Solving the Interchain's Liquidity Problem with Mitya Argunov of Drop

Transcript

so basically our thesis is that the liid stum protocol should be deeply integrated with the def5 partners and uh it should be all launch as Nik syst rather than a liid station protocol really we released our initial version one week and a half ago now we have V2 of the protocol already so we can we can update the protocol pretty pretty quickly this way the cool opportunity is to have uh DTI uh as a kind of as a native version of tier for validator the the Emer drop is a win because that's just one more let's say one more feature of of the overall staking product that they they can provide to the [Music] users welcome to the interrupt today my

guest is Mia aranov he's the CEO and co-founder of drop it's a new liquid protocol that just launched on Neutron very excited about this project and in fact interop Ventures are investors in drop uh they just launched in August and already have 1.5 million atom staked So today we're going to be discussing the protocol why a new liquid staking protocol in Cosmos uh how it's different from the other protocols the architecture and the future of defi in the ecosystem so you might have noticed that it's been a couple of weeks since I haven't released new episodes after nebular Summit I took some welld deserved some well needed time off I don't know if it was deserved or not but at least it was needed uh but I'm back

now and we'll be uh putting out new content on a on a pretty uh regular basis just as before before we get started make sure to hit the Subscribe button to get notified when new episodes drop and also remember that none of what we discuss here on the interop is investment advice and if you enjoyed this content please consider a sing with us we're validating on a handful of networks just look for interop in the active set hey M what's going on hey hey thanks for having me and uh hope you enjoyed your rest yeah well it feels good to be back uh here in the studio in fact like as I was setting up like nothing was working I couldn't shut my blinds I couldn't get my lights to work but you know um growing everything had to be reset exactly but yeah it's good to be back in

Paris um I spent about a month you know just traveling through Canada seeing family um how's your summer been yeah summer summer was super busy to be honest we preparing for the lunch uh so yeah didn't get much rest yet um but yeah we went to Russell Russell was was really good was great to see uh to see many people uh our partners uh people that we want to work together in the future we actually to met some users which is amazing uh that was my my favorite part of L Summit that's I just was hanging out there and there was the actual like user as opposed to normally people that you meet at the conferences the people who work here so yeah that

was really cool and um yeah it was U for for us LLY this was uh just a few months of preparing for launch and we went live on August 12th uh so far so good we went live with autum as the first asset and uh yeah now basically going through the phase one of boot striping liquidity around the protocol getting some first integration FL and so so yeah I'm pretty pretty relieved to to now be live with the protocol as opposed to kind of getting getting prepared which is which is more stressful in fact yeah feels good yeah um yeah people should people should check out your talk at nebular I'll put it down in the in the show notes although we'll probably talk about more like the the talk seems a little

bit dated now since it was before launch we'll probably discuss a broader set of topics here on the podcast but something to look at and uh you're also on a panel with um uh with FAL from stride Josie from Milky Way Edgar from Kil and Clay of um of Igan lair on this big liquid staking liquid reaking panel um I'll also link to that in the show not it was a pretty spicy one um so yeah yeah so you guys went live uh about about two weeks ago when this releases um how's everything going since lunch um yeah it's been it's been really really smooth uh yeah obviously it's it's always a bit nervous when uh you go

life you're releasing that complet you think so you kind of you try to get prepared for all the um all the things that can happen but you never know what what could go wrong uh and for now nothing really went wrong which is which is pretty amazing uh there was so we kind of did a phase R out on on many fronts um so one thing that we we just released after launch uh is uh so-called LSM staing when you can migrate just sa from b b so that was just yesterday uh and that's a pretty cool feature because you have to wait for for the uned period which is 21 days for for ad and uh yeah otherwise we've been really really busy

getting integrated with with a bunch of D5 protocols so we went live with sort and Lana on day one and yeah since then marsp 2 also launched uh on mutum and they also will have more and more new cool pictures coming and there are any more Integrations lined up so yeah there's a there's a pretty long view uh and yeah we're uh get been really busy in other like um also preparing the integration of the droplet site we have this uh droplets program where people can uh earn their future alligation of drop uh toking by participating in protocol launch providing liquidity using Defi and so on and what what is really cool to see is that uh defi prols

uh get integrated with droplets pretty deeply so they would do something like they will show you in the UI where how how much droplets you're going to be earning or your your car droplet SM and so on so it's kind of U let's say ecosystem wide uh thing now which is which is great to see um yeah so it's uh it's been good fun uh I think having fun is is really important and yeah we definitely have been having fun and we'll we'll have w war yeah definitely well we'll talk more about like the architecture you mentioned the LSM restake staking module I want to talk about that we also talk about the Integrations uh but but you mentioned something here that maybe it's a term that we can like just for people understand like what is a droplet um and

how does that kind of like play into drop yeah so droplet uh is a um uh droplet is something that you can earn uh during first six month of protocol existence and this is a uh like this is something that you earn by participating in Dy by staking with drop uh by generally speaking like being doing something which is productive for for the prodical launch and uh uh the Baseline uh kind of assumption that you can have about earning droplets is that you if you have $1 worth of stake with the drop you will be earning one droplet per day and then uh if you participate

in defi for instance if you provide asset silic liquidity pool then this will be multiplied by maybe 5x maybe 50x uh and by the end of this six month uh people will be uh like they will have their kind of their accumulated droplet amount um and then this will lead to towards the TJ event uh for for drop and the drop token will be like we have 10% of the drop token allocation which is going to be distributed to the droplet program participants and this is going to be distributed proportional to how many droplets uh everyone own and uh there's one more aspect to this program uh we uh essentially want to you to encourage people to invite uh other um

