SotN #41: dYdX & Starkware Announcement!

Transcript

[Music] all right bankless nation welcome to another episode of state of the nation this is the episode where we talk about something big that is happening that has happened in the last week we relate it to some of the bigger picture topics we discuss on the podcast and write about in the newsletter and then we drop some insights and action items this comes out every tuesday we live stream it on youtube if you're watching it live now hello this also comes out on the podcast on wednesdays david how are you doing today uh absolutely fantastic another great day in the world of ethereum something new comes every single week and at this point it seems like every single day of

every single week and this uh today of this week is a new announcement from a dydx and starkware which is going to uh i think rock people's worlds and so we're going to get into that uh as well as a number of other subjects this is one of my favorite announcements because it's not just like an announcement that something is coming it's an announcement that oh we just shipped to mainnet and what they shipped is really cool this is a combination a collaboration from dydx and and starkware um i think of this not their words but i think of this as kind of a bitmex killer so like a centralized perpetuals derivatives exchange killer that's how cool it is but this episode is unique because we have two guests so we have one from dydx the founder of dydx we're going to introduce in a

little bit and also the founder of starkware to talk about this collaboration and i think there's two stories here for the bankless community david um the first is this is the story of a defy app a story of a decentralized non-custodial exchange called dydx and its trajectory of eating its more centralized competitors and that's kind of the first story and i think we'll talk about that mostly in the first half and the second story is a story of a network this is the story of how ethereum scales how ethereum might come to start to eat some of its more centralized competitors maybe some of the eath killers out there this is the story of ethereum scaling through technology uh so i think these stories

are sort of interwoven and really exciting uh to talk about and these are the perfect guests to uh to to go through them with us yeah yeah you said that right where we so it's been frustrating when we were on the bankless program and we talked about like oh uh this l2 will be deployed in two to six months like that's been kind of the through line that we've had for like the last year now it's like oh yeah this is coming and now it seems to be that the wave of like oh is the thing that we talked about it's here now uh and so hopefully this is the first of many to come we could really use some scale on ethereum uh and and like you said uh this is the uh the story of dydx which is an ethereum application that is exactly like similar

legacy financial applications or products but now it's on ethereum and it gets all the benefits of what ethereum has to offer and so hopefully this is an anecdote of a greater story of ethereum scaling while maintaining decentralization and permissionlessness the layer 2 wave is coming this is just you know the first part of that wave the crest of the wave if you will we've got some other new stuff that's coming up and has come up in the bankless community lately one is speaking of stories this amazing story with the founder of uniswap hayden adams another adams on the podcast david it was a year in the making but just like a fantastic uh episode kind of the the canonical episode of the story of uniswap which i'm shocked is not told in in mainstream

yet but you're hearing it on bank list this is the story of uniswap and the shipping of v3 so cool that came out on monday uh david any any words from that episode that uh you want to highlight yeah we we made sure to take as much of hayden's time as he would give us because he's made his time so scarce up until now uh we were we were going for two hours and then uh we had to pause the interview and i was like hey then like we still have like a number of subjects we want to give more hey can we yeah can we keep going more time yeah we need more time and he said yeah i'm just gonna not go to my next meeting and and he stayed chatting with us for the full two hours and 35 minutes the complete story of when unit

swap was just a blog post on reddit to unit swap v3 and where we're going into the future uh and and also also a similar through line i think to the conversation we're going to have today where that's the story of one single app but the through line is a story of prioritizing decentralization above all else absolutely uh we also had a really hot podcast that's coming out on monday we recorded that last week with commission sec commissioner hester purse she's known as as crypto mom as a moniker that the crypto industry has given her wondering if she is now going to become defy mom as an advocate for crypto of some sorts in the sec so that conversation is dropping on monday david we've got some great stuff going on with the bankless badge as well like so the

bankless badge is something you get when you become a full member of bankless right so that's the newsletter can you talk about what we're doing with that badge now yeah we are going to do a big push for the badge rewarding members of the bankless who hold the bankless badge um hold on let me get that there we go um and so we are going to be giving doing some giveaways and so we're going to give away a bap for those that aren't familiar though that the bap is the crazy awesome vibrant uh t-shirt that you see ryan and i wearing usually on the friday weekly roll-up videos uh and then we're also going to give a raffle away this is a raffle so not every bankless badge holder will be able to get one there's only 50 bats out there and we're giving away one of them uh

maybe we'll give away more in the future we're also going to airdrop an eth to the raffle winner in the future uh and then perhaps some nfts down the line i have a relationship with a guy who does a coffee startup and perhaps a year-long coffee subscription uh the bankless badge is something you want to own yeah absolutely so this is an nft that you get we mint them on a monthly basis you get when you become a member of the bankless community uh and uh we want you to get these badges in april lots of benefit to doing so these raffles are just one so make sure if you're an existing bankless member you haven't gotten your badge yet make sure you do that we will include a link in the show notes with uh some instructions where

where you can do that um well david we should well actually before we get to before we get to our guest i gotta ask you the question we always start these episodes with which is what is the state of the nation this week my friend uh yeah this one's an easy one the state of the nation is scaling we are scaling out uh the network we are scaling out the nation we are growing in how much throughput that we can put through the ethereum blockchain with data but then also what that means is that because we can host more data throughput through technologies like starkware we can also scale out the the social uh society on this on this uh ethereum blockchain uh it's always been one of my

crazier ideas that i've had that like if we can put more transactional data through ethereum we can host more people actually maybe that's not that crazy of an idea that's perhaps the main reason to why we scale ethereum in the first place so not only are we scaling the data throughput but we're scaling the size of the bankless nation scaling the social layer also scaling the network layer with transactions per second that is going to be the conversation we will have with antonio who's the co-founder of dydx and yuri who is the co-founder of starkware in just a minute but before we do we want to tell you about the fantastic sponsors who made this state of the nation episode possible metamask is your go-to wallet for the bankless journey if you're going

bankless you need metamask period browser and mobile get them both this is your tool to unlock the world of defy here's my favorite part now you can swap tokens directly in metamask with a single swipe this has got to be the easiest way to trade ethereum tokens choose a token you own a token to exchange it with and get your quotes if you like what you see you hit swap that's it what makes swap so useful is what happens behind the scenes it compares dexes aggregators and market makers to find you the best price with the lowest network fees and the least slippage this means you can swap a wider range of tokens and swaps can even automatically split up your trade to give you access

to better liquidity you don't even have to think about it try it out download metamask for desktop or mobile now at metamask.io and start swapping bankless is proud to be supported by uniswap uniswap is a new paradigm in asset exchange infrastructure instead of a cumbersome order book system where trades are matched with other humans uniswap is an autonomous piece of software on ethereum which is what ryan and i call a money robot no human counterparties or centralized intermediaries just autonomous code on ethereum input the token you want to sell and receive the token you want to buy something brand new in the uniswop ecosystem is the uniswap grants program

