh on terms of being able to open these loans to begin with we're just experimenting with this idea initially just to try it out see what works what doesn't work and see how effective it is to accomplish and the goal that it's designed to accomplish but I would think that in general it's like it's unlikely and long term that that there would be a net mint of roon on the protocol of course that can happen from day to day or even month to month but generally speaking in the long term that's not likely to happen there's a few reasons for that one is there's this whole idea and traditional Finance called the small cap theorem and this is basically the idea that like that small cap assets are more volatile are more likely to go up a lot more in a bull market and down a lot

more in a bear Market than a large Market asset so Bitcoin being the largest market cap asset in our industry right now which is I don't know how many is it a trillion now or whatever the hell the number is it's a lot larger than than roon and so roon will uh it just has a natural thing to outperform Bitcoin in Bull markets and underperform Bitcoin and bear markets and this is nothing specific to Rooms just like any asset that's like less that has a market Capital less than Bitcoin that's just like a general thing of every bowl and bear Market you can see that's that's true across the board and so during bull market that's very unlike the that room would underperform Bitcoin just because of that theory uh by itself but also the idea that like runes can be printed during the bear

markets is actually much more less less likely and that is because when your collateral is uh follows below the value of the debt so if you start off with thirty thousand dollar in collateral and you receive fifteen thousand dollars in debt and then the market goes bare and the debt's always a dollar right so it's always stable at fifteen thousand dollars your collateral can drop below and drop below it so now your collateral is worth let's just call it five thousand dollars instead of thirty thousand dollars right we don't have liquidation Services we actually don't need to do legalizations resection doesn't cause consultancy in our Network like it does at any of the lending protocol but what happens at this point is that this loan was no longer really closable right because who's going to spend five thousand dollars I'm sorry we're supposed to spend fifteen thousand

dollars to get back five thousand dollars with a Bitcoin like that's a that's a bum deal right in fact if you were actually do that on the protocol it technically allows you to do it if you wanted to but if you were allowed to do that it would actually net burn roon even in that scenario so because the market itself embarrasses scenarios that the the value of the collateral drops down significantly relative to the dollar it's very it's it's there's resistances or uh or frictions to actually minting Rune in the bear Market because of this and because of that you have this asymmetric relationship with minting and burning there's a tendency to Mint and less of a tendency uh a little tendency to burn and less of a tendency to Mint Rune in the bear Market

that makes a lot of sense to some extent it seems like taking out a loan sort of acts like a Perpetual call option where like if I have the ability to any point go buy back my collateral so if let's say like you know I put up one Bitcoin let's say it's 30k I take out a 15 000 die loan Bitcoin you know Falls and price goes down to 15K and eventually in a year from now it's at 50 000. okay now because I'm still able to I'm gonna go repay my loan and get my Bitcoin back so it's almost like this call option um I'm wondering if you have any thoughts on if people use it in that way and if that if that's something that you guys have thought about before yes of course um we've definitely thought about that and that's definitely one of the use

cases for this particular design I feel one ease in that way go right ahead have fun you know uh go with it um but it's accurate to say that that it's like a Perpetual call option but there is a difference here right and that is that typically in a call option there's somebody's a winner and somebody's a loser one of the one of the other right but in this design it's not the font doesn't work that way it's actually a quadrant of four right so there's a win-win a lose-lose a lose win and a win lose right and so any one of these things can happen so either the the protocol loses and the user the borrower loses both of us win or one of us wins and one of us loses one of these kind of things and so because of that like just because you as a as a as a

usage as a Perpetual call use it and are successful in doing so doesn't necessarily mean that the protocol is lost in that scenario in fact poor code could have and most likely have one in that scenario as well right so it's it's not quite that simple as a call option it behaves like one but it's mechanics underneath the hood are quite different am I right and assuming that this doesn't really affect the profitability of uh LPS and Savers in Thor chain because really the main value of creative uh Prospect of it is really just the roon uh burn and mint uh no I wouldn't agree with that just because when you're entering the loan and closing the loan there are four

swaps in total that are swapped through the layer one pools which generates revenue for the LPS and then we go all these are also for the most part unless you're a saver LPS are on the Dual side LPS are exposed to the roon price so they're getting value from the from the room price being um uh stacking some value from that so I don't think it's necessarily true to say LPS don't benefit from it but I think because I think they actually do yeah no that actually makes a ton of sense and then so you said that there's this 500 million Rune hard cap so what happens to borrowers with open positions if that hard cap is reached just you know they sit in their positions and and wait for the market turmoil to play out or or what exactly happens

