We were expecting to maybe get the same amount of value because
obviously the file had a really big peak, but what happened more
recently is that it got a lot of more traction.
There is somewhere between I think 1313 above billion worth
of value locked over the past years.
The stakes are growing in terms of what we're actually having in
D5 in terms of value, how much we have to secure and also how
incredibly well the space is growing still being very small.
The reason Go exists today is is because all they had from time
to time liquidity crunches to avoid this crunches, we could
actually have a protocol owned stable coin that could be minted
into these pools for users to borrow against.
But what's important here is this liquidity premium is
actually and pricing the liquidity is the answer to these
types of situations that happen incur because.
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Welcome to Epicenter, the show which talks about the
technologies, projects and people driving decentralization
and the blockchain revolution. I'm Sebastian Kruccio and I'm
here with my Co host Felika Ernst.
Today we're speaking with Stani Kulichov, who is the founder and
CEO at Avi Labs and Avara. We'll be diving deep into the
recent Avi Before proposal and what that means for the protocol
and also talking about Defy and the future of decentralized
finance in general. Cool.
Stani, thank you so much for coming on again.
I mean, I had to like talking to you 2 legends.
It's it's, it's always a pleasure.
Thank you. So we're here to talk about Ava
V4 today. There has been a number of
proposals that just very recently passed.
Before we dive into that, can you maybe walk us quickly
through the evolution of Ava V1 through three?
Well, yeah, it's it's definitely been really, really out saving
long journey. So as some of the listeners
might, might know, and I started building decentralized finance
in 2017, two 1016 already kind of like thinking of ideas and
what to build and, and what's important for the ecosystem as
a, as a product. And, and what came out of that
was, was a project called Eastland shared for Ethereum
lending. And I had this idea that if you
can actually swap assets on chain, you could also use those
assets as a collateral and borrow against as well and also
earn yields. The way I started was more of
like a peer-to-peer setup in a market because mainly a lot of
these assets were very low liquid and there wasn't this a
concept of pulling yet. But later with, with Unisfop and
a lot of the innovation, pulling assets became a more of a common
thing. And we iterated into all the
protocol, which is essentially a a pooled model where you can get
liquidity, access to liquidity right away and then use whatever
you supply as a collateral to draw basically borrow any other
asset. And the difference between what
you pay for supplying. So you receive as an interest as
a supplying and pay for borrowing than it is your
different cost difference cost there.
And looking at each deployment we had, I guess it land was more
of experimentation. I was still studying in
university. I've I've been, I've been
builder for quite a long time. I built Fintech and various web
applications back in the Ruby and Rails and Web two era.
And I think of the protocol was something that evolved as a kind
of like a ideal way of of actually gaining on chain
liquidity. And when we launched, I, I think
our expectation was that maybe the protocol will have 10 or 20
million worth of value in the smart contracts.
And with based on like the TVL mimetic metric of value lot in
and ended up ended up having several 100 millions.
And by the V2, our goal it was to basically create a better
protocol and being more capital efficient, more risk management
tooling. And that ended up being what we
expected to have maybe few 100 million became a protocol that
had few billion worth of value. And then V3, which is our most
recent development of the other protocol from other labs, we
were expecting to maybe get the same amount of value because
obviously D5 had a really big peak.
But what happened more recently is that it got a lot of more
traction again and we have all these different network
deployments that the community developers are deploying now.
They is now over 13 different markets.
There is somewhere between I think 1313 above billion worth
of value logged. So it just showcases kind of
like how over the past years the stakes are growing in terms of
what we're actually having in D5 in terms of value, how much we
have to secure and also how incredibly well the space is
growing, still being very small, but still exciting to see how
things have been evolved. And that's basically where we
are now. And the V4 is something that
where we want to build a lasting protocol, which should be the
last like a major iteration. But I give you a little bit of
warning because every time we are building a new iteration, we
think it's final and we don't need to do much changes.
