Liquid Staking Will Supercharge Cosmos DeFi | Aidan Salzmann, Riley Edmunds (Stride's Co-Founders)

Transcript

there were lots of teams that thought about building defined Cosmos and just never launched because the hurdle rate was so high lots of defy applications and Cosmos just don't make sense if you don't have liquid saving tokens what's up everyone welcome back to another episode of Xerox research this show is made possible thanks to our fantastic sponsor the atom accelerator it has literally never been a more exciting time to build in the cosmos so if you're a contributor looking for Grants between ten thousand dollars and one million dollars be sure to check out Adam accelerator.com or you can check out the link in the show notes today is June 5th and we have an awesome interview lined up with the two co-founders of stride actually there's three co-founders but we get Aiden and Riley on today it's a fantastic conversation uh liquid staking is

obviously a prominent industry in the ethereum ecosystem so we're expecting the same thing in the cosmos as well but before we get into the interview as always we're joined by two blockworks research analysts effort capital and Xerox pibbles for a little bit of a hot seat cool Throne to discuss the latest Market happenings uh Dan how about I kick it over to you this week to start out yeah absolutely um well unfortunately the Talk of the Town today has been the sec's entrance back into the crypto space this time bringing the buying Nancy cartels easy and all the entities into their purview essentially so the SEC is kind of joined the fun here and alleged Finance bam trading which is the operator of Finance us and CZ or the

three of them are those groups and individual are in violation of the U.S Securities Law so among the charges or the was essentially the idea that finance and Bam trading sold unregistered Securities Finance co-mingled customer funds similar to what we saw with the FTX debacle Finance operated as an unregistered exchange and there was wash trading on finance U.S and lastly binance and CZ solicited U.S customers which is kind of if you're soliciting the US customers and then you know breaking Securities Law that kind of confounds compounds the dilemmas that they're facing so for the people in the space you know this has kind of been rumored to be happening for quite some time now it's

almost like it feels like two months ago the first talks of Whispers of oh you know like cz's in trouble he's been co-mingling customer funds kind of started becoming a thing you know there are some sketchy relations with FTX when that all was going down uh back in November and then just honestly it just weird cryptic tweets have been coming out from different individuals in the space so this didn't come as like a total surprise but it is indeed here you know I saw asset prices fall anywhere from like five percent five percent on the initial pullback to around ten twelve percent uh on the lows of the day so the market definitely wasn't thrilled to see this the coinbase stock coin got absolutely smashed I think that Wicked down to like minus 15 on the day so uh

people really just like unsure of what to think of this outside of the fact that it is bad news um as you know my initial gut reaction was again not not too surprised just like okay we kind of heard Whispers of this but now it's here so what are the aftershocks of this and um I was looking for some copium on Twitter and sure enough Matt Hogan was able to provide me some of that basically saying you know the Silk Road got washed out and that ended up being a net positive for crypto and uh we'll put the link in the show now some blanking on a couple of his other points but basically saying you know things that uh are net negative for the space but exist getting washed out ultimately are positive so that's kind of the way I'm looking at this and you know maybe some

of the like if these things are true and there was commingling of customer funds and things of that nature then like okay that's again we don't we can't avoid we can't keep having these overhangs kind of uh fall over us but so it's nice to watch these things these these bad pieces and Bad actors out of the space um even if that is kind of some short-term pain you know this was I guess a FTX and in and of itself was similar to that thesis or that idea as well but pitbulls I know you had a couple other things that you wanted to point out on this yeah so first um I think it's interesting because we don't know if this is the end of choke point if this is the last Stone to fall or if this is the start of choke point 2.0 and then we start seeing even worse

things happening for the industry um and another thing to remember is that binance converted about a billion dollars of busd to different crypto assets probably mostly majors in March and that helped drive a lot of this recovery rally but if they have to pay a fat fine there's a solid chance that maybe they have to liquidate those and now there's way less liquidity so um I mean they can nuke us back to the shadow realm if they wanted to let's hope they don't um another thing is they the SEC came out and specifically said that Soul cardanomatic filecoin Adam sand Mana axi or all Securities

um effort Capital pointed out probably earlier this morning that these are actual assets that Hong Kong whitelisted to go live for trading um so I just think that's funny yeah I did um I didn't read the entire lawsuit uh or claims against binance from the SEC but just being a cosmos goal I did look into seeing like what their take was like specifically why Adam might be deemed to security and it kind of just shows that I don't know how quickly they put this whole legal document together but they are clearly like are poorly researched on I guess the history of some of these assets so specifically for Adam just give you an example um jayquan who's one of the founders of the cosmos ecosystem and of tendermint

he recently created a new legal entity called new tenderment that is supposed to do some like core development work for the overall Cosmos ecosystem it really speeds like this other legal battle that's happening internally in the cosmos ecosystem but long story short new tenement which this new development company has not done any Dev contribution work to the cosmos Hub yet in this paperwork like on the GitHub Newton hasn't done anything for the cosmos hub for core development in this legal document they specifically call out new tendermint as this new entity under jayquan said that this new entity has done significant contribution efforts to the cosmos Hub and they also claim a host of like other falsehoods

about like the atom token how it's distributed to its entities upon the initial allocation uh back in 2017. so it just feels like it's like poorly researched that is I'm only speaking about the the atom asset in particular but I mean as we've seen time and time again the SEC is going about this from like a regulation by enforcement it's actually coming up with like a good framework uh one thing that is more on a positive regulatory development point of view is um two House of Representatives Andrew McHenry and Thompson who are two house reps they created this new uh Market structure Bill specifically for crypto assets it is still in draft stages but it's kind of making the rounds on crypto

Twitter and other uh legal entities out there it really comes up with a framework for like how to even if a crypto asset is a security like on day one when it when it is initially launched what is the pathway for a certain asset to actually become a commodity and what is the framework required for that asset to be to kind of make that transition um I'm not a legal expert but a lot of legal experts that are on crypto Twitter are saying that look it's not perfect uh I think what the EU is doing like with mica is it's coming out with like a whole new regulatory body just to focus on crypto assets whereas this bill would kind of say like where do crypto assets fall in the current regulatory framework of of the United States between like the cftc and SEC so it kind of does a little

different spin than what like Mike and EU is doing but over while overall like a lot of crypto forward legal and legal experts are actually saying that this is a potential big win for crypto in the United States assuming it passes again it's still at very early stages it's still in draft form but you know in lieu of like what we're seeing today with the SEC cracking down on binance there are potentially like a light at the end of the tunnel to look forward to in the coming quarters assuming this eventually makes its way to the house floor and ultimately the Senate and on that note like it feels like that's been the this has been the first time where we have a moment that we can kind of step back and be like okay like this is actually this is kind of a win for crypto when it

comes to regulation so uh that's kind of my view of on on that bill you're mentioning effort and uh I love to see that I saw a Lex node on Twitter uh Gabriel Shapiro I believe his name is did a great analysis of this and there's still of course a couple unworkable things um in there just in but again this just feels like one of the first moments that we actually have something that we can like use as a positive Tailwind when we we look at things from the regulatory lens so uh that's at least a positive development yeah I strongly agree I just wonder how many how much like legs it actually has because obviously our timelines are are filled with crypto focused people like I wonder if people who paid no attention that are active in politics like if they support the bill

