Sunny Aggarwal: Osmosis – The AMM Protocol Built for Liquidity Providers #400

Transcript

this is epicenter episode 400 with guest sunny agarwal [Music] welcome to epicenter the podcast where we interview crypto founders builders and thought leaders i'm fredeka anz and i'm here with zubin kutticha today we're speaking with sunny agrawal who all of you know and love as one of our epicenter co-hosts but today we're talking to him about his project osmosis which is an amm thing on cosmos we'll get into the

details in a bit um but before that let me tell you about our sponsor this week solana is the next generation blockchain with lightning fast blocks and fees less than a cent per transaction scalability is perhaps the single biggest challenge preventing crypto from becoming the backbone of the world's financial system go to solana.com epicenter to learn more cool sunny it's super funny to actually have you on the other side of this uh for once it's weird it feels really weird osmosis is a pretty pretty recent project right so it's not been the wrong uh it's not been around for a long time so tell us about how osmosis came into being and uh

and about the team and uh what it does in a nutshell yeah sure um so it's about uh the project launched about a month ago um but maybe worth talking a little about the history of the of the project the you know i think i was on i i particularly was actually my second time being a guest on epicenter i was on as well maybe a year and a half ago uh me and ethan buckman we talked about cosmos and i think it was like shortly after the launch of the cosmos hub um and yeah so uh basically last year uh we i left the core tenderman team uh and i sort of went but you know still wanted to keep

working on the cosmos project and so i went and you know i had a validator that i'd been running for a while called sikka and we started sort of running our validators and we were just experimenting with all sorts of different things uh we realized you know running validators is not the most fun thing in the world i mean it's okay but you know we want to build stuff um and we're trying to figure and you know this is right around when like deep by summer was happening on ethereum and we're like well all this d5 stuff is going super cool let's like how do we bring it to cosmos and so we started experimenting with like different kinds of things that we want to build uh we got re you know so me and my co-founder dave oja we were like you know experiment with a lot of like privacy

stuff uh we got really interested in front-running resistance and so we started building that out spent most of all building out a front-running prevention scheme um and realize it's a cool feature without a product and that's why we're like all right let's actually launch a dex uh called osmosis so it's the first sort of dex on the cosmos ecosystem that's like ibc enabled uh and that's sort of like you know in parallel while we were working on this osmosis thing we were also contributing back to the cosmos core development and helping with a lot of the the work that was going on there and i supposed to sort of we got our chance to be like the first chance that uh what inter blockchain communication protocol was used at scale

and so this is sort of the first real time that like the cosmos vision has sort of come alive um oh and then one thing i also mentioned about the team is we kind of actually merged with another team called uh chain abscess so they built their uh the kepler wallet which is sort of the metamask of cosmos it's those popular walled on cosmos and so our syca validator company kind of merged with the wallet company and we started building this osmosis project together and so we've been doing that for about six months and until we launched last month super interesting i'm fascinated to get into the wheat because amms and mev resistance seem to not go together very well but

uh we we'll get to that um so let's talk about cosmos first right so basically osmosis runs on cosmos is it is it its own zone nor does it run on cosmos hub and maybe for for the for the listeners who are probably mostly familiar with ethereum can you kind of put these into a larger context so osmosis is a chain in cosmos so yes it is its own independent chain it has its own validators it has its own staking token as its own security model uh but what it means as part of cosmos is that it enables this ibc protocol and this idc protocol is what allows it

to talk to the other chains in the cosmos ecosystem so whether that means the cosmos hub you have the akash network chain you have regen chain currently we have about eight chains connected right now although i think another one just launched yesterday so it'll be nine hopefully by end of day today uh so yeah we have we have more and more chains uh that are connected but yes it's built using the cosmos sdk and like the tendermint software stack which is sort of a lot of the stuff that i was contributing to back when i worked at the tendermint team uh but yeah it's its own change outbuilt using this uh stack so the ibc just for so the ibc is the internet of

blockchains um what exactly does that mean does it mean that the the the standalone chains kind of trust each other or that there's shared security layer or what's what's the what unites them yeah so ibc it stands for inter-blockchain communication uh what it is is it is a generalized bridge protocol so you know at this point i think everyone's familiar with bridges and like you know you have a way of moving tokens between two different chains but all of these bridges right now are very bespoke and for every like chain wise pair you usually have to have some trusted set that maintains the bridge and all this kind of stuff with ibc the idea is

let's build this native generalized bridge protocol where you have two chains let's say you have chain a and shade b chain a will have a light client for the consensus of chain b on on on chain a itself and so it's part of the state machine itself and it's doing like client verification and so this way your security of your bridge is equivalent to your to the security of the counterparty chain um and so this allows people to sort of you know basically send tokens between these chains uh with no additional trust assumptions they have to

have trust in the two chains because you know if you're you know you're if you're holding tokens on chain b and you want to move into china you obviously have to have some trust in both those chains but you don't have any additional trust assumptions on top of that and what what's nice is um because we use the tenerman consensus protocol which is this like fast finality chain where you know it comes to consensus on every block and you know once a block is committed there's like it will not be reverted uh this allows this like cross-chain communication to happen very quickly you don't have to wait for like minutes or hours or you know days for like some sort of finality guarantees you can say okay i want to send a token from shane a you know one block happens

