Felix Lutsch: Chorus One – On Proof-of-Stake, Interoperability & Crypto Markets #439

Transcript

hello and welcome to episode the show which talks about the technologies projects and people driving decentralization and the blockchain revolution i'm brian crane and i'm here today with felix luch who's joining me today as a guest host so we're gonna speak about lots of different topics today uh maybe briefly felix so felix i've been working with phoenix for many years now uh over four years at uh at course one so he joined us about four years ago as a research analyst and now he's the chief commercial officer of course one he's super knowledgeable about lots of crypto stuff including staking industry and other things and today we're gonna have you know a bit of a discussion just where we talk about

we sort of try to answer the question of like you know what's interesting in crypto right now and you know we have a bunch of topics that we want to cover like things around you know decentralization proof of stake uh interoperability uh crypto markets phoenix is going to tell us the crypto prices at the end of the year so you can make your trades based on that but before we uh before we go into that brief about our sponsors first of all well very fitting of course one so you know if your crypto assets are sitting around idly you're losing out so you can start earning rewards contribute to network security by staking of course one and we are

securing billions of dollars on over 25 different networks including solana cosmos and ethereum uh course one also works with many institutions to run you know white label nodes providing you know high availability very secure and compliant service so you can directly participate in decentralized networks so you can go over to course course.1 and start your staking journey uh also hiring people so if you're interested in starting a career in the world of crypto and staking make sure to check out the open positions there and then paraswap so parashop is a multi-chain dex aggregator so that means through paraswap you can easily access

the liquidity or various different decentralized exchanges they automatically find you the cheapest liquidity so you can trade knowing that you get it the best price it's also very gas friendly and helps you keep your transaction costs low they have expanded to various different networks including avalanche polygon pse phantom and you can also use pairs from directly within the ledger live application and they've become a doll so if you have psp token or you want to get some psp token you can participate tell them what to do so yeah and they have a gas refund program even better so go to parisrock.io episode to check it out

and so with that let's uh yeah let's get into our let's get into our episode first of all how are you doing and welcome hey brian so great to be here and be on the kind of guest side of a podcast for a change um i guess you already introduced me so not much to add and looking forward to the discussion today and uh talking to you outside of work about crypto my favorite hobby yeah yeah uh well i mean i gave brief i gave some intro but maybe maybe it would be nice if you can sort of give your your own life story yeah yeah totally totally no yeah so um i

started out basically getting interested in crypto and i was studying i studied finance in germany and i just realized more or less that i didn't want to join a bank or become one of the big four companies and i uh learned about crypto through kind of the internet just being an active internet lurker and i learned about auger initially kind of trying to write my master thesis about prediction markets on and augur but then obviously auger wasn't like ready at that time so i wrote about like kind of another blockchain topic uh ultimately kind of also made the decision to work in the crypto industry um luckily found the chorus one

ad on angellist now we have positions again on angelis if you want to check it out but yeah found the ad there it was like super fitting to my background uh one of the i guess kind of rare at that time to have a role that wasn't like super developer focused and uh yeah just a super interesting proof of stake and now and started as a research understand brian said um been kind of trying to make staking um yeah like understandable for people i initially wrote a lot of content stake economy newsletter maybe some people read that and kind of mo did work on more and more things in course one ultimately also like business development and uh just kind of things

on the business commercial side um now for over four years as brian said and um yeah that's that's basically it so i'm here today i've been looking at a lot of different networks a lot of things that have happened in crypto uh through the bear market and now the start of the bull market or wherever we are right now um so yeah i guess that's that's the background cool well yeah proof of stake let's talk about proof of stake i mean i guess we we've talked about truth stake many times mostly from the perspective of speaking with you know proof-of-stake networks i think that has been probably the most uh you know the dominant way that we have at epcenter right have sort of addressed the topic

uh i guess there's also been i mean we did an episode about lido once right so we've covered like liquid staking a little bit not too much i guess bison trails we had at one point on as well so maybe there's a bunch of different but you know proof of stake is basically gone from a concept i mean i remember we had vitalik on you know 2015 or something talking about how the theory was going to switch stake right so like the notion proof's sake has been around for a long time but now it's become something different right where it's actually like an industry so what's going on today in your view what are the most important uh sort of evolutions in the staking landscape

yeah i think one thing that has been a topic since i started in blockchain or crypto and probably even longer was this idea that the institutions are coming i guess they are still coming slowly but surely and i think it's it's it's also reflected in the staking industry and the landscape where essentially yeah the the industry has matured a lot over the last three years from basically i guess game of stakes where most of the uh validator operators started out or tesos initially right where there was like basically some people that were interested in this in this technology

and started to run these validators no one even really knew what they're doing and in the meantime like a lot of best practices developed and um just proof of stake networks grew a lot first of all in number but also in terms of like market cap and kind of money to be made from staking rewards and commissions for the node operators and i guess in general the concept then became widely understood in the kind of broader market and because of its nature of like relatively easy to understand and relatively risk-free yield in in the proof-of-stake assets where that's that's i guess an interesting field for

