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A | Welcome to Bankless, where we explore the frontier of Internet money and Internet finance. And today on bankless we are exploring the frontier of the multi chain Ethereum roadmap. The roll up centric roadmap has always been about producing many, many new layer twos, each of their own flavor, construction and type, in p... |
B | Yeah, thanks for having me. I was hanging out downstairs for a little while. I couldn't figure out what channel to get you on. |
A | So yeah, just like the problem that we're going to discuss in this episode, how do you reach me? Telegram, discord, email, Twitter, text. |
B | We need some kind of aggregator. |
A | Yeah, we need one single shared way of getting in contact with each other. You're in town in New York here for Mainnet. How's that been? Gone? |
B | Yeah, it's been good. Yeah. So Mainnet and EthNew York Pragma, I guess the ethereum hackathon conference. So yeah, it's been pretty good. Vibes are pretty good. |
A | Lovely, lovely. Do you go in and out of Australia or do you do a circuit before you go back home? |
B | This time I did because I went from Togo, 2049, landed in Sydney, and then 24 hours later hopped back on a plane to come over here. I had to pick up my kids on the way through, so I couldn't go directly from Singapore to New York, unfortunately. |
A | Man, the life of juggling being a dad and going to conferences and also being an app founder, I cannot imagine. |
B | Yeah, it's pretty hectic, but yeah, my kids are pretty good travelers now. |
A | Okay, so as I alluded to, there is a problem arising in the world of ethereum, the roll up centric roadmap, as great as it is for producing natural emergent solutions across the different modules that make up a chain. It also fragments composability. And this is like, kind of how I alluded to with like, how does, how d... |
B | Main net and optimism are the only two? |
A | Okay. And why not more? |
B | Good question. I think we obviously were the first project to deploy to optimism. We worked really closely with the team. I did try to warn people about this and say, like, hey, guys, why don't we coordinate around optimism rather than having 100 roll ups? But that ship has sailed now, I think. So we are in an environm... |
A | I would imagine with the demands that Synthetix has, the growing number of chains produces probably an exponential growing amount of complexity for managing those chains. |
B | Yeah, if you do it the right way. Unfortunately, we're not uniswap. Where Uniswap can just deploy their immutable code onto a new network. There isn't even the complexity of moving fees around. Fees sit on that network, they go to LP's, you flick a fee switch on, and all of a sudden the complexity goes up significantly... |
A | Right. And so what you're starting to allude to is that there are different types of apps out there that have different cross chain needs. Yes, maybe there's a few categories of this in your blog post, which is going to be the basis of this conversation. You kind of start to progress through the different kinds of apps... |
B | Yeah. So I think on the spectrum, the simplest thing is a Uniswap style deployment. It's immutable code, so you don't need to govern it, you don't need to upgrade it, you just deploy the code and it sits there. There's no need for fees or anything like that to go outside of the protocol. So there's sort of endogenous t... |
A | Right? |
B | Does that even make sense? Are they the same kind of stakeholder, or is it only the aave token holders who are staked in the security module or whatever on arbitrum should govern the arbitrum deployment? And then there's another area of complexity, which is fee sharing. So, okay, if there's fees that are being earned o... |
A | Right? |
B | And if it is, how do you then enforce that fungibility? Right? So you need bridges, you need cross chain communication. You need to know if the DAI is moved onto a different network and it needs to be liquidated, how does that liquidation happen? And so all of that stuff just adds complexity. |
A | Is this both, uh, if I'm understanding this correctly, is this both like a kind of a more higher level philosophical question of is the die fungible from, like, the social layer, do we perceive these things to be equivalent? And then the other problem is like, okay, maybe even if we do get to that point where, yes, eve... |
B | Think there's kind of three. There is the social problem, which is if I'm using Dai, what is the perception of a user of dai? Do they expect fungibility? Like, what is my expectation as a user of Dai? Then there's the financial layer of, okay, if my expectation is they're fungible, are they really financially fungible ... |
A | Really just to drive this one point home, the way that you describe this in your article is Alice has trust preferences. That maybe Alice is very conservative, and so she only wants to use, uh, you know, a very low LTV inside of synthetix on Mainnet, uh, with very good strong collateral because these are her trust pref... |
B | Yeah. And is there, you know, this is the financial layer, right? Like, is there a way that you can parameterize this to allow both of these people to interact with one another and feel comfortable, right? And. Or if not, is there a way for you to sort of cauterize the risk and segment and silo the risk so that, you kn... |