and then chain b receives it and you get it and also from the developer standpoint to create these bridges is very simple because when you want to open a connection with two idc enabled chains it literally just requires making two transactions on both chains so you know you don't have to get validators to run new software you don't have to run you know all this new stuff it's just like transaction transaction you have a connection and now these things can start talking to each other that sounds like it's potentially dangerous we're going off on a tangent here but what prevents you from kind of scamming this mechanism uh yeah so you know what what happened so if you actually go right now there's a site called map of zones

uh and what it does is it has a overview of the cosmos network right now with all the the list of all the ibc enabled chains and you'll actually notice a lot of them are there's like on that on the thing there's probably hundreds of chains but most of them are actually just test nets and like on you know weird chains that people just spun up on their computer for an hour to decide to make an ibc connection and to ibc it doesn't know the difference right like it doesn't care it doesn't know that something's a main net with like economic value or if it's a tesla that's running on my computer uh so basically the idea of the ibc cosmos vision is a lot of this is pushed onto the users where you design

protocols such that the um if if a user trusts chain a and they trust chain b they can like move their a tokens onto chain b and do whatever they want but any other user that's also uh has to a tokens on chain a if they as long as they don't move the tokens onto chain b they're not going to uh be affected because the ibc you know it keeps track of how many tokens were ever transferred over a connection and it will never let more token more than that number of tokens come back so it's sort of up to users to decide which chains do they trust and want to interact with so it's kind of a web of trust um architecture is that correct where

basically the nodes across which you can actually send tokens correspond to um how trusted the connection is by connections by users yeah it's up to individual users right like i i think that the uh region network chain is trustworthy and you know i want to interact with it the question is would you be willing to hold tokens natively on their chain in the first place if so then you should also be okay with holding ibc tokens transferred to that chain as well okay i see but you might not be okay with that you might not trust that chain and so you're not going to and you know this happens already today right like all right like let's say let's say chain that's like somewhere

it's a little bit sketchy but it is legit like something like tron right it's like all right maybe i think it's i think it's okay to hold tokens on tron because i think it's secure enough but there's obviously a reasonable argument for when many people are like no i'm never going to hold tokens on trump because it's a centralized system or whatever it is and and today we already do that right like i can hold tron tokens and you don't have to it's the same model for idc as well it's up to users to decide what they trust or don't okay and did you did you just say that there's currently eight ibc enabled chains in the cosmos network there is eight when cosmos when osmosis launched i believe

at the moment there's ten so in the last two last month two more okay and can you give us an idea of of what kind of uh chains they are what they do what the ecosystem looks like yeah so i mean there's a there's a wide variety of different chains right now so there's um a project called uh akash network where they're trying to build like a sort of a decentralized cloud uh similar to like uh you know build a decentralized version of like aws essentially uh a compute market of sorts um and so you know the they're they're one of the big ones you have um chains like uh the crypto.com chain

which is like this like large exchange their chain is actually built on the cosmos sdk and has ibc enabled so it's interesting that a number of different big exchanges actually use uh the causes sdk for their uh change but dot com was the first one that actually enabled ibc and is using it you know actively uh you have things like region network which are this they're a carbon credits marketplace uh there's um there's a sentinel which is this like decentralized vpn service uh so you have you have you have all these a couple of different chains and you know it's interesting that in in cosmos right now it's sort of like a very it feels like ethereum if you go back in 2017 there was like you know i feel like

most of the things that are interesting things that are happening on ethereum right now are like mostly device stuff uh but i think like but back then there used to be like a cool combination of like d5 and web 3 and all these different things i think you see something very similar happening with cosmos right now and especially a lot of these uh products that were sort of priced off of mainnet ethereum because of you know d5 just like takes up all the bandwidth on mainland ethereum i think a lot of these projects are starting to like migrate onto their own chains which like you know so some of these probably for example sentinel they used to be on ethereum and they actually migrated onto a cosmos chain for this reason now let's talk about solana we all know that scalability is one of the most

important issues facing the blockchain industry today the solana blockchain has been engineered from the ground up optimizing for performance and scalability the network supports thousands of transactions a second with 600 millisecond block times and over 500 different validators it's not a shorter blockchain but a single blockchain hyper optimized for performance and that makes it easy to maintain composability between the apps on solana so they work together seamlessly the solana ecosystem is growing at a rapid pace and it's a great place to build your project and get involved with the community so go to solana.com epicenter to learn more what was the um amm landscape look like

on cosmos right now are you guys the first amm are there other amms coming about and does it look like you know uniswap constant factor market makers or is there new ideas being pursued in cosmos yeah so um we're not the first amm built using the cosmos sdk uh there was a you know so one so for example there's a project called secret network that they built this like uh uh sgx based like smart contracting system and they have an amm on there called secret swap so that was running uh the biggest one is is thor chain right so thor chain is this like you know i i absolutely