other participants to the protocol and um you can earn more droplets if you invite people to the protocol and they earn droplets you earn some percentage of this so basically even if you're not wh uh personally or maybe you don't want to participate in the defy strategies that you think are just not a good fit for you uh you can still a lot of droplets by being kind of an active Community member and bringing other people on board so uh yeah good old affiliate marketing here yeah yeah no that's cool so so basically if you if you stake $1 worth of say adom uh you will get one drop drop droplet sorry per day drop and and then there

are multipliers so if you're using those D assets and D5 if you're uh getting uh if you're referring other users to uh to stake their atom in drop you can multiply that like you said up to 50x exactly exactly wow yeah so everyone has let's say the the preferred way to to participate in this program uh I think one one interesting thing to mention and again not a financial advice but obviously you going to have your different opinions on whether aart is going up or down uh and I think that doesn't really prevent you from participating I know that people who essentially borrow that or gu like usdc or whatever they were holding and uh

then even if you're want to go short on on autum you can still participate in the program so yeah it it really allows you to be pretty creative with the strategies that you use and the more def Integrations that we have the more options you will have to to do so because uh for instance if you like Leverage your position Mars then your droplets are also kind of Leverage so yeah uh I think it's a it's like a huge playground really and you can pick your kind of pick the way that really works for you uh we we make this Choice kind of easy because the the actions that are productive in terms of like helping us with st liquidity helping the protocol grow and essentially helping to have a more healthy defi ecosystem uh in the

interchain in general these are the use cases that get the most droplets so you can be selfish and this is going to be good for the ecosystem that's kind of the B that we're trying to keep here okay cool of course none of this is financial advice uh definely uh um we we'll talk a bit more about the the Integrations later on so um during your talk at nebular Summit you you mentioned something uh I think it was also discussed in the panel and you know I'm prayer facing here but the the the the general idea is that that native staking in Cosmos has held back the inter sh ecosystem and you know if I look at the liquid staking market right now in

Cosmos there are at least four like four now five withd drops so we have stride Quicksilver uh Milky Way persistence uh you know there might be some others I'm missing like hydro which is like more on injective and um there's a lot of liquid staking providers but at the same time you know Market penetration is pretty low still I think you have a graph in your deck which shows you know um just how low uh liquid state asset penetration is on all the major Cosmos chains uh and um and I think one of the reasons why that is because there's not really much to do in defi or at least you users have a low

incentive to utilize their liquid stake well their Stak assets um in defi by transforming them into stake assets um yeah can can you maybe expand on that problem and you know what is the what is the major uh kind of hurdle that the cosmos ecosystem needs to overcome in order to have more LST adoption um and which I think would should have a direct effect on how defi grows yeah hopefully hopefully it's will um yeah so maybe an interesting way of looking at this comparison to to eum for instance because this is the ecosystem where lsgs have the highest highest

adoption so in terms of just numbers if you compare LST Market to the overall staking Market in cosos chains that would be typically 1 to 2% uh in the biggest chains and um in ethereum it's around 40% now uh in Salan it's somewhere in the middle I think like maybe five but it's actually growing uh quite quickly since uh Sal Revival uh let's say and uh yeah in Cosmos we have a pretty interesting situation where uh Native staking is like it's super easy it has very high aprs um and uh the let's say the alternatives are not

obviously very good uh to na taking just because like if you if you uh use your assets in defy uh and you're potentially taking some additional risks of migrating to LS are getting much more then you would be guessing Mak thinking that's that's not super obvious um and uh if you compare it to ethereum that's almost the opposite so in ethereum uh the ux of native thinking is horrible right so you have to have 30 need to spin a validator you have to somehow spin off a validator then even if you have 302 and then you get kind of 3% if you if you State natively uh and defi in etherum is is very diverse it's very

scalable and so on so uh yeah in cosos is just a very easy choice to just uh just take natively and uh on the retail part of the market there's also this additional consideration that uh there's a history of pretty amazing air drops that people were getting uh if they just St out and um yeah they're kind of thinking okay am I got results on the air drops uh if I now my bra to to liquid staking and uh yeah that's all kind of combination of factors that means that as a result most of the assets are uh essentially locked in in M State game and um yeah that means that there is not much left for

for some other activity so we're kind of providing a lot of security uh but this we should be securing something right should be something going on on the chains and with all the value locked in Native sing We just not we do not have an upli video for it I think eort capital eort capital had the of block risk research had this whole thing about like how the cosmos Hub was paying too much for security I think that observation also extended to other chains in comparison to ethereum and what ethereum pays for security because like you said right in Cosmos uh as a user your your assets are you you have an advantage to keeping your assets stake because one you have a high APR on

on or apy on those on those assets and two the risk is lower plus you also have the benefit of possibly getting airdrops now for a protocol Protocols are I think sort of split in the middle because protocols I think there may be some pressure for protocols to retain the um the largest amount of native Stak assets because liquid staking there's this conception that liquid staking somehow centralizes now in Cosmos that might not be the case depending on how the LST protocol is designed we'll get into the architecture of drop here but you know if most of your liquid staking goes to like five validators that are white labeled that might induce further centralization of your of your protocol

but at the same time um letting those liquid those assets move to liquid staking and potentially you know active and defi may also grow demand for the token so I think Protocols are kind of like Stuck in the Middle uh of you know possibly like reducing emissions on their protocol and therefore like less revenue for validators but but forcing people to go to liquid staking um and and this this potential like centralization yeah there's different uh there's lots of different kind of moving pieces oh yeah yeah that's that's for sure um yeah to your point about over paying for security um yeah there was also some interesting research uh that