A | In the days of one great gas. |
B | Exactly. And then like 20 minutes later, it's March 2020, and you're like, oh, wow, this does not work at all. Like, it just is not possible for this to function, right? And so even if we have cross chain communication and we've got these kind of rudimentary solutions or whatever, do they scale to something that is acr... |
A | And just to, again, really just hammer on the definition of the problem statement. The many app ecosystem. If you have uniswap without governance, just raw instances of uniswap deployed everywhere, that's like problem level one, not too much of a problem. Problem two is when, okay, we have central uniswap governance an... |
B | It's the hardest level problem that we've thought of today so far. And this is, you know, like, it would not surprise me at all if synthetix or other protocols eventually come up with even harder problems that are harder problems that have to do with cross chain communication. There's some, you know, demand or some fun... |
A | Right? Yeah. And of course, just to throw a bone to the Solana camp out there, this is why they are like, layer one, one chain maximalists. Like, they get to be the composable chain because they only want to have one monolithic chain. So they're listening to this and be like, yeah, that's why Solana, of course. |
B | Yeah, don't fragment your liquidity, of course. And there's something to be said for that, but there's definitely a counterargument of like, okay, fine. I. But at some point, the l one monolithic thing breaks, right? |
A | And then they just kick the can down. |
B | Yeah, they'll get there, too. Great. You got ten x, more growth, right. But eventually you're going to be like, oh, this doesn't really work. |
A | Okay, without asking about the technical details, what's the vibe check on this problem becoming solved in the fullness of time. |
B | It's a really good question, and there's some ways to route around it. We've at the moment got these conflicting drives within the synthetix community. One drive is maintain s and x as the primary collateral in the protocol. Maintain the value prop of the SNX token as effectively as possible, do not devalue the token i... |
A | Yeah. In that model, you're kind of letting the free market. You're really leaning into the free market to solve a lot of problems, which I generally agree with. And like, as a design principle, the free market's powerful. Let it do its work. Okay. One thing I will give credit towards synthetics with is its seemingly e... |
B | Yeah. So I think it's worth calling out, though, that synthetix. We are very pragmatic, but we're also extremely dogmatic. And it's a weird mix. Right. So there's certain dogma within the community where it's like, you can't touch that. So for a long time, it was like, you cannot siphon off fees away from the s and X t... |
A | I'm liking this. |
B | Yeah. Okay. Zero chance that will ever happen, right? You know, back in the day, because we just said the instant you. It was almost like the uniswap fee switch. The instant you divert fee. Like, we had a fee switch that was on and welded shut. |
A | Right. |
B | You couldn't actually turn it off. Right. The opposite of uniswap. Right. It's like we basically, you know, jammed it to, like, full v switch on. All of the fees ever generated go to the token holders. Zero goes to LP's because the token holders are the same. And then we're like, let's make sure that no one can ever to... |
A | Well, this is just a good lesson in incredible neutrality that a similar EIP was put forth. Shout out, Kevin Aki Eip. I can't remember what it was, but it wanted to siphon off Ethereum, block rewards for public goods or something. We were going to take this, what was ideally this credibly neutral protocol, Ethereum, an... |
B | Sounds like a great idea. |
A | It's a great idea, but the community was super divided over this and over just like, the corruption that that might instill. Like, it starts off as a good idea, but what if bankless starts making content about XRP and how apps are dumb? That is not something that can be imagined in the short term, but then it might hap... |
B | Agreed. |
A | A small little divergence there. |
B | Yeah, but this is the same problem, right, that you really are trying to avoid. I trusting anyone, right? Like, you know, if there's no proper incentive mechanism to ensure that the alignment's there, then, you know, it becomes very risky, right? And so, you know, the same, by the same token, right, as soon as we're li... |
A | But if 80% goes really, it's the front end. |
B | The front ends are doing the work. Let's pay the front ends. We need them. They're critical to the ecosystem. There's an argument to try and maximize that. For my own personal benefit, I said, no, I don't want to be advocating for high fees. I don't think that we should be looking at the cost of running a front end tod... |
A | Holders, I get, I can find acquisition. |
B | Exactly. Yeah. You know, then I can choke off all of these other guys. And I was like, wow, I hadn't even thought about that. And so now it's a situation where like, it doesn't matter what I advocate for. Like, it's bad in both cases. So I kind of have to recuse myself and let it play out in the community. But, you kno... |