A year goes past or two and we're still, you know, finding
things that we can do better, new innovation.
And it feels like whenever we say this, we still have some
work to do in the future. Stani, you and everyone else, I
think this has happened. This is what happens to our
bidders. So let's quickly just say on V3
before we keep dive into kind of what you're planning for the
future. So you guys have a stable coin
called Go that works similarly to makers die.
There was recently an escalation between maker and Ave. regarding
the use of certain collateral. Can you quickly walk us through
what happened and why it escalated?
No, it's an interesting topic because what happened factually
is that from the maker community, there was an
initiative to to actually use ethinos EUSD, which is
essentially kind of like on chain yield fund where the
collateral is in this different centralized exchanges and you're
capturing the the yield of that, that type of activity.
That's the the staple core had in the underlying model.
Now the model is very interesting and the project is
extremely interesting and got a lot of traction, but obviously
it's still very new. And what we saw from maker is
that there was this initiative to actually meant a lot of dye
against this collateral, which basically meant to the extent of
couple of billions of words over the short time horizon.
So this is kind of like interesting because from all the
protocols perspective in the Abbey DAO and risk manager
perspective, holistically the the the Abbey DAO and risk
management has to go and is seen through asset by asset
perspective and risk parameter perspective.
So this changed the risk profiling of make it out, but
also specifically die with this initiative.
So it's it was a question of the conservative die as A and and
maker as a system is basically taking more opportunistic
approaches and that risk should be repriced.
And there was a lot of discussions in the Aberdau how
to reprice this risk and also signal of change of risk profile
within the, the protocol and, and, and greater D5 community.
And that was essentially like what, what was it all about?
And I think that they, they, the actual question is that's the,
the, the underlying collateral itself could be and make it some
extent that the way it's for example, to some extent in as of
today, you know, the V3, but it's a question of magnitude and
risk profiling as well. So that's the kind of series of
events that that happened. So makers deployments are
actually just deployments of the other V3 contracts, right.
So kind of do you think the difference between Maker and and
Abe at this point is kind of just risk appetite in, in terms
of underlying collateral or where, where do you see the
differences? Yeah.
I mean, the tech that we usually build, build from the other labs
perspective and and the tech IC in wider of a community, it's
very innovation driven. So even things like go, the
underlying technology, go stability module and compared to
what exists today out there, we usually don't fork directly code
what we do, we actually figure out things that are could be
improved and and innovate on on top of the existing status quo.
So do you think that they vary different type of technological
risks and over time they mature, especially more air pairs, pairs
come so kind of like the the last bastion of risk.
And I think this just doesn't apply specifically only to Abe
and and maker, but in general, the whole DFI ecosystem is is is
the risk management on the underlying assets.
So what is actually backing all that activity, all those
borrowings or or mints of go or or die and and So what is the
kind of like a last standing collateral there?
And I do think that makers risk profile has changed since if you
go back in for example, in a couple of years, obviously T3 MA
module where you can printmaker into different protocols that
existed quite a while and that's been very useful for the Abe
protocol as well. But essentially, what with the,
the way to think about these two different protocols is there's
two different risk management communities that are seeing risk
differently. And this is important because
previously, you know, everyone was relying upon dye and, and
maker and there was so much vested interest because it was
one of the main projects on Etherium in D5, the main state
decentralized stable coin. And now there's options and, and
I think this optionality is really important because it
allows the the avenue risk management community to decide
what direction to to take go for example, and monitor as well
what direction the maker community takes die and reflect
towards. Yeah, I mean, at the end of the
day it's all about communities and how decentralized governance
decides about what risk parameters, you know the
community wants to accept for in this case the the collateral
types on their protocol. Yeah, let's let's talk about V4.
I think this is quite an ambitious proposal to move as
you said towards, you know, what might be the final version of of
Ave. I I have doubts about that.
I think they'll be further versions and and possibly more
innovation. But we have what inspired this,
this development of V4 and can you maybe just give us an
overview of some of the main things that Avidi 4 innovates on
with regards to like V3? Yeah.