institutional customers and and they have um entered this field a lot so i guess to to to say what that means is in the end that these customers have like different requirements in the end then maybe um the stakers that started out in 2018-19 to stake where they would yeah basically just delegate from their ledger or through metamask or whatever they wanted of their choices and now there is a whole like other process involved and due diligence and compliance for for these players um to yeah and the node operators that want to work with these

because clients that are on the institutional side they need to adhere to their kind of or to these rules in a way i mean i guess we can get into that a bit brian i'm sure you also have some some thoughts on that yeah i mean it is interesting right because when i uh when i became interested involved in crypto was 2013 and with sort of this bitcoin this bitcoin uh bubble started uh one of the first ones and even then one of the main stories that there was was all the institutions are like coming and it's like imminent and they're gonna like and of course there were some examples then yeah like overstock starting to accept you know bitcoin as

payments and of course it in the end well now we're here many years later right nine years later almost eight and a half years later or something and yeah it's still a slow still slow process but i i think you're very much right that there is actually i mean if you think about you know what do institutions do with crypto i guess the first thing is sort of the easiest thing is like okay bitcoin right you can just hold bitcoin i think that's that's kind of like the the first thing you can do and of course hold that is also

something that we've seen happening you know for years and you know maybe some corporations holding it on the balance sheet custody right being a huge topic and again the custodians have generally been like okay first of all you know let's let's allow people to just hold bitcoin or something maybe hold some others maybe enable like trading a little bit but then if you go like beyond that you know staking is very attractive i think because it's yeah it's easy to understand right it's it's low risk it's this you know it feels like a bond right with some save interest rate it's quite different from d5 right also d5 moves so quickly right the gifa you have something here and then next month

it's gone and something over here and i think that's like very and from a regulatory perspective also seems probably like uh more of a mess so i think staking is is probably or is one of the ways that institutions kind of get into it but of course it's still very slow the uh the other thing i think that stands out to me the most is sort of like one of the the themes i think when it comes to staking is it's just the increased in complexity i mean you mentioned this from different types of customers right in compliance is like an interesting topic so we at course one right we've been doing uh a lot of work on compliance and it is a

huge amount of work right to basically then you know measure up to some of these institutional standards and comes with a lot of implications so that's those are some things but then there are other things too that have brought like more complexity to the value to staking and the valid role you know one is just the the diversity in different worlds right so we have um the kind of normal validator role of you know you're checking the validity of the transactions creating the block checking the other blocks proper propagating in pdp network and kind of you know creating those blocks right but then i mean already there's been other roles like you know

oracles and uh and new ones coming up how how do you think this what do you think the impact of that's going to be yeah um yeah it's very interesting question i guess we started out like originally like a long time i think there were a lot of roles that people or protocol designers thought of for crypto economic protocols a lot of them actually never came about or um maybe maybe didn't like take off as planned like for example the polka dot fisherman it was for a long time a thing i don't know if this is actually even implemented or how these work but in general right um

people get creative with the the things that the note needs to do to make the network work and um in the end i guess as more applications also like if we think about the networks as the space layer where applications run on and then um more value is is just on this chain these these roles become actually yeah quite important and there's more competition i guess around fulfilling whatever this role is designed to do so i guess in the validator sense normally you you're just looking at your your uptime usually and i mean that's also not the easiest thing so it depends on the network right the networks nowadays actually also increase in uh demand for

hardware so for example on osmosis right you there there's a lot of computation happening at the epoch boundary that needs like more servers or better servers and i guess this more state needs to be saved but um then there's also another dimension where for some of these roles uh there's also like a certain optimization needed and i guess yeah what what we're what we're conceptually thinking is probably that this optimization obviously will like some people will be better suited to to kind of fulfill or optimize these these for these roles and then they will basically take on a lot of the market share of of these roles so like if it's

like a competitive market probably like only a few players will be suited to to do that um some of the examples that come come to mind of course maybe like familiar for people in the defy space this is liquidations where essentially um yeah there is some loan at risk if the price moves now the person that is the fastest to um um kind of get that uh transaction the liquidation transaction in will will make the money so obviously there are parties that probably better suited to do that than the average um yeah a token holder that was to participate in this um

so i guess that that complexity i mean i mean um yeah makes it kind of harder for smaller players maybe to to compete in a way i guess brian i don't know what what's your yeah i mean i i think that's it also sort of brings up this other topic right that's become uh you know one of the most talked about in crypto it's also something that we've been bringing up you know guests various times and you know like people are thinking about it a lot it's the topic of mev and you know i think anyone we have on the podcast that's like you're building a crypto network thinks about this and i mean what is mev right we've also done some podcasts about it but nvd is