no I mean it anybody who's a borrower can can exit their their loan whatever they choose to even if we hit the 500 cap the only happens there is that we we move from minting room to borrowing room from the reserve which is like a hundred and I think 160 million or something like this it's like a huge quantity right so it's still there we start borrowing from the reserve instead of just minting it so the cactus stays at that 500 uh million Mark if the event happens that we do get to that place where we get to that 500 million cap or whatever then we have to decide as a community of like well maybe this lending idea didn't work out the way we want to do or maybe it can work out just because if we adjusted this thing or tweak that thing or made a change here

whatever that might be and so there's a good chance that the community as a whole lot to determine whether or not we want to just Sunset the feature entirely and just kind of let it let that feature particularly die out or we will make some adjustments to it that something we've learned in the process of experimenting with this idea and say you know what if we made this tweak or made that change this whole thing would be a lot up a lot better so we don't really know that until we actually try it out right we actually always experiment with with D5 and always encourage the industry as a whole to always experiment and try new new ideas I want to give a quick shout out to hexins as we explore today's blockchain landscape let's take a moment to recognize them as a premier cyber security provider in web 3. hexins

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free web 2 pen test with your partnership and reach out to hexins at hexins.io find them in the links in the show notes or reach out to them at permissionless they'll be at Booth 832 but without further Ado let's get back to today's episode would you mind explaining the concept of v-pool depths and how that impacts borrowers and like why that might mean that there's Better or Worse times to close a position or open a position yeah yeah so very good question so when you're swapping from roon to a virtual uh to a derived asset the one I mentioned the Thor BDC Thor F like these kind of things the pool that you're swapping with is a virtual pool it doesn't actually really exist it's just there's a there's an oracle used from the layer one

counterpart to determine what the what the ratio is between the Rune and the Thor the virtual room and virtual Authority in that particular amm just to create you the the the price point right and so that pool is used to help mitigate against uh against a couple mitigating uh factors four one in the what we don't want people to do is to um do what we saw like in mango Market that's probably a good example where somebody was able to price manipulate an asset you know take Bitcoin for example push bitcoin's price on on the network to term being thirty thousand dollars or twenty six thousand dollars worth of current prices and push it up to half a million dollars then deposit a bunch of Bitcoin tell the network it's worth millions of dollars

when it's actually worth you know fifty thousand dollars or something like this and then get a huge amount of debt much more value than the club that would be bad that'd be price manipulation that would be a terrible situation so the virtual pool plays a role in helping protect the network from that manipulation so the virtual pool's depth is always relative to the layer one so here's the virtual pool here's layer one and their starting point is that basically the same depth same the same size and so the more volatility the more trade volume you see in the layer one pool that's more shallow the virtual pool becomes and the more shadowy virtual look on is the more fees that you pay on those swaps And Trades through that pool and so if you actually were to price manipulate and push bitcoin's price to

500 000 something like this the virtual pool becomes so shallow that you couldn't pass much value through that thing anyway which means it wouldn't be profitable for anybody to actually make that action the second thing that helps to the network on is it creates the correct incentives to put a to put a break on any attempts to draw a bank a bank run right so and take Tara UST for example the way that was designed was that it was to Foster more people to run for the door Not to cause less people to run for the door right so for example um Tara USD talked about having back in the UST with I think it was like six billion dollars worth of bitcoin right on this on the face die this sounds like

a really good idea backing with a real asset right but in reality actually it's counterproductive to the to the peg so that means that as soon as there's some troubles going on people are going to look at that uh Network and say well this 40 or 50 billion would have held the number was of UST there's six billion dollars worth of bitcoin effectively backing at this point if I get out now I'll be fine I'll get i'll get my dollar my full you know one-to-one ratio dollar be good I get my Bitcoin right but if I wait until tomorrow all that bitcoin's gonna be gone so you're creating the incentive for people to exit the system now and to to to to bank run the entire system and you don't want that obviously for obvious reasons and so what this does is like as there's volatility through that