looked at what is kind of the optimal uh optimal say inflation rate or uh optimal um let's say optimal cost that you would be uh paying paying for security from the game theoretical perspective and the conclusion was basically that your emission should be covering the cost of running validated modes and then everything on top of that should be coming from uh from the feed from the transaction fees which yeah I don't think it's it's the case uh in in qu for instance or like in most of the in most of the cosmos chains but I think there's some other interesting way of looking at it because like validators are very

different in size and you when you when you say okay like we should cover the cost of running a validator are you thinking about validator number one in ranking that has the largest o power definitely they they making profit but well they to number 180 probably is not making profit so yeah it's kind of kind of difficult balance to to hit really uh I'm I'm kind of asking myself what would be the reality with like lower inflation rates uh in in this chains uh that would have kind of it pros and cons for many participants including like liquid state and pbls by the way but I think we have what we have and with probably with the current governance system it would be

Pro very difficult to to change the like the inflation rates and such so yeah we kind of live in this reality of high inflation people should protect their assets from from inflation therefore for staking is almost kind of inevitable uh and uh yeah we have to somehow deal with it um yeah and obviously yeah like Wick staging protocols play a role in it uh like from multiple perspective as as you said the you the validator set and like distribution of St across the validators plays a role here so like ideally you would have a liquid St probal that kind of improves the stake distribution and in some shape or forms kind of like let's say increases the decentralization of the network and such uh I think also

liquid Stak and probes because they're in the in the middle of the C system they play the role of aligning or or not aligning incentives between all these players because you have validators you have uh the investors you you have Detroit protocols that are kind of and liquid taking Protocols are kind of in the intersection of all these interest so yeah it's a pretty pretty interesting space to navigate that's uh that's say sure right yeah and you know coming back to governance as a token holder uh as a token holder you know why you your incentive is not to reduce the uh to reduce the inflation rate because that means your rewards go down and so

like that those are hard you know it's like uh that's like getting that's like getting uh you know the the the legislature to reduce the salary of of of uh of of of elected officials right just so um it's it's it's tyal to to do that from a governance perspective so yeah so we mentioned you know the different um liquid staking protocols that exist in Cosmos um you know these are all like established at you know varying degrees so like stride and Quicksilver and persistence have been around for some time like Milky Way launched a few months ago um you know striding Quicksilver have been pretty active across uh Cosmos app chains you

persistence has been I think was like the first to launch even longer ago and and was the first uh chain to do liquid saking on on atom and then Milky Way recently launched with a focus on Celestia so why a new liquid staking protocol like you know yeah that's that's a question yeah um yeah uh I think like the T Point uh yeah we have quite a few of them they might be a slightly different flavor uh but at the end of the day yeah the market share of liquid taking is still still kind of pretty low and um I think we got Cally let's say as an ecosystem I probably got

to to the state where um maybe like a retail user can actually use this lscs in defi but if you uh if you're thinking about kind of larger talking Boulder maybe like a fund maybe wh uh for them this is just too small of a scale uh to make this LSS really really useful and uh just as an anecdote we spoke to to whale who I think almost kind of single-handedly uh got filled all the all the boring caps on Mars for for all the LSS so basically takes one person to to take all all the capacity of the of the ecosystem around the LCS now uh and

um yeah that's that probably means that there there is a room for for external ration and a room for kind of bringing some new protal um that would be addressing these issues from from a slightly different perspective and at the end of the day lsts are probably as good as as the use cases that that they enable and uh yeah that's basically what what we're focused on so basically our thesis is that uh the liid stum protocol should be deeply integrated with the defi partners and uh it should be almost launch as M system rather than a li a station protocol really this is what we really focus on and um yeah we've been

planning the launch from the perspective of how do we uh get all the moving pieces uh in place from the technical architecture perspective from the perspective of uh like preparing Integrations uh like relationships with the D5 protocols and with the other channel Partners uh and uh also kind of aligning in cenes across the parts so that yeah it's kind of functioning ecosystem that we Ena rather than like a standalone protocol that then maybe works or maybe it doesn't really work well with the others um yeah and uh so for instance on the architectural uh side of things we CH to bring forward as a as a spart contract based protocol and

essentially what it enables us to do is to be more kind of more nbol and to uh experiment quicker with the protocol but also not to have the cost of running running a chain um and uh yeah I think there are like there are multiple ways to launch a protocol and uh there are probably like cases when you really need your adchain and cases where you don't and we don't think that drop belongs to the category of like we we needed to launch this as a separate chain but on the other hand if you launch it as a smart contract based protocol you get many advantages right because you're you have secret composability with the with the G5 Partners uh at least like the ones that are on the same chain with you

uh upgrading smart contracts is much much easier than upgrading the chain because you don't have to cordinate all the validators for the upgrade and uh don't forget that so we deploy the solution um we are in um uh kind of in the situation where we're borrowing validator set from Cosmos hub so these are not kind of not our validators let's say they're cosos house validators so they're kind of one H away from us and uh like coordinating all the bra with them would be just a nightmare on the opposite with the smart contract it's pretty simple and this is why for instance so we we released our initial version uh like one week and a half ago now we have V2 of the protocol already

so we can we can update the protocol pretty pretty quickly this way and uh yeah therefore just more room for experimentation uh and uh yeah and this is really important because yeah if you think of like all the variety of kind Integrations you can build with the with the different protocols it requires you to be to be like M faster to be liol to be flexible and so do you think that this is your biggest advantage over the other protocols we mentioned you know the fact that you're built as a smart contract uh well as smart contracts Neutron rather than having your own Sovereign chain and what do you think of the like you know I mean there are

