Nebular Summit: How Agoric Is Building The Interchain Stable Token To Power IBC & Cosmos Ecosystem

Transcript

foreign protocol that lets you build crushing applications and experiences in a secure way Rob and I really enjoyed their Tech because they don't add any new security assumptions on top of the connected change as they don't rely on an external validator set or an oracle security is definitely Paramount in D5 so we're excited to work with connects hope you enjoy this video what's going on roll up Nation high rollers we're here today day one of the nebular summit I'm here with my good friend Dean I'm rocking the IST hat which you're going to find out about later so stay tuned

um yeah and talking a lot about the cosmos SDK what's going on with app specific chains l1's tons of really cool Innovations in the cosmos space passing over to Dean Dean how are you feeling how's everything going I thank you for having me I am feeling great we are uh here as I said in this now beautiful Paris sunny day um talking about talking about all this stuff um June was an awesome month for agork we deployed our so agoric is uh smart contracts in JavaScript for uh you know if you want to if you want a million developers you got to meet them where they're and so we launched the stack of agoric um that has upgradable contracts and fine-grained asynchronous messaging between contracts and individually up

you know upgradable by governance and all these kinds of things so so and then on top of that we launched IST where you're uh you know wearing wearing the eyes these are exclusive hats guys you must you must pay a lot of money for this beautiful fine wool that's right well you have to you know fly to Paris and join nebular Summit here right um uh so so we launched that and now we're heading towards getting getting Partners who've already been building on a gork also launching coming up in the next quarter here so so it's a very exciting time we go from working working heads down everyone in a room coding to now we have this thing that people are are starting to build on and so it's really great nice yeah I think I mean before we jump too deep into why this

hat is so important I think just the the key thing that you've been uh ringing a bell on to us on our pod and I think just generally over the last couple years is this idea of onboarding devs um into crypto and I actually recently just put out a tweet that pissed a lot of devs off like I went into a part of Twitter now it's fun I went to a part of Twitter that I did not ever know that I wanted to be a part of which was Dev Twitter where they get very very upset because I tweeted that we need to onboard new devs in different languages and I mentioned C plus uh C plus plus and rust as as part of an in program that Arbor's room is is launching and I mentioned that it was easy easier and that was not the correct terminology and

I got absolutely roasted very bad but you guys are focusing on JavaScript so talk to us a bit about the the thought process behind there how that's going and how you plan to onboard you know tens of millions of devs sure so um so the first thing is Javascript you know it currently is you know deployed it's got 14 million to 17 million developers depending on who you ask and it has evolved over the the the years to where what we you know we've been in the standards committee for 15 years now driving into JavaScript you know um strict mode proxies promises all these things to enable us to lock it down so so what we actually build an end program

in is what we call hardened JavaScript which is you know Works in any standard JavaScript environment and it lets you program in the JavaScript you actually thought you were programming in rather than something that got corrupted by a library that's trying to attack you right and so so we build in JavaScript but but this style of JavaScript it's used in in Salesforce it's in the upcoming metamask extension it's used in brokerage Terminals and so JavaScript controls and orchestrates the behavior of literally trillions of dollars a day in value caps pressure in terminals like you know Bloomberg Terminals and Salesforce and all these things so it is a language you can build robust systems in and more importantly it is a language in which you can build Frameworks in and

that's a lot of the reason why JavaScript has has such a hold on building user interfaces and building web 2 applications is some expert can build a component you know some expert in JavaScript can build a component for a beautiful rendering of of whatever it is you want to see and then a domain expert who understands you know art presentation or photography or whatever it is can plug it in and use it to build a site that that is really focused on the usability in a particular domain whether it's you know as I said photo sales or gaming or Finance you know you really want that differences in expertise with a framework that lets them safely plug things together and that's a big part of why JavaScript has been so effective and so we are you know

that's what we think is necessary for the next generation of web 3 developers to come in is you got to meet them where they're at and millions of developers there are 6 000 solidity developers so whatever grief you were getting in that programming thing it was from 6 000 people okay right there are 14 million JavaScript developers it's three orders of magnitude right it's you know this versus that right and um you know and so so to get all those people building in web3 you've got to meet them where they're at and that's JavaScript yeah yeah it's interesting yeah I got a lot of flack for that one but I think for for a good reason right you have to know kind of what you're what you're talking about and clearly you've done your research about JavaScript and uh you know you are ready to try to onboard