is now accepting applications for grants we have been saying this for a while and we'll say it again dows have money and they are in need of labor if you think that you have something to contribute to the uni-swapped out apply for a grant to uni-swap just look at the size of the uniswap treasury it's almost 3 billion dollars this mountain of capital is looking for labor do you have something of value to contribute to the uniswap dow no matter how big or small your idea is you can apply for a uni grant at unigrants.org and help steer unit swap in the direction that you think it should go that's exactly what we did to get uniswop to be a sponsor for bankless and you can do the same for your project thank you uniswap for sponsoring

bankless we are super excited to introduce our next guest we have antonio giuliano who is the co-founder of dydx and yuri uh claude kolodny who's the co-founder of starkware guys this is the team up dydx has a non-custodial derivatives exchange starkware has some amazing ethereum layer 2 tech and together they just delivered something amazing to mainnet that we will get into we are going to let them tell us more more gentlemen it's great to have you on bankless happy launch day how are you how are you feeling thank you

yeah feeling great yeah we're super excited to finally have this product live and out to everyone and i think you guys gave a great introduction um where the point is like we've been talking about i mean both us and a bunch of other adapts and scalability solutions and it's coming it's coming and it's finally here and it's just good to finally have everyone be able to use it well antonio let's kind of start on that theme so uh tell us what did you just release to mainnet right now yeah we released our brand new layer 2 product obviously in partnership with starkware and this product is for perpetual contracts which are basically a type of derivative contract the most popular trading product in crypto period

it's kind of a more sophisticated type of trading product which gives users really great access to leverage amongst a bunch of other features but perpetuals as i mentioned are quite literally the most popular trading product by volume in all of crypto combined they're bigger than even all of spa trading in mind uh dydx were kind of one of already the leading decentralized exchanges for perpetual contracts um and the thing we just launched on layer two is not only just basically putting what we had already on layer two we built an entirely new product from the ground up new user interface new backend new order book uh new everything um and kind of paired that with starkware's awesome scalability solution to create something

that i think is really awesome so decentralized exchange focused on more advanced financial products and specifically perpetuals can we talk about just like a quick explain it like i'm five on perpetuals uh antonio before we go any further i know we have a detailed ask me anything where you explain this thoroughly yeah but for for someone who's just bought generally spot on something like coinbase or uniswap what is a perpetual how is it different how is it similar yeah absolutely so perpetuals are a type of synthetic contract which sounds fancy but all synthetic really means is that when you're trading these contracts the actual asset that you're trading so say you're trading a bitcoin perpetual doesn't exist in the contract

a derivative basically just means that you can put a lot of different like financial mechanisms to create a different asset which actually trades at the price of another asset so a bitcoin perpetual for example is a synthetic asset which trades at the price of bitcoin and you might ask yourself well why do i want this like why would i not just trade regular old bitcoin and the answer to that for the most part is the concept of leverage and the concept of leverage what that basically means is you can multiply the capital that you're trading with and this is a really powerful concept so basically you can come to dydx and you can put down a deposit of a thousand dollars and you can immediately start trading as if you had five thousand

dollars ten thousand dollars potentially up to you know twenty five thousand dollars depending on how much risk you're willing to take on so just that concept where you can come to dydx you can immediately buy say like 10x the bitcoin um or whatever leverage you want to use then you could have otherwise on spot trading is a really powerful concept and something that's uniquely enabled by perpetuals antonio i want to go into that a little bit more because i think the user story of people who are compelled by this kind of product might may illustrate why an l2 is so valuable here so when when it comes to the full range of spectrum of people who invest in in crypto there's people who who buy on exchange and then they put it in the cold source and they never touch it uh and then on the other

side of things there's like high frequency like traders that are doing like 10 000 transactions a day um and in my mind diy dx is you know obviously in the middle of that but closer to the end of there's multiple transactions going on uh in a short time frame which means that we really need scale maybe you can illustrate for our listeners like who are the what is the disposition or types of traders that would come to use dydx and how frequently are they trading how frequently are they making transactions uh and and hopefully that goes into the story of why we need scale yeah absolutely i mean that's a great intro i'd say there's kind of two classes of customers that we support right now on dydx um and the first is kind of the the rightmost end of the

spectrum that you are alluding to in terms of the more advanced kind of sophisticated more like crypto funds basically and these types of traders as you say do need really high performance they need to execute a lot of trades they need to be able to put and cancel a lot of bids and asks on the order books they require access to more sophisticated order types things like limit orders things like stop orders stuff like that and then the second kind of archetype of users that we have on the platform is more individual traders um and not so much though like i just bought my first bitcoin on coinbase type of users or kind of like in the middle where you know they're more active traders perhaps they're more actively trading uh bitcoin or ether other cryptocurrencies all the time kind of trying to profit on

shorter term moves um up and down um or sideways and that's kind of what we're we're targeting like these two classes of users and even kind of those individual traders they also require like pretty high performance they require access to just like you know new order types uh different types of derivative contracts like perpetuals and that's what we're really focused on building for them so antonio we want to start to shift this to the conversation of of kind of what's new in layer two and with this new mainnet uh deployment and um get area into the conversation as well as we talk about that um but maybe you could kind of tee this up for us so my understanding of dydx on mainnet was

that basically there was this um this throttle in in terms of uh how much you could scale on on maynet right so gas was high i think that you guys dydx was were paying some of those gas fees so you were feeling the pain as a business and you knew it wasn't sustainable to continue providing the rich experience of dydx and expanding to the future on mainnet so you decided you needed like a layer two can you talk about kind of the pain points that you were feeling and then why a layer two and then why in particular starkwear and then we'll get to uh yuri in his you know description of what starkware provides but first tee

this up for us antonio yeah absolutely so i guess the the main reason that we needed a layer two is pretty obvious for anybody that's been using d5 is that the gas fees are insanely high and previously dydx on layer one worked pretty similarly to how most other decentralized exchanges work in terms of for every one trade that was on the platform that mapped to like we had to send one transaction to layer one ethereum and this has been getting just ridiculously expensive especially in the past few months i believe on average it's costing users about 150 dollars in gas fees per trade to execute a trade on layer one uh on dydx and oftentimes we'll see the spike up to hundreds of