love the thought chain team uh and project and you know they have they're they're they were sort of the first people to build like an amm using the big major scale amm using the cosmos sdk uh and they don't have ibc enabled yet but i know they will be working on that very soon but they're they're kind of focused on a different market where they're trying to uh connect to like bitcoin and ethereum and like a bunch of bitcoin s chain so they're kind of going for a different target market than we are right now but yeah we were the first ones to have uh sort of ibc enabled and being able to provide liquidity to all the all these like tail end assets that are built being built on the cause on the cosmos sdk right now and then

there's more amms in development right now so the cosmos hub uh actually is building their own amm called gravity decks i have all these reasons why i think that like it's not you know i was as a core developer i was heavily against uh putting a dex on the hub which is what you know when we started osmosis we actually started from the idea of like hey we're going to build this as a decks on the hub and as we thought through it we realized well there's all these like different reasons why building something on the hub like this doesn't make sense um but you know we were outvoted in on chain governance and so there's a decks on the hub now uh called gravity decks and they launched like two days ago actually so um yeah i i think the you know amms

are obviously one of the most fundamental building blocks of defy and i think you know the way that you're going to see d5 exploding cosmos is you need to see multiple amms sort of all competing with each other and like trying new things and so you know i think the gravity decks people are working on like certain things uh what we have right now is actually very similar to balancer i mean admittedly it's it's i'll say it's basically a clone of balancer we we took the balancer code base and like re-implemented it in the cosmos sdk um so we didn't code basically took their white paper and re-implemented it re-implemented it in the cosmos sdk uh and that's sort of our basis and then on

top of that we're gonna start to build all these like cool innovations that we have coming up soon why not build an amm on the hub what is your philosophy there yeah i mean so i think that the cosmos hub is really the core feature and use case of the cosmos hub is shared security where there's a number of you know for example osmosis you know we are we want to secure way more assets and but you know we just don't have the security that the cosmos hub does this cosmic atoms are this like multi-billion dollar market cap coin and that you know i think what it should be doing is taking that security and offering it and leasing it out to other

chains that want it similar to what polka dots relay chain does and i think that's really what the cosmos hub was meant for but i think by putting a dex on the hub it kind of ruins the credible neutrality of this like base layer l1 like the consoles hub really is supposed to be this base layer l1 and by putting a dex natively on it and i've just noticed like a massive shift of resources within the cosmos hub development team going towards this dex as opposed to like shared where it should be going which is shared security you know imagine ethereum had a native dex that was like built by the ethereum foundation and like instantiated in the chains like would uniswap have been built on ethereum

would i i just don't i think like you look at you look at like finance smart chain right the only people building on finance smart chain are people who are being basically paid by binance and if you don't have that like credible neutrality at the base layer it's very hard to like build an organic system on top of your l1 which is okay because you know the cosmos hub is not this like the basis of the cosmos ecosystem the cosmos ecosystem is sort of a much larger vision than just the kosovo's hub and they are sort of distinct but you know as someone who is also very you know active in the cosmos hub side of things as well i would have liked to see it go on a slightly different path but i think it could still happen i think a bit i'm willing

to bet that within a few months gravity decks will move on to its own chain what do you think will cause that um just a a a realization that like this like shared security model is probably like where the real value lies and like this gravity like the the cosmos hub should not be competing on becoming a d5 application and i think that people will start to realize that as like you know i think it'll look bad for the cosmos hub if it tries to become this defy application then isn't able to compete uh uh at being the best device because the problem wasn't designed to do that like you know every all the tokenomics we've designed and everything that went into the classes hub went in

with a very different purpose and so it'll be interesting i i think eventually you know hopefully they'll they'll see that you said earlier that osmosis kind of launched as a clone of balancer you you kind of position yourself as an experimentation center for amms though can you talk about that for a little bit yeah sure so there's what i call the cosmos mindset and the cosmos mindset is this idea that like we believe in localized systems we believe in systems where like you know spread a thousand flowers and see what blooms right and that's

sort of the vision of the cosmos like okay let's have all these change some of them will fail we'll see what ends up happening and i think balancer is that the closest thing to that mindset but for amm design where it i think it's the most like generalized amm that exists currently on ethereum with like as much flexibility and like you know you can change the weights and create the pool you can have like different multi-asset pools you can have you know you can have two different pools for the same asset pair and is that the most efficient probably not but i think it's the most in line with the cosmos mindset and so that's why we were you know most intrigued by the balance or design and we decided to implement that

uh but as we go on you know i i think what's going on one of the so one of the key visions that we started with when we started osmosis was i wrote a blog post almost over a year ago now back in maybe like february 28th where i said you know it's called dalifyin uniswap and i basically said hey this like amm thing is really cool but it's way too simple right now it's like x times y equals k cool but you know i think it needs to become more powerful and like just more smarter algorithms and since then curve came out and balancer came out and all these like a lot of am innovations happened obviously in the last one year uh but i think i think it can go even further i think like and we're starting

to see that now as well right now you see all the v2s and v the curve v2 and usb3 and you're seeing like it's still going forward and essentially what we want this whole idea of being the amm laboratory what that meant was we wanted to build a place where it's very easy for people to design custom amms and have them like and and then osmosis provides like all the standardized interfaces and uis and everything but in the back end the amms could be working completely differently and a lot of this actually was came from like watching zubin design a lot of the uh amms for options that us he's been working on for like you know many months now and so you know