this this kind of next next generation of devs um you know and kind of flipping the script towards agoric right and the IST which we're almost at guys so stay tuned um you know ISD is a stable coin which is I'll give them a little hint but before we talk about that we saw a lot of development in stable coins over the last uh I don't know a year and a half kind of post Terra Luna post so some of the unfortunate downfalls of stable coins deep pegging and things we've kind of seen a lot of innovation I was recently at stablecoin Summit some really interesting projects launched new Dynamics new kind of Technologies for pegging and for liquidity and positive liquidations things like just soft liquidations but yeah I guess what's your mental model of the current state

of stable coins going back you know that 18 months uh what were some of those downfalls that you saw and you know kind of what were some of those ideas that allowed you to iterate and towards what you're building with ist sure so now we were working on the the predecessor to ISD which is IST but with a different name as part of the igoric ecosystem you know for the last couple of years and that's partly because you know if you think about ethereum Solana whatever um you're paying gas like on ethereum with ether right eat with eth and it's a volatile commodity right it goes up and down it's not the same tomorrow as it was today and that's you know if you think of gases like rent or postage

that's like paying your rent with Apple shares right you can do it but like a thousand years ago we all figured out that economies work better if you have a currency if the price of my rent is the same today as tomorrow or more importantly next year right you know so you know a fundamental thing that's largely missing in the blockchain economy in the crypto economy is long-term contracts because you don't have this underlying pricing in terms of you know in terms of a stable value and so we realize that we really needed an economy if we were going to reach those millions of developers and let them roll out their business without having to be a crypto expert you know they needed to live in a in an economy where there was where where you paid gas in a stable currency so you could tell that it was

the same price one day to the next and so we were already building this right so uh Cosmo verse 2019 2020 I don't know um the first Cosmo verse I was there describing what we were what we were building a stable coin and the economy will you know enable rapid building and deployment and in a way that that normal or fintech business or what have you web2 businesses would understand and sunny agaroll got really excited uh you know Sunny of Osmosis about oh my gosh an atom-backed stable token we desperately need this you know at the time everyone was using UST but lots of people knew it was architecturally problematic right it was not a collateralized stable token even though

people you know people would make those claims um and and so everyone like it's the only game in town it's not great it's better than nothing and I'd really like IST to get done or you know it's called run at the time before you know these things go apart right um when he said that we realized that this stable token that we were building was just you know maker down inspired you know over collateralized stable token so designed for to have a robust solvent long life to support growth of a large economy um we realized that it wasn't just for us that we had all the pieces we needed to have a stable token for The Interchange because we were already planning to have it be backed by Adam essentially

liquid state because we've always been interchained first you know native interchange this idea of lots of different independent things that are all that are all able to voluntarily collaborate and this interoperability and so you know we were already built that way and realized that oh we should really make sure everyone's attention thinks of it that way we're prioritize design decisions that way we get input that way and so we rename to the interestable token and that was sort of the the the the the launch of that now we rolled that out at uh Gateway in you know which coincidentally happened four days after UST collapsed right and everyone's like oh my God what's gonna happen

everything's falling apart the world you know the sky is falling and so forth and that conference really turned a lot of Cosmo stuff around um for two reasons one is you know there's all these projects on terror that really we're doing cool stuff in in wasm you know but Tara was kind of Cosmos and kind of isolate right it clearly used the tech stack but it was sort of growing in a different place and so they kind of showed up and shell shocked that their world has been knocked out from under them and here's you know osmosis and Juno and well now Neutron and all these things going you know you've got a project we're still alive everything's awesome you know everything's great come and build on our platform there were grants programs instantly stacking up to fund

these projects and all that kind of thing and we came in with here's ISD here's why it doesn't have the the problems that something like UST did here's why it will be robust and solvent here's how it unlocks the asset value that you all will be creating it's not just you know a play to make our it's not a play to make our torque invaluable it's a play to make the backbone of economy work so we could grow a very large interchain economy and so that that event kind of kind of kicked things off now now since then we've had um obviously you know not just out in Cosmos we had lots of other interesting experiments that were a lot more you know reasonably solvent but still interesting like fract or something like that and