dollars i've literally even seen it be over a thousand dollars to in gas fees to execute a single trade on dydx on layer one at peak times like when the price is moving a lot which also is when people most want to trade so it's like double whammy there um so so it's just like who's gonna use an exchange where you have to pay a hundred dollars in fees to make a trade like nobody well like maybe like really big whales but like that's basically it um so that was just kind of the the first and overarching problem that we needed to solve it didn't really stop there there were a bunch of other limitations actually that are a little bit more behind the scenes but that are actually really impactful to kind of the quality of the product that we were able to build on layer one ethereum i'll just

touch on them briefly the first is uh this thing called isolated versus cross margining which sounds fancy but it's actually a pretty simple concept what isolated margining is on layer one is you have to put down collateral separately for every different market you want to trade on so say on layer one on uydx you come and you're like i wanna trade both bitcoin and ethereum which is like a pretty reasonable thing right you'd have to put down collateral for the bitcoin market and then separately put down collateral for the ethereum market whereas on layer two because of the increased scalability and what starcraft is able to offer um with kind of their fully featured platform we're able to build this thing called cross margining which basically just means you can have one account you can deposit allow collateral to dydx one time and

then you can just start trading every different market that dydx has and this is going to allow us to launch a ton of new markets one of the really big handicaps we had on layer one dydx was because of the scalability we were only able to ever have three markets on the platform uh which is not optimal right especially with all of this like exciting stuff that's going on with all these new g5 coins and things like that like again like how are you going to be successful as an exchange if you can only support like three or four markets because of this isolated margining now with cross margining we're setting a target for ourselves was launching 50 markets by the end of the year um and we're going to start executing on this we just announced this actually with launching ave and uni tokens uh

hopefully later this week or early next week um and then just continuing to roll out with like two or so markets per week after that which i think is pretty exciting and then the last thing i'll close with before answering the second part of your question uh which i think is a really big advantage of layer two is we're now able to offer much higher leverage on the platform higher maximum leverage status on layer one because of kind of the limitations and performance of price oracles um we were only able to offer 10x maximum leverage on dydx and kind of given a binance recently put out some data on their users usage of leverage where they basically said the average leverage that people usually use on binance is roughly in the 20x range so oh my god

yeah and yeah absolutely disclaimer like think critically about whether that's uh the type of leverage that you want to be using but regardless like we're in exchange right and we need to support like the the leverage that users want to use um we weren't able to do that on layer one and now with kind of the improvement in performance in price oracles that we're able to have through starcraft on layer two we are able to support that and the really cool thing maybe just as an aside because i think it's cool that we're able to do with the price oracles is we use the exact same price circles actually the exact same decentralization and same security um that we had on layer one uh in terms of the chain link price oracles and then the maker dial price oracles as well but we put them on layer two instead so same

decentralization same security way better performance and i think that's kind of the overall narrative of the story um is that the product is vastly improved in a lot of different ways um so just really kind of quickly touching on the the second question you had there in terms of okay we knew we needed to scale like which scalability solution do we actually use and kind of what led to the decision to use starkware there were three main things that we considered first of all obviously starkware and more broadly zero knowledge or stark rollups and obviously starkware is the leader in that so you know if we wanted to go with that technology starkware was a pretty easy choice for us um second of all we considered optimistic rollups potentially something

like an optimism and then third of all we considered other layer one block chains so i'm just going to take them in turn but in terms of why not other layer one block chains i mean first of all kind of the scalability is still like bounded and especially like the amount of state you're able to put on chain is still bounded and that's something that that stark proofs and stark roll-ups handle very well uh second of all just the the state of the world in terms of like the the quality of wallets the quality of cross chain solutions the quality of developer experiences on layer one is not there yet like i don't know suppose we were to move to like near or salon or something like that um you know what wallet are users going to use like would they wouldn't be able to

use metamask and that would be like a really big detraction and kind of the user experience were able to offer um and also like how are they going to get their coins over there like what cross chain solutions are available it's just not we wouldn't be able to offer the same product experience on those axes if we move to a different layer one then kind of optimism and optimistic roll-ups that rolls up to ethereum in a similar way to how our product with starcraft rolls up to ethereum as well so we can you know we could still potentially use like the same wallets same everything like that with optimism but with optimism there's there's a couple of big uh i would say you know i think there are trade-offs but for us like i think the main trade-offs with optimism that weren't optimal for our product

um where first of all the withdrawal period is really really long um this is something that i think has been talked about by a lot of other people in this space but really high level overview uh because of the way optimistic roll ups work you can't actually take your money out for you know roughly a week or so which is a really big problem like who's going to use an exchange again where you can't withdraw your funds for a week there are ways to get around this you can potentially use like a central kind of liquidity provider to front withdraws but then the central liquidity provider has to have capital proportional to a whole week's worth of withdrawals on the entire system which is like even for us at our scale like a ton and imagine if you're trying to scale to like the finance level like all of the

withdrawals for binance for a week is just like more money that probably exists in like all of crypto um so so that you know we couldn't use for that reason and also like one big kind of downside or no yeah i would potentially i'd say like a downside for now or at least something that's very unproven with optimistic roll-ups is first of all they're not you know publicly available on production yet and that was something that's really important to us like starkware has a really solid and long history of already being live in production for a while now actually um with diversify which is another decentralized exchange which offers spot trading and that gave us a lot of confidence that you know we need to scale now like our users don't want to wait for like

months on end to be able to scale so which which scalability solution is the most production ready and i think that was obviously starkware um and that was a big factor in our decision to use them as well great answer antonio and i'm wondering your if you could kind of uh continue the story here so antonio's story he's got sort of this defy app um it's getting tremendous product market fit but uh gas fees are becoming too much you know on chain main chain congestion is is too much and so he needs some sort of a layer two solution i'm wondering if this is a similar story you're hearing from other defy apps and also could you tell us a bit about what antonio was talking about

so in the in sort of the press release in the announcement there is a solution called starkx i believe uh is what is that is that is that the solution that dydx is built on tell us about that so please continue the story sure so um dydx's story is is really the quintessential experience for a lot of of of default applications and and they're basically the the worst thing that could happen to you if you launch a dap is that you know no one shows up the second worst thing is that if you know everyone shows up and um and that was sort of the ydx's experience and then you know when we first started talking to antonio and the dydx team they're spending on in terms of annual

exp monthly expenditure on gas compared to revenues was fast rising and shockingly enough uh in no way bound by their monthly revenue right so gas spending was crazy and you have this odd situation where you know you've spent on customer acquisition they show up they knock at your door and you have this minimum trade size and this minimum trade size is in fact rising so okay so i traded for 2k you know i made a 2k trade today which was fine with the uidx gas prices keep moving up and they just pushed up the limit to whatever three or four i think it went all the way to 7k or even beyond that at some point now what i could from think about this from a user experience perspective i could conduct this trade two weeks ago or a