i saw that when i saw him like designing that that also like helped me realize that yeah look the design space of amms is still so much left to explore because i think as we have like new types of financial instruments each financial instrument will like need its own specialized amm essentially and i think these are current ones are great for spot assets and like very specific spot assets at that um but i think yeah i think there's so much more room to go and when i say amm i'm actually you know i don't think i don't think of them in terms of like this x times y or like this like two-sided amount i i think like i have this mean that we have or we have this meme internally which is like amms ite but bonding curves though because i think like bonding curves are

they you know the original amm essentially and like i think there's a lot of uh cool design space to be had there when you explore with like one-sided amms for creating like financial derivative assets and things like that so i'm a big user of osmosis and i'm just wondering like what's your road map how is osmosis going to to change the world and change defy um and when are you gonna also uh have a stable coin on osmosis the first part uh for the road map we have a lot of things we want to work on uh but so we basically we've prioritized three main like big pillars that we're gonna like focus on for the next like

six months uh and these are the three things we want to start with so one is better amm designs um and so whether that includes things like concentrated liquidity one of the ones that we're really working on is batching uh because i think because that kind of feeds back into a lot of the meb stuff that we're doing where uh we want to make sure that like okay if you have two you know trades coming in different directions they could be batched against each other and where it comes from really how we think about it is that you have it'll make actually maybe more sense but if i come back to the batching in a second the second piece that we're working on is a something called threshold decryption so that is our sort of grand project to like solve front

running which is it's a method of encrypting all transactions in the mempool and they only to a threshold key of all the validators and once they the validators commit and finalize a block in the order of trans ordering in a block on then and only then do the all the transactions get decrypted and executed and so this basically makes it impossible to front run because you can't read what's in anyone's transactions and this like no more sandwich attacks or anything like that um and you know we this is like i mentioned before we did a lot of fall where we were exploring all the different techniques of doing mempool encryption we had like sgx's which has its own host of issues

for many many reasons uh you have time lock encryption which has its own set of issues for like uh around like ux and security and stuff and then you have threshold decryption and you know which you know physical encryption also also has its own issues of course but you know we spent a lot of time looking at the trade-offs and we came to the conclusion that like okay this threshold uh encryption model is definitely the way to go and so now that's what we're like building right now and like building it into the tendermint we have our our own like sort of fork of tendermint core where we're adding this in natively and so yeah so that so that that will help solve the front running and then so then going back to the batching why we think batching is important here is if you have a system where no one can

read the transactions you know the order the transactions that are about to go in the block you know the order of transactional block are really just random and they're kind of meaningless um and so it seems but that what order they end up being executed in means that everyone gets a slightly different pricing which seems arbitrary to us like why should this random ordering effect what pricing people get and so that's why we want to create a batching system to make and so to create what we consider a fair mechanism and we have you know i think people often use the word fair but then they don't have good definition they don't define what they mean by fair and so we what we've actually done is we come up with a definition of fair which means that you take all

permutations of all orders of transactions in a block everyone will be getting a different pricing let's give everyone the average price across all permutations of orderings within a block and that's like the execution clearing price that everyone would get and i feel that's like that basically removes the arbitrariness of transaction ordering within a batch i have so many thoughts so in a way what you're doing is basically you're amalgamating you know from from an ethereum point of view shutter network and cow swap said correct yeah yeah so we've been working on this thing for a little

for about like nine months now yeah so shut up so that looks cool the problem with doing it on so the reason why it's beneficial to do this on your own chain instead of on ethereum is you just have so much more flexibility on like what you can do on your own chain so for example shutter network has to be done as this sort of like overlay system on top of ethereum but with your own chain we have the ability to bake it in natively into the consensus protocol and make it such that decryption of transactions has to happen atomically and in lockstep with consensus itself and there's no you can never get into a situation where anything is committed but undecryptable and you can't or the other way around if something is decrypted but it wasn't

committed we have all these ways of creating slashing conditions for that so you essentially get the same security as your consensus protocol itself okay and and then the second part with um the batch auctions yeah so basically from from my own experience working with gnosis protocol v2 and cow swap basically finding optimization conditions that make sense is super difficult i mean so basically even even if you look at the average prices it depends on what you measure the average prices in right so depending on what your basis vector is um the average price and the fair price is going to change right no actually can you explain that a

bit more yeah so basically if you look at um at the average prices of different assets and basically you say you go um for for the average it depends on what you measure these prices in right basically what your unit is your unit a unit of account depending on what your unit of account is the average is going to vary yeah so you actually have to take so we're dealing with four types of orders right now which is out given ins in given outs and then the same for the other direction right out given in so a give me the out given in for asset a given given out for asset a then give me the

outcome in for asset b and then the in given out for asset b and basically we need to create an algorithm that gives us the takes all four of these transaction types and gives every individual the average clearing price and i would call that i don't know maybe maybe the word fair is not the right word to be using here but i think it's the one that removes the bias of ordering and i think you know that's how what we're defining as is that you what is the because we so you know epicenter hat you know we just did the episode with uh with the uh with the gnosis protocol and you know there they had a sort of a different definition of what the utility function for your batching system

