**A** (0:00):
Foreign.
**B** (0:12):
We are here at the ASLAR Interop Summit and we are going to talk to Sonny Agarwald, who when I hear the word interoperability I definitely think Sunny. He's been in the Cosmos ecosystem since Cosmos was born, so he is the king of interoperability if he accepts that title. So we're going to go talk to Sonny right after we talk to some of these fantastic sponsors that make this show possible.
**C** (0:30):
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**B** (2:54):
We are back at the Interop Summit hosted by Axelar and I'm here with Sonny Agarwald and when I hear the word interoperability I think of Sunny.
**A** (3:01):
How's it going Sunny? I'm doing great.
**B** (3:03):
Are you just vibing in this conference that is really custom built for you to vibe in?
**A** (3:08):
Yes, it is. I'm getting to spread the word.
**B** (3:10):
Yeah. So tell me about, as somebody who is largely inside of the EVM world, what is the new meta in the Interrupt World?
**A** (3:17):
The new meta? Well, Axelar is definitely helping bridge the EVM and IBC worlds or there are new stuff that they're building. It helps you like send messages between EVM chains to Cosmos SDK chains very seamlessly. So really excited about that coming about.
**B** (3:35):
What I've understood with Axelar and I've only really learned about it in this last like 24 hours, is that it is like the cosmos between Cosmos and Ethereum. Is that a fair like metaphor?
**A** (3:45):
Yeah, that's, that's right. It's. It's a Cosmos SDK built app chain that lets. It's a bridge app chain basically. So you know you have like many bridges. They're all like multi sig based and stuff. Whether it's wormhole, multi chain, whatever. Right, but it's like. Well actually it's similar but instead of being a multi sync, it's a proof of stake based bridging solution.
**B** (4:07):
Okay, so how is that different from other things like Thor chain For example, like there are or like Ren protocol. Yeah, there's a bunch of other proof of stake middleware chains. Is Axelor really all that different from all those?
**A** (4:17):
So Thor chain, it uses similar technology to Thorchain, but Thorchain is like, it doesn't let you do bridging, it only lets you use their bridges for Thorchain swaps. And this is part of their whole security model where they don't want you to use it to bridge stuff. Right. And that's cool technology, but you know, we can't use it with osmosis. Right. You can think of it almost like osmosis plus Axlar equals Thor chain. And so we sort of fragmented these two things out. We were like, hey, at osmosis, should we be building our own bridges? And we looked at all the bridge hacks that were happening. We're like, that is a responsibility and risk that we don't want to take on ourselves. Let's find a team that is like really solid and understands this stuff really well. And that's. We went through this whole decentralized bridge bake off process and we kind of came to the conclusion that Axelar is the team that has the best bridging tech in the entire space, in our opinion.
**B** (5:15):
Okay, and how much of that opinion is shared by others? Is that your opinion or is that kind of the consensus in why there are so many big names here at the Axelar Interoper event?
**A** (5:23):
So I think like part of it is like this is like a generalized interoperable event. So a lot of people have been coming, but I think like Osmosis picking Axelar as our canonical bridge, that helped like get them on the map. And then basically every other Cosmos chain started using them as well. And now they're starting to be used by, you know, I think Polygon Supernets are planning on using them. They're a partner for the new base roll up. So I think they're starting to get more and more traction. What I really like about them is they're like, they have a lot of functionality, both from the cool features and security functionality that I think other bridges just don't have right now.
**B** (5:58):
Okay, so just to really test my knowledge here, it is a Cosmos IBC chain and it also, by a nature of what it is, can also connect to non cosmos IBC chains through its proof of stake consensus.
**A** (6:11):
Correct. Cool. So it uses a more traditional multisig style bridge system. Not multisig, but like, you know, validator controlled like deposit system to talk to EVM chains. So They've connected to Ethereum, Avalanche, Polygon, Arbitrum, bsc, a couple others, Phantom. But then to talk to Cosmos chains it uses ibc. Okay. And what's really nice is that means for something like Osmosis to talk to Ethereum, we don't have to have our own Bridge protocol, we just talk IBC to Axelar and Axel are acts like a translation layer for us to talk to EVM chains.
**B** (6:47):
Okay, so it's a translation layer. Is there a bridge risk here? So if Axel are talking to Ethereum and Phantom and then also Cosmos, how much bridge risk is there present in the system?