like I have no idea but the best we can do is cross our fingers I guess it just yeah I mean the the regulatory landscape just doesn't look great right now obviously Canada I think Australia has had a lot of pushback I think they're even I think Canada made it like illegal to buy or trade crypto at all so that's obviously really bad so I hope that's not a path that we we embark on but at the end of the day like I always say this I think it's kind of inevitable like it's you can't put the genie back in the bottle at this point like it's been invented the crypto is here it's here to stay it just you know it's it's all about timeline it it depends if the U.S wants to remain kind of a hub or if we want to push that overseas and

eventually flip-flop later on down the line so hopefully not the latter in it it ends up being the former but yeah that's all I've got on that I don't know does it feel like it's like when I think about this it feels like this just makes things for a longer a longer colder winter but to your point say I'm like you know you can't really put the genie back in the bottle but like is this something you guys think maybe I'll throw a stew effort like do you think this will just blow over or is it something that will probably have to be if you know another thing to be battled out in court I saw that binance actually already tried to settle allegedly with the SEC I think they put out a statement saying like hey we trying to even settle before this got to

this point but uh basically no cigar so I don't know what are your takes on the impact to the industry for the next say six to 12 months not gonna look great uh I mean people said it already but like liquidity is already like terrible where you know the Lotus lowest trade volumes that we've seen in in years um I mean 90 of the market and I think over the past few months their finances market dominance has actually been slowly chipping away which I think is good regardless of this because I think we need more diversity in exchanges uh it's for like a healthy ecosystem especially a sector that Prides itself on decentralization when one entity has 90 market share that's not good um but I think binance has a war chest they're going to

fight for it they're probably the only crypto entity that has more money than coinbase and I think coinbase you know has relatively good actors in in the space are at least probably the best actors in the space compared to most other entities out there um I feel like the by you know I'm not sure about like the security standpoint but what assets or Securities or not I think if some of these uh things that are are being said in this lawsuit like them co-mingling funds potentially buying a yacht with some of these commingled funds if that's true like financing together throw the book thrown at them either way um I I also think that like the Ripple lawsuit that's going on right now the coin the coinbase lawsuit you know that

they're going to be fighting for that uh over the coming years um I I don't think it's necessarily changes anything like you've brought it up earlier Dan like we kind of saw this coming the SEC it was obviously if they're gonna go after coinbase they're absolutely gonna go after binance um it doesn't really like change the market dynamics that much uh the only concern I have is if like if the doj comes in and goes after specifically CZ and goes after binance and like looks to extradite them to the United States and potentially like jail them that could be like a really big issue because now like EU and other areas where Finance is like legally allowed to operate in might decide to kind of side with the United States and really throw their own book at Finance which I think could have like

huge issues like impacts from like a liquidity perspective um if anything it's going to just force more users to go on chain because they Sam like you said the genie is already out of the bottle you can't kind of re-cork it uh so this could be bullish for like on-chain D5 Primitives in general but I I think in general like the United States it doesn't really change much like they're gonna be combative about with crypto regardless uh if what they say is true binance doesn't look like they're the greatest actors in the space they've always been you know on the shadier side you know at least that's my personal take there we go there you have it folks the bullish Spin Zone is pulls liquidity back on chain to its home where it belongs um and then I suppose watching Bad

actors out of the space is a net positive over the long term Sam who do you got for us this week yeah just one more comment on that too we do have two pro crypto candidates running for presidency in just one year right after the Bitcoin having right after Das DC a lot of catalysts coming up here so at least keep my fingers crossed for that but uh I actually in the same vein I've got uh perps on the the cool throne for the exact reason you just mentioned effort I think you know we saw this exactly happen and play out when FTX collapsed not saying binance is going to collapse But ultimately perps platforms saw a huge increase in just underlying fundamentals in terms of users volume traded free revenue generated um so I think that that could potentially be an outcome I know

finances are regularly used exchange to obtain leverage so if there's any question around that I think a lot of users do flow on chain because once you you know get bit by The Leverage bug I think that's just something that it's a lifestyle honestly um so yeah I've I specifically want to point out dydx because um you know we're already starting to see Dex volume start to surpass sex spot volumes so I think towards the tail end of this year or even next year I don't know how long it takes to play out but I think that we'll start to see that in the leveraged trading space as well it's just great product Market fit and we see that through like the GMX token dydx gns Etc so I really like dydx that's my favorite play going into the end of the year so I've got them on the cool thrown

this week you've got usdc coming to the cosmos you've got lsts ready to just be proliferated I'm pretty sure they're focusing on a mobile app there's just a ton to be excited about over there like if you ask 100 people in crypto what's your favorite crypto ux experience you've ever had if they're not located in the United States I guarantee a lot of them are going to say dydx so I'm just kind of bullish Antonio their team and their ability to ship a good product everyone keeps talking about the giant unlocks in December um but the way I see it is if they really do build a product that is better than any centralized exchange offering which is exactly what Antonio told us he is seeking to do on Xerox research like a couple months back I think that they're going to want to stake those

tokens and earn that Revenue into perpetuity like I don't see I get it would be tempting to take that immediate payout but I do think there's a serious case to be made for that to be the go-to leverage trading menu in the cosmos and if if you can own a large portion of those revenues every single week and it's truly decentralized which is you know the reason they move from Stark X app specific chain in the first place I I really like the play um you even saw quite a bit of strength out of the token today when everything was nuking so that's usually a good sign when things are nuking and something else is holding up strong so I think it's something to pay attention to I think the timeline uh effort you told me before the call was September sometime so I just like all the catalysts for

dydx going forward yeah even uh when we spoke to Antonio gosh that must have been like the third or fourth episode which is it's just pretty crazy to think now we're on 40 some odd episode numbers uh episode counts in so uh bringing it back to the early days but you know I think one of our major takeaways from that call was if they can pull this off it is really going to prove the use case of an app chain um so still really excited from from that standpoint I think they're doing a lot of really cool things on the tech level Tech layer like uh decentralizing the indexer and things of that nature and using uh asking the validators to do more in their system and decentralize their order book so a ton of really cool pieces that they are custom building out

so super excited to see this come the next couple months um but yeah to your point Sam it's hard not to be bullish on somebody like Antonio who is just so product focused and all he wants to do is make the best product yeah I would also say outside of dydx you have something like quenta on optimism as well like we just we haven't had infrastructure this good for on-chain perps or just on-chain activities in general like this is a first for us we just need to go more than two days without having an exploit somewhere but uh we'll iron that out incident encounter has been reset to zero going uh going back to like DUI DX and them kind of trying to decentralize their

entire stack um it's arguably a regulatory loophole right especially now with the SEC cracking down or not now if they have been but if they are sufficiently decentralized there's really no one point of failure um and I think that is is a huge Catalyst uh it you know if the SEC keeps cracking down on crypto projects obviously that's bearish the asset class but if DUI dxv4 product is really good it's incredibly bullish for app chains it like Dan just to your point uh just like a regulatory perspective and I don't wish this on on any teams especially teams that are trying to push crypto uh

to mainstream and really trying to improve the product Market fit but I will also say I'm kind of like I'd be worried if I was l2s right now if you if you're if you have a token today if your arbitrary optimism and you're running a centralized sequencer I don't know like I I don't wish that on them I hope they they make it out alive and I hope that they're able to ultimately decentralize that sequence over time but I think in the same vein that you can be bullish d by dxv4 and this whole like decentralized app chain thesis if it is correct if the product is good you also have to kind of look at like the L2 model and be like if they don't decentralize their sequencer soon and they have obviously like a real uh reason to push this as quickly as