we've had bridges of XLR and gravity that really came online and let us bring over usdc usdt die and and other coins and so we integrate those into IST um uh and now there's a bunch of these native tokens coming in and so you know that's sort of the state of it now is is well so IST is collateral backstable you know fully collateralized over collateral stablecoin with multiple mechanisms for minting right you know the key limitation in a stable token is can it grow with the size of your economy not you know we're not fond of artificially growing it by crazy 20 guaranteed return kind of kind of stuff because ain't no such thing but

you want it to grow with the size of your economy naturally and to do that you've got to be able to back it with all the possible assets that might be reasonable and solvent and you could do right so if you have dollars great you can put dollars in a bank account admit the stable token that way if you have Adam you know there's a there there's Billion Dollar Plus right you know there's billions of dollars in atom that currently can't be liquid they can't fund something because you can't get you can't mint a stable coin against them by enabling vaults now all of that asset can be made much more liquid so you can pull you'll you can mint ISD against it and go off and you know buy things in osmosis or Buy nfts and stargaze or start to um you know buy compute time on

Akash tickets on omniflex I mean it's one of those things where once you've got a currency economy now that one asset lets you just power through and do lots and lots of of stuff so um so the key part of IST is that enabling of multiple mechanisms enabling extending it to include you know dollars in a bank account that we Outsource the usdc and usdt and others right they're already doing that work you know someone will come along with real world other real world assets and that could be incorporated and then natively these maker Dallas style vaults you know these CDP vaults where you can lock up a digital asset the kind of things that we all make you know as I said Adam osmo build et cetera yeah yeah lots of lots of unpack there

um as per usual with conversations yeah everything here we go all of the alpha has been dropped here um yeah I mean to summarize um kind of in innovating on those issues of UST and just like the broader stablecoin environment is unfortunate that USC has such a big impact on Cosmos um you know I think that's that's kind of like you said gone and in the past and kind of building for a better future uh it seems that IST is basically has no competition if I'm not mistaken is there is there another stable coin well currently being developed other than like usdc and the bridge ones there that that are launching which but the the the there are a couple

things that are sort of that are key issues in any stable token design and we've been watching these other projects and they're sort of dropping the ball on one or the other we try not to drop any drop any of these things um and ho and we haven't so far but you know this is one of those things where you don't wanna if it is a win for all of us if there's some competition here right because you know defy summer happened you know you started to see defy when the first stable token rolled out but DCF defy summer happened because there was more than one yeah right you know so so you know of course we welcome native ustc we welcome you at Native usdt we welcome good Bridge die right you know because that makes for I mean users don't want to use a bunch of these things they want

to just be able to take whatever they've got and use one payment mechanism that's what ISD gives you on The Interchange but the economy it makes it makes it much more Rich right so you know cmdix could you know usk these are the okay um uh you know a good example bring up bring on fracks whatever it is right those have different or subsets of the mechanisms there are choices one makes about the design of your oracles or choices one makes about how you do liquidation and you know all of us need to learn from each other but you really want you know very thoughtful very high quality mechanisms for all of those for governance Etc yes or are those the the the the the the key parameters are are what you just mentioned could you could

you repeat and kind of go into those a bit further yeah so um okay so so first there's vaults and PSM parity stability model so so I'll start at the we since we initially launched with the parity stability module I'll start there that's where I can bring some other stable token so you know risk managed selectively controlled what stable tokens you would take um and mint IST directly with them so I can basically bring usdc and buy IST and then and then the usdc becomes uh essentially collateral you know controlled by the contract and then you can take IST and buy the usdc out and so it's just one-to-one swaps with high

quality uh um uh uh State stable tokens where this is where I say we Outsource the the bring dollars to a bank account to usdc right and there's a lot of dollars to bring to a bank account yeah but I don't know about you but I don't have a million dollars to bring to a bank account you know and in order to Mint ISD to play on the market right or or to participate in the market and so that's great for people who do but for people who built a valuable chain and built assets they might you know that that won't work for them right but it's really important right there's some people that go oh it's not you know it's not it's not decentralized Etc it's like there's a lot of dollars people have in a lot of bank accounts and there's multiple mechanisms right there's usdc