benefits and advantages also to having your own Sovereign chain right I mean you are like have close Aline with your validators uh you can incentivize your validators to like do other things like run oracles Etc you have like you know governance and you know there of course the costs are higher but um but there are also some advantages to be Sovereign like how do you weigh those um when making you the decision to build H as as a neutron contract and you know I'm asking this sort of it's kind of in contrast to a lot of the other projects that that come on this podcast a lot of projects that come in the podcast like you know we chose to build as a sovereign app chain because you know X XYZ reasons and this is kind of like the contrary to like what a lot of Protocols

are doing these days which is going towards sovereignty it's good it's good to be contrarian though right so you're you're taking a different shate B and um yeah I think it's probably like a bit of a pandal that we see right so uh maybe we have this kind of Spen pandal towards maybe launching app chains before an app chain is really really needed uh and maybe we will see bit more of let's say let's start with the with the spot contract and see if we ever need to be an app shap and maybe like many applications don't need to be upchs at at any point in their life um because yeah as I said like for instance being on the same on the same chain with the D5 protocols that you integrate with is just so much better uh just and you can

see it in like in some like smaller details but also bigger things like one of the conversations that we had just today was about uh like how quickly the um the exchange rates are updated for for the Stak St assets and uh for us the question is like it's just every block right so we're in the same chain we W really have to care about it and uh yeah just takes a lot of headaches out of the equation um and uh yeah that's that's one thing but also there are some uh some things that just work quicker in terms of the ux because you you don't have to go through the IBC

hubs uh there are things that work well in terms of just saving cost on some this kind of operations behind the scenes and uh yeah all Al together they accumulate to just experience like generally speaking experience of uh how easy it is for you to stake how easy easy it is for you to and enter uh defi position because like by default you can go to a protocol that's on the same chain uh how easy easy it is for you to exit position as well so yeah that's uh that's all like some uh like smaller and bigger contributions to the overall experience of oer yeah do you think that I mean so there's the advantage of course of being

like on the same chain as the D5 protocols uh that you intergrate with and I understand like you know neutron has this whole very integrated thesis right where things should work closely together um it kind of you know miror this initial idea of ethereum and having composability Etc U does that also serve to your disadvantage though like later as you access um or or integrate other uh liquid Stak assets like you know te or osmo where there you will have to make those hops across across you know IBC and over to other chains and will have to wait for things things like exchange rates Etc right like so how how are you

thinking about expanding outside of just you know Neutron and and Adam on the Hub yeah I think uh for with with Tia for instance so there's no and Def ecosystem on celes chain right so in avoidably that's going to be like s fragrance across the rollups and maybe some other D like small and neutron they would be working with ti as an asset so yeah inly there will be some some level of fragmentation um I think for for us it's like it's really good to to still be kind of synchronously composable with a few defi Primitives where that will be on the same chain uh and then uh with

the like with the other uh other rollups or other defi ecosystems the infrastructure that we're having in Cosmos now in terms of like working with the with the other chain rollups is actually pretty pretty amazing now so it's not it's it's not a huge disadvantage I would say uh it's rather an advantage of H having your whole base which is like uh which covers all your all your basic use cases and then using all this kind of cross chain infrastructure uh when you when you work with with the other assets and and the other chains and actually using cross chain infrastructure is at the heart of uh of drob because we're working with assets from other Chains It's a a bit of

a magic happening when in fact you you initi st transaction or like C sub or Celestia while your SL contract is on the other chain you mean this assets on the other chain um so yeah just maybe you can think of it as two levels of fraction and each of B are actually pretty useful so and that's getting back to my Point uh I think that works really well if you think about it as uh like Drop not being an individual protocol uh drop being a part of the of the defi ecosystem that kind of collectively works with all these all these other ecosystems and um yeah and who knows and I can uh let's say I can see a version of the future where drop has some kind

of outposts in the other EOS uh and that could be very interesting if uh for instance we have and module of our slot contract that would be taken care of all the staking part for instance so that uh on some other chain that has its own defy ecosystem this module would still be serously composable so that we have would have like a COR SL contract of neutron and there would be this Outpost that is very easy to work with for the protocols of thech why not I think it's sex viable viable version of reality we're not deploying this tomorrow but uh yeah totally see this as as an opportunity so so what's the what are the next steps here in terms of the go to market you've

launched already atom so people can I think it's still in beta so you need like an invitation so it's not fully open yet but um it's possible to liquid stake atom what are the next assets like that you guys are looking at and how does you know how do those play strategically within your um you know this this kind of ecosystem that of defi that you protocols that you want to build across yeah definitely uh definitely Tia U yeah I think Celeste is a is an ecosystem on S obviously and as I said has has a very very different structure um and uh yeah that's that's coming soon so watch this space um yeah and for for

the TA ass system I think there will be like part so what we're building for AO that will be definitely rused so may of the def integration that work with will be equally useful uh for tier so that in terms of having this uh very strong combination of like a well integrated uh Dex sling protocol leing protocol uh then am finances is launching something something very interesting like we will have this kind of package ready for any your assets uh that we're going to launch uh but I think for fores ecosystem like the other component that we will be working on is uh how all these assets are getting into it into into multiple rollups and um yeah I

think for rollups obviously because they're kind of studing they um their their on systems from fresh the the cool opportunity is to have uh DTI as a kind of as a native version of tier that is basically the right balance between kind of not sacrificing Economic Security of Celestia and then having this heeld bearing asset in the rollup and kind of very interesting to look at it from a perspective yeah like ethereum comparisons are are interesting because that's like a very very logical system that has a lot of history and uh it's uh if you look at ethereum uh e is like the native asset versus versus S and a lot