basically around the ability of the block producer to you know decide on the order of transactions although i guess the term is sort of used in different ways that sometimes also includes you know people who are not actually the block producer right so when you uh in ethereum often they would talk them up as searchers right so the people who basically look for some kind of opportunities to like reorganize the transactions or put in particular transactions to to make money and then of course if you if you think of these roles as well now let's say there's some crypto economic uh

mechanism and expects some transaction and for somebody who like puts in that transaction they can earn some money then of course if you are the block producer then you can basically you know you have to monopoly right you can say like you can say like i'm gonna put my transaction uh first right and if there's that money to be made you can make that money you know examples of that are like let's say liquidation right on maker uh you can have some cdp or basically somebody borrowed money you know put up collateral the collateral drops in value and somebody can liquidate it and earn something and then whoever does that first right basically

gets like free money and then of course if the validator or the miner right at the moment but the validator and proof of sake networks you know has the ability to to do that but has the ability to do that does require like understanding you know the contents of the block analyzing those things maybe analyzing the transactions that are coming in then you know executing that in some kind of real-time fashion so it's like pretty complex and something that who does that today it's i think probably just in like small amounts it's being done

but if you think i think of the future of staking like this is going to become like a very big thing and of course you then have also the counter trend that uh and i guess that's where mbb is very you know controversial then people say oh but um maybe that's bad for the network and sometimes it can be good for network or bathroom network but at least it's something that then also protocol designers application designers you know try to deal with different ways i mean for example right we've had a cow swap on here before right or i think uh and then they're twitter handle at least is mev protection i don't actually understand like but so

you know specific decks developed around that so but i think that entire thing is it's just a huge topic that's gonna uh you know be something that will give work for many different parties for you know like many many years and the outcomes kind of who knows where where it all heads yeah i guess like from from the node operator perspective in terms of you you're kind of forced to deal with this topic in a way because yeah most people realize that this is

big because we saw it on ethereum we know there is definitely a market already and and it will probably grow of course there's also people building tools to like make it more accessible maybe to smaller notably so i guess from the perspective of uh who is well suited to do that maybe there is some scenario where the node operator can work with the searches through some tool and still have the same opportunity as like a bigger operator but still um just in terms of like it's one of these things where that you have to think about as an auto breaker so it's not just about you know keeping your server up and there's there's a lot of things that that go into being um operating these notes and and

at scale especially uh so i guess our one of the topics we wanted to discuss when ryan and we talked earlier what we want to discuss is kind of this this idea of uh yeah decentralization what are the kind of forces that help it that hamper temper it and i guess the mvv seems as one that probably is centralizing for us in a way i think we we also just came up with a few other things or i guess we could discuss some other um um yeah things that maybe increase or decrease centralization brand new what is like things that you so i guess we mentioned compliance mentioned mev do you have other things to come to mind i mean there's definitely

various things that i think are driving towards the increasing complexity of validation and then increase and of course that means that if you can invest more in it you know you can provide the better product and you can get more customers and you can become bigger right so that you have those kind of dynamics i think they're there of course you also have other dynamics i mean you know one thing is just that you know when we started with course one but we didn't like there was not really like a template for how to do it right so there was it was a lot of work to figure out how to run a validator but today um there's lots of open source tools

like lots of guides right like so that so that i think that barrier the initial barrier to just you know have evaluated run on the network has gone down you know a lot right i mean i think in cosmos for example it's like very easy to do it you know that's one thing yeah i guess there's liquid staking too uh liquid shaking could be sort of like decentralizing and centralizing in different ways right so you can have let's say if you have something like uh lido as an example right you can have on the one hand uh it distributes the stake to many uh node operators so that's kind of more

decentralized right then what would he have as a normal outcome but then at the same time more control gets shifted to you know like the governance of that governance token and so you can have sort of like uh some some degree of centralization again at there and so that's that's also interesting you know that interplay yeah i i found this always very very interesting and i guess we saw the staking mechanisms shift a lot since kind of staking came around right like i guess early um cosmos and taser started with this model of delegation so you're actually able as a token holder

to stay even though you don't run the node which enabled like all this these businesses that now run nodes for others um and and then i guess the theorem kind of made a shift from that again where it's like oh you have to eat yourself to validate but then of course uh someone came around and realized there's an opportunity to build like a delegation protocol as a smart contract which which is essentially ido and and give that liquid staking dimension to it which even makes it more attractive than the native staking so i think from my perspective what this is also like i guess if we're thinking about protocol designers designing their protocol to minimize mev i think they should probably also think about designing the

protocol to minimize like having other protocols take like share from their core mechanism which in in this case i guess is staking where now it shifts to lido as you said right the governance is now with lido instead of the portal 7 maybe it would would make more sense i mean i don't know actually if that's true but that's kind of like what i was thinking that maybe if you have this kind of natively in the protocol that the stake is already liquid then i guess you're taking a little bit that opportunity away from someone to make like a drastically better staking model than yours i would actually be curious to hear brian what do you think about about that you mean you mean because if you have an outcome where you then have like let's say lido which controls a lot of the

