**A** (0:11):
And speakers.
**B** (0:12):
Sunny, we got Euron and we got Young.
**A** (0:31):
Sorry, one more speaker.
**B** (0:33):
Vishal.
**C** (0:43):
Okay, through. Sorry, just trying to find the right messages. All right. Okay. Has everyone spoken already or do we need to do intros? I think you spoke. You spoke. Did you speak?
**A** (1:02):
Yeah, I think.
**C** (1:04):
Yeah, yeah. So, okay, I don't think we need to do intros. Everybody can see who we are, so let's just like get into the meat of it. All right, so I'll just, you know, a little bit of the theme is I think we want to talk more about how like, Defi projects and Cosmos are collaborating together and like, building things collectively rather than like, oh, like, which Defi project is the best? But, you know, so there's this, you know, why don't we start out with Sunny, you want to talk about the ION 3.0 proposal and building a basket asset for Cosmos and like, maybe why it's even needed?
**B** (1:42):
Yeah, sure. I don't know if people saw there was a proposal that just went up on the Ion Commonwealth. It's called ION 3.0. Basically it's an idea to build two pretty independent products for the Ion Dao. One is called the Interchange Basket of Coins. Ticker is IBC name is pending, you know, community approval. But the point is to have a interchange basket where, you know, if people want to, you know, part of the problem today with Cosmos is like, oh, if you want to invest in Cosmos, you don't, you're a newcomer to this space. What do you buy? Right? Like, you know, I guess there's Atom, but like, that's very, you know, specific to one product. Right? What you want to do is have like some sort of exposure to the entire Cosmos ecosystem. So the point of the Interchange Basket is supposed to be a index token that, you know, it follows some sort of cap weighting of all the Cosmos ecosystem coins. And you know, this solves a bunch of problems that it shows people, you know, it's a new way of like directing newcomers to the space. And it's just like a easy thing to, you know, just buy this one asset and you, you're exposed to the entire Cosmos ecosystem. The second product. The other benefit of the IBC or the Interchange Basket of Coins would be that it is a, you know, a pretty, a much a better DYN diversified asset than any one asset in the Cosmos ecosystem. And that kind of leads into the second product, which is to build a stablecoin called IOU following a maker or reflexer style model, but using the interchain index as the primary collateral in the system. So it's basically a IOU would be a IBC backed stablecoin.
**C** (3:37):
So I think that touches on what I think maybe many people I think perceive as like one of the pain points of interacting with defi in Cosmos, which is there is no sort of basket or index or fat protocol asset that you can invest in. What are the other pain points that I think you as builders and trying to build defi in Cosmos are facing and like what hurts the most?
**A** (4:02):
Yeah, I think the volatility of assets is one of the pain points, especially if you're talking about borrowing lending protocols where you use the assets as collateral. High volatility has the risk of triggering liquidations when you don't want them to happen. And I think a product like this can solve this. And we've thought about this as well looking at doing something very similar but with a basket of staked assets. So something like that could be very interesting where you have a basket of staked assets and you use those assets then together as collateral. So yeah, that's one of the things I guess a solution like this can definitely solve.
**D** (4:40):
This is a more boring answer, but I think the infra around developing IBC applications really trails where it should be in other ecosystems. And it's getting much better. There's tons of really good work being done here. But right now if you want to prototype an IBC or ICA application and test it locally, there's no good testing framework. I would say it takes something order of like three to five times as long to do it right now on Cosmos as it does on eth for example. And there's tons of really amazing work being done by lots of teams to make this better. Right now it's a pretty meaningful slowdown on Defi progress.
