Infinity Pools: Unlimited Leverage, Any Asset, No Liquidations | Matthieu Gavaudan

Transcript

hey everyone welcome back to another episode of zero X research we have a bonus episode for you this week we are speaking with the founder of infinity pools one of the founders uh Machu and it's great to have you I'm with you how are you doing today yeah that's bad thanks awesome yeah you guys have uh you guys have been talking to town of all of crypto Twitter over the past couple days so super excited to have you on and kind of peel back uh what infinity pools can really do for the perps landscape and so that's probably a great place to start is you know when you look out into into defy and centralized exchanges as well like what does the perps landscape look like to you and then maybe if you could like end that conversation with you know what did you think could be optimized and how

did that lead you to building infinity pools yeah absolutely um so I I also want to give a little bit of like context you know which is that um infinity pools was actually built by the same team that built Lemma Lemma Finance um you know about a year year or so ago we were the first uh protocol to like um build out like a stable coin backed by uh perps and like you know like a perfect shirt position um or what they call you know delta neutral like per position so you know um initially we were very very bullish on on purpose in general um you know I coming into the space um I had an entire thesis about uh

derivatives blowing up in crypto and really kind of doing the same ratio of like volume that they do in traditional Finance or or C5 right so if you look at Sexes today spot is you know a tenth of the volume um that that goes on derivatives and specifically perps are at least an order of magnitude uh bigger in in size um and you know so that that was kind of my thesis going in that derivatives would come in and and essentially do the same thing um and pervs would just grow to be like this massive uh you know 10x bigger opportunity than you know whatever like

you know swap one inch Etc et cetera did and um obviously that that thesis like today like kind of like came alive but it's I want to say like it's probably not as much as I expected and you know the growth didn't was not what I expected um and was a little disappointing and I I think really like the main reason behind that um and you know like the reason that I've kind of calibrated my thesis going forward is that uniswap was not popular and was it didn't you know like get all of this

attention because it was spot trading on chain they solved a real ux problem right which was that they offered um access to uh spot trading for the long tail of assets and they listed those assets 10x faster right so it had nothing to do with um you know like oh like it's on chain and transparent like those all are all fantastic things but in the end the reason that a gospel popular was because they offered the 10x Improvement um on uh two fronts which was speed of listing and a number of assets over its seat by competitors

now unfortunately um you know I kind of expected the same thing to happen with perps right where like an innovation would you know allow for Bes on the long tail of assets et cetera Etc unfortunately when you were dealing with oracles um and specifically oracles on the long tail of assets um you're You're Gonna Get Wrecked I mean just Oracle manipulation on the long tail assets is is a Surefire way to essentially wreck everyone involved like both Traders and LPS and perps essentially do rely on uh on oracles which means that you know

um long tail uh long tail assets are never going to have Perks um and it's it's it's quite it was also quite a sad realization for us too right because once again we were built on top of um and we you know um we yeah we really believed in perps at the time but we didn't see that 10x Innovation essentially that um we didn't see any improved like any 10x improvements over what we saw in C5 what we saw was you know just a copying and pasting of perps uh that lived in C5 on chain and

um and yeah unfortunately uh you know that that was uh um it just offered a worse experience then I don't know why like you know professional serious Traders would would you know have like a worse experience with no 10x improvements um so yeah so that's basically why um about six six seven months ago we really started researching um you know um what we could do uh to mitigate this problem and essentially uh what we ended up finding out was that infinity pools was not only you know a 10x Improvement in the same way that uniswap was with perps right so like not only could we offer leverage on

the long tail of assets offered that leverage 10x faster than any other exchange could but we could actually offer also 10x uh larger leverage than any other C5 exchange we could offer no liquidations which you know results in in 10x like better expect to return for Traders and no counterparty risk which you know after the past year I'm sure a lot more people appreciate um so yeah so that's kind of like um the story about how infinity pools came to be and um and yeah I mean I've got an entire like you know feel about like perps and like why