layer one pool because people are trading through it they're closing the positions a lot of trade volume happening Arbitrage blah blah all these things the virtual comes very shallow which means that the fees increase right it's very similar to like think about it like um like Bitcoin like when you do a transaction on bitcoin the gas fee or transaction fee should say actually is relative to the demand of of the block right and sometimes it's really cheap and sometimes it's really expensive depends upon how much demand there is and so fees are basically increasing with demand and that becomes like like a braking system if you want to call it that or a way to counteract any intent for a large amount of value to being exited the system and very quickly that makes a lot of sense that's

actually a super cool design because like at initial you know my initial reaction to this design was maybe it does sound a little bit like Terra Luna but it seems that you guys have a lot of breaks in place to make sure that you know there can't be this kind of infinite flow of of new roon coming into the supply and mitigate people leaving their loans and the total value of outstanding loans going down at a quick rapid pace so that's awesome um yeah Sam do you have any questions yeah yeah I'm actually curious what has the usage been so far we probably should have uh started with that but I'm curious if the the adoption's been pretty good yeah uh Mr refresh my my browser right here uh it is about one second uh 300 000 roon has been bought and burned from

the network thus far in the last I think it's been what less than 48 hours since we launched this this feature so uh you can judge that to be really good or really poorly depending upon how do you how much do you think 300 000 Rune which is about what half a million dollars or 600 000 worth of worth of worth of uh buy and burn pressure on the asset that's that's not too bad have you guys worked on any like uh I know like you can make swaps between you know eth and Bitcoin on xd5 wallet for example have you guys you know tried to integrate this product offering with maybe some centralized exchanges kind of makes sense to me or maybe some wallet providers yes uh to my knowledge there's only been

two uis that have implemented this feature that's like that's lens uh l-e-n-d-s and Thor swap both of them had some some troubles in the first you know 24 hours or so which might have contributed to the the current number of room bought and burn um I think more uis will play integrate interface over time uh that's what's going to take you know months to be honest with you before you get to that kind of thing yeah that makes sense those Integrations definitely take time sorry Matt do you have a question there was nice if I'm not mistaken today you could only use Bitcoin and ether's collateral and any of the Native assets supported by Thor chain you can borrow as your debt asset are there plans to support more collateral assets and are other are

there plans to support more debt assets as well yeah good question so um and true story chain spirit in terms of how we run this this protocol as a community we always start small and start like capped and and cautiously we never roll out any large features and just like YOLO it out and so um that also pertains to what eths are supported just to keep it small and concise and limited in the early days when we're first trying to like get our feet wet in a matter of speaking so Bitcoin and eth were selected because obviously they're the most high demand assets and we didn't want to get too big into like smaller capacity at least not initially I think there is intention to expand to other assets I think my

personal uh uh two cents is that anything that's a that's a layer one uh like main asset of any particular chain we call them gas assets internally but like Bitcoin eth avax Litecoin Doge you know whatever the primary asset of each and chain is I would like to see those particularly supportive in terms of debt assets it is clear that that won't be clear that the debt is always or core which is our own stable coin right Tor is always the debt that that you are owed but you may receive whatever asset you want so the the network will from accounting perspective track what your debt is in in dollar vet terms not in terms of ether or ufcc or anything also that matter specifically in its own uh

tour asset but the network doesn't allow people to actually hold Tor that's why the market cap of tour is always zero right at the end of every block the market cap of tour is always zero right and so uh you can send what you want to receive which could be Bitcoin could be eth could be Litecoin it could be you know some long tail uh you know small cap asset on ethereum it can be arbitrarily anything interesting okay and you just sparked another question and maybe this is a bad question but I'm curious how is tor actually priced internally like if we saw an event where usdc or usdt depeg to the upside or the downside like does that have any effects on how the actual mechanism works for Thor chain

yeah good question so uh the short answer is is no uh the long answer is yes for me only explain how well that is so right now I think that we have about three different stable coins we're utilizing for the anchor of of the tour asset uh maybe it's four I can't remember from the top of my head and it uses the median of these three different pools so if usdc depegs like it did what was like six months ago whatever the hell the number was it actually has no effect to to tour whatsoever because it's looking at the meeting of them not at the average of them or or all of them combined right it's and they're always looking at it's like it's it's looking at the healthiest stable coins in the industry at any given moment and that