possible to to get them decentralized and not have any single point of failure like that is the reason to decentralize is strictly what the SEC is doing um and I'm personally worried that if it doesn't happen soon they can kind of be part of this uh I guess collateral damage from from the sec's actions yeah agreed and just to play Devil's Advocate a bit just because you you know you bashed on my ethereum l2s here uh I do think the stakes are pretty damn high for dydx in the cosmos ecosystem like if it's a flop that's pretty tough I don't think it will be like if I was a if I were a Batman I'd be betting on the uidx not Financial advice All That Jazz but um I do think if if they fail over there

that's gonna really hurt Cosmos the whole brand the yeah I I don't know if it's something they'd be able to recover from to be quite Frank so a thousand percent um one of the lead like core devs of the cosmos ecosystem I'm not going to mention names but has like said it he said it publicly too and not that it's a big deal but like dydx literally dragged their Market maker like participants and usdc into the cosmos like I'm sure there was other work I'm sure uscc always planned on launching the cosmos ecosystem eventually they're already launched on other chains like or ecosystems like Avalanche and Solana but my understanding is like usdc predominantly came to the cosmos specifically to support dydx and their Venture that they're trying to build out

there so like they kind of kicked they dragged their their uh I guess major contributors and core participants like Kicking and Screaming into the cosmos ecosystem so I 100 agree Sam if this doesn't work out like there goes really most of my thesis why I'm bullish the cosmos ecosystem well I'm glad that uh that you agree with me there um it's interesting to hear you uh talk about the bear case for Cosmos it's not something I get to hear too often Everett I do know you've got a pretty fun uh cool thrown this week what you got yeah so it's not crypto specific maybe crypto like adjacent uh if there's like a metaverse play here eventually but um so it's Monday June 5th today Apple's uh WWDC worldwide I think developers conference I think it stands

for uh today was day one of it um obviously there was a lot of hype around their their new product launch and it was official so they did announce uh Apple Vision Pro uh their new um AR VR headset that's really trying to compete with meta um and I think like Sony and a couple other products out there that are really like the large players in the VR AR headset space um they're calling it their spatial Computing product um it's a 3 500 headset I'm gonna be honest it looked Sleek as hell I really didn't know what to expect from it but they pretty much have their own like operating system called Vision OS that's really just like to me it looks like a copy pasta of of Mac OS or iOS but specifically for their headset product

and I also think like that alone uh regardless of like additional use cases I'm sure there's like a ton like over time that'll build out once there's like a good developer uh toolkit or environment for this type of product but I think a VR AR headset having its own operating system like a really solid one is really what's going to separate like the the products that have failed in the past like Google Glass for example to like this Vision Pro so Apple's name of the game is like building a solid operating system they did it for Mac they did it for iOS they did it for their watch like that Sleek user experience is really what I think sets their products apart from the rest like the Androids and and others of the world so I think having their own OS that is like very familiar to the average iOS

user I think this is going to be like they're going to knock this thing out of the park it's very easy to like make these things look cool on screen until like the actual user uses it I'm sure there's gonna be a lot of bugs the first couple iterations but if it's even like somewhat compared like in the real life to what they showed taste at their keynote speed speech today like I'm incredibly bullish on this product um like just as an example like if I was wearing the headset right now and I actually thought the headset looked pretty cool if I was staring at this screen I could literally lift up my head and then project this entire screen like into my physical space and expand like the size of the screen so eventually you won't even need like monitors you can literally just like

duplicate displays in your area and just have like a 360 degree view of like all your different screens um it uses cameras built into the headset to actually track your your fingers so like if you want to click on something like your fingers can literally be at your um your waist and you just like pinch your fingers together and the camera is literally like are pointed down towards your fingers so I think it's a really cool user experience like improvement from other headsets like meta uh meta's Quest where you actually have to hold like a joystick in your hand it doesn't really feel natural so I mean Apple's always known to like not necessarily make revolutionary products but make incredible like uh incredible improvements on products already out there in the market

um and I think they really did that with what I saw today um in addition they launched they have like a partnership with Disney now where like all of Disney's like product Suite like Disney plus um is going to be like able to be watched like using their their Vision OS um they have optic ID which is like very similar to what world coins doing with their orb so like when you go to unlock your screen instead of using face ID is able to like see what your ocular pattern is in in your eyes to like unlock your your uh the device um they didn't mention metaverse explicitly so like I guess that's kind of like the bear take from a crypto perspective but I have to imagine eventually there's gonna be like games associated with vision OS and and this Vision Pro

headset so I'm like really excited to see like what this product looks like in over the next couple years I really think it's going to be like the next I would argue it's probably going to be the the biggest product for Apple like over the next decade even larger an iPhone over time just like many funds and crypto VCS made their AI pivot I think this is effort Capital making his uh crypto pivot so uh this probably is a good bottom signal just mental note I think something could be really cool later down the road is if Apple opens up to being crypto friendly I think division Pro opens the floodgates for a lot of really neat um nft applications like being able to purchase an nft and like only you have that experience on

your AR headset or even I think they announced that they're partnering with unity which is like a gaming engine so if people make crypto games on Unity they're a lot easier compatible with Vision Pro so like people could actually have demand for in-game assets that could be tokenized on nfts so there's a lot of really cool synergies that can happen if Apple just gives us an out of the head yeah no kidding and like the Apple wallet is still this overhang of like what could be for crypto if like that your Apple watch usdc enabled I mean that is the biggest unlock of for all of crypto um but what I think I'm most excited about for this is the exactly the

scenario described like you can just be looking at your screen with your glasses on and then have multiple displays everywhere like anybody who's been traveling knows how big of a pain of the ass it is to go from your sweet at home setup multiple screens got everything set up exactly as you want it to go into that hotel room crammed up off your laptop I'm on like a three month travel thing right now and if I'm like working from home it just sucks as opposed to being in the office because I got into the blockworks office custom created my own setup everyone in there is laughing at me I got my own double screen monitor set up and like I I need the high quality monitor set it up monitor setup um and so like being able to just strap on glasses and then custom build my own

setup every single day I mean that's pretty damn cool being like think of the unlimited number of Doom dashboards you can have at once you're a wet dream [Music] that is hilarious yeah I don't know I would take a a more bearish spin though on like metaverse gaming like I honestly hate the fact that Apple's just gonna have more of a monopoly over like the hardware stack because like the reason crypto gaming hasn't taken off to date aside from the fact that the games just aren't very fun I would attribute to like just not having a mobile friendly place to deploy like ultimately like with these hyper casual games like I think people want to be able to use them on the go and to have to like actually sit down at your computer and like play them it feels a lot more like a job than

it does a game on the move so I don't know how I feel about it in terms of how bullish it is metaverse gaming but I definitely know for myself like I want to buy this even first gen headset like I think it's going to be worth the price tag and I can't wait just for the same reason you described it I'm like to literally have these screens anywhere Everywhere You Go is is fantastic true and one of the The Knocks I had on the Solana sagaphone uh I really I like equated it to Teslas it's like the first gen of anything you just don't really want to own but damn I want to break my own rule like this thing looks cool you're gonna spend 3 500 on a headset in this market no so point in case we gotta collectively put our minds together and

come up with a business reason for blockworks research to own one of these things I just said productivity enhancement of all those Dune dashboards all right Mike and Jason you'll have a letter you're coming your way all right I think that's a good spot to end the hot seat cool thrown and get into the interview Dan before we do that you want to tell people what's good with Adam accelerator absolutely as always you know special shout outs and special thank you to the atom accelerator uh they're really just trying to do what's best for the cosmos Hub and expand the atom economic zone so if you're a developer looking to get involved in crypto or find a new home in the industry the atom economic zone is really for you I feel like we naturally talked about a ton of the awesome developments that are kind of coming up

in the ecosystem throughout this intro section but just to hit on it again interchange security provides the ability to essentially put in any new features or chains under the atom economic zone and there's a lot of really really exciting things going on you know Duality is one of those things more uh further out on the the timeline of when it's going to be enabled but you know they might not even have a token and they're going to fully align with like potentially even atom as a gas token so a lot of really interesting things there IBC gives you the flexibility of connecting to any other app chains and interchange accounts gives you the functionality to kind of utilize what the activities on those other blockchains as well you know stride who we're speaking with today has a phenomenal use case for why that's important and what that can unlock now