**B** (5:12):
Yeah. On the like infrastructure I think the one like one piece of vital infrastructure that's like missing right now, but it's being developed by like Strangelove and Osmosis is this. And IBC team is this idea of multi atomic, multi hop IBC routing. So you know, as an example and this is like a big blocker for a lot of use cases. So as an example, look, take something like Quasar, right? So Quasar is a vaults product. It if you send Juno from the Juno chain to the quasar chain, you put it in a vault and then it wants to start LPing on osmosis. The Quasar contracts can't just IBC that Juno directly to Osmosis because that would be like double Hopped. Right. It'll be from. It'll be Quasar wrapped Juno. Right. And that's not how IBC works right now. So they, but Quasar needs a way of like atomically sending tokens back to Juno and then to its account on Osmosis in like one click. It doesn't have or not even a click. Right. It's, it's not even, it is a contract that's doing it. Right. And that's, that's the real challenge. And so you know, we're working on building this out with the Strangelove team, so hopefully that'll be ready pretty soon.
**E** (6:23):
Yeah. So also one of the pain points for this index fund idea is that when you want to deposit or withdraw from that fund, you need to bring all of these assets into it so that your same assets can be invested so you can mint some index token from it. And, and some of the assets are not quite available. That is possible. Some of the assets will be loose any of like liquidity pool there. There'll be no liquidity at all. Then it is very difficult to mint those tokens or so I think like there should be like smarter way to like avoid this kind of like pain points. Yeah.
**B** (7:05):
So what we do, what would happen is it would, you know, if you bring one asset, it will auto swap it to the right portfolio on the osmosis dex and then put it into the index, you know. Yeah. I mean, okay, is there an edge case of like, oh, there's not enough liquidity for one of the assets on Osmosis, but like I don't know, any, any, any asset that's like probably should be in the Interchange index will have enough, will have like decent enough liquidity on Osmosis. I imagine.
**C** (7:31):
So I guess when you like. I guess so. My, my bigger question is, is like, is maybe like. Okay, let's talk about this. What is the core objective that like we are all trying to accomplish with Defi on Cosmos? Like what is the Defi experience that we're trying to build? What is the thing that like Defi and Cosmos should be like anchored in people's minds as like what, what it is and then like what is the barrier to building that?
**E** (7:58):
Yeah. So I believe that there are different environment in different blockchains and ecosystem and like in Ethereum or other smart contract platform, they have one of the biggest advantage which is synchronization. In the interchange world it is quite tricky because every chain has its own consensus and it's synchronized each other. So all these defi should be connected each other. So we have all this like connected economy in this interchange. But this like asynchronous prevent us from build this like very connected service within with this atomic transaction accomplishment. So we I kind of like imagine something like collaboration with all these different blockchains having different consensus but having like frequent, like occasional like collaborated block created all together with validation from all these validator set so that we can create this multi chain block, one block, single block connected each other so that this IBC can be expanded as a feature so that we can like allow like multiple messages across all this multi chain at once atomically happening within a block. So this is kind of like a step points of each block so that we can connect every block in every blockchain in one block so we can accomplish part of this synchronization issue so that we can do all this kind of multi chain MEV or multi chain liquidation, multi chain message transaction such kind of thing can be happened with this kind of technology.
**A** (9:55):
Yeah, and I really like that and I think from my end like one of the pain points in Defi that I really like to think about and one of the things we can potentially solve with the things you mentioned is really the UX experience at this stage or the user experience at this stage. Within Defi, it has been quite tricky to build because there's so many different apps, app chains build a different chain for every app. But so now a user has to go and use those different apps on different chains. And it's very confusing because at some stage you just lost which chain am I using at this stage. And I guess they're like interchange accounts, interchange security, interchange queries. These things start to help solving a lot of these UX problems that we like to solve. But I think it's only the beginning. And the thing, the things you mentioned can really work 20 towards further progress in that stage.
**B** (10:44):
I actually think that the whole synchronicity is a little like bit overrated. You know, you look at all of web development, literally all of web development happens via asynchronous like programming. You know, the entire Internet doesn't run on one server. All of finance is not going to run on one synchronous like state machine. And I think Cosmos is just the farthest ahead in designing systems to be built for asynchronous designs. And I think we're exploring a lot of new models of how to do this. So I know the Mars team I think is going to be talking pretty soon the way that they do Their outpost system is I think like, you know, one probably like one of the most interesting ways of how cross chain defi is going to work. And you know, we're going to be applying a outpost model to osmosis as well, where like, you know, deployment deploy, you know, let's call it OSMO swap, right. We deploy a contract on Juno or Neutron or Archway where you, you know, if you want to do a swap it I it you send it to the contract it the contract will IBC it to Osmosis, auto do the swap and then IBC it back and like have, have the same UX as a Dex on that chain, but still actually be routing through osmosis liquidity. And so I think this outpost model is like one of the most interesting ways of how interchain defi is going to sort of grow.