becomes the the one that that that it depends on not so much the unhealthy ones and if one becomes unhealthy and becomes one that is healthy becomes unhealthy it gets basically removed from itself in a matter of speaking the only time it becomes a problem is that if the entire industry and the majority of the stable coins in our entire industry depeg all the same second or the same moment that's when we run to an actual uh actually to a problem in which case the network has the ability to remove in a very quick fashion specific stable coins that are being problematic for one reason so if they were all depending except for uh LAUSD for example I'm just making one up for one on random the

network can just choose us to drop all the ones that are being crazy you know that are deepegging and just pin off of LSD for this time being and then wait for the dust to settle and those things become healthy again and stable again and then repeg to those same things again so it's I it's almost like a inevitability that that tours ability to be priced to a dollar is more effectual than any of the stable coins that it's pinning off of because it arbitrarily migrates and moves from the one that is the most stable any given moment right who do you think is are the main users of this product like who do you think has the highest appetite for barang is it kind of an Ave competitor or because you know there's no liquidations and no

expiration and no interest this is something completely different so I'm wondering how you think about that like who's the main Market yeah um that's a good question and and to be honest uh you never know these things until the market tells you what the answer is but the way that I look at it personally is that um lending and D5 is a horrible experience right and anybody who's taking a loan you know on insert a D5 protocol here knows how stressful it is and how much it sucks because the vast majority of them like you have available right interest rates like a balloon up to 20 30 in any given moment and that's stressful as all hell you have to worry about your collateral value of dropping

in you know so much and then you have to worry about like losing all getting liquidated losing your collateral forever that also sucks like so many people who take out loans are just like stressed all the time they're just like constantly checking their phone at the price of ether the price or whatever to make sure they're not going to get [ __ ] in the ass basically right and so anybody who's taking a loan like this knows that how stressful that is and I think that's one of the values of what Fortune's design gives is that it's it's really like the first Stressless lending protocol right because you don't you know what the what the interest rates are going to be it's zero percent hint hint right and you know that you're not going to get liquidated so you can come back in 30 years if you want to and

get back your Eve to get back your Bitcoin whatever it doesn't actually matter so anybody who wants to um uh use this protocol to buy a car or buy a house go on vacation like do something real with your money and actually improve the quality of your life in one form or another rather than just using lending as like a way to de-gen yourself up to a to a you know very risky very risky profile I think it's appeals to a different kind of user personally well a longer holder of those assets rather than somebody looking to leverage themselves up over the next you know two weeks I'm curious how you think about like you know Thor chin really is

like the only place where you can do like trust minimize swaps between eth and like native Bitcoin so how do you feel I guess this is more of like a theoretical question but like how do you view like like keeping up with D5 Primitives trying to innovate but also like remaining pure to like the original ethos of Thor chain of like providing this like truly critical infrastructure for defy like do you ever worry like man maybe we shouldn't be launching some of these features because like we've got something so good going yeah I mean that's a good question to ask um I mean typically we're not the only ones that do what we do anymore like Maya is a fork of Thor chain and they've launched and you can now trade through their their UI chain flip is coming out

they're basically like a fork of our white paper um but a new implementation um I think early on what we had realized what I I had realized was that the hard work we did to to create this kind of like multi-chain framework right and a way of securing its way of observing observations way of you know um getting a decentralized group of individuals to coalesce together to be able to do multi-chain uh things without requiring a smart contract or these kind of things like that was extremely Innovative and I think in the early days it made sense to use it for swapping it was kind of like the most immediate use case it's like it's like when the

internet first was invented the most immediate use case of the internet was email right sending little like digital mail letters to people across a series of tubes right like that was like the original kind of use case for the internet but it doesn't mean that uh that's the only use case for the internet right and so I think we are uniquely positioned as a protocol to do things that nobody else in the industry can reasonably or possibly do like and there and I I truly believe that we as a as a project are years ahead of most of the defy industry by a really good margin by the fact that we don't have Mev and we have a slip-based FEMA which is like revolutionary in terms of how it works and we have cross chain and we've

got like so many things we're doing that is like leap years ahead of the rest of the industry in such significant ways um it'd be it'd be a shame to take such advanced technology and just apply it to one particular use case when it's so possible to do so many other things so I think long term we have an interest to do things not just swaps we would like to do new synthetics was a big thing we did Savers which is like single asset yields something you would only see on block five or Celsius these kind of guys are now available on Fortune today lending is another major component we've been talking about perpetuals is another thing we've been kind of discussing internally and how we can Implement perpetuals in a way that could be groundbreaking just because it allows