Neutron is officially live and it's the perfect place to go launch permission permissionless smart contracts with ease I think Astro Port just went live today or yesterday might have been and they've already taken over to the highest volume decks you know Astro Port is a terror Survivor so great to see that team still thriving and again liquid staking taking off means more defy and more it's more exciting and more attractive strides really kind of pioneering this and making it more scalable as well and again you know we've said this a million times and we'll continue to say it but the closer usdc gets to launching the more exciting defy gets as well as there's kind of that stable form of value throughout all the Cosmos so you know if you think that you can provide

value to the atom economic zone and need a grant to do so be sure to reach out to the atom accelerator Dow the their link is in our description and they're doing grants between ten thousand and one million dollars on a rolling monthly basis uh so be sure to check them out now on to the interview with stride all right everyone we are joined today by Aiden and Riley the two co-founders of stride who's bringing liquid staking to the cosmos interchange guys I really appreciate you guys hopping on uh to zero x a day we got a really really exciting conversation about what you all are doing um and of course that's within the cosmos ecosystem so before we dive directly into shride I kind of want to get your overarching take on kind of what the landscape of crypto looks like you know to me it kind of feels like we

have these like three ecosystems at the moment kind of like the high throughput camp with the solanos the Aptos is the suis and then you have ethereum in its l2s and of course the cosmos ecosystem so zucky had a pretty viral tweet the other day a couple weeks ago now that was essentially like this Battle Cry for the cosmos ecosystem he said I think Cosmos Social Capital has about 12 months to do something unique and differentiated otherwise we get swallowed by eat flavored variants of the cosmos originated ideas like roll apps and eigenlayer I feel a sense of urgency the hour is late I'm curious to get your take on kind of what you think this was about or kind of how you feel like does this resonate with you is the time truly now for the cosmos ecosystem it's an impossible question uh we

debated this at length internally uh on one hand Cosmos has a ton of new tech shipping over the next six months well eth altuser in some ways still basically multi-6 secured by admin keys they don't have live client-based interoperability and they're not quite as trustless as cosmos at least until you see something like zkl2s and Cosmos now has shared Security Plus interop while eth is still at the stage of shared Security on the other hand eth has distribution Cosmos doesn't even have metamask yet eth has so many more users institutional penetration custody super easy and many teams choose to build rollups on

ethereum instead of app chains for these reasons and there's evidence of momentum in both directions in my opinion you see coinbase choosing op l2s have some of the most exciting Partnerships in the entire digital asset space but then on the cosmo side dyex is coming in Noble has native Circle Integrations uh maybe the maker endgame is on Cosmos who knows and I think Zaki followed up uh to his own tweet with some more context talking about the aspects of Cosmos that he's most excited about talked about Celestia skip Noble metamask snaps the liquid sticking module bear chain ABCI plus plus osmo 2.0

basically a bunch of pent up Innovation that has been done over the past few years but hasn't quite shipped yet and we might see the fruits of that labor in the next three to six months um might totally change how Cosmos is experienced by the broader and and perceived not just experience by the broader crypto world but I'm curious what you guys think uh and e2a and it's it's an impossible question at the end of the day yeah I would just strongly agree with that like on the one hand you have all these awesome things occurring in ethereum and its L2 ecosystem with Partnerships like with coinbase World coin Etc um but then on the other hand Cosmos has like it's had these missing pieces for the past two three years and like with

Native usdc with you know obviously lsts like you guys becoming a more prominent narrative and then dydx before like there's just so many Tailwinds for the cosmos ecosystem and it's like just like you said over the next three to six months it's going to be like the most interesting time there has ever been to pay attention to the cosmos ecosystem so definitely excited for it but Dan what do you think I'm with you there and it's hard to like pick one ecosystem ecosystem right now for me and be like all right the time must be now because it kind of feels like for all of the industry that's that's where we're at like everybody's itching for that killer app and you know there was some discussion around this the other day on Twitter and like the idea was you know everyone's building infrastructure no one's

building apps and it's because well there needs to be the infrastructure to support the apps I mean it feels like we're kind of stepping in that right in that direction there but I'll toss it over to u8 and I'm really curious to get your thoughts here yeah one thing that I think is interesting here is different people have different definitions of what Cosmo says so Cosmos is the SDK which is the software development kit that you can use to build blockchains um it's also the cosmos Hub which is you know the uh the one blockchain and the cosmos ecosystem and other people use the definition of any chain that's connected to IBC so depending on which definition you use I think you might have a slightly different take on this tweet um but thinking about like the cosmos Hub in particular I think one thing that

the cosmos ecosystem has struggled with a little bit is uh when everyone has their own chain and everyone's Sovereign sometimes people like are rowing in different directions whereas in other ecosystems like either Solana at the base layer at least everyone is rowing in the same direction and the applications are built on top um and there's of course trade-offs to sovereignty but I think this is one of the downsides of sovereignty is is you sometimes get people running in different directions but recently with the launch of interchange security and um you know some changes to the atom or cosmosob tokenomics I think it seems to me that you know people are feeling this sense of urgency and maybe rowing a

little bit more in the same direction behind Adam and the cosmo sub right on so specifically when it comes to liquid staking in the post-shapella ethereum landscape it's just like this huge narrative everybody's been talking about it LST Phi LST summer it's it's pretty Non-Stop and so the obvious benefit of having liquid staking tokens is obviously keeping the asset liquidity and earning the staking words and that's very powerful when it's plugged into a vibrant defy ecosystem but when people talk about Cosmos ecosystem their Cosmos D5 it's usually like the conversation on how how it's been slow to develop do you think the arrival of liquid staging tokens to the cosmos interchain can really help kind of be that Kickstart Catalyst to the D5 for this ecosystem um I I definitely think so

um so I think it's sort of interesting in that liquids taking tokens as far as I know were actually invented in Cosmos there's a forum post from like early 2019 and this course one research report on lsts however they didn't take off in the cosmos ecosystem of course they took off in the ethereum ecosystem through Lido I think Lido was the first really large decentralized LST protocol and as a result I think Cosmos D5 struggled for a long time part of the reason is just the tokens in Cosmos have such high staking yields that to even use these tokens in defy you have to clear this hurdle rate or provide very generous external incentives so we have

seen some chains do this successfully I think Osmos is sort of pulled it off with their large incentive program but for other chains it was really hard and when we were actually launching stride we were thinking about what D5 protocols could use LCS and Cosmos and it was a little bit hard to say because I'm sure there were lots of teams that thought about building defined Cosmos and just never launched because the hurdle rate was so high lots of D5 applications in Cosmos just don't make sense if you don't have liquid saving tokens um but I think our thesis has been validated we launched the ride back in September and in the three or four months after launch we started seeing tons of D5 protocols come online some of these were definitely in development

before stride but I think other D5 protocols saw lsts coming to Cosmos realized that they could finally build D5 Primitives for the cosmos ecosystem so things like lending uh things like CDP stable coins like IST is a big one coming on agoric which hopefully will be backed mostly by lsts um all these D5 products are finally coming online so I I think llc's are going to be huge unlock and especially over the next year you know it takes some time to launch a cosmos chain it's not quite as simple as launching a smart contract even if that's what we like to say um but yeah I'm pretty bullish on uh defying Cosmos over the next year yeah same here I I just always think to like the the perps tokens like GMX gns Etc

like I I salivate over the idea of being able to use that as an LST earning p l trading fees you know the inflation like that would just be such a huge unlock and like it just wouldn't be able to compete with anything on an Ethel 2 quite frankly because you know you get to do so much with that token but um I'm I'm curious what do you guys think uh how do you think Lido's arrival to to Neutron is going to affect the market landscape on the lsts in in the cosmos ecosystem obviously they have a huge treasury a lot of network effects built up on the ethereum ecosystem like it's it's essentially a whale coming in to fight you guys for your 80 plus market share and really nascent Market I think it's one percent of all of Adam's