**C** (12:07):
Are you maybe one way of saying what you're saying is that moving away from token transfers as the main primitive of Cosmos Defi and towards interchain accounts.
**B** (12:18):
Is maybe is the future towards interchain accounts as well as just like custom interchange standards. Right. Like, the nice thing about cosmwasm is we get a lot of flexibility to just like, you know, build bespoke IBC protocols really quickly and have them start talking to each other.
**D** (12:38):
I think there's also an element here where IBC transfers are good and I think ICA is going to make them better. But there's a lot of things that are under explore with ibc. So for example, when I want to deposit on osmosis, I'd IBC over and then deposit as two separate authorizations. You could easily imagine sort of IBC middleware that kind of intercepts the packets and routes them to the right function call. Doesn't necessarily want. I could route through like six different app chains much the same way. A lot of server calls are done today. And I think we're moving towards a sort of future where the users are mostly abstracted away from the fact that I'm moving across chains. I just hit stake on osmosis or Crescent, whatever it is, and then four different hops are happening in the back end. Invisible to me.
**B** (13:15):
Yeah, the IBC team right now is working on like ICS20V. I don't know what V it is, but it basically includes a metadata field to an ICS 20 transfer. So when you send the tokens, you can include metadata of the action you want it to do as well.
**D** (13:30):
Yeah, I think you can do this right now. Middleware, but it's a little bit Hacky, but it's getting more productionalized.
**B** (13:34):
Yeah, I think like IBC middleware is like getting, you know, developing a lot. So we added a new piece of middleware to the osmosis chain. It'll not be in this upgrade this week, but in the next one which is like IBC rate limiting. And it's the idea of like, hey, we can cap it, we can say like, hey, you know, more than 20% of a channel's IBC channel's TVL shouldn't be like leaving in like a six hour period. Right. You know, let's have like circuit breakers and stuff to like in case there's ever hacks and stuff. So yeah, I think there's a. And then we're working with the Strangelove team to build this into a generalized like IBC middleware stack. So I think that's going to open up a lot of new use cases.
**E** (14:15):
So on this context, I think also like Oracle is one of the core issue for all this defi protocol and I think IBIS can expand its feature to serve that purpose on one permissionless transaction which can be verified by all this host chain so that this data from any index in the KV store can be verified by validator, it can be sent over to destination chain and then this destination chain. If they believe this ibc then they can believe this data also. So this Oracle can be more on chain than off chain in other blockchain ecosystems. So I think that will be a great expansion point for IBC features.
**B** (15:05):
Yeah, like the. So on Osmosis today you can pay your transaction fees in any token you want. Right. And I think that's like one of the most important UX features and. But we want to make sure this functionality gets like given to all Cosmos chains. I think that, I don't know, I personally find that to actually be a big blocker in like a lot of cross chain ux. Is that like, oh, when I send something to Juno, oh, I need to have some Juno to make the transaction fee. Then I go to Stargaze. Oh, I need some stars to make, to make my transaction. So we are going to be like exporting our osmosis TWOP oracles over IBC so that other chains can use them as the way to accept fees in any token they want.
**C** (15:48):
Cool. All right, let's kind of go to like staking derivatives and like this like, you know, we made it a big part of Atom 2.0 that we want to see staking derivatives sort of, you know, become pervasive throughout the cosmos defi ecosystem. The question is like how do you expect that to play out? Like you have be Crescent already out there. You would stride's staked atom is out there, huh? And stars and stargaze. How do you imagine that this is going to like sort of like where. How do you avoid liquidity fragmentation? How is this going to play out in different Dex models? How is this going to play out as collateral? What are the thought? What are your guys various thoughts on this?