cross-chain professionals that's never been done before the wrapped assets and that kind of [ __ ] even uh a stable coin that's something we've been very interested in doing in the tour asset itself is a stable coin an algo stable that exists in running on the network Taylor's been running on network for over a year now it's actually one of the oldest running algo stable coins ever to exist uh but because you don't have an ability to to buy it and hold it and trade it freely it hasn't really kind of been utilized yet but we've improving the peg over the time span of the last year that has proved that the peg actually works extremely extraordinarily well uh there's so much things you can do with this and it's okay to experiment and try new things the important thing is that that when you're trying

something new you do it on a small scale to start with validate your assumptions validate that everything works the way you think it's going to work and scale things up with your conference as you get more confident that things are working well things are gonna work you know are heading in the right direction kind of scale up that that feature over time yeah that makes a lot of sense so Switching gears a bit since you actually left this one off your list of innovations that you guys could do but streaming swaps it's a kind of an interesting innovation of being able to spread you know large trades across multiple blocks to get less slippage for for the person actually trading can you kind of explain exactly how that works and if you've seen much adoption to date yeah um so streaming shop was the idea of a

way of giving people more Capital efficient trades right and another way of doing something similar would be like uh constantly liquidity right it's another way of someone doing the same thing somewhat they're both achieving the same goal of being more Capital efficient but I'll have different ways of accomplishing the same the same end goal for us because we have a split-based feed model it's not profitable to make large trades through a shallow pool because the fees go up um respective to the trade size whereas an xyk it's like more or less uh semi-static right uh a 25 business points or whatever all the numbers and so we we can't actually do that in a static kind of way because they would go against some of the security mechanisms

on the network so instead what we do is we we take the trade and we break it up over time over you know every block or every 10 blocks and make a kind of a sub trade right and by doing that you may you you allow Arbitrage Bots to arbit the pool in between each individual sub swap of your swap right and what allows you to have much more Capital efficient approach so today in in 14 land you can trade from any asset to any asset and pay a five basis point slip on your on your on your trade that is monumentally huge like that makes Thor chain the cheapest place to buy any Blue Chip asset as you can reasonably think of right it's actually better and

cheaper and faster to buy and sell Bitcoin or ethereum or other assets on Thor chain then it is on coinbase finance Kraken in insert centralized exchange here that's pretty fantastic for me there's the trade volume happening on those exchanges as monumentally large obviously and they're doing it in part because they have best price execution right but that all of a sudden change for stream stuff and that was like about a couple weeks ago and from launching that feature you got the question like have we seen an increase in trade volume and the answer is resoundingly yes right the uis that that chose to support this feature

um like Thor swap for example they saw a massive increase like I think it was like 10 or 15 x in in trade volume on their on their us Thor chain itself is now like a top five decks in the world in terms of trade volume just because this feature basically close to like 5x the volume on the network quite significantly right or well I know you know the exact time I had but like we saw a humongous increase we saw a massive whales coming through a Million Dollar Plus trades and still getting business points on humongous traits that's pretty incredible to think about um and once we've had this feature for a while and more uis integrate with it more kind of you know while it's

integrate with it we'll probably see even more of an uptake what's the highest fee that one could expect to pay on to you know all eight swaps in their loans like taking out a loan or closing alone what's the highest fee that I might realistically pay uh so lending itself when you're opening or closing alone the fees you're paying is not using streaming swap so I just just described it's a single trade so how much you pay uh how much you pay excuse me is relative to the size of the loan versus the depth of the pool right and that can be arbitrarily you know pretty wide ranging it can be a small amount of fees it could be a humongous feeling prohibitively large amount of fees either on the open or on the close right

um that all depends on how large your Traders which is I think which is why so far on the lending protocol we haven't seen million dollar loans because it's just it's two price uh um uh it's too price difficult to to do that the fees will be way too high to make it viable um but I think long term I think we're intending to add streaming swaps to Lending uh there's a few complexities you have to work out uh some math problems to work out but but once you have streaming swaps built into lending assuming the the market is non-volatile I mean if there's not you know huge amount of Trades happening for some you know um Bank Run scenario or just like Bitcoins going crazy in price and