I think 2 important, I would say categories of of innovation
pretty much is consistent with with all of these other protocol
releases. There's a focus on risk
management and, and the tools that protocol enables regarding
risk management. And the 2nd is capital
efficiency. Yeah, and, and also in before we
have these two categories as well that we focus quite a lot.
And a lot of these features are actually improvements of
existing way of managing risks, bringing more flexibility as
well bringing more capital efficiency.
But there's two additional categories and and one of them
is actually related to both risk and capital efficiency, which is
a pricing component. So for example, given the way
the other market is, is built, it's actually built in a really
user friendly way. So users can come in supply
different kinds of cryptographic assets that are eligible and
then pull the liquidity that they need.
So effectively, you can utilize pretty much your portfolio on
whatever you need to, to borrow, can repay.
It's really flexible. The, the, the experience there
is relatively simple, but also intuitive.
And you don't need to go to separate markets and, and kind
of like, you know, put it into another place, put like, let's
say another asset, let's say of it to another place and, and
then borrow from here and here and monitor all these positions
and, and, and manage them, right.
So, so that's kind of like a one part of it.
So because you can do this all this activity in one same
market, it also means that whenever you supply a particular
asset that is yielding, so let's say you supply USDC, it also
means that you're earning based on what users are borrowing that
asset out. And it creates an interesting
scenario for the users because it means that USDC is priced
across the protocol in a, in a one, I'll say price regardless
what is the user's risk positions, how much they're
adding risk, whether they they're not adding that much of
A risk. And we wanted to change that.
So we wanted to change the pricing in a way that it
reflects how much risks these users are actually bringing into
the protocol. Yeah.
And that's the new category. And another category is the
governance overhead. So the way we are thinking about
the whole protocol, the architecture, it's more
modularized. It, it means that you can fix
different parts without actually needing to upgrade the whole
protocol, the code base, it gives a lot of flexibility
there. But in this category, we also
want to minimize the governance overhead.
So how we actually can create let's say liquidity layers that
are immutable or we can create different kinds of parameters
that are immutable or time based where they only affect from from
the moment proposal gets into execution and new positions as
as an example. So these are the kind of things
and I think a lot of these new categories are really optimizing
the existing really good product and and also removing the
overhead of governance, which basically means maturing.
The protocol is getting more matured and the technology is
getting more matured and reflecting to that.
Right. And I noticed you didn't mention
the the unified liquidity layer. I think this is actually one of
the most interesting aspects of B4 is pooling liquidity from all
of the different markets that Ave. is present in.
This is an interesting and probability challenge I think
that you guys have solved with this this Portals product that
you released some time ago. What are the main architectural
challenges and and maybe changes from V3 that folks will notice
in V4 with this new unified the query layer and maybe we can
then get into what the unified the query layer actually offers
users. On a high level, without going
too much into technical specific specification, I think one of
the challenges is that the other version three is a little bit
built in a more like a monolithic model.
Meaning it all the main kind of like a ingredients of the
protocol are very interconnected.
And if you have significant changes that you want to change,
for example the borrowing logic, maybe you have changes regarding
to you know, a liquidation model.
You will have to go kind of like into the core protocol layer and
make those changes and upgrade a a code base that might be
affecting 12 to 14 billion worth of value in a smart contract
upgrade. Now we haven't seen those type
of upgrades that many at at this level, but a stakes are going
high and more value sloped in, in these protocols.
That is something what where we have to mitigate also risk and
and the way we think about unified liquidity layer and also
this new modularized architecture is is that the
unified liquidity layer is is a way to capture liquidity into
one specific like a pool or layer and everything else can be
connected to that liquidity. So that's ranges from for
example, a borough modules that might differentiate amongst each
other, updating the borrowed logic.
It can be a changes to a liquidation engine, different
kinds of modules that might affect might be also like a
portal module that manages the main thing and burning a tokens
between different networks for like a cross chain type of a use
case. And I think this is the
fundamentally different difference between what we're
doing in the V4 and previous versions.