**D** (16:38):
Yeah, so all great questions. So one on liquidity fragmentation. I think this is slightly more of an issue in cosmos and other ecosystems because there's more different places to move the tokens. But we've seen so far is I think there are sufficient number of arbitraries who kind of are different Dexes and you mostly I think will not see too much liquidity fragmentation on one SD token. So SG atom for example on Crescent and Osmosis, as long as there's one sufficiently motivated person running the relay, you're not really fragmenting liquidity that much. The more important liquidity fragmentation is probably like you have ST atom, Q atom like a bunch of. A bunch of different atoms. That is a harder problem to solve. Although I think there's like two ends of this. There's one where you just have one player dominate the market. That's also not. Not very desirable. We have lots of centralization on this one chain. Even the chain is decentralized. It might not be like what you really want up to one stage. And then there's another thing where you really want enough liquidity on these. On these assets where it's actually usable. I think there's probably two futures we're going to see might be more. You know what I'm thinking right now? One is when you see more stable swaps, for example on Crescent like pervade the ecosystem get much deeper liquidity for much less assets. Something like $10 million liquidity will give you like $400 million or $10 million in the pool. If you have stable swaps gives you something like $400 million of liquidity which gives you a lot of like slippage that you're able to do. And as long as you have arbitraris who come in and it's not like eth right now where you can actually unbond. So the chance of deep hacking is less pervasive. I think you might also potentially see someone wrap all the staked atom into one different like super staked atom. And that's what's Going to be used as collateral tbd, like who actually does that and what the weights on that. That is. I think this is a solvable problem. You see this with like ETFs for example, there's all sorts, there's like a hundred different like S&P 500 ETFs and of various different flavors, but you don't see that much liquidity, fragmentation. Each of these are liquid enough for their purpose.
**A** (18:30):
Yeah, and then I think that, that makes a lot of sense and I think the, the true way out of here is collaboration in, in a sense and I think we've seen this on, on Ethereum is now as well where they have this liquid staking collective I think that's trying to solve this, the same problem. We have our SDK BNB product and we have one of the solutions you mentioned is those stable swap pools where we actually combine all the liquid staking derivatives into one pool with the base assets, which makes the swaps a lot more efficient and capital efficient in a way. So yeah, I think those are things that can be used then maybe also like things like flash loans for example could make arbitrage a lot more efficient. So yeah, looking forward to seeing that. And that way we'll have maybe quicker arbitrage and things like that. So we need less liquidity. Maybe.
**B** (19:17):
In a way I'm going to offer a third end game which is maybe staking derod is balkanized even further. And I don't know if this is what's going to play out, but a third worldview is that every defi protocol becomes its own staking derivatives protocol. So you look at some. So okay, who did this correctly? You know, say what you will about it, but I think Anchor actually did this correctly. Where in Anchor you didn't deposit B Luna, Right, you deposited Luna and then the Anchor system would stake the Luna and collect that staking yield and decide what to do with it. Right. They used it to subsidize a 20% fake yield. Okay, whatever. But like the idea was correct. Right. And so what will happen is defi protocols will accept. So I mean we talked about this in the, it was mentioned in the ion 3.0 thing where it's like, hey, you know, this ETF is going to have all these causes assets, but then the Ion DAO will stake the assets itself and collect that staking rewards as revenue for, you know, and it can choose what it wants to do with it, it can give it to ion holders, it can, you know, give it to the index holders, it could use it for you know, incentives for liquidity mining of the index. You know, there's a lot of different things that can do with it. But the point is that like you know, the defi protocols are going to be the ones who want to control those cash flows. And so I think that what will happen is defi protocols will start to like partner with like staking derivatives protocols to provide like white labeled staking derivative functionality.