deposit a lot of Arbitrage and all this stuff assuming that this is a a regular day uh you could you could pay you know five bips right to to open your sorry let me uh correct that uh 10 bips on the 10 bits in the inbound and 10 bips on the uh 10 bits on the open and 10 Pips on the close so that's still not not bad at all right um once we have that feature uh set up then I think you can set up a million dollar loan and not pay very much in fees at all so if TVO got large enough though like let's just imagine a world where most of the Bitcoin underneath is held within you know the third chain node network does this feature become somewhat

irrelevant or am I wrong and assuming that yeah so stream shops it becomes less and less relevant so um the network will not allow each individual sub trade of a streaming swap to be less than five basis points paid right which means there's a minimum size right which I don't know I think it's like maybe it's like four thousand dollars per trade or something like this within uh the Bitcoin to each trade if you were to make that one today and so um if the pool it becomes really deep because it's like there's you know 100 000 Bitcoin in the pool I'm just making up a number here but just imagine that's true for for the moment and then each pool has you know a million Ethan there or something like this then the five

basis points of of each into a sub up would be not four thousand dollars it would be I'll just call it a hundred thousand dollars or two hundred thousand dollars which means that if you have a trade that's lower than 200 000 stream shops is not available to you you can just do it in a single trade and you're still paying less than five bips so I think you're still pretty happy right but it just becomes not so useful to uh for you the one say one caveat of this is that stream swaps can be used in a way of doing a t-wop order right the t-wop just means time weighted average price I think that's a call or something like this but basically it it's for basically whales who want to make large trades but they don't want to you know be killed almost on this on the fees and

they don't want to cause huge price swings in the asset because they're they're trade is so large that they might push the price up or down a particular way and they don't want to do that and so they might just say you know what I'm going to do I'm just going to follow the market every hour I'm Gonna Make You Know ten thousand dollar trade for the next week and a half or something like this and so stream shops can be used as a t-wop and so it might be useful for that particular purpose into the future but uh we'll we'll see even in that case like you still have to in order to use it as a two up you'd still be less than the 200 000 you know hypothetical limit they were just talking about so it'd be harder to use it for that particular use

case in that example but as a deep pool is to get really deep which is the long-term intent of the protocol for obvious reasons uh streams also become less less valuable just because you can do everything in a single trade and still get like close to like five bits or less in in fees so last time we met on the podcast we did talk a little bit about Savers you guys had just launched that that feature then um how has that look so far have you been pretty happy with the the adoption there um yeah I mean it's hard to be to be bearish on Sayers the value that came into the protocol and and hundreds of Bitcoin for example that came in through Savers and it made

the pools significantly deeper right and we've seen how a deeper pool and Hanley creates more volume right like it's almost one-to-one practically um but like as the pool scrub became deeper because people depositing Bitcoin eth and Adam and Litecoin whatever also Elsa was uh the pools get deeper and more trade volume comes with it so we've actually got to the point where Savers became overly successful and we actually had some problems where there was too much Bitcoin in the network right and we had to deal with that problem we've dealt with that already but like it it literally was so in demand that like it hit the Caps of what we could economically allow which is obviously a good sign yeah I would say that is

pretty successful now if I'm not if I'm not wrong I think you guys activated protocol and liquidity uh in relation to Savers vaults and I don't really I'm not super familiar with what happened here so maybe you could just explain uh you know why you guys activated that and what impact it's had yeah so um protocol and liquidity is the idea that the network Reserve which I mentioned earlier in the conversation it's as a I forget the number like 100 and something million Rune in it that room's just kind of sitting there it's not owned by me or or anybody I don't have a mo it's not it's not home by a multi cigarette like this it's owned by the network itself the protocol itself has the response and it can

utilize those funds as it wants to right now it's primarily being used as block rewards to supplement the pools and in their apis was that as we add more sense into the network via Savers the the LPS are taking on more risk right to back the value of those Savers right and so uh well half of the yield those Savers are making is going to LP so they're being compensated for that we want to make sure there was additional support if there was needed and so pul in some sense you can think of it as like the LP of Last Resort to ensure that there's always Capital there's always a you know uh liquidity in these pools to be able to support trading and support the save