is where they have this concept of surplus value uh and you want to maximize the surplus value that's given to traders uh that's based off of where they think the slippage back what what prices they're willing to accept versus what clearing price they get and i guess we just have a very different definition of what is the what is our batching mechanism trying to optimize over and what we're trying to optimize over is removing the bias ability of ordering because you know we kind of remove 99 of the mev by our front running resistance and all we're left with is the uh arbitrariness of the order and we're just trying to remove that arbitrariness okay but basically you're you're um very much in the mev

must be combatted camp because i mean there's also the converse camp that says um mev must be extracted right so basically the flashbots uh camp yeah and very much in the meb can must be combated and it's this like it's like a moral issue for me i think i think this is fundamentally a privacy violation like you should not the fact that you're able to like read other people's uh intents before they commit them uh seems like a privacy violation to me and that needs to be combated there are specific forms of mev that i think i actually gave a talk at the uh flashbots like mev conference last week where i kind of categorized the different types of mev

and you know it's pretty good categorization but when it comes to you know you go down this tree or categorization you get to this thing called transaction ordering uh manipulations and within that there's what i call relative ordering and absolute ordering relative ordering is when you're trying to position your transaction in relation to someone else's transaction and that is what i think and but to do that you need to be able to read someone else's transaction that is what i'm trying to stop right i don't i think that is like where the issue comes that's what sam sandwich attacks and all and like you know back running and all these kind of things that's that those are all examples of relative attacks

now you have like what i call absolute ordering attacks where like you're not trying to position relative to someone else's transaction you're just trying to position yourself in a block so you want to be the first person in a block for example because you want to go run some liquidations or you want to go do like some exist arbitrage based off of some existing state of the network right that is i think is a fair that's not what i'm super concerned about i mean you know we've spent some times figuring out solutions for how if we did want to get rid of that how we could do that but i'm not concerned that i'm not convinced that that's what we need to get rid of and i'm in that kind of thing i'm open to having like auctions and things like that

what i'm not okay with is having auctions in order to extract value from other users that's totally fair so maybe if i zoom out a little bit um what made you build this on cosmos with a very i'll be gracious and say nascent d5 scene i mean it sounds like you have a lot of very advanced opinions and ideas of how to combat these things that are currently happening in a really large scale on ethereum but you're building solutions on a network that currently doesn't have that problem set how does it fit together so keep in mind i'm biased because i've

been building the software for cosmos for four years and i do think it's the best software blockchain development stack that exists today um i think that and part of it is because to do a lot of the things that we're trying to do you need this like low level native access to your chain so you know like i said threshold decryption we need this at the we need we needed to like change the consensus protocol itself in order to make this happen we needed to like one we needed to invent new cryptography to make our threshold decryption scheme work and then we needed to like integrate it into the chain which is something you know we can't do on ethereum today or our batching systems right

we need to um like build like we need we want code that executes automatically at the end of every block and yes you can do this on ethereum by building overlay network you can build relay networks you can build shutter you can build all of these things but it's like you know i just don't think that's the right ux i want this to happen natively in the chain and also as i mentioned as well very importantly with the same security guarantees as your chain itself where i don't want this like threshold decryption to have us different security assumptions than the consensus protocol um and so that's kind of why it's important for it to be on its own chain now just as it's on its own chain

doesn't mean it's not going to be part of the ethereum ecosystem i mean i don't know if people realize polygon is basically built using the cosmos sdk it is like it's built on tendermint core using the cosmos sdk and you know i don't think anyone would argue that it's not a core piece of the ethereum ecosystem right now and so you know our osmosis will you know currently we focus on just connecting to the ibc chains right now but like very soon we'll be connecting to the wider ethereum ecosystem as well so in so basically the bridges are something that is kind of a mystery to me how exactly it works so basically the bridges within the ivc

they're kind of built in but there's also grav the gravity bridge right that that bridges um the ibc networks to um to ethereum how does that work and can you and principal actually have an amm that works across this bridge the gravity bridge is essentially so ibc requires building a light client for the other chain in the native in another in their chain typically what we do is build this into the core code base of the chain itself uh so in the causes sdk it's in the software of the cosmos sdk to be

able to do this you can also if you wanted to write this like client system at a smart contract layer so you know i think there's a team working on doing this for solana where they're you know solana is reasonably scalable thank you sponsors uh that they can uh uh like you know you can actually build an ibc attendant like client in a solana contract and have it be performant enough but the problem with ethereum is it's just too expensive to do that like writing a like client a tendermint like client in ethereum people are working on it i mean that people are working on it but it's just a much harder lift uh than going the truth and just too expensive especially

you know six months ago uh where it would just have not been feasible from a gas perspective that's why for the ethereum to cosmos bridge we needed to go down the more traditional typical bridge route not using ibc and so in that what happens is you'll essentially you have this chain that is the bridge gravity bridge and you have the validators of that chain running ethereum nodes and acting as the uh like like the you know they all decide what when they witness an event happen on ethereum and then they they declare their witnessing of the event happening on the cause on the gravity bridge chain and then once they declare that uh once there's enough of a quorum of them doing

