Lighter CEO: Why Robinhood Chain And Lighter Core Are Built On Ethereum (The Technical Thesis)

Transcript

That's where you have to meet the customers where they're at. You still want to use lighter on the back end and being interoperable. So can those rules can be implemented while still having as much access to liquidity as you can given that constraint. Just like the streets of Manhattan, I'm going to keep this quick. Over 70% of our viewers are not subscribers. Yes, you. Every week we interview [music] some of the best entrepreneurs and investors in the financial industry. The easiest way to support our channel is to hit the [music] like and smash the subscribe button. Now sit back, relax and enjoy today's show. Thinking through the liquidity dynamics, the fragmentation dynamics and just kind of the technical architecture that you guys have built to kind of create this new instance on Robin Hood chain. Why do you feel that

that is the superior way to move into this kind of more regulated uh uh especially domestically available per eventually? Why is this kind of separate instances of lighter the best way to do that? And then kind of second order is how do you think about the the liquidity dynamics and the kind of fragmentation amongst these instances? >> Yeah. So there are definitely trade-offs to be made around architecture, right? Um and we're partnering with bunch of folks. Um the the biggest partnerships are Robin Hood and Telegram Wallet, right? Like if you look at the structure of those two, they're they're quite different, right?

Telegram wallet actually uses lighter core. Robin Hood uses uh the new the new instance uh we have um you know I think if you go to uh there's a website called Lithub like GitHub with an L. Yeah. That shows uh >> a bunch of the integrations partnerships we've done you know there's there's variety there right now you know um I think for Robin Hood specifically it makes a lot of sense for them to do it this way. you know, they're growing their chain. I mean, there's a lot of activity on that chain. I think it's like one of the best launches of a new chain that we've ever seen. So, you know, I think they they're right um to make that bet like, you know, in a world

where their chain didn't get much adoption and the only interesting product on it was per in that world, it probably wouldn't have made sense to do it the way we did it. But in a world where that chain is growing, I mean remember it's still it's you know Robin Hood chain ultimately sits on top of Ethereum just like lighter core. And so that makes it interoperable. That's like >> you know I think not um not always clear how the tech works underneath but we're educating folks more about it. So the the zero knowledge proofs actually make it really easy for market makers to move capital back and forth between those two instances. So they're not it's not like siloed, you know, um worlds where never the two sides shall meet. You know, the

the market makers can quickly move capital around and we're, you know, right now it's like within minutes and that's actually going to >> be even less uh time when some of the work we're doing with on lighter VM with Axium, some of the work we're time we're spending with like Ethereum Foundation like making all the Ethereum L2s really interoperable. >> Yeah. like what that means to a trader like if you're a trader you know you want to trade um a tokenized stock you know using lighter on Robin Hood chain or you want to trade you know gold per lighter core I mean as long as liquidity is there for both you're good like you you don't really care how the liquidity

got there but the reality is that market makers they can quickly balance their books the way large market makers think about it is like one large order book globally liquidity and it's not you know fragmentation is not it's not like a black and white thing you're fragmented or not you can fragment you're only as fragmented as >> there's slowness in moving capital back and forth if that doesn't exist then then you're in a really great spot and >> the the advantages you get from the separate instance one is >> um you know you can have different types of assets like different you know promote those the different customer bases. Yeah.

>> Regulatory side as well, right? I think >> that there's a world where like let's say Robin Hood core customers in the US start trading per through this kind of framework, right? Then certainly it makes sense to have a separate instance for that if that's what we're building towards with them. Makes sense to have that separate instance because that may have slightly different parameters like >> you know even in a world where lighter core and Robin Hood both have licenses. >> Yeah. like the parameters of those and the leverage settings are not going to be exactly the same, >> right?