um you know they they have like uh uh some some fruit Comics themselves but I I want to pause and see like if you guys like have any questions um before I before I continue on my rant yeah absolutely you can keep on going I think this is this is exactly like what we want to hear so keep keep on telling the story Ah that's great okay cool um so you know um that was my main qualm I think with perps uh in in G5 but then I had an entirely you know other set of columns with like perps in general as a financial instrument not only in D5 but also in traditional finance and you know in the end like Harps operate in the same way that margin trading like Works

in traditional Finance right and they're really Bound by the same restriction essentially all of the problems that perps margin trading and traditional Finance et cetera et cetera all of their constraints all of their forthcomings all can be traced down to a single thing which is liquidation risk what I mean by that is that and and like you know the problems that I'm talking about is um are um number one uh limited leverage right so you only have like up to like whatever like 100 x in crypto but you know whatever like much much like lower levels and and traditional Finance

um you have um not that many assets right just like the long tail of assets once again is not not possible to to be brought on on purpose and then you've got obviously um uh some kind of pretty risk right via like the force settlement of markets right so this is when somebody like uh you know somebody's like position doesn't get liquidated fast enough and all of a sudden um the markets uh the market that that it was in starts to accumulate enough bad debt that the Insurance Fund of the underlying decks can't cover it and uh the the market essentially has to be paused traders that were on the

profitable side of the trade don't get paid out um and it actually happens a lot more like often than you would think so um you know um anyways so all of these problems they actually not only exist um in in in crypto and specifically C5 but there actually also exist in traditional Finance with margin trading right because margin Trading still has liquidations right like the way the margin trading works is that you borrow cash you take that cash to essentially buy an asset and then um you know in case your position goes under you still need to essentially liquidate that asset but the usage of liquidity for a spot uh uh

trading is is very competitive and so being able to liquidate very large spot positions immediately and before there is like a a big price move is uh expensive and it's uh um you know like not a Surefire way to like actually get things done well um so basically there are all these problems once again can all be traced back to a single thing which is liquidations um and so we started thinking about okay well like how do we get rid of liquidations and turns out there is a fantastic thing that already exists in D5 which is um liquidity provisioning right what

liquidity provisioning is at a super high level is that you have people um uh liquidity providers that are willing to um uh suffer impermanent loss right or IL as I'll start calling it uh going forward um and and what that IL is right is that they're willing to accept the worst of two assets right and you know you simplify that a little further and it actually becomes um essentially a a great way to liquidate assets without liquidating them and I'll get it a little bit more into like why that is but um maybe I want to start with

um um a very concrete example of like how the protocol works and then I I can get into like more like high level ways to like think about it so um you know the the classic example that I like to give people about how infinity pools works is um in a simple ethusdc pool right so um and by the way like this kind of assumes that you have like some basic knowledge of how liquidity provisioning and unit swap V3 uh works so uh I'll just leave that to The Listener to uh to uh read up on before before I I continue um but um so once again you have a if usdc pool market price of ethereum is a thousand

usdc and let's say that you have um a tick at the 900 range right so like uh uh the liquidity you provided comes in and provides liquidity at the 900 uh 900 usdc range and all of that liquidity is deployed on a single take and is worth a thousand usdc right so like the the liquidity provider takes 5000 USD up their own assets and deploys deploys them at um nine hundred dollars um in return to get an LP token now let's say that a Trader comes in and borrows that LP token what they can do is that they can redeem

that LP token for the reserves backing it right which is the thousand usdc and essentially take that thousand usdc that's backing it and swap those reserves for one ethereum because once again the market price of ethereum at that point is a thousand dollars now the interesting thing here by the way is that um the trader can use any decks any aggregator to actually swap that thousand usdc that they borrowed for the one ethereum um and uh it's just kind of like a cool property though that I'll talk about more but essentially like because this is an atomic transaction you you can you can you can use any aggregator

um uh or you know something like you know swap um so now the trader has uh one uh ethereum under a balance sheet you're right and you have two scenarios price goes up price goes down um so the price goes up scenario it's a lot easier to digest it's let's say the price goes up to 1.5 K uh per ethereum Trader can take their one ethereum and sell it for 1 500 usdc now with those 1500 usdc the trader can take 500 and profit and then use the remaining 1000 usdc to Mint back their