month ago and now i can no longer do that you know how how difficult is that in terms of a customer experience um so in that regard i think the dydx story is very very much uh sort of the standard d5 story a situation where transaction costs are really killing the business and killing the sort of the the the the narrative for permissions blockchains and d5 this democratization of access to these tools uh there's nothing democratic about a transaction at you know hundreds of dollars everything becomes a whale chain every everything becomes a whale chain and you're saying so hold on a second the whole exercise was you know to end up with this kind of story no that's not what we're here for

so um so and in that regard it was a very i think i think it's a very difficult story and then we've heard it from uh from other uh uh teams as well uh in terms of uh your question about starcx so starcx is our scalability app uh and currently it can support a whole bunch of uh different functionalities so it can support transfers and spot trading this is what we've been doing with diversify since june of last year it can support derivative trading and this is live on mainnet with dydx as of uh this morning and um it can support nfts both minting and trading and for that you won't have to wait more than actually a day

to see on immutable x um so it can support a whole slew of of different functionalities this is all powered by cairo cairo is a train complete language that we've developed developed in-house at starkware and it can support uh the scaling of any dap any business logic using starks and it's it's a very efficient language and the proof is in the pudding here uh we are able to to uh to support dydx's transactions today at uh below 5000 gas per transaction that's pretty incredible um yeah i i'm wondering if if maybe we could go into

uh that in a little bit more detail because sort of in the in the crypto community and anyone who's familiar with engineering always recognizes that there are some trade-offs with a solution have we made any decentralization trade-offs here yuri in implementing something like uh starcx so dydx on mainnet versus a dydx in uh starkx on a zk roll up chain um have we lost anything are there trade-offs that have been made obviously we got the gains of of scalability and many of the gains that antonio was just talking about but what have we lost so um i think that we actually haven't lost anything dydx had an off-chain

operator uh beforehand and still has one now they had the the the intuition and tremendous wisdom you know this is going back to what an antonio mentioned to actually redesign their system okay so in a lot of a lot of cases and a lot of the layer two teams are saying you know we're gonna have this big red button that says compile my solidity code into whatever it is that the optimistic roll-up of choice or to the zk roll up of choice etc just take my business logic that i wrote for layer one just move it to layer two and dydx uh had the good sense actually not to even aim for that but to actually take a step back and say hold on a second we have this off chain operator right now it is centralized dydx antonia

can talk about this in great detail they they have a decentralization vision that they're aiming for but as a first step to say let's see if we can make this system better by having this off chain uh uh entity function in a much more trustless fashion okay and what can be done using starks in that regard and and cross margining and much higher frequency price oracles and the benefits that this uh brings in terms of leverage in the system and the ability to introduce so many more assets the removal of minimum trade size all these uh features are a result of the fact that they actually redesigned the system from scratch using the tooling that we've developed

let's go i'd like to go into this off chain operator a little bit more what what what does the offstring operator do and how it how is it when dydx is on the main chain and how is it different when uh dydx is on the uh starkware yeah i can take this one so it's basically exactly the same so dydx is right now what's known as a hybrid exchange by some people which basically means that we have some kind of off chain operators and then we have some things that are on chain as well which are of course the smart contracts basically we run our order books and we run our order matching in an off-chain way and we have been doing that for i don't know like two years or something now

and this model just allows us to get kind of the really big increase in performance that i was touching on before that's basically required for kind of the level of traders that we're trying to attract and kind of the crypto funds and advanced individual traders so we've had that for a while and i think the point that yuri was making which i would wholeheartedly echo is that we haven't changed that at all um to kind of move from ethereum to starkware's layer two um and the re you know basically what we have is we just kind of store these like off chains like cryptographically signed messages which are kind of similar to xerox orders if people are familiar with that um and we store these on kind of our off-chain matching system and then whenever we execute a trade we just send it on over

to starkware um they do all of kind of the the stark proving and the batching and things like that which is where all the scalability comes from we probably dive into that more later um and then it gets all just put on chain in a really quick way and then once it's on chain uh it's 100 as decentralized because of the the stark proofs and kind of the validity checking that goes on in the smart contract so there's anything else somewhere one ethereum so how would you uh describe that dichotomy between what you guys do on chain and what you do off chain right so assets obviously stay on chain you can't actually remove them off chain uh but then just the order the the logic and order matching is off chain what does what

what does that mean for the trust of the user with in regards to dui dx what are they trusting you to do and if perhaps if you guys were malicious what could you do yeah absolutely good question so they're basically trusting us to just like allow them to to trade on the order book right um and there are ways basically where you can trade on the exchange they're they're not normally used but they're basically used uh if a user you know even so much just thought we were being malicious for like whatever reason you could go directly to the smart contracts you could trade out of your positions you could close your positions you could always withdraw so that's kind of where all the non-custodial trading comes from

so like normally you go through the front door and you just talk to our matching engine but then for whatever reason if you want to you can always just go directly to smart contracts as well so they're really not trusting us for for anything really um i mean we could potentially give them like a degraded product experience like if we want to um but you know they could always just go to the smart contracts and withdraw their funds and trade that way as well so there's nothing and there's nothing about the dydx protocol that can't be accessed by the user you guys just kind of have like a monopoly on the front end is that is that a good way to put it yeah i think that's a good way to put it basically on kind of like the product that you know the website that we built

basically um i like using that has to go through our matching engine so antoni i wanted to just get this question out of the way because um you know some folks that are listening are obviously based in the us and when they try to access the new dydx uh they're geo blocked i'm just curious if you could get into the to the reasons why and of course they are geo blocked on on the front end anything that is on chain as a smart contract cannot be geo-blocked um but can we talk about the reasons for that and where sort of that's coming from yeah absolutely so it's a very complicated issue um and i won't touch on like every like specific like legal issue here but the place it's coming

from is just kind of a legal and regulatory obligation uh that we have it's very similar to basically like any other crypto exchange that supports derivative products right now um again it's quite complicated and this is like a very high level like overview of it but it's basically like derivatives are very highly regulated like in the us um so we can't offer the the products to us customers for for that reason and that's something that's pretty standard across the crypto industry and again just echoing kind of what you're saying too where it's like you know you can't use our website basically um but again like the the protocol and the smart contracts are still available to everyone and they can't be censored can you underline and emphasize uh what's different about dydx versus a

centralized competitor so when i think of a you know centralized derivatives exchange i always think of like the the go to bitmex right for instance what is the difference between dydx and bitmex from a trust perspective what are you you know trusting in in a bit max that you don't have to trust with dydx yeah absolutely so this is a good question so the first and probably most obvious thing to anybody that knows what's going on in d5 is that on a centralized exchange you're trusting them to custody all your funds that are on the exchange um it's very similar to coinbase or binance or anything else that's out there but the reason why this is especially impactful in uh derivatives contracts is because on spot trading you