of um I say a lot of liquidity that exists there is focused on this e s pair but for her rollup they can kind of assume that uh DTA as a is is the native version of tier on the rollup and they don't really have to think as much about uh like having native version of tier on the rollup well represented because like um essentially and the this home base of of trop will be taking care of like of the pack between tier and the Tia taking care of actually like Min the Tia and so on so yeah I think that's that's a huge opportunity for the rollups to just make every representation of of t on the rollup you weing and uh yeah therefore

it's just fre 11% uh of of APR on every every tier that you have so will you launch a rollup on Celestia will we launch a rollup on Celestia uh yeah not not right now if there is a good use case to do so yeah definitely definitely will do uh I don't see this as something that will get us a lot of Advantage right now but again Never Say Never I that would be I I think the motion that that would actually be pretty cool I I don't see a very good justification probably just just for okay so then in terms of like technical architecture how would that work on Celestia then would would you have to

launch um a drop so like say have drop contracts on every rollup uh with which you integrate or oh no no no you can uh you can breach to to rollups by Hy plane uh for instance ah right uh and yeah so we can use um impl ation of hyp Lane that has been live on muture for a very long time right fun fact is like just how large is volume uh on hyper Lane between celesti and neut I just saw it CH recently that's just mindblowing how is going through that um yeah and then this staking staking with Celestia is going to be possible once um in account S to list

which is uh uh hopefully coming soon as well so yeah so the ecosystem is actually pretty pretty interoperable especially with with hyane hyan is kind of big the bridge the default bridge for for rollups and um you know what do you what do you figure is your competitive advantage over Milky Way which you know has launched as the first liquid staking protocol on Celestia like very ingrain that in that ecosystem like how do you compete with them on you know features on you know Partnerships uh yeah yeah we don't yeah I think for uh with Milky Way

yeah it's definitely more of a partnership um and uh as far as I understand there foros it's uh kind of being more and more on the side of reaking use cases versus versus liquid staking and which I think is is good like for us it's say it's great to have a very strong risk taking partner um and yeah I think that's actually pretty interesting U about this ecosystem in general I can see the vision of of the future again where like different lsts lrts reaking providers have their own niches we don't necessarily have to be kind of direct one toone competitors and this is something that apparently is happening with Milky Way because now

they focus more on restak initially for them we are more of a partner than a competitor and uh I think U yeah so our strength this SP ship is uh going really really deep on defy Integrations and like navig navigating def Landscapes well and figuring out how how to get the best use cases in in the defi space um yeah and for for milkway their focus is yeah how to create this raking infrastructure how to get adfs on board and so and the intersection is actually pretty SL because uh D assets could be used in the Milky Way escal and uh uh yeah that's uh that's this kind of natural natural handshake of the

partnership okay so Milky Way that is kind of moving more into a a reaking um provider where any like any LST so like you know D atom or St atom can be used as collateral to secure uh Celestia based avss is that kind of okay interesting yeah I think there they're probably yeah probably better ask milkway I think it's going to be like tier derivatives first or let's let's say tier based lsds and then maybe they will open up to to the other assets but yeah they all my I'm actually pretty excited about it

uh I think it's a for everyone it's good to have kind of strong teams like having their their focus and building this kind of money money Legos and token Legos whatever you want try we should do like a space like with you guys and Milky Way and oh yeah yeah because I think a lot of people see you guys as competitors or at least until now I sort of saw you more as competitors than than part yeah that's yeah yeah that's that's what they were saying as well I think uh like before we launched and I only met them in person in Brussels uh for the first time um yeah there were people that were telling us oh here was like mil how you going to compete with them with them it sounds like it was kind of kind of similar people tell all Li to CMOS how

we going to Compu L and so uh but in fact it sounds like it's really more of a partnership relationship which is which is pretty cool even I if it was more of a direct competition such a like we're very very early in this market and uh I think like having even if it was like very direct competition would be actually healthy thing to have just because Market needs a lot of education and it's much better to educate the market together and actually kind of push each other to to innovate more um yeah so I I think it's good to have multiple teams building multiple Strong teuns building in the space right let me ask you one question here like why would an application want to build as

a Celestia based a um AVS like what's what's the particular advantage of using Celestia as the restate collateral you know um when you know there are the likes of enan Lair and all of the reaking providers on ethereum that just have like so much more liquidity and um uh and penetration in the market yes um yeah I think uh I think it's generally kind of good to be parts of the of the ecosystem in terms of the the asset that you're rign on is a alignment Mee is a is actually a thing

uh so yeah I I think like given that like if we believe that there will be multiple abss uh in in the Celestia ecosystem uh using using Tia as a primary asset to secure that is probably probably a good move uh from my perspective because then you have lots of synergies with the many people in this secos system around it and maybe you have like TF holders who are willing to provide um like provide this assets for for for security uh and so on so yeah I think it's a gen like General alignment thing which which would actually be pretty practical uh in this regard yeah lot of raken specialist

again I'll leave it leave this to okay that that would actually be a very good question if we jump other podcast together yeah yeah so there then like the the AVS is using um restake Tia or restake stake Tia in the case of liquid reaking for security and and using Celestia for da uh I guess so maybe yeah or maybe just working with the Celestia based projects and not using Celestia da directly even I would imagine these are these are possible type of abss as well okay yeah I'm actually pretty excited to to see what what are the avss that are