stake that then lie those in a strong position to basically uh you know extract meb and that's kind of your point yeah yeah just that or also like distribute the stake how lighter one and maybe maybe it would have been yeah like better that the the from the start we have like a protocol that is like liquid staking i i think one one of them that now comes around slowly to it i guess is cosmos where there will be these delegation voucher ish design where now you can tokenize your delegation um on the on the hub or you will be able to and then

that can be used in different composable ways so that's kind of like natively built into the protocol instead of having a separate um thing and i i think that's a pretty pretty good idea yeah i mean i think one thing that's like interesting sort of like on this point is this uh you know like you race it so like on cosmos right like anybody can like spin up a validator and you have to have like whatever one atom or you know one token and whatever the the coin is and and then people can stick with you and you don't have to have capital right now tesla's was already kind of different there right because tasers

required the the validator or they call the baker to have uh 20 of the of what other people stake with you in their own wallet right so now if i'm like some random guy who wants to start like a taser's baker well that's kind of creates a big barrier because if i don't have the daisies myself like i have to go and like figure out some way to get daisies before people can actually stake with me so like i guess the idea of tasers was that there would be some sort of you know skin in the game for them and maybe higher security but i don't think that played out like that right so i think it put practically

speaking there's not never been an issue let's say on the cosmos networks that you know while they just don't have their own stake uh up because first of all there's not really any attacks they can do that will give them money and their reputation so key so if they did anything then people will just like go elsewhere and so i i think but the but the effect has been right that then the violators or the bakers have to you know have a lot of extra work may have to find whales uh create legal contracts uh actually we we have kind of dealt with that and and then i think in the end it has

it creates a barrier to entry and it's a kind of like a centralizing thing and of course ethereum i mean ethereum i guess that's there was like um so one guy we were in touch with quite a bit in the beginning cosmos right because he was running a cosmos validator at the game of station at the launches of ryan adams who of course has become he has done like fantastic work with bankless and then created like you know really great podcast and media thing around mostly ethereum and d5 but you know he was making this tweet recently of like oh you know cosmos uh staking is a cartel and too centralized and it's interesting compare that with

like ethereum right because on ethereum of course you again have this thing as you said right like i mean yes it's easier right for me as somebody who has let's say 32 eve and i want to run my own validator right like i can do that right whereas in cosmos you know the least validator may have like let's say 2 million or something like that of adam's staked on the cosmos hub let's say so you know the barrier to get in there is higher but uh from that perspective but you have to have the capital right and and that's a huge uh it's a huge centralizing effect yeah i guess on that right i mean for

one in cosmos also the nice thing is there's many cosmos chains right the idea is we have many networks and there's also like networks that have a lower barrier to entry where you can get started and start a validator and get familiar and make your reputation so i guess that's one point and the other is also right as you said you need the capital so what i think happens is that sure there's probably more people that run like notes on their own with their 32e if they have that much which is also like already i guess a pretty substantial amount um and and then but that's kind of like a very long tale of node operators or like in terms of percent of general stake i feel like

that's a very small minor fraction it's probably not even very clear how much it is but i would assume it's less than 10 and will probably never be probably less than five even um and so what is actually the impact of that is probably not that much and then on the other hand on the more extreme sides i guess you have more centralization because it's so hard to build this delegation model on ethereum that's really only lido as like a liquid cycling protocol can do it and maybe like centralized exchanges can do it so there's really like only like a few very big players that then get a lot of stake and probably in terms of kind of how many people it takes or entities it takes to reach that threshold of something going wrong like

i guess that's what you should optimize for in a way for the proof of stake network right that um it's hard to attack the network and maybe distributing the entities i i would almost say that probably in terms of this nakamoto coefficient or however we want to call it um maybe the cosmos design is actually doing better than ethereum at least right now and um so yeah that's kind of my view on it yeah i mean i think that seems pretty clear right i think if you add up like whatever coinbase cracking and binance or something then i think you you are going to be above a third for sure on ethereum and uh and your course and also i think one thing is like actually ethereum hides a lot of it like you don't really you have a lot much visibility what's

going on right because and of course that's also one of the nice things about the cosmos model is that there is this aspect of like i can look at the values and i can you know there's like the the name and the website and you can like stick with them so there's this you know in a way it's like this advertising board where like people can show up people cannot do something and uh of course it's not so easy to get uh delegation right you have to stand out somehow but much much easier than to i know convince some some institution i guess to like you know

basically uh you know build some solution where you can you can take the heath yeah i think that the upside of that is also like now you have this the validator has some kind of identity right there's a reputation as you said attached to it there is all that i think if you if you get rid of that again now all the validators anonymous so really they don't care about anything maybe about but the yeah their stake and and i guess that is also like maybe less secure right because now with this reputation if your thing is on the line your your brand is there you actually kind of increase the security i guess because you you have all that on the line where is if you're just like a string of numbers like let's say on avalanche where