that then it triggers you know it emits the asset that's being bridged over so what does that mean for an osmosis ethereum amm bridge does it mean it's too expensive or does it mean it's theoretically possible but not feasible uh no uh it means that uh you'll be able very soon will be able to bring ethereum assets over the bridge into cosmos land and then uh trade them on any you know you can bring them onto osmosis and trade them uh on osmosis and you know they'll be like a multi-hop thing but like you know it'll be our ux will like handle all of that where it'll be like you know we want to

make it as simple as possible whereas like you know deposit ask ethereum if you go on the osmosis website today like you know it's you'll notice we actually don't use the word ibc anywhere because i really do think ibc and bridges and all of this stuff is like lower level things that users should not be the ones worrying about and so on the osmosis website there's like a deposit button and withdraw button which is like very similar to what you see on centralized exchanges today and you know it'll be the same where it'll have a button where it's like all right deposit eth and it will just your east will show up then after a couple of seconds into your osmosis wallet and then you can do whatever trading you want and then you

can press withdraw and send it back to ethereum one question i had was how do you bootstrap a new chain and make sure the security because you're not drawing from hub security so what was your process of making sure that there was security from day one uh a strong validator set uh sufficient like capitalization of like osmo et cetera yeah so one of the things that we did was we actually distributed all uh the genesis osmo via a quadratic fair drop uh what that means is uh it's basically an air drop to atom holders

uh the quadratic airdrop was basically you everyone got airdropped based off of the square root of the number of atoms in their in their address obviously we could not announce this before the airdrop happened so we had to take the snapshot first and then we announced the quadratic nature of it uh but yeah this was basically a way of like making sure that distribution is like even more decentralized than the you know the atom distribution uh and also because you know traditionally whales are going to be the ones that get more of the liquidity mining rewards so we wanted a way of just giving every uh all the atom holders a little bit more distributed stake you know unlike a lot of d5 projects on ethereum our token is also the staking token along with being like the governance

token and in order to be the staking token of the network you need to be sufficiently decentralized from like t equals zero you can't be like okay you know all the tokens are in the hand of the team and we're gonna have this liquidity mining program and then like you know look five years from now it's gonna have a decentralized token distribution we needed something decentralized from day one and so that's why we were able we we did this airdrop to make sure uh that had it and then you know a number of because it was distributed to adam holders that means all the cosmos hub validators by definition were airdropped uh uh osmo as well and so that's how we were able to bootstrap the validator set we did you know i know like a lot of new chains have to go look around

validator programs and all of that but you know because all hundred twenty-five the deposits have values had atoms you know i'd say probably the majority of them uh also became us osmosis validators as well uh and then how did the chain get enough security i mean i don't know market dynamics i guess i mean the price of osmo uh became enough from the get-go to to uh secure the number of assets that were bridged onto it what is ion because that's something else that people have mentioned has been air dropped recently yeah so ions are this uh it's the secondary token of osmosis and basically all right i could tell a

little bit about the story of ions uh where what happened was i wanted the smallest unit of osmo to be called ions and it was but you know how like either has whey or bitcoin i said stats so but then uh one of my teammates said no because he's like oh you're gonna make the wallet job more difficult because the standard in cosmos is you use metric prefixes uh for for like denominations of assets so if you have like a thousand it would be mili osmo or you'll have microosmo etc um and so and most wallets sort of expect this so i'm like okay fine but then when the test when we were doing the test nets

you know i really i still just really like the ion name and so i you know test that's particularly an emm i need two tokens to test with so i just used to put a second token in there called ions just to test my amm with and then two nights before the launch i just i don't know i was really tired or something but i just had this like stroke of inspiration like what if there was a second token in the genesis of the chain and i kind of just pulled this like all-nighter like i don't really even remember everything that happened that night but like there was like i woke up in the morning i was like all right i have a token distribution and let's just add it to the chain and i don't know what this thing does uh but

you know maybe people like it and uh do something with it and what's really cool is there's a huge community that has like formed around uh ions like it's probably one of the most active uh chats i've ever seen in my like life and it's one of my friends uh dylan uh from commonwealth we had him on actually a couple years ago but yeah he's working on a project called commonwealth and you know he has this whole idea called token curated communities and i was honestly a little bit skeptical of it until i saw it happening in front of my own eyes and like i accidentally created one where it's like this ion thing just created this like token curated community where just and they they're having like every other

day they have community calls for like you know all these like really active governance proposals and and what's crazy is jay who is like you know the founder of cosmos who's sort of been stepped away from the cosmos ecosystem for the last year he actually has gotten involved with this ion thing as well and he's in the chats like every day now talking about it he even has a bounty up for people to try to reverse engineer the distribution criteria for ions which is kind of funny yeah so i don't know it's just a big experiment to see what would happen if uh it's a meme coin and you know but can the memes become real we'll see well knowing that you're a big proponent of doge

i kind of know what your answer would be tell us more about this osmosis community because baby community building has been one of the least planable things in the d5 ecosystem and a lot of the ethereum defy communities are also i'd say peculiar in nature so how would you describe describe the osmosis community yeah the osmosis community i mean i think it's still like so early and it's like still trying to find its like aesthetic or its own uh you know culture what it was was um zubin and i about like