can normally just say like go to a coinbase make your trade and withdraw immediately back to your hardware wallet or whatever you're using right um you can't do that on a derivative contract you have to leave collateral on the exchange for the entire time you have your position open so you may have to say leave your all of your crypto on a bitmex or something like that for months on ends like as long as you want to like hold your levered long position on bitcoin or whatever you're trading um on dydx you know because it's non-custodial you don't have to trust us with your coins they're always withdrawable directly through the smart contracts and the security uh is basically the same as you would get on on any other decentralized exchange the other thing that you're

really trusting that's also very important to a bitmex or any like centralized derivatives exchange is not only the custody of your coins but also the execution of the contract that you're entering into um so you know they're like i said and kind of alluded to these contracts are fairly complex under the hood there are a lot of different financial mechanisms that are used there are things like liquidations that happen there are times when insurance funds are used they're in times when you're deleveraged onto all of this and on a centralized exchange you're really just trusting that the exchange itself will honor or will kind of like execute these contracts that you've entered into as per what they said they're going to

but there's no way for you to tell and it's a black box right there's no way for anybody to really like go in and like audit the system and really understands like are the rules being executed um like how are these contracts working whereas what we're able to build um on our products through star wars layer 2 is something that's really transparent so like the rules of these contracts are quite literally coded into encode the smart contracts and basically star wars system that yuri was talking about with with power and everything like that like the funding rates the liquidations the deleveraging everything is coded into the smart contract so again it's like you don't have to trust us to execute your contracts just trust the smart contracts um or trust like

these like third-party audits that we have in all of this um and that's just a much more secure and transparent way to trade and so that was the the compare and contrast of what is basically a defy app versus a centralized competitor but with this new uh starkware announcement there's actually a lot that's actually now the same with bitmex and the same in in a good way which is the performance that is matching of a what you would expect in using a centralized exchange but you still retain all of the power and trustlessness and non-custodial nature of smart contracts and auditability of smart contracts and this is i think the through line that a lot of people miss about about

roll-ups and and other l2 scaling solutions is that ultimately at the end of the day we keep all of the power of you know code is law and we gain the usability and uh just good experience of what a centralized exchange can offer is that a good way to describe this yeah i think that's a great way to describe it and that's something we've been pushing for for a long time now with dydx in general just like trying to build an app that from a ux perspective is every bit on par or you know even ideally surpassing what is available on centralized exchanges i think we've really been able to build it on kind of this new product on layer two uh as you mentioned still retaining all of these

great security and transparency advantages but now we have instant trading now we have just a really simple onboarding experience just like come with your ethereum wallet like any other decentralized exchange immediately start trading you know that's way better than a centralized exchange right where you have to like do kyc you have to like do all the stuff like set up your u2fa um so now i think we have a product that's every bit on par you know if not superior in some ways to centralized exchanges we're excited about that guys the user experience of this if you've ever used obviously metamask everyone who's listening to bankless has has used metamask you just connect metamask literally to this new dydx exchange on layer two and it's it's gasless there are zero gas costs and the

experience is just phenomenal right like transactions going in instantly zero gas costs uh it is so cool to see you know the possibilities all of the the user experience enhancements that layer two can bring i i just wanna end this question um where we're talking about trade-offs and sort of security versus bitmex with maybe a question to uh to yuri here so um antonio was describing all of the trust assumptions in a centralized uh derivatives exchange like like a bit max right we didn't quite get to sort of the the base layer trust assumptions so let's say antonio and dydx just decided to deploy this on binance chain or

create your own proof of authority xdi type network deploy it there instead my understanding and hopefully those who who tune into the bankless program is they are now trusting a a different protocol essentially they're no longer trusting ethereum they're trusting the validators uh that validate transactions in that new kind of sidechain network with dydx on layer 2 in starkware are there any additional trust assumptions that we've added here or is this the equivalent of you know deploying something on maynet in other words what i'm trying to ask gary is are we trusting anything other than the

security of the ethereum base chain with this layer two deployment so uh as you point out with us something like binance chain uh we know for a fact that you know there are i think a handful of seven computers if you know those are compromised your assets are essentially you know at the whim of of whomever it is uh whereas on ethereum it's a very different story now the beautiful thing about validity proof systems and star kicks in particular in this regard and everything that we're building is that we are our hands are completely tied in terms of uh our ability to to act as malicious players

meaning even if our systems are compromised both software and hardware okay think of this sort of thought experiment if we hand over the keys to a malicious party and say these are our servers go and operate them the worst thing they could do in fact the only thing they could do is deny service to users and as antonio pointed out in that situation users can go directly to the smart contract with their transaction say my transaction here has been denied i haven't been served this past batch or the last couple of batches the smart contract basically raises the flag for the off-chain parties for starkville and dydx and says here's the user complaining serve their request

and if you don't within a reasonable time frame i'm freezing the system okay meaning any user who's denied service has the power to completely halt the exchange's operation wow okay way back in you know the cold war this was called you know mutually assured destruction right next next best thing to you know the americans the russians each having no nuclear was weapons was you know have an awful lot of them here there's this mutually assured censorship right meaning if dydx is starkware sensor users any user who's censored has the ability to single-handedly censor the exchange in return now that's an awful lot of power given to

individual users in terms of ensuring their rights and their self-custody of their assets and that's essentially that's as good as as one could could get here uh as antonio points out while maintaining a lot of the benefits of a centralized operation yuri what about the possibility of a user using this power when they shouldn't can they make this can they try and get this thing shut down in uh false pretenses no no no so this is this is not like writing the subway and you know some prank uh pulling of the emergency break because you come to the smart contract and say my transaction has been uh denied if that transaction has been included in the last match there's nothing you can do about it you can't you know crying wolf here won't help if you've

been served guys this is why we are so excited about this because we get these scalability benefits but we preserve banklessness we do not have to trust a third-party custodian you don't have to trust a bank with your funds when you're using the dydx exchange on starkware we're going to talk more about that we're also going to get into how starkware solutions and how zk rollups in layer 2 scale ethereum and scale d5 but first we want to tell you about the sponsors that made this episode possible synthetics is ethereum's decentralized derivatives liquidity protocol what does that mean synthetics is a platform for