DLP token at the 900 range right at the 900 tick and essentially make the liquidity provider hold right so they pay back their debt um plus interest right um so that's uh all that as well as well uh scenario obviously things get a lot more interesting when uh the trader loses money so let's say that the trader um let's say that the price of ethereum Falls to 900 um so right above the liquidity range hasn't quite crossed it yet the liquidity provider is still expecting back a thousand usdc right because the liquidity range has not been crossed

so what happens at that point is um that the the trader can only sell their ethereum for their one ethereum for nine hundred dollars so they're in the hole for a hundred dollars so let's call that the max loss at nine hundred dollars um now the interesting thing and like the entire um you know concept I don't know if that's the best way to put it but that that really allows um you know us to like Capital losses and offer the unlimited Leverage is that the low 900 once the liquidity threshold uh once the liquidity range of the uh uh

underlying LP is crossed the liquidity provider is no longer expecting back a thousand usdc they're expecting back 1.1 ethereum right so uh a thousand usdc times uh or uh over 900. um now um because the liquidity provider is expecting back 1.1 ethereum below 900 dollars and a Trader already has um one one ethereum under balance sheet all they need is to have an extra 0.1 ethereum uh below 900 right but that 0.1 ethereum below 900 is

always going to be less worth less than 100 usdc so that means that no matter what the max losses are always going to be capped at 100 usdc or less so if the max losses are capped at 100 usdc and you can essentially deposit 100 usdc as collateral to borrow um this LP token which is worth a thousand dollars then that means you have 10x Leverage but if you were to borrow an LP token at the 999 uh uh liquidity range

at the 999 uh you know usdc Tech then the max losses would no longer be a hundred dollars but they would be one dollar and that means that with one US dollar you can borrow up to 1 000 US Dollars which is uh thousand X Leverage and obviously the closer and closer you get to the market price and the closer you can borrow uh an LP token to the market price the more leverage it enables wow okay that's super exciting and there's a ton to a pack there so uh first thing that comes to mind is like one of the last things you said is the maximum amount of Leverage then capped at the uni V3 ticks tick range that's

correct yes so okay practically speaking in our V1 uh infinity pools is only going to be able to offer about a thousand to two thousand X leverage which honestly should be enough to satisfy most people but you know come on that's it I'm kidding yeah and uh yeah eventually like it'll grow to like higher than that if there is truly desire for it but um yes um awesome and so like now I guess what I'm thinking is all right so let's say the trade moves against the trader right and so the price of uh the price is falling when it crosses over the uh like that 900 range let's say then does the Trader's position automatically get

closed out or are they just like you know essentially out of the money but still holding on of the collateral yeah so the latter um and that's that's a great way to put it you know like definitely uh uh there there is like an entire options like parallel that that can be you know that that we can like use but um to stay kind of like more D5 specific yes um essentially the trader can keep their position open no matter where the price goes as long as they keep paying the interest on the lp token that they have borrowed um so you know when when they stop paying that interest it's not a liquidation it's more like not rolling an options position to use you know um the the term you just did

so with the fees the funding fees be taken out of the Traders collateral like automatically as as the the fisa crew yeah correct so a big you know like really like the way that um uh leverage right like Leverage is is not only um a factor of uh the money that Leverage is not only a factor of um the minimum and then uh it's not only a factor of the max loss it's also a factor of the interest right so you've got to add essentially um the um max loss and the interest that you pay to actually um figure out what the Leverage is right

so for example if your max loss once again for thousand X Leverage is one dollar but then you have to pay another dollar up front in interest then your Leverage is actually 500 x it's not a thousand X so uh basically to us yes um it is it is very much uh intertwined and by the way that's that's uh what like you know like Ave flash loans I believe are right like a lot of people think that they're unlimited um you know you can borrow as much as you want but I believe that it's about a thousand thousand X leverage uh because you you still have a 0.09 percent or like you know nine bips like interest