Savers and all this kind of stuff so as the Savers increases in terms of like the number of synths in the pool uh increase the LP of the the Pol will add a roon into that rule as a dual sided LP so it's effectively buying it's selling half of its Rune into the into the uh Bitcoin asset or ethereum or whatever pool we're talking about here and so it's constantly adding more at when it needs to to support the pool support the LPS and support the Savers it will withdraw when it needs to as well once once there's you know not that many Savers in anymore we can start to withdraw and kind of uh the reserve can come claw back its money but in the meantime it's deploying on those ruins

as just like a regular LP basically and earning a yield on that capital and that Capital obviously goes back to the reserve the long term has that had a negative impact on profitability of other Savers and LPS because now the protocol is you know earning some of that yield itself um theoretically yes the I don't remember on top of my head how much the Bitcoin pool the pul actually owns I think it's like but somewhere between one and five percent I'm gonna guess maybe no longer no more than 10 to be surprised if it was more than ten so it's not like a huge amount but it's it's there in a way to to help protect the LPS more than to

take from them right like when the LPS are experiencing a high amount of Il right from Price movements happening just naturally in the market the P well is entering to be like a a bodyguard if you want to call it that to to take on some of the IL losses to help kind of spread the load in a matter of speed so that they experience less of it does should I mean by that so it it is taking some of the yield from the LPS technically that's that's absolutely true but it's also playing a role to help support them at the same time as well that's that's the reason why we added it there to begin with was to protect the LPS predominantly primarily not so much to like you know siphon uh income or yield

yeah that makes a lot of sense grow the pie instead of restraining the capacity of the network um so you did tease for a second like a perp decks I'm personally super into that bullish on D5 perps so curious if that's actually a priority on the road map or really what the next 12 months of concentration looks like for you and the team contributing to Thor chain it is something we've been talking about we we don't have a strong design at this time we have an idea we have a high level concept we don't have a specific implementation details worked out quite yet and I think there's a lot more work to be done in this regard um hopefully that can be done by the end of the year hopefully that's much my intention uh between now and then we also have other features where we want

to ship first like I think once we get lending all kind of settled down and iron out the bugs and that kind of thing uh we're going to work towards um order books and order books would be very significant because it helps increase Capital efficiency increase trade volume um it introduces Thor chain to a pro level Trader right rather than just like a simple swapper uh that could be very beneficial to protocol we've talked about um this thing called Cobalts to the way to scale security we've talked about other features as well but I think perps is something that we're all excited about because we see the value of it and we see that it can generate a lot of income for the protocol and we see that it could generate a lot of trade volume as well throughout the pools to create more uh uh income that way as well so

I can't get into any details of work so to be honest we don't have we haven't figured out all the all the we have a document written in the and and and um in secret so to speak non-secret but just a private document that is going to lines out our current thinking but to be honest like when we were designing even the lending idea like we went through about I think like 14 or 15 different designs and took us a total from the first lending idea or uh was probably two years ago and the one we actually using today when we just launched a couple days ago we the ideation actually happened about a little a little less than a year about 11 months ago so like we went through many many iterations over a long period of time to to finally land upon a design that we felt really

good and for the confident about and I suspect that perps will be something similar that we'll go through you know 15 20 different designs before we actually decided that this is the one that we should go with one thing that's for sure is it'll be a lot easier to launch your purpose decks if you have your own stable coin that's tradable so I I could see how tour and a purpose decks might go well together in the future Ferguson like you mentioned synthetics what uh what are you kind of thinking there I assume it's similarly very early on and it's a very nascent idea but wondering if uh you can share anything um well let's pull that apart a little bit so there's two ideas within the third chain about a synthetic one is what we call synthetics today is a

synthetic acid that exists where the the its value is backed by the value of the pool itself that's what we use for Savers and that's what arbs use to ARB the pools very efficiently very quickly um derived assets is another type of synthetic but that's going through a burn mint mechanism of the roon acid to acquire that so that's backed by the protocol itself right or the roon asset itself so those are two different ideas they are both similar in the sense that they are assets that that mimic the the purchasing power of external assets like Bitcoin and ethereum and so forth and so on but the way they are backed are structurally different synthetics have been around for a long time it was actually in the original multi-chain chaos net code

many like over two years two and a half years ago but it took about six months or a year for us to actually flip the switch on uh and when we did it was actually highly like effective actually increase the capital efficiency of the network by about 15x at the time which was pretty amazing I think uh there was a report that I read at the time that like we were the second most Capital efficient decks in the world second to uh uniswap and uh but derived right assets are different and that's the new thing we're using for synthetics that's why I'm sorry for Lending uh those assets are not generally available you cannot just buy them and hold them in your wallet or trade them you know whatever value you want all the drive tests that I get to the network are held by The Lending