right now if you run a note really you just see like a string and you don't really know who that belongs to so if they misbehave uh you wouldn't really know who was it and they could maybe like launch a new note again and get steak again and um that that probably wouldn't happen customers like that right although like i guess the flip side of that is that you know the if you look at like a cosmos network right there the entities running that are basically identifiable like you can be you know you can figure out at least for most of them okay where are they who are they you know uh where's that company so i think in terms

of you know pressure from governments or you know maybe some regulatory crackdown it may well be that the ethereum model might be more resilient though i would say it's still probably for a government size actor easy to identify it no it's yeah so we talked about about liquid staking where do you think that's going yeah i think it's still i mean we've been it feels like a long time but i guess even people that were really in this space is like only two years since people started like thinking about it and then probably like

a bit more than a year that something is live and then i guess most of it is lido right and lido and ethereum kind of being the poster child for liquid staking and a lot of things designed around that i think there's been a bunch of innovation since then already and i would obviously expect there to be a lot more innovation coming since i mean i guess liquid taking for me is also just like a extension of general staking design that kind of takes into account defy um and yeah right like we've seen a few things already like some innovation i guess we'll see more and we'll hopefully like have competitive market and see different models play out and uh succeed and probably it will

um yeah definitely be i mean that's why i guess of course one we're also like very interested in because it's like it's also like this trend we have to kind of deal with it because it kind of changes the model like who is your customer now now you have this liquid staking protocol i guess as a customer which two years ago didn't exist as your customer potentially um yeah and then these protocols can all have like different ways how they stake and you can probably yeah as a node operator you would like try to optimize to get in that set i guess we talked about about lido how it works there where it's more like a governance based decision and um essentially you need to like prove that you have

you know of your setup of um kind of track records and and send the application and it's a bit more like that the whole system and then there's like some algorithmic solutions right now i guess like primarily like some some people that innovated there essentially was okay so originally the solana foundation itself with the their stake pool design that kind of tried to look at uptime and different kind of objective measures to to um decide where the steak is delegated and then marinade and uh social i think kind of build off that and build like liquid sink protocol that does a similar thing um now sure there's like more designs to be explored there and i mean i'm just

excited to see some of them one that comes to mind of course where we have explored is is now being implemented by quicksilver a kind of a spin-off of course one where um they are building a system where essentially the holders of the of the liquid token can kind of signal their preference when they initially mint the staking token to which validated the stake should go to and through that basically the the validator set is uh formed um i'm sure there's like a lot of other designs one thing i could think of is also like maybe there could be something that just mirrors the um existing validator set and the distribution there or i mean yeah

lord knows what what's there um i guess yeah what what's your thoughts brian how do you expect this it's a good question right because i think at the same time let's say i think the thesis around liquid staking i think there's also a little bit that you know you're gonna have uh this liquid staking acid that's being created let's say state eve and you know the the ambition of lido uh and and i think this is true for you know many proof-of-stake or many liquid second protocols is that then this token actually becomes kind of you know the token that is used right so

you know i hold state in my wallet not eve you know maybe you you have uh pools on amms that have like staked eve pairs it's used as maybe some sort of base token in d5 applications and of course that's a big benefit right because then all those tokens wherever they are are basically you know like accruing uh saving rewards and and then i think the i would say the the thesis is a little bit that then you have this you know sort of ossification right that becomes like the standard becomes like super hard to disrupt becomes you know like it also winner takes all uh dynamic potentially uh at least can work out like that but i

guess we'll see but i think there is there's obviously a benefit to having you know a lot of liquidity crew around a particular liquid staking acid so it's interesting sort of ask you know how how much evolution is there going to be or is it something that kind of you know becomes sort of solidified and and extend this like layer and then uh other things are happening on top i'm yeah i'm sort of i guess i have a little bit uh question if does mev change things fundamentally maybe not right maybe it's uh maybe it's sort of like

let's say a whole stake if and then uh on a somewhere else mev happens and maybe it changes what my staking rewards are and and what the validators do but doesn't really change you know the erc20 at hold so maybe it doesn't fundamentally change the liquid staking model or like but but maybe i don't know so i i think that's still kind of like an open question because i do think maybe it's gonna change a lot and so i'm yeah wondering if that's it's gonna impact uh you know kind of bring new new models early mistaking that maybe are able to out-compete some of the existing ones i think yeah for example i guess now

some of these liquid staking solutions look at that the algorithmic ones at least try to like find the most performant validator which often is just the one that has like zero percent commission rate so i think a lot of the algorithmic solutions on uh solana right now they basically delegate a lot to like low fee validators and that also that kind of obviously means that these um the operators of these nodes actually don't really earn so like kind of the money uh goes away from the node operators and i i don't think that's in the long term a good idea in a way but i mean maybe if mev is there then they would pick nodes that do better on mev so it could again kind of um

lead to that because i guess if your liquid taking protocol really like your main product is the api of your nd integrations of course which i guess mostly the goal of the integration is also to increase the api of your the holders of the liquid staking asset um so yeah like yeah remains interesting to see i think we are still very very early i think that's another you know another big trend a big thing that's happening it's just that you know interoperability is really you know really starting to happen right because there was i think been work on this for you know a long time we had early things like what was it