>> Um just like in Trafi like you know CME and you know um IC don't have exactly the same parameters across the board either, right? Like they're different decisions to be made and so anyway the the thing is that you want the flexibility to be able to do that while still being interoperable kind of when it comes to the infrastructure layer. >> Yes. So in summation, the interoperability dynamics of the ZK proof technology that lighter has built running on thousands of Mac minis is it enables market makers to be able to quickly shift from lighter core to the Robin Hood instance. Um and there's no like regulatory hurdle here. It's the same kind of it's the same instance.

It's the same level of requirements from what I understand as far as KYC these things. Obviously it's you know not available for US users etc. >> Not yet. >> Right. And then when we get to a world where as you mentioned potentially Robin Hood US core users trade per on the app through a another instance of lighter. This one would obviously be uh these users KYC they do their background they they put their ID through Robin Hood and then that you know they would have their own account on this instance for Robin Hood core. When it comes to interoperability, I'm struggling to understand how how would those like would the market makers of lighter core Robin Hood current and then that instance of the US users be

able to all kind of interoperate as well given that there's like a regulatory block, not a technical block. >> Well, the regulatory block only applies to market makers that would not want to go through KYC or KYB. Right. >> Right. the ones that do which I think you know many of the larger ones are happy to do it would not have a hurdle >> right and so there's a world then where you've got somebody like a citadel who is market making multiple lighter instances >> well citadel will probably only participate in the regulated one correct but there are others that have >> kind of various entities onshore and offshore that will participate on both sides >> and so you're >> but on chain the capital can move quickly

>> right exactly yeah and so Is is this vision of these instances is this part of like a you know I mean maybe I'm you know overdoing it here but are will we see you know half a dozen of these >> um >> well it only makes sense yeah I mean like I was saying >> this framework only makes sense if you have a really strong distribution >> yeah you know there not a lot of >> um >> it's a bet on Robin Hood >> yeah there there not a lot of platforms there there you know there's more than one right but there's not like thousands of platforms that have amazing distribution. So um so you know that's I think we'll kind of and and in some

cases um it may you know like in the case of Telegram they have great distribution but it actually makes sense to use lighter core. M >> um so I think we're willing partners to all these guys and uh yeah I mean I I think like um the the thing about it >> is like imagine like talking about regular right like us like we're very familiar with US regulations at this point and are in some part working with >> the innovation advisory committee to help >> shape them but like just zooming out like maybe in in some jurisdiction somewhere in the world they have rules where

um like let's say to trade equities you need to be KYC but to trade per you don't just hypothetically right >> sure >> so and let's say there's like a platform that wants to offer that like let's say the new bank of that country wants to offer product like that to the customers like >> and to be compliant with whatever like maybe their local regulations are a bit weird like I just described >> but okay well that's where you have to meet the customers where they're at >> y >> you still want to use lighter on the back and being interoperable. So can those rules can be implemented while still having as much access to liquidity as you can given that constraint.

>> So then it it kind of gets me to the thought here of like we're not really looking at lighter as a per platform trading front end for massive distribution. Sure, there is going to be a lot of onchain growth. There will be a lot of, you know, website traffic to lighter.xyz XYZ as the crypto bull kind of comes back, which I think is, you know, we're in this transitory uh period here. But what what we're starting to really see is like the the development of a liquidity layer that can be plugged into distribution channels, you know, that that currently exist and offer a superior product. And basically what like what you're building is you're not really building like a you know, you you're building a UI and you're building, you know, you want to have a really good experience for your traders on the main on core and etc. But what

you're building is you're building a a technological underpinning of pers for distribution across any kind of consumer front end globally. >> Right. Well, it's a great question. when we were starting out and uh like when we were describing to because you know we we're we're not you know our our background is Trafy and Silicon Valley right and we obviously understand blockchain >> from a technology perspective but like we didn't grow up with cryptonative community kind of >> you know >> you know we're like the kid who moved to new school when it comes to that but the point is when we were starting out like a lot of our early investors were Silicon Valley investors and they kept asking us like are you a product company or are you an infrastructure be