So what we want to actually create is that as a, for
example, community developer, you can work on a specific
module, improve that specific module, or create a new module.
And by governance process, it can be plugged into the
architecture as well. And you can this way iterate
faster. So you can change this different
modules without actually affecting the whole core pool
logic. And this also means that this
allows institutions and other entities even create their own
liquidity layers and somehow manage them as well.
And this brings a interesting new opportunity for
institutions, for example, to to create something on towards
their own use cases. Maybe let's go into detail as to
how the unified liquidity layer handles risk profile of assets
across different chains in the market.
You you were talking about risk earlier and how we risk boring
and sorry, how you price boring and lending on different assets.
Does the unified liquidity layer sort of create a like a single
price for an asset across all these different markets, or is
there a way for users to specify and target certain types of
assets that you know may get them a better rate or like a
worse off rate depending on what chains those are on?
So unified liquidity layer, what's amazing about it, it's,
it's simply a, it's simply a place to store value the, the
actual liquidity and, and the accounting of that liquidity
that who and which users it belongs to.
And also there's a connecting points into these different
modules. So it's, it's as simple as that.
And you can also register your liquidity into a liquidity layer
without actually supplying it and keeping it, for example, in
a Gnosis safe as an example, which means that you won't be
able to lend out your funds, but you will be able to borrow
against. And it's something that is an
interesting feature from institutional perspective or
mitigating that type of lending risk.
But essentially all these other modules, for example, what is
the interest rate curves, what are pricing mechanisms and
everything else it's is outside of the unified liquidity layer.
And they can exist obviously between different networks.
And to give more details about what, what what you mentioned
said about the, the pricing. So we have this new feature
called liquidity premiums. And the way it works is that
with liquidity premiums US with your position, it's priced the,
the, the asset that you're borrowing is priced with the
position that you create. So we can take an example where
you create a position where you supply only it and you borrow
USDC. So for example, today you will
be paying a certain price for USDC, but also a a person that
is supplying, let's say, more riskier assets that are eligible
in the protocol and borrowing USDC, they're paying the same
price. So I don't know if you remember
there was over a year ago this scenario with CRV where
basically the Curve founder had a big position in in all of it.
And, and basically the Dow started to off board the
collateral by mitigating the loan to value ratios,
liquidation thresholds. And effectively the the founder
went to other protocols with which later today, as of as of
today, recently suffered actually bad debt because they
they took those positions to their protocols.
But what's important here is this liquidity premium is
actually and pricing the liquidity is the answer to these
types of situations that happen incur.
Because what you can do if, if a position is borrowing the same
USDC and they're providing more risk or the market conditions,
dynamic market conditions changed significantly, we can
add a liquidity premium much more higher.
So basically even if you keep the position in the protocol,
you're paying more to the protocol into the Dow for that
position. And then it's up to the user to
to take that additional cost or living out of the protocol.
But this also means that actually if you're just
supplying eats and you have the most leanest collateral, you're
effectively paying much lower rate than the average because
you are essentially having the the the leanest position within
the same market. And architecture wise, we are
not segregating these pools from each other, but it's still in
the same market. And I think that's the beauty of
it is that you can do all this activity on the same market, but
we have a way to price the user's position based on how
much they're providing risk into the protocol and whether there's
sufficient reward for the protocol.
How does this pricing work? Is it algorithmic or is it
something that you kind of need an underwriter function for?
Technically speaking, it's essentially just a delegation on
the contract, which means that it can be a fixed logic.
And that can mean, for example, certain asset could have a
certain parameter which is the risk premium parameter.
And I think that's the way to start in the first iteration.
But of course, because we have this amazing module architecture
it it also means that that type of pricing module could be
changed to something or asset specifically change for example,
that reflects actual market conditions.
So for example, if an asset decreases in liquidity that
could automatically increase the the premium.