two or three months ago we made this like political compass chart uh if you know that the political compass meme where it's like left and right and then authoritarian libertarian and we planted every like major crypto community on this like chart it didn't make that much sense but it was you know it was a funny meme and like you know okay bitcoin is very libertarian right ethereum is like mock like left like moderate left and then like somewhere like not as libertarian as bitcoin and like dogecoin was at the farthest left and we had we had this whole like thing and i think tom zuma's twitter and then someone asked me like oh where does osmosis fit on this and i'm like i don't know we're figuring that out right now as we have this like literal conversation is like the this discussions that we're having in these

early days is what's setting the community culture and so what's cool is uh a lot of the i mean we were able to bootstrap a community pretty quickly thanks to this air drop where like you know the atom can we kind of a lot of the atom community has come over and become osmosis uh community as well and then also just a lot of the communities of all these not just the atoms but like you know uh we we connected to all these like other chains right you have like crypto.com you have the akash network you have the region all of their communities have also sort of become part of this osmosis community as well because this is sort of the first time that a lot of these projects have had liquidity on their tokens and so a lot of their users have like either

and but by by being lps on it they're earning osmo tokens thanks to liquidity rewards and so now you know so they're also really excited about being part of this uh osmosis community as well and then there's obviously like there's a little bit of drama that happened sometimes between uh the osmosis community and the cosmos hub adam community and i really think i don't know if people have read like any of like renee gerard's work on like memetic uh conflict and stuff where it's like you fight the hardest with the people who are the most similar to you and i think that's sort of what's happening a lot right now between some of the inviting between the atom and osmo community but i i do think that's sort of a

temporary thing that you know i think i think will get resolved over time and i think the osmosis community is really supposed to like we try to be as pro atom as possible because we are there's another meme i had which is like the father of the sun and the holy spirit is atoms osmo and ions i don't know what that means but it fits really well well you had it here first um so sunny i mean it's been a couple of weeks and um the community is kind of uh blossomed where would you say it fits on the four quadrant model that you just talked about i mean you said that you didn't know when when when before you launched it but now it's been around for a little while

right i still don't know yet i don't i don't think i don't think it's something that gets set in four weeks i think you know i mean it took bitcoin years to find out it's like culture it took ethereum years to find its culture i think culture is not something that ah is defined in four weeks i think culture is this like more long-term process and i i i actually legitimately do think it's too early i think what's happening right now is the community is finding it's like you know i mean i don't want to use the word like the leaders or like you know influencers and like you know there's people who didn't even get any tokens in the airdrop but they just have gotten really passionate about the project and have done like are stepping up as

these community leaders and are like you know hosting government community calls and like writing governance proposals and stuff and so i think you know i think we're still in this very early stage of it that it's hard to really pinpoint anywhere yet what's your role in the community my chief troll i don't know i like to spend a lot of time in the community it's fun because it reminds me of like early adam community i used to spend a lot of time in like the telegram chats back like when before the class was hub launched and you know i really enjoyed doing that and so i spend a lot of time in the telegram but sometimes it's a little bit too much where i'm like i need to get away from this thing and go back to like building the actual product uh so yeah i

mean my role is i'm the head of the development team and so you know we want to we have a we have a road map that we are really passionate about and we and our goal is just to execute on that road map and then you know we hope that the community sort of likes this road map and like works with us on like you know pushing this to the larger crypto ecosystem but you don't want to set culture you think that that's impossible to do from you know a single person yeah i think i think single people can influence culture i mean you know i i think i you know i share my thoughts in the community quite a bit

and like the kind of things i'm thinking about i i think it's a dialectic process i think it's like you know i'm communicating with the community but the community is communicating back and obviously i wouldn't say i don't have any influence over that but uh i try not to have too big of an influence over it i want the community to to figure out its own path which is why another reason why i try i try to not be especially on like the ion one especially right i try to not be too active on there i'm sort of passively following along and when someone asks questions or you know someone someone has something interesting and i want to say like you know for example people were talking about web of trust stuff in there yesterday and i you know if anyone knows me i've been

super passionate about web of trust for like number of years now and so you know i started telling them about you know brain dumping about all my ideas about web of trust and i talked about circles a lot and i talked about like you know all these cool things so yeah you said that um osmo is both the staking and the governance token so let's talk about governance a little bit um so what what does osmosis need governance for which parameters are governed you mentioned the stinking token one thing i just want to quickly mention real quick the third thing that was on our roadmap that's like the priority so one was the amms the other was the threshold encryption the third is um we're building something called superfluid staking which is this idea inspired heavily by like dan elliser's

post from a couple years ago called like superfluid collateral but the idea is we have osmo is one of like the main base pairs of the amms but it's also the staking token and this has this like weird tension on its like security model and so what we're trying to do is what we're going to build is this a super fluid state so you have these normal staking derivatives where what happens is you take a staked asset you stake it and then you get back this like derivative asset and then you go use it in d5 the problem is this completely undermines this entire like security model of proof of stake where it's like oh well i mean you were supposed to lock up these assets and