there's taxes there's ustt there's multiple mechanisms of converting those into an on-chain asset that one can then mint uh IST against and it's really valuable to have all those mechanisms but you really want them right and part of the reason you really want that is in support of the vaults mechanism so the vaults mechanism a vault is I bring some volatile asset right I bring um uh you know atom is our first one SP atom whatever but in the real world I mean this model has existed for for a long time hundreds of years where I bring a house right and the house has a volatile uh value but I can get a home loan against it or I can get a line of credit against it or whatever it is minted where the house is worth you know a hundred thousand dollars and I can get

fifty thousand dollars right and if the house of value goes down I might have to pay off my loan quickly or they will or they may foreclose it but but but you know usually house values don't go down that much right um but people can do that against anything they can do that against gold which is again volatile commodity you to be able to pay for it not very efficient much better to be able to take it to a bank get a line of credit mint dollars and go buy stuff with dollars and so this is the same mechanism only what you're locking up is a digital asset key to that working is not whether the digital asset goes up and down because that's the point is you've got digital assets go up and down it's whether if it goes down below how much you meant it

right I got bring 200 of Adam I meant 100 of Adam and then the value of my atom Falls below say 150. at that point the bank you know the the the the smart contract needs to sell it to cover what they minted and pay off their debt in order for it to remain fully collateralized solidly backed you know solvent system and so that's automatic right smart contracts watch oracles they go oh the price is falling I'm gonna I need to liquidate this position um and so it goes off to some kind of liquidation mechanism and I just want to touch on that real quick we've seen a development recently from let's just call them well let's just say let's just start all the way back from like how Perpetual swaps liquidate you if you go under collateralized to zero uh

traditional Banking and options then if you get under collateralized on a stock exchange on options or on a high leverage position you go zero or negative even you know in 2008 plenty of people went negative tens and hundreds of thousands and their broker is like calling them to buy more to take more money so they can pay off this negative balance right so D5 kind of uh innovated on that and crypto as a whole to where centralized exchanges only zeroed you out to zero like Finance bitmax zero like that's the lowest you can go so a step in the right direction now D5 when Ave launched and maker and compound they have 10 liquidations on different assets so you have some time to pay back your collateral and you only get a slash like 10 now curved USD has just launched a

very soft liquidation mechanism where effectively you can you can almost not get liquidated but you can take one or two to three percent of your kind of uh collateral and you get to you know you have some time to pay it back so you don't get slashed the whole ten percent what is the agoric model what is your thought on this on the transition between let's say hard or fast to soft liquidations um and you know do you think that that's an Evolution that's going to keep going forward yeah absolutely there's a great question because that's really critical to the to to a bunch of things and that's one of the differentiators there are a lot of these systems where you know okay there's a liquidation threshold of let's say 150 which is to say you know if my 200 Falls to 150 now it's going to go it wants to liquidate

foreign that's great if you want to suck value from your customers right many of these things they make a lot of their revenue from Liquidation fees and what they do is man as soon as the market Falls bam I'm gonna I'm gonna go after it right in in in margin positions at Stock Exchange yes you can go negative so that's a separate issue but it's not that you're racing the market to cover your margin position and if you go too far that they're going to sell it all off from under you it's you've got a day right you've got a bounded time so you can have an orderly process for recovering your position um now this is so this is an example where at the two extremes are many of the typical um you know the the some of these other

um stable tokens Market Falls below the threshold instantly your stuff goes off to liquidation and so you have to be watching the market until oh I think it's going to go down I'd better top up my thing or I'm at risk right to us and for an economy the best liquidation is one that never happens right and so um you know like one of the things that as an accident um that maker Dow you know stumbled into after doing you know after after various various Alternatives is um uh they will do an oracle sample at nine o'clock and go okay at ten o'clock we're going to liquidate at you know eight dollars right or whatever you know eight dollars per token or whatever it is right and and so there's an hour there