Supply is staked uh through liquid staking tokens so how do you guys think about that competition are you excited about it how are you gonna how are you gonna position yourselves in that one so maybe just frame this uh there are three main competitors today in the cosmos ecosystem uh outside of stride there's peace take there's Quicksilver and there will soon be light up and there will always be key differences between these platforms bucketing them up a little bit uh the stride and Quicksilver and stride in peace take another key difference of minimalism they're both app chains or all three of them are app chains but the the main differentiator is that peace taking Quicksilver both aim to have

defy ecosystems on top of their own chain so they issue the LST and they plug it into their own defy ecosystem and this is a very attractive business model because you get not only the fees on the liquid staking but also the D5 The Stride is a little bit different in that we just do the liquid staking and then integrate with other defy around Cosmos so maybe it's not as good of a business model in that sense but maybe it can scale more um then comparing stride and Lido the key difference is the approach to liquid staking overall Lido deploys smart contracts and stride uses an app chain uh if lighter deploys on Cosmos they'll likely deploy as a smart contract on

Neutron um and so you have different trust assumptions uh between a smart contract based deployment of liquid staking and app chain uh the smart contract based deployments sometimes are controlled by admin keys and multi-cigs they're upgradable um whereas the app chain is controlled by a validator set this is not strictly a good thing and not strictly a bad thing they're just trade-offs here that are made there are kyc and compliance reasons to be controlled in a certain way and then there are also different safety capabilities if you have an app chain you can do things like rate limiting and invariant checks but maybe you can't pull all the funds if you need to in a split second in case of a hack whereas

with an admin key you can do that at the end of the day Cosmos is sprawling and diverse and I think we're gonna net out in a world where some of the liquid sticking providers specialize to particular subsets of this broad multi-chain ecosystem and others specialize in other places so it's very hard to say we're in that out and as you said Lido is a huge incentive uh program and a massive massive one of the most competent teams in the crypto ecosystem so it's it's going to be a real race um to especially for the Adam Market um where maybe 80 90 of the state value

and Cosmos lives today yeah that I love that you also mentioned the one of the key differences between Lido um and of course dried is it's like I think our listeners are probably pretty comfortable with what the kind of the ux flow looks like for someone's taking e through Lido because that's like this uh this dap built on top of the chain that it's servicing and so I want you to kind of like walk us through what the user flow looks like for somebody who's let's say has Adam and wants to stake it through stride what does that process look like and can you just kind of uh walk us through how the the asset moves from the like uh the cosmos Hub in this case to stride and what that the process kind of just looks like yeah definitely so

on a monolithic chain typically the way that you interact with a contract is you click a button maybe you do an approval and then you sign a transaction and it happens on that chain so there's no bridging step um there's not much waiting involved depending on how fast blocks are produced on that chain and Cosmos things are a little bit different where you first often have to IBC transfer a token or Bridge a token over to another chain or application to kind of quote unquote deposit it there and then you can do your action so up until actually today the way that stride typically worked from a user's perspective was you would first IBC transfer your token to stride and then in a second step you would

liquid save that token so there were kind of two transactions the first one takes maybe 30 seconds it's a bridge transaction the second one takes maybe five and it's liquid seeking transaction um it's not a perfect ux and especially for people coming from the ethereum or monolithic worlds it's a little bit counterintuitive like why you have to bridge a token before you just liquid sake it um what's nice is as soon as you liquidsake your atom you get St Adam immediately in return so there's no waiting um like stride isn't querying another chain or doing anything like that it is instant and then you can take your SD atom and take it to osmosis or Umi a lending protocol or you know do whatever you want um but there was this extra stuff so we spent the last couple months looking at

how to optimize this and uh what the stride ux looks like now is the user assigns a single IBC transaction and their token is transferred from the cosmos Hub to stride so that atom moves from The Hub to stride and then it's liquid staked immediately upon receipt on stride um so this takes it from two transactions down to one and it feels a bit more like a monolith and there's even an additional sort of routing set that you can do where if you want to send it back to the cosmos Hub that's something that we could do in the future um so you just sign a single transaction on the cosmos Hub and then 30 seconds a minute later you end up with astiatum in your account on the cosmos hub um so I think the ux started much more like Cosmos native or it was bridge and

then do the thing and we're getting much closer to something that feels like a monolith where you just sign something on the cosmos Hub and you don't really have to worry about what's going uh what's happening behind the scenes in terms of where your token is going fantastic I mean we always talk about how improved ux is just a no-brainer next step for the entire industry so love to hear that the steps that you guys are making there um and specifically when it comes to everybody kind of is familiar with IBC and how that plays a role in the cosmos ecosystem but ica's interchange accounts are this like new unlock that you guys are really pushing forward can you talk about how stride is using interchange accounts and the value that that provides for you yeah um so a brief sort of technical backgrounds on inner chain accounts on

most chains there's uh public private key pair that people or contracts use to sign transactions um so when you create your seed phrase you get a private key and then there's a public key Associated and you sign a transaction with entertainment accounts the model is pretty different so it requires a slightly different model for thinking about it but the high level idea is with an inner chain account either a user or a protocol on one chain can own an account on another chain so rather than having a private key for one chain you have a private key or the protocol owns an account for another chain and then it can control that chain remotely one way to think about it is it's sort of like a puppet master where you're uh you're kind of sending actions

and seeing results across different chains um so that's uh sort of technically how entertain accounts work and the reason that they unlock strides logic is when stride Stakes or unstakes user tokens they're all pooled together in one account um this is like pretty similar to how other liquid taking protocols work um and the inner chain account will actually send the staking and unsaking transactions so when you deposit say 10 atoms to strive those atoms get transferred over to this pooled account on the cosmos Hub and then stride will send a transaction through IVC and say hey here's 10 new atom can you also go ahead and stake these on behalf of the

user um so that's uh sort of how energy accounts work yeah that was a really helpful explanation one analogy I saw for entertaining accounts that I really like I can't remember who came up with it but it was like sending letters inside of an envelope inside of a box over to to various chains which I thought was kind of clever in terms of uh lsts though specifically for for stride based tokens are they like a token types so like Auto rebasing or are they C tokens um that that basically become available for more of the underlying when you go to redeem those tokens what's the actual model and what why did you make those choices yeah good question they're seeing tokens it's really hard to rebase tokens in Cosmos as you can imagine many

blockchains St Adam lives across all of them so if you wanted to rebase you need to count them all up and then divide uh to bring them back to par that's a very very expensive operation uh might actually be an NPR problem because the the connections to all the new chains are permissionless so at any point in time a new no name chain could open a connection and bring St atom over and you'd have to count that in your rebasing operation so that's maybe a technical limitation but at the end of the day even if it were possible to build St Adam with the a token type