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contextualize this before we talk about you know where starkware is is adding value and helping to solve this problem with with a question do you think yuri there is ever a point at which we say we're done okay ethereum has scaled it's over we've me we've met the threshold mission accomplished yeah exactly so uh you know i think when considering that question uh one good analogy is to look at what happened with bandwidth say over the past uh 20 or 30 years okay and there in a very clear way the answer has been a resounding no at any given point in time right are we done you know our optical fibers can do this are we good enough no what about the routers you

know what about uh uh uh cell phones what what about streaming video what about live uh broadcasts uh you know thousands of people and so on and so forth the the the thing about about scaling solutions is that as they mature as they become stronger and more powerful new applications suddenly become available and those present ever you know increasing demands uh in that dimension and we're only starting to scratch the surface here uh you know saying we are no longer dealing with hundreds of dollars in transaction fees we're going back down to whatever fractions of a dollar that that sounds to me like sort of an

entry condition for the discussion right now and the question is can we make this 100 times a thousand times 10 000 times cheaper and what will that mean for application so we're far from that point so maybe we are even now still at the 56k modem days of well so how does it happen then yuri so um recently ethereum has almost i want to say almost pivoted in a way we had vitalik on not too long ago to help explain uh what um roll-ups are and he talked about the difference between optimistic roll-ups and zk roll-ups and he seemed to um you know his take was like optimistic roll-ups they're kind of ready here z roll ups they are too for specific applications he also said he

thought in the future zk roll ups because of these krypto cryptographic guarantees might be even more important to the ethereum scale scalability journey in the future i'm wondering how you see it and take us through the like what's happening now and then how's it going to play out in the next you know year two year three from now so uh the the interesting thing about this narrative and of course we've heard of italic and read his post about rollups and all that but the you know in rough lines the story was you know optimistic ropes are here they're going to dominate the near and mid-term zk rollups are going to take care of the long term because eventually the tooling will be advanced enough and they'll be able to handle general

computation now cairo is a general computation a train complete language that's been on mainnet since june and as we see today with dydx a zk roll up is live you know from a massively scalable application on mainnet well ahead of any optimistic roll-ups and there are no proverbial sort of custodial crutches here right there and there's no sort of emergency button that we can hit that says hold on hold on a second you know this we were we were only kidding we're just testing the system this is it this is a live system and it's handling very complex uh arbitrary computation defined by dydx so zk robs in spite of this notion that they're you know only going

to happen later on in the future are ready for prime time uh ahead of optimistic grow ups uh and that's a message that we want to send across to the ecosystem and say whatever your needs are whatever your computational needs are and your you know no matter how you want to scale your application uh we're ready for you but we're ready for you today uh so that's on the topic of zk relapse versus optimistic release yeah i think that's a great point that you know the fact that z cave roll-ups have have beat some of these uh optimistic roll-up solutions to market is is definitely of note at least to to me and i think david and many people um on the bankless journey i want to ask you about um the ability to have a turning complete

uh programming language inside of a zk roll up because when we talked to vitalik he was kind of like well this is the hard part and it sounds like you have started to solve that um can you talk about this what i think people really want is um something that's evm compatible i can just take my existing defy app with a few minor tweaks i can put it in a zk roll up and it just kind of works out of the box how close are we to that and can you talk about the strides that starkwear is is making on that front sure so yeah it's not that we've started on our journey to turn complete language we have it it's done it's in production right uh uh dydx diversify uh the reddit scaling

bake off last time we're all using cairo so that's that's just a comment on that note now um the question with these things and and and i i think we're sort of you know this is sort of uh uh a lot of people think about this like you know this is california in in the early 19th century it's only just begun so all the real life considerations like like efficiency capital efficiency cost et cetera people are saying don't worry about all that stuff now efficiency of of a zk roll up is a huge deal okay so building a uh something that compiles evm byte code or solidity to uh you know to say to cara or other languages is certainly a doable task the

question is how efficient is the uh resulting system okay and it is considerably less efficient than something that is built natively say in cairo how much less efficient think something on the order of between 10x and 100x less efficient okay now these are costs that would someone have to bear in the context of the system but going back to i think a much more fundamental point the notion of saying let's just take my solidity and you know i got to tell you solidity isn't the kind of language where programmers say you know just might you know just let me have my solidity it's no one's love no one's in love you you have met to meet the guy who says okay i'll do anything you want just

so but another thing is that even if they did love solidity okay as antonio pointed out with their system the the question is not so much the use of solidity per se but the fact that solidity was designed to run on layer one okay with the massive constraints of running on layer one now if all you did was take that logic and port it into layer two you've missed out on a lot meaning the dydx could have done that let's assume so you know we had that capability before launching the system dydx would have ended up on layer two with the system with a price oracle feed every 15 minutes uh three assets or two assets only uh no cross margining uh no instant trading none of all the cool stuff that

right now is sort of what's making this system a huge system um so so they would have gained nothing other than scale it sounds like you're ordering like it it sounds like you're making the argument you're eight that um rather than just port the stuff that we have from mainnet to layer two we should take a more first principles and figure out what would be best in a layer 2 environment is that the argument you're making 100 yeah i think that's a great point too i would wholeheartedly uh echo this that's kind of what i was saying before where like yeah the scalability is great and like that's like we have to solve that but you get like so many second order benefits where if you're like okay well like now with this new like more

scalable system what other features could i add like could i make my price circles more performant could i make my you know can i have cross margining and i had like you know whatever um i think there are a lot of things for for any given application or that's the case and i think for good developers it's really not a big deal to like rewrite things or write things like from first principles again in a new language or on a new system so i really think this narrative where like we need everything to be in solidity is is a bit overhyped and i also strongly like echo like yuri's points about like you know just we need to move away from this kind of notion that like optimistic roll-ups are like the beginning and then like we'll go to zk roll-ups later like look what's in

production right now like they've been live with like diversify for like you know a year now dydx one of the most like complicated computationally complex things on all of layer one ethereum like straight up like already live on star query now too so it's like we're not talking anymore like it's here like go use the product um and i think that's a powerful thing this this is why we love this by the way we love kind of the uh the rush to ship in layer two because it's kind of a survival of the fittest right all of these layer two solutions are are competing to be the dominant one uh and um it's awesome because as a as a defy user we get the benefits of that we get to start using dydx maybe a little bit quicker but i'm curious this this whole approach yuri that you're talking

about sort of this this first principles approach um i almost want to hear the the starkware vision for layer two and what you guys have played because we've heard sort of the optimistic rollups vision we've we've heard high level you know the scalability uh vision for ethereum from vitalik and others how does starkwear see it i know you've got um starkx that we were talking about uh and you also have um starknet i'm not sure really what that is maybe you could talk about that in the context of your vision sure so starkex is our scalability app and as i mentioned it can support a certain set of functionality you know transfers trading of certain uh types of assets minting of nfts that's it right now what we really want to have is