And this is the beautiful thing about it is that you mitigate so
much of the governance overhead of actually managing these
parameters where they could actually be automatized between
certain specific accepted range. How do you think the liquidity
layer will benefit GO? So kind of if you look at the Go
market cap today, it's about a third or so of the die market
cap. Do you think it stands to
benefit from from this unified liquidity?
Yeah, I think Go is quite interesting because and Go as a
kind of like a, as a, as AI would say like infrastructure
within our ecosystem is, is really fascinating.
So when we think about Go internal and, and, and the
benefits, the the reason Go exists today is, is because all
they had from time to time liquidity crunches.
And there was an idea that we had that to avoid this crunches,
we could actually have a protocol owned stable coin that
could be minted into these pools for uses to borrow against to
avoid the liquidity crunches. And while we were thinking of
this idea, we realized that actually one of the benefits of
of Go is and compared to make it out die back in the days is that
when you supply your assets to other protocol, you earn on the
collateral while you're borrowing Go.
So you have this kind of like a capital efficient stable coin.
And on the other, other protocols perspective, it also
brings to the users predictability on their interest
rates, which is a great feature especially when all the markets
are on variable rate basis. And when we look from the other
protocol perspective, what's the benefit of of Go?
It's quite exciting to look at it because Go doesn't have LP's
to at the moment you don't supply into the other market Go.
It will change in the future with Crosschango first in
arbitrary and Dandelion also will be available in in mainnet.
But because Go doesn't have these LP's, it means that the
reserve factor which is the way to collect Orbitdao revenue from
the protocol, it's actually 100 instead of like 10 that is in
USDC. So just to give you a magnitude
of the revenue, 100 million fourth of GO minted brings equal
amount of revenue to the Orbitdao as 1 billion USDC.
And that's remarkable because that revenue then cascades into
building and innovating more on the community side and on the
technical stack and also figuring out different ways to
to reward users. And in the view for perspective,
obviously with with liquidity layers, there can be different
facilitators that meant directly go on onto these liquidity
layers that can be then borrowed out.
But we have in V4, we have basically multiple features that
kind of like make the Go integration more seamless with
the protocol. You have Go soft liquidations,
which is kind of a feature that the CRVUSD pioneered.
So basically you can soft liquidate your positions and go
and and vice versa. You can get paid interest, for
example, in Go on any asset that you have that can be done
directly under the hood on the on the protocol.
And there's a couple of like technical improvements, but
before will bring the integration between Go and the
other protocol more kind of like titling it together I.
Wanted to ask also about the, the, how does changes the UX or
how does it improve UX for Avi users?
So like maybe walk us through an example here.
Like hypothetically you have a user who's on Polygon and has
collateral on East L1 and, and they want to borrow against that
collateral on Polygon on, on the Avenue market on Polygon or at
least on the Polygon chain. How does that work for the user?
And like in the background, what's happening to those
assets? Where are they being sort of
locked? And more importantly, maybe like
who's paying for the gas fees? Because we haven't talked about
this, but the the orchestration of the unified liquidity layer,
I believe is still happening on on Ethereum mainnet.
So maybe just describing like that user flow and what's
happening in the background there?
Yeah, and I can. It's also like a the kind of
like subsequent iteration of the unified liquidity layer, which
is the cross chain version of the liquidity layer with the
portals. And what is effectively means is
that the the of it as a protocol can actually move liquidity
between these different deployments and that can be
iterated to cross chain positions effectively.
You could you could technically then keep your collateral for
example, one Etherium mainnet for example, eat and then you
can draw, for example, go on another network.
Portals is just a a simple feature of minting and and
burning unpacked a tokens that then are subsequently backed
right away. And they kind of like a key
component of this feature is having caps of how much you can
actually do that and, and what's the purpose?
So the, the original idea of the portals was actually to allow
third parties to come and get some sort of credit line up to
certain points to be able to, to, to use portals.
It it's a tool for, for bridging as well.