payment foreign okay and so I guess further on that point then how are interest rates or funding rates determined within the infinity pool system yeah absolutely so um it's a great question um our interest rate the protocol's interest rate is made up of two parts um the first part is what we call a fair interest rate the fair interest rate you can think of it as an interest rate that's there to offset in permanent loss and what I mean by that is that it is um uh uh a yield that liquidity providers um or like really like any uh Financial

investor uh would expect to get to get paid in order for being exposed to the negative convexity of impermanent loss right so it's basically just a yield that theoretically offsets and permanent loss um you know um hopefully perfectly over the long term um the second part of the interest rate is a utilization rate so you can think of it as like a Ave or compound type utilization rate in response to supply and demand right so if the demand for thousand X Leverage is extremely high then uh DLP tokens that are uh near the market price will actually be a lot more

expensive to borrow for example than the lp tokens that are further away from the market price right so there's a fantastic mechanism there to really kind of get more liquidity providers to come in and provide liquidity when uh demand for leverage is high and um yeah I guess I'll stop there for for a second I think yeah no that's that's great I think from my perspective it'd be helpful because you already laid out an example like going levered long can you kind of lay out an example as well you know the other direction yeah absolutely I mean it's it's pretty much the exact opposite right so to go levered long what you're doing is that you're borrowing usdc and uh swapping it for uh an asset in this case ethereum

right so in order to go short you would do the exact opposite which is borrow ethereum and sell it for usdc so the way that you're going to do that is that you're gonna borrow an LP token that is above the market price and therefore uh that an LP token that is deployed at a tick um uh above the market price and uh redeem it for the ethereum that backs it and then sell that if you're M4 usdc so pretty much the exact exact same example like uh the opposite way and actually like one question that I always get is um what about liquidity fragmentation is this a peer-to-peer protocol right because in the example that I gave you

um it's it's a liquidity provider that lends directly to A lender uh to a to a Trader um the protocol um actually does the mixing and matching by itself which um is actually a super super cool mechanism essentially what happens is that um number one you can actually combine different ticks um at different um um ranges to get to The Leverage you want so in the example that I gave you um you know you have a tick at 900 that's used for 10x leverage but 10x leverage can actually be created with takes at other uh price ranges uh for example you can combine liquidity that's

deployed at the 850 usdc take and at the 950 usdc tick so you know above and below to essentially get to that 900 um uh usdc to basically recreate like liquidity at 900 usdc so essentially what the protocol does is that you know when the liquidity provider deposits their token the uh the protocol essentially does mixing and mashing off chain to like see what is you know like the best combination of liquidity to create the leverage that is being asked for by the

trader right so the trader goes hey I'm on 10x Leverage The protocol is going to look okay what ticks are available um what are the interest rates for each individual take right and then um combine those takes to create the cheapest leverage for the Trader and that way it's a pure to pull to peer um Ave or compound Style again and um you know there's zero liquidity fragmentation now that's okay that's an interesting mechanism because I was thinking about the supply side of this right like it's a two-sided protocol with Traders and Ops and on the supply side uh like are you aiming to attract liquidity that will say hey I'm just coming to like I want to be in infinity

pools LP but you know whatever they do with my liquidity after that is fine or is this something who's like attracting uh LPS that are already univ3 LPS they're like hey like I can this is a way that I can earn additional yield on something I'm already doing yeah that's that's a fantastic question and I I think it's going to be a combination of both right just because number one really like at a high level what you're doing here is is almost lending out your uh univ free LP tokens which means that you know you're not only generating additional yields but you're also um you know getting paid on continuous basis and that second second thing is actually very very important and I think will bring a whole new set of the could you providers

or actually it'll bring a whole new set of investors and yield Farmers to uh the liquidity provisioning ecosystem if you will so um what do I mean by that right currently the only way that you can generate yields on unisodly free and like pretty much any amm is by essentially getting your liquidity into price range right so um you need to have the market essentially the market price really be within your liquidity range the big difference with infinity pools is that even when your liquidity range