A | Okay, so as we're going down the rabbit hole, the idea maze of, like, trying to discover how synthetix has this, like, unified vision for itself. Where are, where are. We talked about the three phases of difficulty. We started to define the differences in composability of governance. What's next in this conversation? |
B | So, you know, the liquidity conversation is, can you get people across the line to let go of their dogma? Really? That's the question. We were very dogmatic for a long time about no fees to anyone other than SNX holders and no external collateral. We've had some wrappers and some other things, like little experiments, ... |
A | One of the tools in the tool belt for solving this cross chain liquidity issue is just cross chain bridges. I think Chainlink CCIp comes into play here. How does that help solve the cross chain problem? Can you talk about its involvement here? |
B | Yeah. So it helps in the sense that you can start to pass messages about the state of the different instances, back to the main instance. So, very good for, like, managing governance, managing deployments so you can have a unified governance framework that exists on optimism, let's say, that can pass messages to the ot... |
A | Liquidity profile, which is the golden standard. |
B | That's the problem that we want to get to. Yeah. |
A | Right? Yeah. Okay, so maybe one metaphor that's helpful for people to understand. This synthetix, a long time ago, has chosen optimism. You guys have been working with the optimism team since Unipig. Right. I think after you swap, it was synthetix. That was the second app that was using the OPD tech stack. This is synt... |
B | Yeah, if you've got eth sitting on arbitrary, more optimism, there's a bunch more demand on arbitrum. There's just a strong incentive to move over there and capture the fees. There are some fees that are only going to LP's. So eth stakers in this case, if you're staking eth on optimism and there's less activity there, ... |
A | This starts to feel like a little bit what Roon was going after with his maker Dao app chain. That is what he was calling the backend management of the DAO. And one specific chain that's custom built for Makerdao. And then just instances of makerdao splattered across the cross roll up ecosystem. Sounds a little bit har... |
B | Similar, except minus the crazy LLM salon neural tokenomics thing. Still haven't got my head around that yet. We didn't do our cage fight in Singapore, unfortunately. Maybe a permissionless next year we can put a sumo suit on or something and battle it out or have a boxing match. |
A | Yeah, the permissionless games, which is a meme I'm trying to incept. Okay, so that would be the synthetix app chain. Not that there is one instance of synthetix. That is the large central instance, like Dy. |
B | There's. |
A | That's a DyDX model where dy DX is like f chain. F. All the chains, just the Dy DX. |
B | We're going to go to the best place and we're going to. Yeah, we're going to deploy, you know, on the best ghost chain that we can find. Right. |
A | Why not do the dy DX model of building your own, like Cosmos IBC, or your own one single central, like even role app on Ethereum and say, hey, no, no arbitrum deployment, no optimism deployment. Just this one place where you come to us. Like, why not do that? |
B | It's a good question. And this is, I think, one of the unsolved or unanswered questions, right? And, you know, I had a debate that was moderated by Dan from Paradigm with Antonio. I think it's a couple years ago now, maybe almost three years ago, right? And I was like, this is crazy. Like, you're crazy. Composability i... |
A | We can go on, we can be. |
B | Here all day, and those people are not going anywhere else. Maybe there's people that are on main net and arbitrum, or Mainnet and optimism. But if you're on only optimism or only arbitram, there are users you cannot access. So that thesis is still kind of unproven. And this is where the base experiment of, okay, lets ... |
A | Arbitrum is production. Base is an experiment. |
B | 100%. Exactly. Yeah. And so, again, it's like, if there are distinct users on these chains, then you need to be on every chain, right? If you believe, as Dydx does, that it doesn't matter what chain people prefer, they will come to your chain. If you are the best solution, then that's another approach. And that has bee... |
A | Though. |
B | And this is the Infinix option, which is abstract away the chains completely. Use an execution environment, but you don't even need to talk to users about it. But go multiple steps further than DyDx, where you're abstracting away the fact that there is even a chain. You're just giving people an application, a trading a... |
A | And you're using execution environments as blockchains. Blockchain environment, op stack as an execution arbitrary. Exactly. |
B | For example, yeah, so like if Invadex is working, let's say, right, there's obviously, there's the demand side and the supply side. Okay, so at the moment, the supply side of liquidity is coming from optimism, right? And the demand side is coming from people on optimism. You build Infinix and you abstract that away. Th... |