protocol itself not held by individual wallets there is an ability in the network today that nodes could vote on to turn it on just to allow anybody to arbitrarily mint and burn direct as they see fit uh and maybe that will happen you know in some period of time but that would also launch in publicly our our Allegro stable design what we call Tor and so that's obviously a very like big concept and a lot of like history behind algo stables and there's a lot of like you know negative feelings about these ideas and so forth and so on and I understand why I totally get it but uh at some point in the future maybe six months maybe longer the community is gonna have to come back and and have

that conversation debate of like do we want to make Dura death that's including Tor to be a generally available asset to be traded and used and held and these kind of things maybe the answer is yes maybe the answer is no the community will have to vote on that in six months but the benefit of doing so would cost a lot more buy and burn pressures on the Rune asset which is obviously a good thing uh and the negative is you know it's taking on a new risk Vector the network would have to take on is doing that it's that's definitely an art a discussion and debate of the communities we have to have over the next maybe six months or so wow that's a big idea and you'd potentially be able to support any derived or virtual whatever you're calling them asset and uh you know if

you have very good Dynamic fees which it seems you know you do with the pool depths and other mechanisms to make to incentivize people to you know not redeem these Assets in times of high volatility that's a that could be a huge addition to D5 so very excited to see where that goes yeah I mean I'll be very excited about how it goes too I think like what we've designed here is probably one of the first if not the first like vertically integrated entire defy stack I mean you got swaps you got lending you got single asset yield you got synthetics you've got uh um stable coin you've got uh maybe even perps one day like order books like the whole thing like every major thing that

you can think of in a D5 industry is implemented uh within the third chain cross chain and done the way that's like completely different than everybody else like a very Innovative we could probably spend an hour diving into each individual idea of these things and explaining why they're so different and how they're like so much better than how the most of the industry operates super cool I almost get like a cross chain frax Vibe I don't know if that means anything or makes any sense but like yeah no I know what you mean I know what you mean yeah I I know exactly what you mean yeah I think the guys over over fractal recognize that if you can build a fully integrated system you you have you you you pull in a lot more value into your

ecosystem and I think like Apple's like a really good example of that like apple wants to build the whole pie themselves they don't want to kind of like Outsource certain pieces and by doing so you speak you would say that people just live inside your Apple world with your Mac and your iPod and your now your vision glasses vision probe the health [ __ ] it's called like by doing that you kind of corner the industry in a sense and these all these things are integrated with each other to make it give you a seamless integration uh experience that can be quite like invaluable in a sense and I think I see the value of doing that ourselves uh and because we're we can do things that nobody else can do like cross chain for example like do it well not just like

wrapped assets and all this bridging [ __ ] but literally working with the layer one assets that is like huge right it it changes our mentality of how we think about blockchains to babies like isolated islands that exist across different you know separate universes but rather in a single ecosystem a single World a single blockchain system with all these different kind of citizens of this world in a matter of speaking and they're all there and participating in the same D5 protocols as everybody else right and that becomes a much better system if you ask me yeah that's awesome well I know we're coming up on an hour here but Chad like thanks again for coming on for the second time you're

always an electric personality to have on here I love like I can like Feel Your Enthusiasm just bleeding through the screen and I love it but uh I will uh I'll kick it over to you to tell people where they can find you to learn more about door chain maybe get involved in the community yeah well learn more about sports don't don't learn about me I'm I'm you know I'm boring but learn more about the fortune product you can you can follow at Thor chain there's a huge Community around us that have really good tweaks and that kind of stuff you can find us on Discord jump and Discord ask your questions uh I'm happy to answer them we also do a weekly every Friday we do a weekly uh um Twitter spaces uh follow the fortunate account for that and you can jump on that and we every time we do

we do an AM uh AMA every single time so if you have any questions about lending streaming swaps algo Stables you know purpose I don't know whatever you want to ask about I try to be there every week and I try to answer every question that comes on that stage awesome man we will catch you here in six months I'm sure you guys will be building something uh pretty groundbreaking that time too so hit you up later thanks again Chad thanks Sam thanks man [Music]