is not um even near the market price you're still generating yield right so in the example that I gave you uh once again uh where the liquidity is deployed at 900 um and the market price is at a thousand dollars right so the market price is nowhere near the liquidity range the liquidity range is still getting Borrowed by a Trader which means that that liquidity is being used and if it's being used then it's being paid for and um yeah basically what that means is that no matter where your liquidity is you're still getting paid uh some yield and that actually comes with some really really cool implications um one of which is that uh you know so

far most investors had to rebalance you know as often as possible to be as near uh to the spot price and to the market price as possible but here you could very well see a strategy working where uh uh an investor wants to keep um all of their assets or all of their portfolio in a single asset right and uh and basically what they would do is that they would have um they would lend out um their token um uh they would you know provide liquidity um away from the market price and essentially as the market price gets

closer and closer to their liquidity range they would move it away that way they can continuously generate yield while staying in a single asset and that completely flips you know like liquidity provisioning incentives on their head and it's pretty cool because you know it's also fantastic for Passive investors um you know I think that like one of the things that we've seen specifically with unity free is that um you know passive investors are getting more and more run over um and and by the way this is not just when you be free I'm using univ free because they're they're very clearly the the leaders uh into space but you know what we've seen is that more and more

you have all sorts of attacks um that are essentially taking profits from these uh passive investors um and that it's becoming more and more of a high frequency Mev type type type type game you know where you have um you know jits I I I believe jits is a very is is a good thing uh um in the end for uniswap as a whole because it's it's essentially just like a janky RFQ system right where like somebody like places it places an order and then you know um essentially like some liquidity provider will come in at the very last minute and fill that order uh with like no slippage that's fantastic you know like why wouldn't you do that

that's that's that's great um but who it's not great for is obviously the past the the passive liquidity providers right who are essentially like getting uh exposed to Improvement loss but not making any of the fees so I guess like my point was that uh infinity pools is is good for Passive investors for three different reasons um the first one that I mentioned right is um higher yields um so um and I'll talk a little bit more about that but um essentially uh there are some you know if if uniswap like yields are below realized volatility currently um and then you've got um you know

realize volatility and then implied volatility which is above uh realized volatility and uh usually you know like uh volatility is sold at implied fall uh or implied volatility levels then um we we believe that in Phoenix pools will at least be above uh realized volatility it's it's not 100 mathematically guaranteed but there are some very very cool volatility Arbitrage while there is actually a super simple volatility Arbitrage trade that you can do to make sure that all PS are always at least compensated realize fault which means that um at a high level um liquidity providers are not losing money which is you know better than uh

the the current status quo um so that's that's the first like good thing right and then once again like the volatility Arbitrage gets you to realize fault but then with the utilization rate and with like any extra trades then like you should get to implied Vol if not above uh but once again can make any claims on that until we actually launch um so so that's the that's the first point right like higher yields the second the second point is continuous yield right which means that once again you can stay in a single asset you can have your liquidity range that's uh not not even near or in like the market price once again great for Passive investors

and the last thing is that because um uh trades um are uh you know done because you're paid your yield on a continuous basis and not in a single big chunk uh like you are in like spot trading markets um we are uh just in time liquidity resistant right or liquidity providers are just in time to create resistant right because it's it's spread out over time you can't just like come in for one block and like claim a majority of the profits yeah I guess I'll stop stop here for now and see if there are any questions yeah this has been great and I think one of the most interesting parts of this equation is like really on the supply

side because if you think about just like the usdc pool today for example like uh in the in the uv3 pool liquidity is not perfectly spread across that right it's condensed around the current market price and as well as like it favors like going long in this equation uh so there's like the imbalance between the long and short position create any issues for infinity pools or is that uh like I'm curious how you guys think about that okay so basically you're talking about the basis right so like oh um are are there or I I guess so simple way like um because there are more people trying to go long there might be less liquidity on the long side of things is is that kind of like what you're what you're asking about

um even like I guess like okay so we thought about who is lping and like certain tick ranges across the ethusdc pool uh like that is it tends to be condensed towards uh like around the market price and then specifically uh like above or above I think it'd be above the market price right so um like how does that impact infinity pools or do you think like I guess like a different way to rephrase that question would be really like I guess how does a how does it take range for LPS in infinity pools like really impact um how the ability of let traders to take specific like uh to take different leverage positions long right so I'm