something like startnet which is our a vision for a decentralized permission to ck roll up and there we're thinking of something which is really a very very much an ethereum like experience so anyone can in a permissionless fashion deploy whatever arbitrary logic they want in the form of a smart contract onto this layer 2 network uh the the users would be sending transactions into the network much like they do on ethereum today and the system would be properly decentralized at every single layer now our intent is to take these starkex installations deployments that we uh will have uh you know deployed by then and offer them the ability to port in a very seamless fashion onto starknet if they

so choose uh along with their user base and all that so uh that's the the start net vision of course from our perspective from a business perspective this is a must because uh you know as wonderful as the dydx team is uh there was very close contact since uh when was it antonio augustus or so of last year uh building the system together now for us it was hugely important to understand you know real customer needs develop our software stack help it you know sort of mature uh solidify you know this is sort of uh real life testing of whether the toolbox that we're building is powerful enough but to scale out the business

we need to get to the point where any uh uh you know any developer any team of one or two or whatnot can deploy whatever idea they have onto the network without anyone's permission without talking to us regardless of whether starkware exists or not and they're off to the races and that's what starkin is starting it is all about and this is sort of the vision that we just raised series b a couple of weeks ago uh once again led by paradigm and with uh three arrows and now a bit of research and a bunch of of our earlier uh backwards like sequoia and founders fund and wing pantera and dcvc and uh and this is exactly the vision that that they're supporting this permissionless decentralized uk raw

yuri i've got i've got a question for you because you seem to be a big thinker so i want to see i want to see if you have any uh how far your imagination goes dydx is a tried-and-true financial product that came before ethereum and it's in what dydx is doing is taking this tried and true financial product and building it on this new financial platform but that's doing an old thing in a new way and that's really cool but what about new things in new ways specifically enabled by what you guys are building out at starkware what what are the perhaps new financial products that could be built using this new platform if you could if you let your imagination go have you thought of any crazy ideas like this well i i think that there are a ton of

very beautiful ideas um thinking back you know a few years back the first the first time this is like three years ago there was this uh i'm i'm old and bald but new to the blockchain space but uh well the first idea that sort of clicked in my mind where i heard it and i said my god this thing can open up new ideas this was a company called nsent which i think like in sent incentivized which i don't think operates any longer but their idea was to take nfts as a means of tracking uh all sorts of uh uh sort of uh brokerage like uh brokering uh dynamics so so if you help someone uh fill a position you know like a staff staff a position in their company if you help

someone sell their house so let's say you know i want to sell my house i have an nft that represents this sale i give it to ryan he gives it to david because he knows david is interested in buying a house in my neighborhood now here the the path of you know of attribution who who was it who participated in introducing information into this market is tracked permissionlessly without any sort of ability to dispute this in a very immutable fashion by the nft on the blockchain so and now let's say the brokerage uh the one and a half percent whatever it is is now split between david and ryan okay now ryan if he knows that david is interested in this he wants to get this nft to the buyer asap because if it goes through

antonio this reward needs to be split three ways okay now think about this thing in the context of say real estate or something like that okay so now you have this network no contracts need to be signed anyone can participate anyone can introduce information into the market and get compensated for it you know staffing uh you know hiring people silicon valley hiring where israeli hiring for that matter is is as vicious anyone can do this information into the marketplace and be compensated for it now this is a this is a massively new idea and if if if the economics are are uh supportive of this and the scaling is supportive of this you can build some amazing stuff this way yuri can we talk about some of the

problems maybe that layer two faces or outstanding uh issues uh i would say are challenges maybe is another word for it um one one is this idea of kind of silos right the the concept that we lose composability of all of the defy apps that are working together so maybe we have silos of liquidity maybe we we also have silos of defy apps um that that's the first problem the second problem which might be related in your mind but it's how do we bridge all of these various layer twos together do you have any thoughts or answers on these sure so first of all we're of the camp that says that the the sort of the idea i think that's been circulating in certain parts with the ecosystem that says ah you know no don't

worry everyone everyone's just gonna migrate to the same layer too we're just all gonna meet there and it's all gonna be down the that sort of you know i think that's an absurd notion in a very trivial way meaning if that environment can sustain all that activity automagically why can't ethereum do that and of course no single environment uh can do that so and as we see with dydx and other teams the design space is is rather multi-dimensional and different teams will pick different solutions so from our perspective it's going to be a slew of different layer two solutions and from our perspective layer one is going to remain fundamentally central to all these things and so for example a design like d5 pulling that we put out

uh is an example of of how we believe that layer two will continue to interact very intimately with layer one you know years to come well is layer one like the settlement layer for for all of this the the concept of d5 pooling layer one is where d5 is going to happen okay and the pulling of of demand for uh layer one d5 services is going to happen on layer two so instead of that you know david and ryan and ori all of us you know each initiating a transaction going to compound or ave or whatever it is we go to layer two we create a pool think of this like you know pooling our carpool we pull our resources and only a single layer one transaction is initiated but layer two here continues to interact in a very intelligent fashion in a very cost

effective fashion with layer one now the other thing i think which is very important and this is sort of a responsibility of the different layer two solutions is to ensure that those the bridges between those are built in an efficient manner meaning the worst thing that could happen to users is that if they want to go from one layer to to another layer two they have to go out to layer one and cross over and that would be very very much sort of constraining from their perspective uh we uh today for example for star kicks deployment system going between dydx and diversify student immutable x other other uh partnerships to be uh a badger and other announcements to be to follow in the coming weeks uh you would be able to to move funds

uh using a crypto primitive we call uh um i apologize the fast withdrawals is powered uh um sorry apologies conditional transfers is the blockchain uh primitive uh this allows for trustlessly moving funds across uh starkx deployments without going out to uh layer one so from one layer to uh for one star kicks to another from one layer two to another this can be done across zk roll-ups and fundamentally there's no reason why this cannot be done between zk roll ups and other optimistic in another layer two solutions like optimistic volumes and i think we'll see these things maturing and coming online uh in the coming months and years

the other question that i have about the nature of l2s is the question of an on-ramp for for fiat right and so right now the the the way that this works if you want to get usdc into dydx you got to go from or you want you want your money into dydx you go from bank account to centralized exchange to ethereum l1 and now into dydx on the on ethereum l2 so my first question is whose responsibility is it for making that system easier is it dydx's responsibility for getting usdc onto the l2 to play with the dydx or is it starkware's responsibility to get usdc onto the l2 who goes out and talks to

coinbase in gemini and says come and deposit is it come and deposit usd user funds into dydx or is it come and deposit you or us the user funds on to starkware who who's who who's got to do this job i think both of us yeah i mean obviously we both have a lot of incentives to be able to do this um i think you're exactly right i mean i think the ideal system that we want to build here is just have centralized exchanges and more broadly just like any crypto products that people support even other layer twos just have really seamless interoperability uh with starkware and kind of the system that we're building um so yeah i think it's definitely something that we're both working