coming it's going to be interesting yeah yeah yeah like I I I like with six six Partners on the on the ABS side I can't remember what the partners are okay yeah let's let's um we'll talk after we we should we should set up a space with with the Milky Way to dive in deeper into this um so what what are the biggest opportunities you see in liquid in liquid staking you know and and specifically like from the perspective of drop like you guys are part of this this Lio Alliance um maybe let's start with that so what is this Lio Alliance there was this governance proposal over on snapshot on the Lio governance form a couple months ago that made you may drop

the first uh members of the LI Lio Alliance uh what does that mean exactly yeah Lio Alliance is a is a way to create this broad partnership between Lio and uh and other protocols those teams that are building something which is synergetic with Lio uh without uh like either uh kind of merging the teams into li like kind of preserving their independence uh but also yeah creating this partnership framework and um I think it comes in contast with the what was previously known as a li on X Program uh which was used to launch what used to be Li on salana or light on

padot and so on I think when lier core um focused on eor more and more uh this Li next concept got just outdated uh and uh yeah Li Alliance is a is a new framework that kind of gets you both of Two Worlds you you still you are still an independent protocol and I think for us it's super important to be very native to to Cosmos to interch ecosystem uh and on the other hand get benefits from uh from the slide of partnership which come on multiple different levels um so well first of all we collaborate with the with liers team on uh basically every tront so for instance when we prepare the wellat uh

Val management policy uh we we worked closely with that team to see like what's what's the best way to approach it what we could be missing uh same thing on the kind on the defi part because they have't been like really busy for for the last uh three years or so kind of navigating all the different Dy ecosystems and not using this experience would be pretty stupid to be honest so yeah for us it's it's just a lot of uh kind of super swap people that are helping us out figur us all out uh but there's also uh like Integrations in terms of um like on the UI side there will be some things coming that will uh

allce later on and also helping uh each other in terms of getting more adoption for each other's assets um in corresponding ecosystem so it's kind of asset cross coration uh so drops kind of roll uh in this is guessing more dou st e adoption uh in in the interchain and we're getting Li's help to navigate uh ethereum defi space to see how exactly we could use drop asset there and uh yeah so there's stuff coming on on both of these these areas so yeah that's actually pretty exciting I think there is this General kind of concept of ethereal rols kind of converging and uh uh like Drop as a number of Li lines where exactly on this boundary that is

disappearing as we speak so yeah I think for now like we we see quite a few interesting ways how we can uh navigate this BND but I think as ecosystems converge more and more we'll see more of more of use cases on on this intersection so what are those use cases would it be like restate e on you know securing um chain like Cosmos chains uh you know is a like mes security restating or what like what kind of opportunities does uh does this you know partnersh like liance yeah yeah I want I want SP the beams uh but yeah this all sound sound really interesting um yeah I think

what what you'll practically maybe see in the in the very close future is yeah this kind of assets asset cross pollination Just J of adoption of this asset in the in each other's ecosystems and uh yeah then probably in the future we will see something closer to what you desing now okay so no b no Bean spilling is what I what I understand um cool well I'd like to talk a little bit about the architecture so um I I was I was lucky enough to be able to try drop um and and you know stake some some atom liquid Stak some atom on drop thanks uh it it was pretty seamless I got to say like

the experience I mean it took I don't know it took me a minute to do it even though uh um it was all one transaction uh I I guess I had to sign twice but one one thing that I noticed which was really cool was that uh I could see the item that I had in my wallet like just sitting there and and then also a list of validators with the corresponding amounts of Adam that I had Stak with with them yeah and and so like I had Adam steak with like poku for example and I could just convert those right into D atom and that's a user flow that I had never seen before you know with uh with stride for instance you

first have to uh I guess I guess you also have this ability to swap your atom staked atom for St atom but the UI feels a little bit more cumbersome than so I wonder if that's just a UI thing or if you or if there's more to to the backend architecture uh than than me than like MCI yeah I think I think probably the backend architecture is slightly different as well uh I can't really recall or I I did even Explore very closely how it is implemented uh for stride but yeah there is uh Al St mod which is unique to Cosmos Hub uh

that allows you to migrate between native staking and liquid staking seamlessly um yeah it's done it's kind of pretty pretty complex I say the food because it's done uh by kind of separating your Stak position into so so soort LSM shards the moving uh kind of arbitary amount of steak you're moving the shards around uh and uh um yeah so there is also an interesting part of it because you then have to navigate this via by IBC because we're we're not B the smart form TR is is on the other chain um yeah and uh I don't yeah I don't really know if if we're like really really different uh under the food but

we yeah basically put a lot of effort into making this really simless from the from the ux perspective and uh yeah I think it it works really well it's uh yeah it's simple and it also save here one day so or state in Wars um and this LSM module is only on the hob as far as you know only on the Hub yeah I'd love to see it on on more chains I'm not aware of over the plans of the other chains to do so but yeah on the Hub that's the super opportun to Great Sly between L and liqu sta what why would a chain be opposed to implementing LSM are there any like disadvantages that I'm not seeing here

it just seems like a Winn I think there yeah yeah I I think it is I think this uh there's definitely some level of technical complexity involed so yeah you kind of you you implemented all all this additional logic um in your in your protocol and uh yeah that's probably not a uh definitely not an insignificant effort to do so uh I think also it's a slightly more complicated on the valid dat level because they now have to take care of their um LSM Bond so-called so they have to like they have to make a SE separate transaction that will uh Bond

certain amount of plugins with a validator that's kind of their skin in the game and they can only receive these delegations through through lson if they have enough of the lison bond so yeah it comes comes with a little more complexity let's say and uh yeah making it SE terms of ux is not very easy you kind of have to work with the validators to make sure that they have enough else and bond so yeah defin I think for qu sub it actually works really well they made this effort at some point um yeah for for the other chains uh I guess like if they see a lot of value in uh like reducing this barria for forid taking that probably makes sense it's actually

works works really nicely and um I don't think it's a seal Sil bullet really because like if it was a silver bullet we would probably see like I don't know multiple tens of percentages of liquid Stak in adoption on the Hub but definitely it's like one less barrier for Poli verles yeah absolutely and um one other thing I wanted to to to talk to you about is that the exchange rate so I think most people are aware that a liquid staked asset typically trades below hair right so if you if you like for instance if I had like I trade one atom I get 9.94 D atom and as I was doing this like