model you probably wouldn't want to because it's better for D5 to have um uh non-rebacing token you even see this on ethereum with steth and wrath staked eth the version that eventually gets used in V5 is rhaps day teeth and the reason for this is do you want it to rebase and distribute extra tokens to compensate users for their staking reward it's kind of hard to reason about how that might play out for a user who's maybe collateralizing a debt or LP in a pool where do the tokens end up the tokens that you send them so short answer is we're using C tokens yeah no I

agree that's that's definitely the the trend we've seen uh in ethereum D5 with the exception of stake teeth but of course rhapsake teeth is making its rounds um moving the conversation to interchange security itself stride has the proposal out to share 15 of liquid staking rewards with uh liquid state rewards transaction fees Mev revenue and stride inflation in exchange for the hub's security can you talk us through why this decision was so important for stride and why uh it was ultimately the one the path that you all wanted to proceed on yeah it's a it's a great question um so they're they're sort of one uh assumption and then one hypothesis that we had

um so the assumption is that Adam is a really important token in the cosmos ecosystem today and will continue to be a really important token in the cosmos ecosystem going forward and this is something you know it's hard to validate this today but I think we've seen especially as Adam has shipped more features recently I think we've seen a bit more energy behind the cosmos Hub and the atom token itself um so that's that's sort of uh an idea that we have and you see this reflected in tvl as well I think Adam TV all makes up something like 80 85 of All Stride deposits so there's sort of a power law with Adam at the top osmo second and then it Trails off

could change but this is what it looks like today and then the idea behind interchange security is one um through ICS stride is much more economically aligned with the cosmos Hub so there's a sort of symbiotic relationship where each chain is servicing the other so stride provides sort of an economic engine for the cosmos Hub by creating lots of liquidity for the atom token and the cosmos Hub in return provides security and in particular for liquid sacing protocols it's really important that they're very secure because the tvl can get so high and the liquid-saking protocol itself touches something that's very close to the heart of blockchains which is proof

of sake for example if you look on ethereum I think Lido's TBL is something like 13 billion today which is maybe twice as much as the next highest protocol by tvl which I think is maker so tbls for liquid saving protocols can just get really high and therefore you want very high security both protocol security which we try to ensure through lots of audits and rigorous testing and things like that but also Economic Security so you wouldn't want for example The Stride validator set to have low Economic Security and then secure billions and billions of tokens because there might be some incentive misalignment there um so that's that's how we think about interchange security at a high level um it's both Economic Security but also

economic alignment I feel like a lot of Cosmos nayseries will say well interchange security makes no sense like at a certain point you're going to graduate and want to you know have completely your own validator set to accrue all those transaction fees maybe and and inflation so would you say that that doesn't really apply for stride considering a vast majority of your tvl is Adam and you kind of grow in tandem with each other or do you think there is a world down down the line maybe where you become your own independent chain I am not sure um but if I had to guess today I think either interchange security or something like match security where the majority of the security comes from the cosmos Hub makes the most sense um for all those reasons I mentioned I think it makes a lot of sense for liquid

seeking protocols to uh have their fate tied to the protocols that they support um the nice thing about interchange security though is the chain so stride for example doesn't actually lose very much sovereignty so the strd token still exists it still has governance rights the S uh the stride protocol can still develop next to the cosmos Hub and the only real difference is the cosmos have validator set has additional slashing conditions and runs the stride nodes themselves but Futures tried upgrades can still happen and um yeah so stride loses a little bit of flexibility and a little bit of taking words but in return it gets all of this economic alignment and economics

if I had to guess I think it's uh it's probably going to go on for a long time okay yeah and I'm also curious because I've never actually been able to ask this to someone firsthand like everyone says and talks about how hard it is to you know actually bootstrap your invalidator set from day one from your guys's experience like how difficult truly was that like what were the steps involved I can only imagine yeah it's it's definitely harder than launching a smart contract um but it's not as hard as you would think I feel like it's mostly a talking point um from people that are like sort of criticizing the cosmos ecosystem as maybe just to put some numbers on it when we ran our test net I think we had something like 1100 validators and we launched mainnet we had about a hundred

um but there were many more that uh were kind of wanting to be in the initial stride set so it was really a question of like who's the highest quality validator and how do we make sure the initial set is distributed and things like that but I think bootstrapping available in general is actually not very hard yeah maybe to reframe that it's more about bootstrapping a quality validator set that gives you Economic Security during the test net there are hundreds of people running nodes on their Android phones with globe bandwidth and like arguably that's a validator but hey you might not want that if you're securing billions of dollars on your mainnet okay okay that's a good yeah I like the perspective there as well um and so thinking about the

relationship between like a consumer and a producer chain the like the cosmos Hub in this case is getting 15 of liquid staking rewards and stride inflation those two are very straightforward to me on like how the Hub accrues value there but when it comes to transaction fees and Mev Revenue I want to like dive in deeper on those two so specifically for transaction fees you know for that category to be valuable there needs to be a meaningful amount of on-chain activity um and so will that what's like the the long-term view here for you do you think things or applications will eventually be built on top of stride is that process permissionless or do you think the transaction Revenue will strictly be like staking an unstaking transactions that occur on stride yeah so today it is not permissionless to build applications

on stride and as Riley alluded to earlier stride is very um minimalistic so this is a security but also a narrative and specialization concern I think the best manifestation of Cosmos and IBC is lots of individual chains being the best version of what they're built to be and helping each other out for example osmosis is a great Dex The Hub is a great security provider stride is a great LLC provider and they can all help each other out through IVC maybe in the future it would make sense to build apps on stride but personally I don't think it makes a whole lot of sense today mostly for security reasons that said I do think TX views will accrue um

revenue for the Hub the main reason being when you liquid stake although it's a less common transaction it's typically a very high value transaction so having a higher TXV on that I think is probably reasonable yeah just to add a little color there's also a strategic reason to remain minimalist the quality of the Partnerships between a minimalist liquid sticking provider and D5 locations around the ecosystem can be much much higher than the quality of Partnerships between a liquid staking provider that might be trying to cannibalize that D5 provider's activity for example if I'm building index on stride and I approach osmosis to provide incentives to my SG tokens they might

not know whether I'm being entirely honest with them about my motivations right on I think that makes a ton of sense and then on the Mev piece you've I've heard you guys talk about this briefly but I'd love to like to really dive in here and you have this like unique opportunity to auction off instant Redemption rights so I guess first before we kind of dive into why that could be value or valuable how do you guys view the price of an LST like should that be pegged to one 1.0 at all times or should like longer withdrawal processes kind of like lead to this liquidity discount how do you what's your framework around the value that lsts will be trading at on the open market yeah it's a good question I think it honestly deserves a full research paper and I've never I've never seen

someone write about it and not with in that much depth um but our Our rough sense is first that it's very important for LLCs to trade close to the peg the most obvious reason is one of the largest Integrations for lsts today is lending protocols and if LLCs start to depeg and ltvs are really high on lending protocols you might start to have liquidations and in the worst case you could even have cascading liquidations where one liquidation happens the price drops further more liquidations happen Etc I think this risk was uh there in like 2022 for St eth because they didn't have withdrawals and there was like a big deleveraging so it's really important for that reason