just curious like it's in the example I guess what I'm trying to get is the example you gave was an LP can come in and like constantly keep their liquidity tick out of range and just keep moving it away from the market price how does that benefit infinity pools yeah for sure um so so once again right like what you get to like separate out is the borrowing and then the swapping part of things right so infinity pools and like you know like where most of our liquidity is going to be useful is on the borrowing side of things right so like once again margin trading is is is is uh is two things it's you borrow cash right to go long you borrow cash and then you swap that cash for an asset and that's how you go along right infinity pools once again

separates those two things right the the liquidity uh in infinity pools is used for borrowing and that means that like it doesn't matter um how far uh uh it doesn't matter how close it is um to to the spot spot uh spot um market price right it does matter because like it matters a little bit because um obviously like you know the closer it is to to the market price the more leverage the name pulse but um it matters less right um and then you've got you know um the the swapping part right which is like once you've borrowed the cash you need to swap that and once again you can swap uh The Borrowed assets using any Dax

right not just infinity pools um which means that um it doesn't really matter um if you know we don't have like any liquidity um like near a spot but like if if we do have liquidity near the market price that's actually even better for us because um liquidity near the market price allows for you know whatever like a thousand X leverage but if that liquidity allows for a thousand X leverage that means that it can it it allows for all liquidity levels below it right so thousand X leverage LP token allows for uh 10x leverage too it allows for 100x and so um you know as long as you know

we have the good year around like the spot price the spot market price that's actually like fantastic so um it's kind of like a like all scenario win-win um you know type of thing yeah I thought it was interesting too how you kind of pointed out how you will kind of match different uh LP tokens at different rages in order to get the desired leverage so it sounds like you're definitely going for like the the retail user or like you know the average user I should say um so do you see this being more so a protocol that that is like kind of like a uniswap like where it's like the go-to place to to trade with leverage or do you view it more as like maybe something that protocols can utilize uh underneath the hood

yeah for sure um I I would definitely say to former right um I think that this this protocol isn't that good for everyone um not not just like and especially retail um um the the reason being once again that um number one like Perpetual Perpetual future and like retail has like a high tendency to like be the ones that get erect on liquidations on Perpetual futures um especially as they get to like higher levels of Leverage and um I I don't know if you guys saw like the chart that I had and the medium article we posted but um the expected returns with infinity pools as you crank up your leverage actually don't go down

um so number one you know we're kind of like protecting retail on uh their expected returns and um you know uh from liquidations uh number two uh um you know with like the no counterparty risk then uh we're also kind of like provide like protecting them from like Black Swan like you know long tail events um it essentially I I do think that like this isn't that good not only for like you know like retail and like uh but also like the entire like Finance industry um and I really hope it does become kind of like the go-to place uh for for like people to go go and get Leverage um as for the liquidity provisioning side of things we're still trying to

like figure out exactly who's going to be like the biggest uh you know um provider of liquidity there one interesting use case um that I'm actually very very excited about and you know I'm not sure that we should be the ones building it just because you know we're we're we need to stay focused but um one of the really really cool things you can do is that you can essentially build uh LP uh liquidity provisioning payoffs uh and um essentially these LP payoffs can take any shape uh depending on like where you put your liquidity and what that means is that you can essentially create liquidity positions such that they resemble more uh

common Structured Products so for example you can create a covered call using a liquidity position on infinity pools um now um that may seem like okay well like you know we already have access to cover calls so what's the point well there are three huge perks to like creating um um Structured Products on uh the liquidy provisioning side of unit pool uh infinity pools versus you know vanilla structure products um uh number one um it's available on the long tail of assets so once again you kind of have that unit swap Playbook you know where like you can not only list structure products on the long tail of assets but also do it like way faster than anyone

else uh number two um these structure products um last as long as you want right there's no need to roll over any positions which means that um you uh uh number one don't need to pay a fee to market makers um you know uh and specifically this this fee is usually called a spread right so you don't need to call to pay a spread to market makers to roll over uh your your Structured Products every week um number three um you can withdraw at any time which is actually something that like you know people kind of like tend to underestimate um you know when when they're first putting in their money into Structured Products right um some Innovative structure products