like the bit go you know ptc on ethereum that was like you know custodial stuff like that you know but then you know then you had uh you know a bunch of different bridges but now i think for example ibc right has seen like pretty massive adoption i i haven't seen like i'm not i haven't really looked at the the numbers recently i think um yeah osmosis did like 120 million ibc volume in the last day i guess overall 134 million in one day over a hundred thousand transactions so yeah i mean that's right because i mean i remember any launch and then it was like you know a million transactions

within like a month very quickly and now you know osmosis alone doing a hundred thousand a day and and so i think ibc is obviously uh doing tremendously well like getting like a huge amount of uh adoption uh a lot of new cosmos chains are launching and and i think the the interesting thing there right is that ibc still you know ibc is a generalized protocol right where you can pass messages and then you can do different things but like right now all that's happening is basically uh token transfers right like nothing nothing else right but

even now i think it's uh you know it's now live right on the cosmos up this uh interchange accounts thing and the interesting account swing is pretty cool right because the industry and accounts basically means that you can have you know an account on one chain that's like controlled by a messages from another chain so like you could imagine for example let's say cosmos hop um holding osmo on osmosis and like staking it or like for example you could have like you know cosmos how could buy osmosis and like vote in the governance on the osmosis network and uh and that's just one example right i

mean i think there's this and a quick saver right that that example right is is where you basically say like okay you're going to have this one chain that has an account on another chain where staking through it but then issuing a liquid staking asset on on the host chain so let's say you have like uh let's say quicksilver staking adams on the cosmos hop and then issuing some sort of you know quicksilver atoms uh which is another token that basically similar to the stake eve in leidel and and so i think that's the the

use cases that this opens are just going to be mind-blowing uh actually hard to wrap your head around what exactly will happen i guess it will i mean i remember some years ago there was a web what was it called the polka dot conference and then you know someone uh gavin gave a talk and someone asked uh i think it was dennis from he was at acc at the time but he asked like what about composability you know you have these different pair chains and then like isn't the great advantage of ethereum right you can you can just build on top of each other and uh you know

somebody builds ma you know state thief and then you can put the stake even to curve and somebody else builds something else on top and like how does that work across chains and until now it doesn't work so well but i think we are on the cusp of that starting to work you know pretty well and and maybe one more point on this like one thing i found super interesting i recently did a podcast with the near uh guys and they in their smart contract model actually all of the cross contract interactions i said kind of work in this asynchronous way in the same way that

like let's say uh cosmos hub would interact with something on osmosis or something on terra that's how even on the same chain on near like this works and and i think that was like very interesting and it's kind of like a a good case for just how well that might actually work so i think this composability thing on being on the same chain is gonna be uh it it's gonna look a lot less like a lot less of a advantage i think i mean still gonna be some advantage but i think it's yeah yeah that their design is is really cool

because i guess in the end the thing they're trying to solve was that people would want to be on the same chart as some popular application and everything crowds there because it's faster right so you avoid having that which i also find pretty interesting and i guess yeah nowadays there are a lot of solutions i mean ibc stands out because actually like you said it's a protocol it's very trustless or trust minimized i guess um versus i think on the other hand we have kind of other things emerging also like i guess it there's a spectrum always right but i found it very interesting from terra from the start uh kind of trailblazer in that space um initially

with the terra shuttle bridge which was very very centralized and then but like starting to get assets from other chains into terra to kind of supplement this anchor yield right uh initially i guess so beef and um now uh for example also be sold soon where they actually switched also the bridges from that ferra bridge to wormhole which is at least i guess um another it's another protocol it's again another network in and of itself uh but i guess it's more decentralized than having one and then ibc or like other protocols like this being being like the ultimate maybe a solution of a good thing about walmart is also

that it has an insurance fund yeah ibc has unpaid relayers [Laughter] yeah so yeah i guess yeah a lot of things are happening and and sometimes you know the bridges are i guess lower than the demand for um cross chain applications and i think that's what terra realized very well or like crosstalk collateral and um they really that's that's i think a big part of why became so um yeah popular right now is like so dominating so much because yeah they really like after cross chain bringing both usd to other trades but also bring collateral from other chains to terra itself

so i it's really fascinating to see see what's going on there yeah yeah i mean in a way i think it's a good point right because in a way i think terra is like the most advanced cross-chain application even even said we have osmosis okay like i mean you have a lot of other assets coming into osmosis you trade them but like actually terra has a lot more sophisticated use cases right where you have to uh you know you see going elsewhere and i think there are i i i'm personally i mean there's a lot of like questions around ust often how sustainable is it and