where everybody knows at the end of the hour they're gonna liquidate everything that's below that watermark and the and that was in order to protect from Oracle vergarities Oracle problems like we saw in some of the recent stable tokens where you know they're they they had the incorrect Oracle architecture price went down a bunch of things instantly liquidated but they got a lot of money for that that seemed like sort of the wrong that's the issue there yeah yeah and so they wanted to make sure that oh Oracle went down crap it's wrong we have an hour to fix it but the net effect has turned out that it works like a margin call oh my gosh the Oracle went down I have an hour to fix my Vault doesn't even matter if the number was wrong right it's going to liquidate you know everything that's above 10 and

everybody's above 10. you're all you know a big chunk of folk can go I want to keep my Vault I don't want it sold I can top it up for an hour I can you know do what I need to do um and and what that means is you get much more orderly process and you'll end up with these things where oh the price of each fell they're going to liquidate three billion dollars worth and by the end of the hour you know 15 million dollars involves get get liquidated because these automated systems top up or pay off or make sure that they're that they're sound and that is a much much healthier environment so we were inspired by that to sort of Follow That same regime to really try to avoid um experience liquidations right because you you know what you want is people

using IST what you want is is the stable token broadly in use so people can go at them about their business most of your economy is not people that want to play games with your liquidation most of your economy should be people who want to spend money doing things yeah and so so that's that that's our focus is how do you grow a large economy not how do you extract rents from people using it in our current very small crypto gun yeah and that's uh ever since I got onto Ave um in like 2020 I've basically never gone back to like uh like a high leverage Perpetual exchange for any serious size like of course a little bit punchier and there if I think if I think like CPI is going to do well or bad or

short or whatever you know something like that but to hold serious size in a in a position there's absolutely no reason to do it anywhere else but like one of these CDP platforms with a soft like liquidation so I think there's definitely product Mark product Market fit there and I think that that's the right mentality for the users because frankly if a protocol is no if a protocol is going to do hard liquidations on chain in the future they're going to go out of business because no one's going to use them why would I use why would I use that if I can go somewhere else with basically the same Dynamics the same rates the same fees because it's effectively a market wide rate that has a better liquidation mechanism um so ist's launched had a great month going forward the cap is on what's on

the agenda how can our users uh get it you know involved and um as we kind of wrap up here so okay so first off I mean Agora built the core of it as sort of iced tea is symbiotic to the agoric chain in the Oracle implementation system ironic opco where we build software we don't run launch it manage it whatever it's out there and there's an interchange Community um that is managing and prioritizing and and that sort of thing to figure out what they're doing to build and in some cases building right for example the Oracle Network right the Oracle network was built by simply staking a rhythm driven by them it's operated by multiple chain link node operators it was inspired by and used components from the chain link architecture in cooperation with chain link and so you know agoric

has an oracle Network that we had we didn't do right you know it was it was part of the community that grew this thing and that will start to become an oracle network available to the rest of the interchange as well um and so and now the community has proposed and discussed various additional collaterals right so so now that it's out there it's out there with Adam but with Adam you know your other option is to stake Adam and that you know and there's a lot of value in doing that and so the community is now working on St Adam and we'll look at various other liquid state atoms in order to be able to still have your Capital that that is that is getting you staking rewards but be able to unlock it and leverage it and use it for for cash and so you'll be able to you know and and

people are starting to work on on uh multi-stage UI where you can just say you know basically mint and swap I've got a bunch of atom I want to buy something on osmosis just go do it right and the atom comes over to agoric it gets locked up on the Vault you mint ISD against it it's moved over to osmosis osmosis is a you know ISD is about to be the only native stable token that is accepted as gas on osmosis um and so you could you don't even need to have osmo you bring IST over and you buy something and they do efficient routing and they'll you know they'll do it against huge that's huge yeah it's awesome I mean you just the ability to easily unlock the asset value that you've got see I'm not quiet and I you know

um the ability to easily unlock the asset value that you've got um to be able to you know as I said swap on osmosis swap on Crescent buy tickets on omniflex pay for compute time and get get it get a deployed software uh running on akash you know all those kinds of things based on having some asset that has turned into collateral so you know there was a at Gateway there was a poll of you know what collateral do people want to see next right and you know osmo staked at them someone put Monero um you know whatever it is right you know you know wrap Bitcoin rap Keith you know all that yeah so more collateral uh options more Capital efficiency first

said collateral growth of IST and also just broader growth of The Interchange so looking forward to that and uh and participating in in some of this thank you for your time dude thank you so much pleasure cheers