but also for just you know normal people that want to sell their LST and get the native token back being pegged is is pretty important for that ux um and then in terms of how we think about the peg I think in theory it should be a function of the cost to short and the withdrawal period the reason being if an LST depegs um you could buy the dpac.set or token and you could short it on another market and you could withdraw that LLC from the protocol and at the full Redemption rate you could get back the underlying token so the only cost that you incur is how much it costs to short that token over

the withdrawal period so if a token has a really long withdrawal period and a really high yield that means it's going to cost a lot to short it's going to take a long time to withdraw so it might have a weaker Peg than a token with um a really low yields and a really low withdrawal period but it in general it should be you know between like point nine and one it for for most Cosmos ecosystem tokens right on that's actually a really interesting point and because the cosmos ecosystem tends to have you know that 15 um staking rewards Ratio or rate so that will be an interesting Factor here to watch that play into the peg prices of these assets um so with that said in that that in mind it's like okay well now that you

guys are offering the potential for instant redemptions and kind of like auctioning off those rights how are the instant redemptions processed yeah it's a good question so the way it works has to do a little bit with the internals of stride so maybe thinking about these internals the way the stride works is when someone deposits a token there's roughly a six hour window where the token is just sitting on stride and then at the end of that six hour window it'll get transferred back to the chain um that it needs to be staked on so for example for Adam it'll get transferred back to the cosmos Hub and then six hours later it'll get staked and the reason is Strive runs all of its logic in these things called epochs um they're a little bit like cron jobs

or something like that basically the logic just runs every six hours which simplifies the protocol significantly it makes it much less likely that there's bugs and all these things it's a really nice feature but what's sort of interesting is when you liquid sake on stride those atom are just sitting in the stride protocol for six hours before they're transferred back to the cosmos hub so if you want to withdraw what stride could do which is what it does today is it could kick off a withdrawal and it could burn your SD atom and say like hey unstake 10 Atom from the cosmos hub um but alternatively what it could do is if there's already 10 atoms sitting on stride it could just match that

withdrawal with the deposit so there's some float on stride and that's how you can process instant uh instant redemptions okay that's super interesting because I've seen other protocols like Lotto for example has like this withdrawal buffer and it helps process uh withdrawal so it doesn't necessarily it can like speed up the time it takes to withdraw but of course that creates a drag on the assets yield itself I wish I guess you could then make the argument you know with such high yields in the cosmos ecosystem maybe that becomes slightly less important but are you guys like is the idea uh is the ability to auction off these rights is that exist today or is that something that's going to come in in the future yeah that's going to come in in the future um so something that we're doing a lot

of research into right now is the best way to model this um so we've actually done a little bit of work on insert redemptions themselves and we could just make it like a flat fee and that might be the V1 the V2 is something a little bit more Dynamic where uh you actually auction off the right to do the instant redemptions but there's a lot of sort of quirks that make this pretty challenging we've been talking to the Skip and the fair blocks team about how to best design this auction um personally I don't have a lot of experience designing auctions Riley I'm not not sure about you um but there's many more uh foot guns than I expected yeah Michelle's the expert here the the third co-founder is not on today damn yeah

all right we'll save that one for another day I guess but I have something I wanted to bring back up just before we glazed over it I know when I asked the question like about you know competing with Lido a big Advantage I feel like you guys have actually is that and please walk me through it or correct me if I'm wrong here but you guys got 450 000 atom pledge for some liquidity uh either on Astro port or osmosis I can't really recall which one it is but I feel like having that much liquidity for your LST is going to be a huge Advantage just right off the bat so could you kind of walk us through that deal and and the significance of it yeah so there are a couple of benefits to this the biggest one is that it's a much more sustainable

LP base for St Adam and Adam you know we're talking about um the peg between estiatum and Adam and how it can depack based on lots of selling and you know the whims of LPS by having the cosmos Hub itself provide liquidity for the atom SD atom pool there's a sort of solid foundation of liquidity that's very reliable it's very predictable and um you know it's it's not going away the benefit that it provides to stride is stride has this incentive program like many other chains like osmosis and they're all sort of being burned down through time so this incentive program has Runway and it's going to run out at some date in the future it's

fundamentally unsustainable um you know it's going to work for a while but we need to start thinking about more sustainable models for liquidity and these SC token token Pairs and I think protocol and liquidity is really the end game here at least this is how I'm thinking about it right now so seeing this come from the cosmos Hub is really exciting because I think it can also be a model for other blockchains in the cosmos ecosystem it's also sort of unique for the cosmos ecosystem like it's I think it's much harder to do this in other ecosystems but in Cosmos it's very common that chains have community pools where they just have like you know five ten percent of their supply sitting idle and using it to provide a solid foundation for liquid staking tokens I think is a

really good use of those community pool funds and so just to clarify on this uh like the cosmos Hub is retaining ownership of those tokens and they're just like essentially lping them uh to provide Peg stability yep that's exactly right so the cosmos Hub still owns the tokens um the way it works technically is it's going to be custody by a smart contract on Neutron starting in a few months um so the stride team got a grant from the atom accelerator down to build out this set of contracts and the way that they're going to work is uh the contracts will be deployed on Neutron and because neutron has icas and icqs these contracts can use interchange accounts to receive Adam on the cosmos Hub send it over to stride liquid sake it send it back to Neutron and then LP

it on Aster report but the cosmos Hub uh protocol owns the liquidity like stride can't go to these contracts and like pull out the liquidity or sell it or do anything anything else with it okay so it's like protocol owned liquidity on behalf of uh the cosmos Hub or any other chain in that scenario do you think there was any value in trying to get protocol owned liquidity uh for stride itself and try to like distribute that out into these pools and kind of take that role that the cosmos Hub is providing or would you like to strictly keep it so that the other chain is operating their own protocol owned liquidity yeah it's definitely an interesting question um and people have actually suggested this to us before um you know they've in in governance and uh you know random DMS we've heard

people say like maybe stride Revenue some portion of that should actually be diverted to the tokens that's right house to LP and it could start buying those tokens and then stride itself would have protocol and liquidity rather than the other protocol owning it um I think today would be such a small magnitude that I'm I'm not sure it makes sense but on the other hand it's better to build up early so I don't really have a strong view here but it is a very interesting question an area that I've been a little bit disappointed in in terms of ethereum lsts has been the focus on l2s like I feel like there's a pretty big opportunity for a steth to be like a gas token because I mean I've always got some Ethan my wallet over on ethereum like of course I would hold it as teeth if I knew I could pay for it

you know whenever I needed to make a transaction so is there any I guess Ambitions to have maybe St Adam be play that kind of role across the interchain you know being able to just kind of hold strides at them and be able to pay for transaction fees I know a lot of people in the cosmos talk about making usdc a gas token but personally I'd rather earn yield while it's just sitting there idle in my wallet so curious how you guys think about that that's a great question uh we've talked to a few of the Adam economic zone chains about this duality in particular are uh aligning very very closely with the Hub I think they're passing most of their fees on to the cosmos Hub it might not even be launching a token um and and they're pretty open to this

idea as well as some of the other atom economic zone chains but gas plays a slightly different role in Cosmos than it does on eth frankly you don't really have to hold much other than dust to perform these transactions and a lot of the cosmos chains are starting to whitelist a broader set of the token denominations for guys I think the end game is probably that usdc will be gas across Cosmos and you'll have to hold maybe one or two bucks in order to transact pretty indefinitely across all the chains so could be cool to have St Adam as a gas token but I don't think it's the the long-term solution so we've Dove pretty deep on stride's architecture but one thing I'm