but i think it is i think it's absolutely brilliant strategy to use other crypto assets as like you know some kind of backing in in addition to luna so that you have both the scalability of being able to like increase the ust supply fast but you have this like decentralized kind of acid pool backing it and i think if you if you think of like the if you think of just the how massive this use case is of like a decentralized stable coin which is enormous use case right so i i've been yeah i think it's it's very cool and

still terrible confirmed yeah i think personally yeah i'm i it's it's a great strategy and i think the one thing where i what i would find cool because in the end now it's a lot reliant on like the the assets that come from the other chains are through wormhole mostly and i think that's also like a big risk of course to to anchor if there is something really goes wrong um that could also be a problem and and i guess that's where the interchange accounts kind of come in because in the end ideally terra could use that and have like cosmos assets or ibc enable assets there maybe have like a little bit or like at least diversify the bridges i think that that would be cool but

ultimately like have a bridge that is probably um like yeah ivc based and obviously terra is built on the cosmos sdk so it should be possible i i guess i don't know exactly the details but um i would find that pretty cool and and i hope uh someone in tara is looking at that too yeah i i think this is the other thing that has been like intro i think that's interesting about bridges right where to me it seems that you have two very different uh approaches right like you have ibc basically you have like a light client on each side and then you know you can just uh put assets in between and of course the nice thing is that you know the cosmos

hub validators for example they don't also have to run a validator on you know some other chain nobody has to basically do anything on the other chain and you still can have this connection between the other chains so it's like you know very permissionless very open like uh you know fantastic model uh and working super well but of course the big downside is you have to have that light client and the light client works well in you know between cosmos sdk chain kind of comes out of the box but then you try to do that with i don't know ethereum or like a lot of other chains solana and it's super hard actually we did a bunch of work of

course one right to basically do this kind of cello cosmos and building you know cosmos like kind and solidity and you know it kind of worked it was you know very challenging and and i think that's where you have to the power of something like you know the wormhole axelr where you have you know central set of actors who can like run lots of different chains and then uh yeah and of course you don't have to path dependence either right so that's something they get so i think in the end both of them are going to be like huge success i think both approaches yeah yeah i agree there's even like i guess even more approaches with the

optimistic nomad design which is like yeah don't make me try to explain it but i guess yeah i mean in in general i think yeah definitely been i guess the hot topic in the last few months or actually even weeks this bridge interoperability um and then will remain so and um i guess ibc is still kind of under the radar in in the in the wider sense i mean we were also at the avalanche um conference um and of course we have some big avalanche fans in curse one but uh i guess they are also it was you

know there's the subnets which is kind of similar to the cosmos zones and then there's also supposed to be a interoperability protocol but it's kind of not there yet of course and ibc is there it's being used today um i guess they're then there yeah we'll see we'll see how that goes and even maybe how how the interoperability between because i guess between finality fast finality change the the ibc connection should be easier it is like client design so i guess more chains could that have that could adopt ibc um but yeah i guess it's always like the thing with standards that you have to convince people to use yours yeah no i i do think that makes sense

right so i definitely think ibc will spread uh beyond uh cosmos sdk net or export of course it's it's it is always it's never going to be a solution for like connecting to bitcoin or uh you know various different networks okay so uh the other thing i wanted to maybe final topic i wanted to touch on is sort of the topic of crypto markets now it's something we like hardly ever talk about uh on this podcast and also something like i i don't feel i have

you know like great insights in i'm basically always optimistic i always think always think things are going to be fine and then like you know in retrospect they can look back on like 2018 it was like should have been obvious that this was like a bubble iron hat i mean kind of kind of like kind of recognized it but like but then i was now of course we do have interesting times right like in the world so maybe and you know what what are the interesting times probably the most interesting one i think the most interesting aspect may be inflation

no because i think that's i mean maybe there's you know the oneness is monetary tightening right that like you've had for many many years yeah like central banks you know like issue uh uh you know basically increase the money supply and then of course what happens with all the money like that has to go somewhere goes to buy up assets as the prices go up and uh you know it's interesting if you think of real estate right like if if you're like a real estate investor then probably your entire investment career like the 30 years let's say you you've been around for a long time right you've been investing for 30 years you spent the entire 30 years investing in an environment where basically

interest rates were going down and of course if interest rates are going down then it means that if you just do this like discounted cash flow right you take all the future income streams and you take and you basically uh say what's the present value of those future streams if the interest rate is lower the value of the streams in the future is goes up and so i guess you had this situation that basically because of the changing interest rates you're kind of about to have continuously increasing prices i think we're so like used to this and i mean who remembers like

times of high inflation like i mean that was in the 80s right in the 80s you had like high inflation in and so now it's weird right are we all of a sudden having a higher inflation having this monetary tightening of course you have the whole war and russia and stuff so and i was i was reading like arthur hayes you know he wrote a great post fantastic writer so the you know the big mix um bit mix founder you know he was he was basically being very bearish right he was like okay it's uh i think for other reasons as well but uh it's just i mean like thinking a