**A** (6:57):
Yeah, so it is a, you know, you could call it like a custodial bridge. Right. The Axelar validators, their proof of stake system is custodying the assets that are bridged from the EVM train. So there is bridge risk. Part of the things that, the security stuff that, you know, the team we worked with Axelar to design like things like rate limiting. So basically we have the system where like only 20% of the Axlar bridges TVL so can be removed in a 6 hour period and otherwise it, it triggers a circuit breaker. And this is the kind of stuff, you know, if you look at traditional finance systems, a lot of the security properties come from these circuit breaker style systems. And that's what we've been working with Axl team to like bring these security mechanisms. And that's one of the things that, I don't know. I sleep better at night knowing that like, okay, even if there was some sort of bridge hack or something on Axlar, right. The, the losses are capped, right?
**B** (7:48):
Stop loss for, for bridge hack.
**A** (7:50):
Yeah.
**B** (7:51):
So is the bridge that connects Axelar to Ethereum and Axelar to Phantom. Those are two separate bridges, not one single bridge. Correct. There's not one central bridge that would collapse all the other bridges, right?
**A** (8:02):
Correct. But it is run by the same validator side, right? Yeah.
**B** (8:05):
Okay. Well, yeah, security by validator set. I feel like it's a pretty known quantity. It's that independent bridge from chain to chain that always seems to be the weak link in all these systems.
**A** (8:14):
Yeah.
**B** (8:14):
And so Asler still kind of, it has to work around that kind of risk dependency, Right, Right.
**A** (8:19):
I guess to talk to every EVM chain, it's using a similar implementation. So if there's a contract risk, you can imagine that same contract risk probably exists on multiple chains. But then Axar is working on non EVM bridges as well. And that's kind of what they were announcing at this event was like basically building An SDK that allows more people to build pluggable bridges in Jaxilar.
**B** (8:42):
Okay, moving on from Axelar, because I know you're actually more of a Cosmos guy, just speaking on Axlar's behalf. What's going on in the Cosmos ecosystem? What are people really excited about? What's the matter there?
**A** (8:52):
Yeah, so I think the biggest thing of the last one month probably is the Mars launch. So Mars is a lending app chain and they just sort of launched recently. And so, you know, in Cosmos there have been a couple lending applications, but none of them had real product market fit yet until like Mars launch. And they hit their, you know, they have these borrow caps for security reasons and I think they hit their borrow caps within three hours of launch. And so they're slowly upping that. But like, so far, Cosmos, we've had a lot of Dexes, obviously Cosmos, Cosmos is the biggest one, but lending and borrowing and margin trading is sort of the next big defi use case that needs to come. And we've been working very closely with the Mars team to enable that. And I'm really excited because, like, one of there's a lot of cool things that we're able to do with Mars because of how closely our teams are working together. One of the things that makes like margin trading on Ethereum not as efficient as it could be is that the AAVE protocol doesn't know about uniswap. They act as independent protocols, but in our case, the osmosis Dex knows about the Mars protocol, the Mars protocol knows about the osmosis Dex. And this allows us to do a lot of cool capital, efficiency sort of things, a lot more efficient liquidation, all sorts of cool stuff.
**B** (10:11):
And so, okay, so like these things can be like oracles for each other just because of the on chain state that's passed between each app layer or app chain. Is that, is that a feature that is unique to app chain?
**A** (10:23):
It's not unique to app chains, it's unique to collaborating apps. Okay. Like I love the nuance on that one.
**B** (10:31):
That was good.
**A** (10:31):
It's interesting what's like, so, for example, yeah, Mars uses osmosis T wops. Sure. It allows you to use osmosis LP shares as collateral. It's liquidations. Instead of doing an auction system similar to what maker compound AAVE do they actually execute against on chain liquidity on osmosis. And the coolest thing is this thing called credit accounts where what you can do is you can borrow. So in AAVE today, right, let's say to borrow $100 of USDC, you have to put down $150 of E. Right. In Mars, with the credit accounts, you can put down $50 of Atom as collateral and you can borrow $100 of USDC. How is this possible? Isn't this under collateralized? Right. The trick is that it's borrowed into a special credit smart contract account. Think of it like a smart contract wallet that you're only allowed. All you can do with it is do certain margin trading on certain pools. And the Mars protocol has the ability to liquidate from the credit account directly. Right.