and defy uh like ribbon have like found like you know some like cool um uh ways around that like having only deploying 80 or 90 I think of their assets and Structured Products so that like you know like 10 of those assets just kind of remain Idol in case somebody wants to like withdraw before the end of the period is over but then like you know you're taking a hit on like the efficiency of of of the yields so um yeah just kind of like free huge perks already like over um over uh over traditional structure products and uh you know not only that but like it's incredibly flexible it's incredibly

permissionless which means that you can create any Structured Products uh instantly and permissionlessly and uh yeah I'm I'm very excited to see you know people build on top of infinity pools and come up with like cool uh innovative solutions to this yeah I mean the proposition there is super exciting and what's interesting is it's like you know putting layers on top of right because you guys are building on top of uni V3 and I'm curious if it's like it you know like the Trader Joe liquidy book is quite similar uh to to the unib3 model and I'm curious if infinity pools can be composable with other concentrated liquidity type amms or if it's specifically focused on unib3 yeah for for um you know we're we're once

again like the way that we see is that like the borrowing part um and then the um there are two parts right like the swapping part um you know we can use anyone so that's that's already um good to go so like really like the the main thing that we have to worry about is the borrowing right and yeah I mean right now um we'd have to see but um as long as people are willing to take you know like uh the the same payoff as univ free LPs um it it should work with us I'm curious if you have any takes on like order books like if that becomes a more prominent venue for for trading like into the future as l2s kind of develop like does that put a hole in

your model or is there a way you could kind of adapt to that sort of thing honestly yeah we could definitely be deployed on top of an order book um uh once again we'd uh it'd be interesting right because once again like Unity free is just like a a big order book if if you were like you know if you think about it like there'd be like a couple different things that we'd have to do slightly differently um but and and like obviously it would be a lot of like technical work um but uh overall yeah I mean Unity free and Order books are are basically the same so I I don't really see like any massive blockers yeah I guess I'll let you launch first before I start asking those questions

I'm also curious where are you thinking about deploying that's that's a great question we haven't like um so our code built in solidity um we're evm compatible so it's going to be on that evm uh we haven't like made any Financial uh final decisions yet but we're definitely leaning towards l2s um as as it currently stands and is that mostly because of the impact that gas fees can have on the profitability of these things or like um you could just be granted that you know ethereum mainnet has such a large TVO and specifically looking at unib3 there's about two and a half billion dollars on mainnet I think arbitrim's coming up second there with around 110 or so million yeah big time you know um

I I well not not okay basically um our protocol is pretty tough to build um uh one of the reasons that you know we released our white paper so early on is because we think that like even if people like read it you know they're not going to be able to like uh essentially just kind of like copy us um just because they're they're like quite honestly just like a few like very very complex things in there and like even things that like we haven't like even put in there that's uh um but um it's essentially um the the short answer is um yes it is because of gas costs um but um it's mostly because we don't want to focus on optimizing um gas costs initially we essentially

want to ship an MVP fast prove out the concept um you know and then take care of gas optimizations and Leadership on if you're a mainnet so um if you're a mainnet is completely doable um because we don't have oracles and we don't have counterparty risk right if you had oracles then you'd be because you know like block times take forever but in our case um you know we're chilling so it's it's really just a question of gas costs right and that makes a lot of sense just granted out you know it's kind of like playing the long game there and uh if your view is that the ethereum roll-up Centric roadmap is the way then you know kind of makes sense to really focus uh your building into that model um so it does sound like an incredibly

attractive protocol uh which begs the question of how is the protocol looking to kind of generate Revenue um or is it you know maybe it's running on more of a public good model or how are you thinking about that yeah that's that's a fantastic question and something that like we've actually been discussing internally a lot um what are the very nice things about this protocol is that it's so close to the money on so many different fronts right there are so many different um opportunities um slash um you know like yeah opportunities or like um it's better word uh yeah there are so many different places to like take off like a fee um so you know like one of them is obviously like when you swap out your assets using a DEX aggregator you could