still not following is okay so let's just keep using Adam as the example here so let's say I want to stake my atom you know I I see it destroyed you're going to say I use the one click method and now it's in that first Epoch and it gets sent over to the cosmos Hub in the module account to be processed for staking how does stride determine which validators receive that token and like how does it like you know ensure the fair distribution there yeah that's a great question so there are a number of different validator selection mechanisms that are used across the clips taking providers on one end you have something maybe safe but centralized a white list per se where the team vets the validators maybe

they know them in person now they have a zoom call um something like what we're doing right now they verify the security standards they maybe even have a contract off chain that says hey if you're slashed you have to pay that out of pocket on the very other far end of the spectrum you have something that's very very decentralized but potentially unsafe there are intent based architectures where when a user deposits a token they decide particularly which validator they want that deposit to go to and then they can decide to maybe rebalance their SD atom across validators so they have the full control but these types of approach is our

um right for governance based attacks and I can get into that if you want but somewhere in the middle there's a maybe a balance where you have both safety but also a good chunk of decentralization and what stride has decided to do is something something around that range of the spectrum where there's a council of members who represent the host chain say the cosmos Hub these are members who understand Cosmos Hub governance they're aligned with the atom Zone and understand all the details maybe they know the validators well and they know who has a particularly safe setup who contributes to the community who writes code and they review

applications from the validators they rank them across a number of categories in a objective framework it's totally blind and then the rankings and recommendation put forth by the councils up to governance so ultimately stride stakers get to decide who's in the set according to the set that was proposed by the council and then that is the ratified or or denied and this process has been run once on the cosmos Hub I think it's going to be run again in the next month or two probably for osmosis as well okay and then so like so it hasn't been run for osmosis in this example then like who which

validators are receiving that today is that just like a subset of whitelisted validators uh it's just the top I think 35 or 40 validators on osmosis um so until stride can do something high quality like the council they don't we don't take an opinion we just copy the the osmosis set awesome okay that makes a ton of sense that makes ton of sense um and I hate to Pivot back to the the cosmos Hub itself here uh but I have one more question around so they're the liquid staking module the LSM has been this huge debate can you kind of walk us through what that is and if stride is going to opt in and use that piece of technology so the idea behind the LSM is that liquid staking maybe has some risks but if we regulate it effectively

it can be a massive boom Cosmos so the liquid staking module is basically regulation on liquid staking providers it's a you can think of it as a safety framework for liquid staking where all the parameters that determine how much safety versus liquidity we trade off are controlled by Cosmos Hub governance and it has has three parts the first is a cap on all liquid staking currently on the cosmos Hub liquid staking providers can hold 100 of the atom voting power which some might consider dangerous so the liquid staking module lowers this

Gap to 25. basically it prevents providers from controlling more than one third of the stake and of course one-third is a threshold for Bad actors to censor transactions or Hollow block production the second piece of the liquid staking module is that today validator-like figment can take unlimited delegations from liquid sticking providers so it's possible that they could have 100 of their delegations come from stride and it's also possible that they could take all of stride's delegations with the LSM in order to receive any liquid staking delegations figment needs to put up some skin in the game so they

need to self-bond some atom that they personally own and subject that to slash basically this helps avoid validator corruption risk and align the two parties in the principal agent model and then the third and maybe the most exciting part of liquid safety module is that there is a ton of stake Adam today and in order to liquid state that it needs to be first unbonded which of course costs the delegator 21 days of staking rewards many users are hesitant to do that so the LSM allows you to do that conversion instantly you no longer have to wait 21 days this opportunity cost is gone and our hypothesis internally is that this transition when the cosmos adopts

the LSN is going to open the floodgates and allow for a ton of new capable Capital liquid state and onboarded onto defy like Umi Mars and agork that is incredibly exciting I I actually had no idea that was a thing I would think a massive amount of staked atom would switch to being liquid staked as soon as that happens like there's literally no point not to so that's super exciting to hear actually um I I did want to dive in real quick to uh just the research efforts you guys are launching I was curious like what kind of different things are you looking to research um and uh how can people potentially get involved what's the main goal of the the program that you're putting together yeah um but one of the first initiatives we're going to start researching at the

end of the year is how can stride work with ecosystems outside of the cosmos we want to focus on Cosmos for a long time but part of growing the cosmos is exporting the cosmos tokens to nexuses where there's a lot of liquidity so using Bridges like axolar like composable like Landslide maybe a wormhole who knows um St Adam s t osmo can be exported to ethanir to polka dot to Avalanche it can be used in D5 there there's a pool on Camelot I think a harbor truck now with st Adam as to eat and you might see more of those in the future a second research initiative is creating liquid state tokens for some of those

other chains which might be enabled through General message passing uh through XLR but that's a little bit further out we haven't started exploring that one quite yet another number of other research directions like the instant redemptions um we're doing a lot of work to try to abstract away IBC Aiden mentioned the one click liquid staking goes a long way for users particularly users who are not experienced with Kepler and with the typical Cosmos user flow for example when metamask snaps comes along in August or September these users are not going to want to do the bridge liquid stake Bridge back they might just throw in the towel so we're trying to get ahead of that and make

sure that the whole flow is very simple and then one final big research effort is liquid governance can you vote with your St Adam awesome okay so that last piece is super super interesting because it kind of balances that trade-off between you know who should have the governance rights over a liquid staking provider should that be the the governance token holders or should that be like what our team does more of the users of the protocol which are the people holding the the liquid staking tokens where are your where's your head at around that now obviously this is like a huge research topic but I'm curious to get your thoughts on if you have any opinions on you know what that should look like in the near future yeah it's mainly a technical question right now uh the most of the strike contributors that I've spoken with are

um of the camp that the user should retain full governance rights as long as it's safe and OS model now voting with a liquid staging token is at face value not a safe proposition because the the point of staking is that you lock up your token to vote uh you can't unstake after your vote and cycle or vote you can't perform all these exotic attacks on the stake that's in the network but if you emulate those uh locking mechanisms with liquid stake tokens in order to give the user the ability to vote then it can be safe so step one here is I think we have code written for this already we just need to

deploy it and put it up for vote if the user locks their St Adam on this dried blockchain they should be able to vote on Cosmo sub proposals but hey no one wants to lock their St Adam on this ride blockchain people want to put it on osmosis and Umi and Mars so step two is from a liquidity pool if you're lping for 21 days and you've locked yourself in for the 21 days then you can vote and then step three is if you've locked yourself into any arbitrary defy position whether that's collateralizing a stable coin providing collateral in The Lending Market collateralizing a perp or an option whatever it may be if you lock yourself in for 21 days then you can vote and step two and three are cross-chain

voting there's some complexities under the hood with how that's built but that's on the roadmap and something we're starting to look at nice well this has been a fantastic conversation we're running up on an hour here Dan I don't know if you had any other questions but I wanted to give uh you guys a chance to kind of tell people where they can find you learn more get involved with stride uh Aiden maybe we start with you you can find us at Stride underscore Zone on Twitter that's where we're by far most active on Twitter it's our sort of main platform maybe we'll expand others in the future in terms of getting involved if you're a code contributor you know all of our code is open source on GitHub you can just go make a pull request if you're more of like a Biz Dev or some other

kind of contributor um Riley and I and Vishal all of our DMS are open on Twitter and Telegram and you just kind of send us a message we respond to pretty much everyone um one of the things I love about crypto is accessibility so we we try and uh try and provide that ourselves as well awesome well thanks again guys really appreciate you guys coming on uh we'll have to do it again in six months and kind of catch back up after all these catalysts because I know everyone's super excited to keep following along but anyways thanks again guys have a good one