**B** (11:32):
And so you're, you're giving it into a custodial account that limits what you can do, but you still have more capital available to you.
**A** (11:37):
Yeah, smart contract custodial. Right. It's like it can only pull from your account if a liquidation is triggered. Right.
**B** (11:43):
So you get to. It's under collateralized lending, but with constraints on what you can do with that.
**A** (11:48):
Exactly. This is how margin trading works on centralized exchanges. Right. If you have a margin account, you can't withdraw money off of the centralized exchange.
**B** (11:56):
Right, Right. That's. That makes a ton of sense.
**A** (11:58):
Yeah.
**B** (11:59):
So I heard a tape recently that Cosmos is really defi focused. As in there's most of the innovation in the Cosmos land is defi. There's less gaming, there's less identity. How does that ring? How does that take ring true for you? And are there other. What are the other non defi parts of Cosmos?
**A** (12:14):
Yeah, so I mean obviously I spend my time focusing on the defi side of things, but there are things going on. So Stargaze is like this NFT platform. You know, there's a couple of. You know, we mentioned the bad kids. I think when I mentioned it on the Banquets episode start bad kids had this like huge uptick in popularity since then and there's a couple of projects working on a lot of cool gaming stuff. So like there's this project called Argus Scott, he was a friend of mine, he was one of the builders of Dark Forest and he realized that like hey, the console SDK actually gives us the ability to build a lot more powerful like on chain. Fully on chain gaming things. And so he's building this project called Argus that will enable a lot more like gaming app chains and stuff. So we're starting to see the initial proliferation of other use cases as well.
**B** (13:00):
So how does. Because of Cosmos of what it is, the whole like app chain mesh layer. In contrast, we have Ethereum with the central shared security, the Ethereum community. As a result, I Call it kind of more coherent. And Cosmos is a little. What's like, what is the state of the broad set of the Cosmos app chains? Community. Are they like, is each community. Is each app chain its own community? Is there one broad cosmos community? Like, give us the topology of the cosmos, like, social layer.
**A** (13:25):
Yeah. So there's definitely this, like, meta thing where it's like, people are often community members of specific popular app chains. Like, Osmosis has its own community. Kujira, which is another popular. Dex, has its own community. Juno will have its own community. But then at the same time, we're all like, citizens of the cosmos as a whole. And it's kind of like, you know, I'm a citizen of. You know, I grew up in New Jersey, so I'm a New Jerseyan, but I'm also an American. Right. And so it's just like you kind of have both layers going on well, and then there's always a little bit of like, people are often like, oh, there's so much drama in Cosmos. But, like, I think people. It's a little bit overblown, actually, to be honest. Like, I think there's often a lot of drama within Ethereum as well. Right. You had Uniswap Sushiswap. Right. Compound. Aave you have today. Now you have optimism versus arbitrum. Right. And so you see similar things, but I think at the end of the day, everyone is still, like, very tied with this larger Cosmos region and community.
**B** (14:21):
Yeah, like, sports teams are still all watching the same sport, right?
**A** (14:23):
Yeah. Yeah.
**B** (14:24):
Sonny, we got a lot left in the East Denver Conference. It's just Tuesday and we got goes all the way until Saturday. What's left on your schedule? What's left on your itinerary?
**A** (14:32):
Yeah. So when? Tomorrow? Really looking for checking out walletcon. Just, I don't know, just interested. I recently downloaded a new browser and I'm like, this is an opportunity to try out some new wallets. And so I've just been playing around with a bunch of different wallets and exploring, like, wow, there's so much cool stuff, innovation that's happening. So decided to go check that out. Thursday, there's like this shared security summit hosted by Eigenlayer in Babylon. So I'll be giving a talk there about mesh security and how that's like, the future of Cosmos shared security. And then on the weekend, I'll just be hacking at the Hackathon and Sunny.
**B** (15:07):
Can you walk us through your sweater, please?
**A** (15:09):
Yeah, this is just our Osmosis Christmas sweater. We did a test batch run this year just for the, you know, core development team. I figured, you know, why wear a Christmas sweater only one month a year? I'm gonna wear it in February. Who cares? But I think, you know, we definitely want to figure out how to get these on chain. Something more like Unisox by next year. Sure.
**B** (15:31):
Sonny, thank you for always walking me through this interoperability world, which, again, I need. I definitely need a guide, and you are always a good one, so thank you so much.
**A** (15:37):
Thank you. Here.