**E** (20:50):
So I see these problems and issue as more like an ecosystem perspective and like culture perspective. So I think all this like problem is in this like defy composability issue. I think like in this asynchronous world it is trickier than other ecosystem. So we believe that there should be a quite strong culture that all these assets like locked in different kinds of defi should be well tokenized so that it can be transferred through IBC so they can be reused in other defi. So this is like interchange defi compatibility and this should be well supported by any chain so that this like defi shouldn't be improved and grow within one platform but entire ecosystem. And this kind of new defi coming into Cosmos, they need to have this chance to touch these assets so that they can utilize this for improving defi and more utilities to come. So I think like this connectivity and composability tokenization, this is the issue in our defi world. And I think like liquefy anything like liquid staking. But in Crescent we are doing wicked farming which is like liquefy your farming position so they can be used in UMI or Kava or any other lending protocol. So this is like where we should go because this allows all the composability within other defi protocols.
**C** (22:33):
Cool. So my question is really. Okay, so the, so the question is sort of, it's the best way to think about this. I mean I think that though like the like kind of the narrative that we're trying to say here is, you know the narrative around Cosmos has historically just been like come and stake, right? Come and stake, get your airdrops. Then there was like kind of a little bit of the, you know, we had the osmosis farming craze, but now we're asking everyone to use different defi applications. So do you view that as like how do you think we're going to negotiate like that whole like use case, right? Like that fact that like we have to change that. We're sort of changing the default, you know, onboarding experience from okay, like stake your atom. To stake your atom. Put it In a staking derivative protocol, put that in a lending pool. Right. How do you think that's going to evolve across like the whole stack of applications? How hard do you think it's going to be to onboard users onto that?
**A** (23:41):
Yeah, good question. I think it's, it's as what was mentioned before, maybe it should be easier for the end user to just start with a base asset and say, look, this is the asset I want to take exposure in and all the rest should actually happen in the background. Even the liquid staking, the usage of different defi protocols. And you basically choose, look, I want to have exposure to Adam. I'm fine with that because I'm long Adam and I see with this strategy I can generate whatever percentage of yield it is. And I know these are the risks that I'm exposed to because I'm using this in this protocol. And as a user you basically come in, you have some atom, you deposit that and the strategy runs like on itself. And as a user you don't have to interact with all these defi protocols. And I think we can really make this possible in the long term by really opening up everything that we develop with keeping in mind the composability effects of this, really building SDKs and APIs that allow protocols to interact with each other. So yeah, I think that to me is the end goal for the users itself.
**C** (24:46):
Do we want to talk about Oracles? For the last few, a few minutes? What do we think interchange queries are going to change the game on Oracles or you know, is there more to be done in order to enable sort of all of the defi applications that need Oracles in the cosmos and not require you to like set up your own validator Oracle network.
**B** (25:06):
Yeah, I think, you know, I mean, I mentioned this earlier, but I think that interchange queries will be able to like provide at least the price Oracles that are on osmosis. It'll be able to send those everywhere. I think there's some like development to be done. I think there's like, you know what, like three or four, like parallel lead being developed. Interchange query systems.
**C** (25:22):
What are interchange queries?
**B** (25:24):
What are interchange queries? Interchange queries are, you know, a way of proving something about the state of one blockchain to another. So, you know, today you query a blockchain, you like, oh, what is my balance? Or what is the price of this asset? On osmosis, you get back it, you can get, you get back the result, but you can also get back a light client proof saying like you know, showing you that that's correct, you can take that, like, client proof and show that to another blockchain. So, yeah, and one of my big concerns about, like, some of the interchange query designs, however, is that, like, they're letting people prove anything in the KV store of the counterparty blockchain. That's actually kind of dangerous because then, like, you know, we need to have more strict boundaries on, like, what, you know, as we continue development, we might want to change how some data is structured in our blockchain. And like, we don't want interchange queries to make it like, oh, everything in all of our entire databases is now like, you know, has to be versioned and everything. That's kind of not what we want. And so we need to have, like, better guidelines of like, oh, which parts of state are supposed to be like, queryable and which parts are not.
**C** (26:35):
Is Stride using interchange queries yet?