little bit about you know what is this interplay between is macroeconomics and crypto and what is it going to mean for crypto markets is like a bear market ahead or maybe not i don't know do you have any thoughts on that yeah i guess we come to the section where we uh predict the prices uh what's the bitcoin price on uh on new year's eve i can only i guess i'll i'll say that i mean for the longest time right there was this scenario that like everything will crash it's been around for a while i guess now we're at a point where we also have this war on top of

everything and i guess we had covet i guess that was also already the first time where we thought maybe now everything's falling apart and this asset bubble is crashing now it's kind of the war but who knows if it's actually going to happen and and then i guess the second thing let's say if we come from that what what is happening to crypto when that happens like for the longest time right it also at some point the the the narrative was that yeah bitcoin is this hedge against the other assets because that fails then everyone will flee to bitcoin as the safe haven i would actually say i think if this all collapses then probably it will still also mean bitcoin and crypto would would also uh collapse and wouldn't be

that crypto does good in these times so i think it will still be correlated then in terms of like you know is is this the mania over can we further increase everything i i guess i i don't have a good opinion on that and what time frame that is or what's the are we in a in a world where it just keeps going like this or does it have to fall apart at some point yeah i mean i think you you of course do have a bunch of uh trends that are like very bullish crypto and they're not stopping right like i think first of all you just have to

advance of the technology and you know like i mean we talked about a bunch of stuff right like proof of stake interoperability like so many other things nfts user experience everything's getting better scalability right scalability is getting solved i think right it's pretty clear uh like so you can have like abundance or cheap transaction so all of those things are progressing and there's so much money in the space there's so much funding that even if there is like a pretty uh dramatic bear even if there is a big crash it may slow down things a little bit but it's still going to progress right because also many

companies in the crypt space they have i mean all the exchanges right they have like huge more money they can never spend many startups have raised so much money so i think that's just progressing right and then i also think mainstream adoption uh you know we have seen nft so i bring in lots of users and and i think that's also gonna kind of continue right with like new [Music] new user experiences new new maybe games like i don't think that's gonna stop even if the market goes down right i still think you're gonna see more people doing something crypto related and then the institutional adoption we talked a little bit about it right so

okay it's very slow but of course the i think the flip side of that is also that it may take these institutions like a very long time to decide to do something crypto then it takes them a long time to like move they move slowly but they're not gonna just stop right they're gonna i think they might slow down how much money they put in yeah there's also like i guess they have certain you know you have a fund that has that many millions that you kind of need to deploy and then maybe they would continue that or they it just takes so long that yeah i guess there will be continuous stream coming in maybe not as big or that wasn't actually that's awesome person tweets unfortunately i don't

remember who that was so can can can't uh give credit here but shout out yeah but uh basically you know kind of pointing that out right just like how much money has been raised by you know like crypto vc funds or crypto investment funds to like be deployed and of course that's going a lot into you know these private funding rounds and of course you're seeing private funding rounds like you know huge valuations like raising lots and lots of money you know everyone's raising money and i mean that does mean i guess that you're gonna have a lot of uh you know funds being deployed but at the same time was also sort of the point was

okay but who's going to be like where does the demand come from afterwards right because like okay money goes in they build something they go live now there's some token trading and like who's buying that token right for in the end to generate the return for these investors they need token to go up like you know ten times so yeah yeah so i mean i guess that reminds you a little bit maybe of the 2017-18 thing right where there's also like a lot of money going into these ico projects and then you know they maybe came out but then there was like nobody there to buy it yeah i i think the question is just yeah

where are you and are we in this cycle right i guess is it already is there still like another wave coming i do think the nature of this market is that it like creates exuberance and it goes too far so i was reading this newsletter from dan morehead and you know he was pointing out where they use some sort of i don't know what it is like some kind of you know moving average thing progressing you know going to the moon over time and then seeing like where we are compared to this you know inevitable yeah yeah it's kind of like yeah it's basically like the rainbow chart uh and you know saying like okay if you look at that right you're like you know 56

percent underneath the you know trend line so this like cheapest cheapest ever kind of right so i guess that's uh so it's definitely not the face of like crazy exuberance right that's that's pretty clear i mean i guess in terms of like i guess there's there was this vitalik post once right like crypto markets are at this point have we earned it or something i mean it's very hard for me to like kind of put into context how much of it is like actual value and and or like sustainable obviously it's kind of not sustainable some things and then yeah where is the exuberance when is the point where it's gotten too far um

it doesn't feel like it right now i mean uh maybe that's that's why it is the case i guess that's that's always the problem with with these with these things but i mean yeah i mean we'll see i don't have too much alpha to leak here um today cool all right then well thanks so much phoenix that was fun enjoyed this conversation and thanks so much for yeah thanks for having me didn't expect to be on on every center that soon i i didn't even build anything no yeah it was it was great and yeah looking forward to um yeah what's to come and uh yeah see you tomorrow at work

yeah absolutely and thanks so much for listeners for tuning in let us know what your thoughts are you can tweet at us at episode btc and yeah thanks so much we'll see you next week