have them be easily slashable but if you could just like liquidate the ass you know it defeats the whole point what we're going to do is put this in the reverse direction so we're saying what if you use staking tokens in d5 and then take the d5 assets and stake them so you know the simple example would be something like compound like let's say there's a osmo i can go lend it on compound and get back c osmo and then i can take my c osmo and stake it and as long as there's a way for the protocol to efficiently know the conversion rate of like how much osmo is underlying this d5 position it should allow it should allow you to stake it and treat it as that because that's still slashable um and so while we're doing the one that

we're starting with is with the lp shares uh so if you have a pool that contains both osmo and uh you can then take that lp share and stake it and it will be treated as the underlying value of the osmo half of it um and so that that way it now when you don't have to choose between staking and lping osmo anymore you can do both at the same time and be earning both the staking rewards and liquidity rewards and this will just help the security of the chain um and yeah so i i i really do think this like idea of super fluid staking is gonna be it's gonna it's gonna be a

help a lot of the solution for how to like what you're asking earlier on about like okay in cosmos like don't you have this like security issue i i think this will be part of the solution for a lot of these chains okay so that was a long we're gonna answer that now to answer your governance question um what what are these things gonna be used to govern uh so i mean a couple of things right i mean there's uh obviously so what's super fluid staking you actually do need to specify which pools can be used for super fluid staking because you can't have a system where like uh you can't allow people to just like bring in any you can't create a pool of like osmo with like coin that i can mint infinitely because you can if you stake that then you can just like drain the

osmo from the pool uh so governance has to manually approve all of them that's one thing oh a lot of like the road map and software upgrades have to be approved by governance a lot of like the sort of like new amms and stuff like i i really it really is like you know there's a lot i think there's a lot of parameters in the system that will that will like have to be improvement governments and most of them really do come in the form of like road map esque like software upgrade style things i'm not sure whether i understood that correctly but you have purple governance right and not holistic governance why did you do that uh yeah because i think that the people

who bust understand the needs of their pool are the lps themselves so let's say you know you have this pool that's really popular it's um you know i don't know let's say it's an osmo eat pool and it has a 0.3 fee uh swap fee and you know let's say what's interesting right now what's happening right now in the crypto space or in the amm ecosystem is there's been this like point three percent meme that's been like standardized with unisop from for the past like three years but i think the entire space is in this process of like re-figuring out what the shelling point is going to be for this uh for this for what swap fees are going to

look like um and so i think you know you want a way for the lps of this pool to basically use governance to say hey let's go ahead and like well you could what you could do is create a new pool and then have people like fork off and like try to add liquidity to this new pool but that has like all these issues with like you know who wants to be the first one to take the leap and like you know you fragment your liquidity so instead if you have a way for the lp's of a pool to say hey let's all collectively agree to change our swap fee and if people don't like it they can fork off right they can you know we have a rage we'll have like a rage quick feature where like people can like automatically say okay no we want to stick with the old

parameterization of the pool so then we'll spin up a new pool that maintains the old parameterization so that that's kind of why it's a way of not splitting liquidity essentially that's sort of the main reason why you want lp governance ah i see ah now i no i think i'm wrapping my head around it because when i first heard this it seemed um like needlessly complicating things but when when you frame it like that this makes sense so can you give us an idea of what the current usage of osmosis looks like how much liquid liquidity iron pools and how much trading is going on uh yeah so i think we have about a

hundred million dollars of tbl right now uh at least when i checked last um and then the trading volume it was somewhere between like three to five million dollars per day um and so yeah that's kind of you know not bad for one month in we're pretty saturated right now where i think it's like a lot of the people who in these cosmos chains wanted to like provide liquidity are already providing and now obviously we you know we're going to continue to do that i think we're going to see the big flood of liquidity come in once we get the ethereum bridge up because that's going to be when a lot of the people who you know all the assets currently us on ethereum but actually there's also i'll be a caveat that with like you know

like i said i think there's more cosmos chains coming all the time i think you know it does in the last month since we launched there's already two new ones that i've added ibc and i think in the next coming months there's gonna be a lot more ones and then the other ones are like you know there's a couple of big powerhouses within the cosmos ecosystem like thor chain and terra i think tara actually has a huge swath of interesting assets so because they have like you know they have a stable coin they have their all right you asked question about stable coins but yeah the tara has a stable coin called ust they have all their anchor assets they have all their mirror assets so i think they have a lot of interesting assets that will be able to find liquidity on osmosis

but yeah once we get ethereum connected you know we're gonna be able to bring in like a lot of the stable coins that are on ethereum where uh we're going to be able to bring in like you know eat all the ufc 20s wrapped bitcoin um so and what we're really trying to do is like you know we want to focus on making sure we have the best trading infrastructure for these things when they come over cool super interesting sunny where can people find out more about the community where should they go to join you guys uh yeah so uh where our twitter is at osmosis zone our website you can just go to osmosis.zone

uh and there you know you can click the button to enter the app and like you know trade and everything or you know that should also have links to our telegram and discord and things like that and that's especially the best way to find learn more about osmosis the telegrams are especially some of the more active and so if you really just wanna if you wanna drink from the fire hose of the osmosis community i think that's the that's the place to go cool thank you it's been fun sunny having you on the other side of this uh we will have you back on our side you know next week or so but uh thank you so much for coming on awesome thank you guys thank you for joining us on this week's

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