I I know that this is expected but actually don't really understand fully why why this exchange rate exists between yeah um I kind of know it's like okay you have the rewards that are also calculated so can you explain you know why that is and how that exchange rate gets calculated yeah there are basically two two ways to build an LSC uh so and maybe a more intuitive alternative to this uh from from a user perspective would be you have the ATM which is which cost exactly one to one to item uh and then you just receive more of this dim over time this is how s is implemented uh but what they

kind of found out is that this type of token is actually pretty difficult to work with in defi because like you have to somehow work in in a separate way with all these additional additional kind incremental amounts of tokens that appear out of somewhere uh so yeah there's also a bit of a like depending on like where you live and where you pay your taxes it could be more beneficial to have this other version of the of the token so the other version of the token uh it works like you have the same amount of the token all the time but your staking rewards are reflected The increased rate uh of the circuit so you just forance you you st out you receive

the UT uh right now the rate is very close to one and that is going to grow essentially as the protocol accumulates more and more rewards and uh your like apy that you receive by by staking the atom is actually reflected just in the fact that the atom costs more and more compared to autum that's your that's your yield that exchange rate is is across the board it's not like user per user it is an exchange rate that exists across the entire uh asset itself exactly yeah it's it's Universal exchange rate and it's basically calculated by um yeah what C to to this gum price is uh the initial bonded item plus all the rewards that that come from

staking this amount of BU right so people have claimed if people were claiming all those rewards that exchange rate would get closer and closer to one oh it's into a lot a lot decrease because these rewards have been accumulated already so yeah if you if you just if you just take ATM and then you hold the atem like your the at will always go up in price because like these are these are the accumulated rewards when people what I sorry what I meant was if people are if people were to swap out as people are swapping out of the uh liquid stake atom the price would get closer and closer to one then uh no the price yeah the price of the

compared to a will go up all the time H okay yeah if yeah because they um so they get their um because imagine you're you're like an individual holder of the item uh and uh you you state your item and then you receive your DM your DM will will go up in price and this is your yield so and because this rate is universal across the board um yeah you will still still have an increased uh increased uh price of the when you swap out uh you yeah you you get um kind of you get some of this uh at that has has been accumulated as a words but yeah it

shouldn't reflect situation for let's say one person St atum on day one and they have been accumulating more and more rewards if everyone else swapped out for this person they will be still enough rewards for the for the price of the atom to go up because that's that's the only mechanism of Val Cru oh okay yeah yeah of course uh that makes sense okay and and um I'd like to maybe just a little bit talk about the the technical architecture in yeah in terms of like how uh drop distributes assets among validators I know that different lstd providers have uh different design choices um on on how this is done so for example like I know stride has a a white

label set of validators quicksilver had a very different approach where a user could choose their validator and they were very intent on people being able to keep their governance rights Etc um what what is the the D the drop approach like how are validators chosen and how are you dealing with governance rights and things like that yeah uh I think that that's a super interesting topic um there are one way of thinking about it is um if everything like oh 60 or 70% of the assets are now nature staing there's they're state to one of the validators and uh when when a liquid stating protocol arrives uh on the scene like we don't want to be uh to be competitors to the spell ders so one of the things that

we want to enable is uh like for instance when people using LSM module migrate from their Position St with the validator to their uh position of like staking with with job they might still want to keep this relationship with the validator for whatever reason maybe they they're part of community they like this validator because they have like a cool podcast maybe they like the validator because they have memes on uh on Twitter or whatnot um so yeah we think that this is important to keep as an option uh so that's kind of one one thing uh we also learn from Li on terror experience that was actually pretty pretty interesting case because lien launched if anyone

remembers with like a mandatory uh choice of a validator when you were liquid staking and that uh resulted in like 80% of uh of all the assets being stated to Val validators then light on became huge that was very big imbalance and then kind that that had to be sold somehow um so yeah that's that's kind of in another extreme uh so what what we want to do is to uh provide an OP to express your validat preference and say like if if I have an opinion yeah this is this is the validator that's I want to receive this this amount of Stak uh but by default it is distributed equally across Alors at least in V1 of our Valor

management policy um so yeah we're we're we want to have this balance between between both of these options I think it actually works really well so far so we're experimenting with this on on interway uh first first if you go to staking your words uh call that's one of the one of the channel partners that integrate your drop from day one basically or day two uh you you can actually do both so by default you can St across 30 validators that we have WID listed uh and then you can kind of Click into this and say oh this is my my favorite validator please give them a little bit more stti um and uh so that's that's first experiment that we run in

this area the other experiment is uh all the validators have referral codes and they can invite their Community to to stti with them so that uh basically for for validator that the Emer will drop is a win because that's just one more let's say one more feature of of the overall staking product that they they can provide to the users um actually both are going really well uh from our perspective because for validators it basically means that they don't have to choose between supporting liquid staking probable and sacrificing their volage power and um that's that's pretty pretty good in terms of incentives alignments uh and uh yeah then for sters like if they if they have a preference they they