A | The pattern that I'm picking up here is just like again, allowing players, sophisticated players in the free market, to do a lot of the big lift because it's profitable for them. And just allowing simplicity to go into the actual end users. Who's supplying the orders. It reminds me a little bit of the whole Uniswap X i... |
B | Yeah, absolutely. And again, it might be that something like Infinix ends up routing to multiple different liquidity pools and that there are multiple instances of synthetics where that goes. The thing that I think is interesting is my sense is that liquidity providers are a different group of people to end users or ev... |
A | Well, because if nine liquidity providers, like, I'm not touching avalanche, well, then it just increases the yield for the one that does. |
B | Exactly. And if for some reason it makes sense that that is the place to route the orders, right, then it's this forcing function where everyone kind of has to go there, right? And so on the user side, you just abstract away network. You know, binance doesn't tell you which database engine it's using, right? It doesn't... |
A | So there's some other tools in the tool belt that I want to bring up optimism's idea about their super chain and homogenous block space is their strategy. It's a little bit of hand waviness, there's a little bit of unknowns, but I will accept on faith that once we get to homogeneous block space, we have some other thin... |
B | They are, they're on our radar. And there's, if I put my infinix hat on or I put my synthetix hat on, there's two kind of different approaches or thought processes, I guess, that are going on here with my infidex hat on. I sort of say it doesn't really matter. It really doesn't matter about any of these things, because... |
A | We care. |
B | Now there's a payment for order flow issue. Like fundamentally, the average Robinhood user does not care whether it's Ken Griffin getting their orders routed to them or some other guy, right? They don't really care. They just want to make sure that they don't pay anything to trade and that the execution price is reason... |
A | But it is solving it with centralization though? |
B | Yeah, to an extent. |
A | Minimum centralization? |
B | Yeah, to an extent. How is it solving it? It's saying we're creating a brand that will overlay itself over all of these different things, and that brand will have users that will have some level of allegiance to the brand, and they will be used to the flows, they'll have an account there, all their assets will be there... |
A | Weird preference or synthetix competitor, all of that stuff. Suddenly there's calls, not even a synthetix competitor, but Infinix just forks synthetix with this new token. And it's like, hey, we're doing this thing. |
B | So here's a great example. Let's say we get into a situation where we want to use a lending protocol, margining, right? Rather than building our own margining. System, right? So Infinix says, okay, binance spent two years building their, I mean, FTX, but spent, you know, a few years building their margin system. And, y... |
A | Yeah. The centralized front end should not be top heavy with the power and strength of the foundation of the underlying protocol. |
B | But that's the reality in most of the world, right. The front end is the valuable thing. And this conversation happened, you know, I can't remember what the specific phrasing was. I think it was like Chris Berniski, you know, talking about fat protocols or something like that. Yeah, the fat protocol thesis, right. You ... |
A | So ethereum. Yep. Not like it didn't make a statement about the app layer and then, like, who knows about the centralization layer. |
B | Yeah. So there's a whole bunch of things that could play out. Like, we're still so early and these things are still so unsolved. And so it's really not clear what happens there. But we're already seeing things that I hadn't even contemplated in terms of this UI layer, because it had never been important in synthetix. S... |
A | Supply, especially in crypto. My God, whoever's got demand has it all. |
B | Exactly. |
A | Yeah, yeah. Well, okay, so thinking about this, like, idea of like a top heavy, powerful asset, the kind of the solutions I was talking about, cross change execution via shared sequencing is a check on that power. One of the goals I think we should all aspire to in crypto is we want to get everyone on chain. We want a ... |
B | Yeah. So I think where the disaggregation potentially happens, right? So we might have an aggregation period where these like, ui layer solutions that are abstracting away complexity and making the user experience and onboarding experience better aggregate a lot of power. The disaggregation comes from us. Learning the ... |
A | Okay. All right. So I feel like we've done a pretty good job, like laying the landscape of the problem statement and talking about potential solutions, where to look for solutions. Where are you focused, what kind of solution area are you focused on the most that you're most optimistic about to solving some of these pr... |
B | Yeah, so I think synthetix is looking at how do we do kind of one and two, right, as we talked about. |
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