take a few there when you borrow assets we could you know charge a small interest rate on top of that um there's also like some other like much much more technical but beyond spangs um that that um I I won't get into but there's like essentially like another thing where like no one is actually like really like losing like basically there's like Surplus in their protocol sometimes and we can just take that Surplus um I I really look up to unit swap um uh in in that sense and I want to see like also like you know what what if they kind of like decide to do with like you know their V4 I I know that you know they've they've also like been like

think about like different ways of like um monetizing their protocol and uh yeah I mean uh yeah I'll I'll see uh basically like we we've got we've got a couple options um and yeah we we just really need to figure out like which one is is the best not only from a regulatory perspective but also um you know from a uh doing our users um like good uh like perspective yeah have you thought much about governance I know it's very early on but I'm curious if uh decentralizing is of utmost importance to you or if that's kind of something you'd like to push down the line until you get everything

operated correctly yeah um once again a great great question um governance first of all I'll start off by saying that uh completely decentralizing governance is a terrible idea I'm extremely bearish on that um I believe that the best models uh for dowels going forward are going to be very centralized but um kind of like democratically elected um you know so um for example like the way the like democracies are run right where you know it's it's still like very decentralized I run votes for like you know a given person but in the end you do need that concentration of uh of power and of responsibility and to um you know

um a few people and the reason I say this is because um if you knew you know like um some of the stuff that goes on behind the scenes at infinity pools you'd be like well okay 99.99 of people are not going to understand how this works so why should they you know like actually like come in and and be like okay yeah I think this is the right decision it doesn't really make sense um now for for big decisions that like you know are much more easy to grasp but then like yeah we we can talk about it but in the end what you really need is a focus team that's uh that's that's you know that's got the protocol's best interests and heart um and and yeah so basically you even

run it like you know like big public companies are run today um or run it like um uh the the governments are run today is is my best guess uh for uh how effective governance is going to be done um in the future The Proven godliness bottles you know there's a reason that like not everyone is is is making decisions from their phone on the public policy in America or like in Europe yeah it took us thousand years to get to where we are here in the US so maybe take a a lesson or two from that Playbook I feel that it's like the the Darwinism of of of governance you know where it's like okay well like there's a

reason that Evolution has you know made humans and there's a reason that like governments is the way it is today um so I don't know how to take maybe but um I feel like people that have um I I went to a talk recently with like another like like prominent D5 founder and I think he agreed with me so uh maybe it's not as a hot take uh as hot have to take as I thought but um yeah yeah well this was awesome we really appreciate your time this is like really refreshing to get a project that's building like a completely new like foundational concept so we'll have to get you back on here in like four to six months to to get an update on where you guys are at but is there anything else you want to share with the listeners

where to find you where to learn more yeah absolutely um so you know we've got um our Discord that's open our Twitter DMS are open um I'm pretty responsive on both those usually um these past past two days have been a little more difficult just because you know I've gotten hundreds of DMS but um going forward I'll try to like improve my SLA um our white paper is is is incredibly interesting and a fantastic read highly recommend everyone um to check it out and yeah I mean we're coming out with a test net uh hopefully late Feb uh early March so you know when that's out uh definitely uh check us out test this out

um see see how it works the ux is going to be super super nice um you know we've we've got like one of the best front-end teams and and the entire space um they actually built matcha before this um the Dex aggregator which I I personally thought what had like one of the best uis um and yeah basically it'll look exactly like trading perps so all of that like complex stuff that I talked about completely completely abstracted away um it's it's a fantastic UI ux and uh yeah big big shout out to them you said a ton to be bullish about but honestly like that might be the biggest reason on it uh to be just to be straightforward like crypto is so hard to use these days and you know it's like

cool for the People Like Us that are in here doing it every day but the reality is if you're gonna scale uh we need to simplify things so like strong focus on U.S ux is exciting uh and glad to hear that you've managed to bring in some some giga brains around you to help build out kind of every inch of the protocol uh but Matthew this was this was incredible I really appreciate you coming on and uh thanks we'll definitely be watching along thanks guys thanks for having me [Music]