**D** (26:37):
Yeah, absolutely. We use it in two places. So mainly we use ICA callbacks to handle most record keeping, but slashing events, you can't query through ICA callbacks because they're not done through an ICA call generally. And then second, if anything, for whatever reason goes wrong, we also can issue ICQ to revert back to regular state.
**C** (26:54):
Is Stride the first interchain controller and interchain query user in production?
**D** (27:00):
Uh, as far as I know, but I, I'm not aware of all the projects out there, so it's possible or not.
**C** (27:05):
Yeah, but like, how has that been bringing, you know, these very experimental Cosmos technologies into your stack? It.
**D** (27:12):
It was a very painful development process. It took us a lot of sleepless, sleepless months. But we're getting there, and the stack is getting much better. We're working with Strangelove, a bunch of other teams to really start building up the IBC tech stack. It is. It's gotten better. It used to be that my MacBook would crash like three times a day, and now it's down to like once a day. So, you know, everything's getting more stable. But yeah, in general it's hard. Like an example of flavor, something that's difficult if you're an application that wants to serve other blockchains. You spin up two blockchains at minimum, and you want to test some consensus failures in those chains. You want to have three to four nodes per blockchain. Then you might want to also test like, oh, what if I have two chains I'm serving because their edge case I don't get with just one chain, I'm up to running like 12 nodes on one machine. And there's no good framework to do that right now. You have to kind of build this all up from the ground up. I think it's getting more productionalized, but it's very early.
**B** (28:02):
I have a question to you. How does. How do you think Sommelier fits into the whole Interchange defi stack?
**C** (28:07):
Oh, absolutely. Okay, so thank you for letting me talk about som.
**B** (28:12):
You're like, itching for it, I think.
**C** (28:14):
Okay, so what is som? Som is sort of interchange queries plus or like not interchange queries because we do the computation off chain, but like essentially interchange accounts. For Ethereum, it's essentially been like the base model of like what we've built for Somalia, which is like, you want to have a contract, you want to have a vault on Ethereum, which is controllable by an off chain strategist. We think that this model is like, incredibly valuable, is like the right model for like. So, like, one of the things that I really worry about, which I've kind of been poking at in these questions, is like, accessibility of all of this Defi stuff is going to be like a challenge, right? Like, if, you know, users are not, like, most users are, like, not really capable or qualified or like, on board with the idea of like, wanting to hold like a really complex financial position, even if it, like, really expresses their intent just because, like, the inner workings of that financial position and like, our job as software engineers is to abstract over that complexity. Like, the reason why Defi is interesting is because we could plausibly build meaningful abstractions over the complexity of like, the underlying financial positions. So that's what we're trying to do with Sommelier is we're trying to build these sellers that the seller expresses like some sort of user intent, which is requires like active management and active trading. But, like, they are able to delegate that to the off chain strategist, to the validator set of Sommelier, to like, execute that intent. And then they don't have to be sitting there going, oh, I want to like, I have to like manually click through, like getting the staking derivative, sticking the staking derivative in this liquidity pool, taking that liquidity pool token and sticking it in this thing, like plugging all of those things together and then rebalancing them and changing them dynamically as markets is the problem that Sommelier is trying to solve.
**E** (30:01):
Yeah, I'm fully on board with your saying about aggregating everything. So, like, all these, like, layer one defi are too complex. And too efficient. So this is like decision making for retail investors too hard and all this like aggregator for Dax, aggregator for Defi. All this kind of front end service should be provided even like connected to all this defi so the service can be decentralized one so I think like in Cosmos this is also very necessary because users will find more difficulty is finding this new opportunity in Defi space.
**C** (30:41):
Yeah, I mean we have a lot of tools in Cosmos that like you don't have on Ethereum to deal with. We have Auth Z which like allows you to delegate accounts to like parts of your account functionality to specific users. We have interchain accounts that allow chains to like control funds on behalf of users. So we do have a lot of tools here that I think, I think like one of the things that like we can do is like we can both build these complex deals five primitives in Cosmos and then use the Cosmos technology to also make them accessible. So absolutely. Thank you very much guys.
**D** (31:13):
Thank you, thank you, thank you.