have a way to to express it and some of yeah some of the validators have very very strong and passionate communities that want to make sure that the state goes to to their well later so yeah in the for us uh L of the stake is now still kind of in this equally distributed uh mode uh and and we have 30 validators for now and then some of them are now starting to to get some some additional validation so yeah it's it's a better mode for now we'll we'll see how that goes and whether we have some uh let's say limitations to this or something definitely want to avoid this 80 80% one validator type of imbalance that uh that we saw once um but

otherwise it seems to be pretty pretty helpy thing to do um yeah something else I wanted to say oh yeah obviously works well with this LSM LSM thing but maybe I mentioned this in the beginning because you you remov the state with from this validator you were staking with them already probably like there was a reason why you wanted to state with them so you just move it to draw but you could state with the validator so that's that's pretty good use case okay yeah so uh let let's talk a little bit about I'm sure people are listening here and you're wondering how they can get involved and drop and how they can benefit from um you know the this droplets mechanism that you talked about earlier so what is the what's the best way to make you know

the most uh out of uh out of drop uh right now and um and where you know what what Integrations can people benefit from um by by using D atom in defi yeah so another ex another load that it's not definitely lot of financial advice so um yeah you can uh you can either go to Twitter and search for invite links that people are sharing uh or you can go to drops telegram uh Channel and find some invite links there then you get invite link uh you can then go to the protocol and uh start taking some it with drop uh and uh yeah from

the perspective of if you want to maximize your droplets then just taking is the is not the optimal way to do so uh yeah because you can ear multiples of that if you provide your assets into defy and that's just again like all the behavior that we want want to endorse if you want to just kind of take your atut and forget probably nature taking his way if you want to participate in D5 that yeah drop drop is a is a good option to do so we're now live with the Integrations with s support uh so there are a few pools where you can provide liquidity and um uh yeah you can uh you can earn droplets and also the aprs from from the pools uh some of the pools have

a lot of volume now so the aprs are pretty decent uh then you can also now deploy your uh DM to LS protocol uh that's uh Mars V2 that's been deployed on utron I think on Tuesday so that's very fresh there are many more features coming what are they super interesting ones um is uh you can also use your uh position in the liquidity pool uh as a collateral in Mars so that I think that's coming in the week to uh so basically you're now guessing both benefits from from liquidity provisioning and from using this collateral that's pretty cool I think that what I'm excited about is all this kind of one Legos that are coming together here around drop asses and this

is one of these examples uh what you can do in Mars right now as well is you can just do like Leverage Lo position on on other and uh if you if you want want to go into kind of the Dig mod uh definitely you can do that and just earn multiples of of droplets uh and another integration which is live already is Lana on UT so you can mean the item provide this liquidity to levada and that enables trading on um usdc atom uh pair which is a unique uh thing to uh to the atom because you trade on out price not on the price as we discussed in minutes ago the ATM price is actually

different from UTM price and it's going to be more and more different over time and uh that means that uh you don't have to think about the price at all you just play on UT price so uh yeah that's that's another kind of unique thing to do and uh yeah a few more coming uh soon you will be able to deploy your s support LPS into a poo uh Auto inv bolts so that all the rewards that you get from LP now will be autoc compounded by by the pool so you get some extra gu uh that's another one and then one that is live on test net but on the main net is ulet finance integration so amet Finance is all paying loans um and uh yeah you kind of get a special token called

amaton which is like a representation of some amount of your future future yeld of De so you deploy the there you get a mum and then that's essentially one one again different way to to almost create Lage low position and uh yeah there are many more coming one what else that I I'll mention with noas noas is a leing protocol and it works in different way compared to kind of the borrowing protocols that Landing protocols people are used to because you use your initial asset as a down payment and then you're repaying the loan but it's uh it is swap swapped immediately into the into the asset that you're going to leave so yeah

you don't keep your collateral uh and uh this is a way actually you can think of it as a a bit more flexible way how you can uh create create different positions because your laan can be nominated in in usdc but your collateral is in the other for so yeah yeah other option so there's a lot to explore already many more coming uh yeah but I think uh yeah depending on what exactly is is the use case that uh that and if you want to go long or short and atum you can pick one of these and uh yeah we're pretty sure that now already you can probably pick a strategy that will be uh the right fit for you regardless when is TI launching Tia launching uh

yeah uh it's probably launching in September uh we'll yeah we'll definitely announce closer to the date we're almost in September so we're not not so far away so I guess I guess guess my question is when should people unstake their Tia Tia LM as far as I know yeah yes doesn't doesn't so yeah probably state right now we'll we'll let you know that don't miss out when you taking words uh yeah once the date is confirmed we'll we definit let you know I think we'll we'll start with GF test net in in a few days already so yeah it's coming great well we've uh we've gone a

little long here but uh it's been great to have you on thanks so much for uh uh for coming on and uh learned a lot today about drop and I'm excited to uh start using my D atom in Lana and Mars um I you know on the website you have all of the different opportunities and and I see a I see a juicy 50x on on Lana for 45 day for 45 day LP lock if uh if uh if you're so inclined so yeah lots of things to do uh with your staked atam already on on draw and I'm sure there's going lots of other things that people are going to be able to do and that's what we need I mean we need more ways to utilize atom as collateral in uh

different def5 protocols you know if we want this asset to have any utility it's definitely one of the ways that Adam gains utility so thanks so much for coming on and uh we'll we'll have to talk again about that that that Twitter space I'll have to reach out to the to the to the Milky Way team see if we can make that happen in the next couple weeks we should do that yep great thank you so much all right thanks for having me [Music] [Music]