together uh towards in terms of getting a lot of those integrations for the future and and i want to say that the fiat to to crypto uh on-ramp services you know like wire and moon paint all those guys they're not terribly happy with layer one uh transaction fees because of their user experience right so if i you know charge 100 bucks to my visa and end up with 20 bucks worth of eath on layer one you know i'm not terribly excited by uh by that user experience so if i can move funds directly to layer two without going to layer one and a tiny fraction of that cost that's a big win for those services as well you know i've been kind of waiting for like um the crypto bank's answer to something like binance chain

um and what i mean is like other crypto banks like maybe kraken or a gemini or or a coin base right because binance approaches we're going to create this whole side chain thing and we're going to push all of our liquidity into the side chain that they as we talked about earlier have some have some pretty strong control over i've been waiting for like a coin base or a gemini to say hey we want to provide liquidity to this layer two ethereum secured uh chain and really kind of like push push that i'm not sure if they're any closer to doing that do you think that's how um this competition will will shape up

between the the finances and the other crypto exchanges i i get that that gets into some speculation but i'm curious about how you think this competitive industry shakes out you know i can only speculate about that but uh having uh sort of seen the you know coinbase s1 and the material coming from from that direction these are operations that are profitable to a degree where it's difficult for them to sort of entertain things outside their sort of main focus right now and defy as exciting as it is for us and has been for a good while um i think it's going to take time for the centralized exchanges to sort of you know step back and say this we need to seriously rethink our

business in a fundamental way not you know not as sort of some uh a side you know a small team you know over on the third floor that looks at this but you know this is going to affect the the whole business here and i think there's a reason you know why dydx is a startup that that sort of started afresh and built this thing from the ground up i think you need to have a fresh team and a fresh approach to do these things and i think it's that's not easy for established companies so guys as we come to a close here and again uh thank you for coming on and sharing us uh your time and answering some of our questions uh antonio i know we asked this when you came on to our ama forever ago but uh the youtube chat

box will absolutely kill me if i don't ask this question uh when dydx token oh oh man yeah i knew it was coming um everybody asked me this i mean i'm just gonna give you the same answer i've been saying for a while now it's probably what i said before like we believe that the best way to build dydx and make uidx huge in the future is first of all to build a great product i mean our goal at dydx is to become one of the biggest crypto exchanges period like on a three to five year time horizon from now um and we think the way to do well you know i would argue the way we know that how to do that is first building a great product and that's what we've been focused on for like three and a half years now i mean that's why i'm

so excited about this newest product built on top of starkware obviously we've been talking about it but think it's a huge leg up and now we feel like we have that product um which can play like in the big leagues is every bit as good as like centralized exchanges and of course it's you know it's still something that's early we'll continue to improve it over time so we're not done yet but we think we're on much better footing now um so i think we're thinking about it we're obviously paying a lot of attention to what's going on in the space really big champions still of kind of decentralized governance really excited about that community involvement um so no specifics but it's something we're definitely tracking um but we're still laser focused like we have been for the past three and a half years and

we've gone through two cycles of this now right with the like 2017 icos we were there for that um and then this most recent kind of like liquidity mining craze we're here for this as well but now i think the difference is we really feel like we do have a product that's just launched today which can be successful um and then kind of thinking about what comes next after that guys uh this has been a phenomenal conversation i think we we married sort of the the defy app perspective and the scalability solution perspective really well um i i want to end with with this question i'll first direct this to antonio and then uh yuri can comment on it but the question in my mind is there are all these shortcuts you could take to scalability and many chains have

arguably taken these shortcuts many defy applications scalability solutions have taken these shortcuts um the the path you guys have chosen has been harder it seems like right it's it's it's taken longer to get to to this point and i want to ask the question that we we sort of ask many teams in many projects which is this why go to all this trouble is the decentralization that you're getting on the other side of this worth it maybe antonio you could comment first yeah i mean obviously i think the answer is yes and wholeheartedly um i think just what i was alluding to before and kind of talking about with a lot of the limitations of centralized exchanges and

remember when we talk about centralized exchanges it's not just centralized cryptocurrency exchanges it's literally the entire global financial system that we're talking about there right so it's like these things where there's no auditability in the systems there's no transparency in the systems they're very permissioned uh you know you have to trust your funds to various third parties when you're trading on them that's the way all of finance works and now we have a chance kind of for the first time and i'm not the first to say this right but just like jumping on the bandwagon where we can reinvent that and rebuild that for things that are really core to the financial system obviously the thing that we're focused on at dydx is specifically applying all of that to derivatives contracts but i think that's actually a really great and kind of

prime use case for a lot of these advantages based on kind of what i was saying before currently very permission they're currently very black box they're very very trusted not only with your funds but with the execution of your contracts and if you can take a lot of these advantages of decentralization and apply them to this literally the biggest market in the world in derivative contracts um we think that that's just a complete game changer for from the whole global financial industry potentially right and and that's the biggest market in the world and we're excited to tackle it so i would say emphatically yes yuri same question to you why why go to all this trouble so uh the reason we we go out to this into all this trouble is because we sort of try and think you know a few steps

ahead and the basic question is okay what if everything we're doing succeeds you know in a phenomenal way and this becomes a thousand or a million times bigger okay so we're not dealing with uh just let me pick on nfts we're not picking with nf i'll pick we're not looking at nft cards that trade for 10 bucks but about 10 million bucks or a hundred million bucks okay now if that asset is sitting on some side chain and suddenly this thing is worth 100 million dollars i wouldn't be sleeping well at night okay um if your application scales massively all of a sudden and then you need to handle you know many more transactions etcetera and something capital efficiency is just a huge factor you know how how do you consider these

things and the way we see it building layer two on top of ethereum building uh a validity proof system where the the only thing that's allowed is a valid state transition in the system without any reliance on the integrity of the operators etc that is a path forward we can say we can see this thing massively growing and it doesn't fall apart and that means there is a business to be built for us and for the likes of dydx and any application developer out there that's that's that's why we're doing it the way we're doing well very exciting guys we certainly appreciate your efforts and it's been a pleasure to have you on bank list thanks so much

thank you thanks so much for having us guys action items i think the best thing you can do with later to today and with dydx today is try it yourself so you should go to the dydx exchange it's now deployed on layer 2 and try it out if you do so we have a special code that we could share with you it's in the show notes it's trade.dydx.exchange slash r slash bank list that will give you ten percent off your trading fees so get your metamask wallet connected and try out layer two try out dydx of course guys we end every episode with this risks and disclaimers ethan's risky bitcoin is risky crypto is risky so is

d5 you could lose what you put in watch out for that margin guys but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the bankless journey thanks a lot