We see the idea for for portals also kind of like an, I'd say a
way to move liquidity very fast between networks.
I personally believe that maybe most of the users will, they
might have their liquidity in one specific network, but you
will have users that are operating in, in, in multiple
networks and it's going to be very useful.
But for from like from for me, like the the the most exciting
actually UX part of of the whole before and and this works with
with the portals and unified liquidity layer is the aspect of
the waltz and smart accounts. And, and it simply means that,
for example, if, if you want to supply liquidity, but you don't
want to supply the assets into the liquidity layer for some
particular reason. One, you don't want to, to get
the funds lended out to, you want to see the collateral
segregated from the other parts. And then you want to keep it a
three, you want to see it in your, let's say, smart account.
So what, what we are essentially doing is that you can see your,
you can, you can register your collateral in the protocol, but
you don't need to supply it. So you can keep it in your knows
it's safe and then you can draw the liquidity against it.
And, and obviously this is like a really interesting thing
because you, you don't really need to put your assets into the
to the protocol and you can keep them segregated.
And this is also opens up some interesting institutional use
cases as well. You can provide some asset
station to avenue that the liquidity is in a contract.
It might be locked there that that liquidity is that the the
position is backed by something even though it's not in a pool
on the protocol. Yeah, exactly.
So that's the, the, the key difference.
It's, it's mainly of kind of for, for some, some users, it
feels more intuitive to see those assets in there, basically
smart accounts. And then you can still borrow
without having to kind of like we don't see in your assets
leave. And I think that's a interesting
thing. And then obviously using smart,
smart accounts itself is a big UX improvement because that
enables things like for example, gas less and silence
transactions and bunch of other interesting things that can be
built upon that even further. Cool.
Stanley, can you talk about the role of real world assets in our
V4? Yeah, there's, there's obviously
the, the, the segregated world applies also to the real world
asset type of A use case and could be very useful way.
Maybe there's some sort of extension of like tokenization,
tokenizing, storing in your own vault, borrowing against.
What I'm excited quite a lot about the V4 is that it allows
to have with this new V4 liquidation engine, it allows to
have liquidation strategies. So typically the way these
protocols are lending protocols are built is that when when
liquidation happen, there's certain rules for that.
And and that might be, for example, you have a liquidation
bonus that happens when a certain price range is hit and
the liquidator keeps that portion.
It might be Dutch auctions as an example.
But what liquidation strategies actually allow is that you can
have a a different type of liquidation strategy depending
what the asset is. And why this makes sense is that
not all of these assets that will exist on chain will have
the same liquidity profile or the same redemption time period
or or profile as well for some most of the assets that are
listed today. Their redemption profile is
really similar where you can go and swap the asset on a
secondary exchange and replace it and and you you created a
successful liquidation. The protocol is healthy, but in
more kind of like a real world assets of chain assets.
They might be, for example, a time period of like 2 windows a
day, once a day, every couple of days where an asset, for
example, the underlying assets, you can redeem it liquidated,
take the proceeds and return it to the protocol.
So these type of liquidation strategies allows to onboard
this type of assets where, for example, you have to, you have
some sort of like a time component involved.
And that's where I'm very excited about as well.
And of course, I combined that with the idea of segregated
bolts. It's quite appealing for an
institution to to consider using RV.
Yeah, absolutely. So Maker Dao also has a very
alive RWA offering. Can you, can you compare that to
kind of what you will be offering?
Yeah, I would say that most likely obviously depending on
what direction the DAO chooses on the RDBA to proceed with.
But I would say that there's going to be a lot of similar
profiling. But with the the with the aspect
of liquidation strategies that extends to new type of use cases
or things that for example didn't exist as a collateral.
Because you know, let's say in institutional context, Bitcoin
might be stuck somewhere in a custody for under 12 hour to 12
hours. So you can't liquidate right
away. So those kind of scenarios.
So I would say that's what we're trying to achieve is that
capturing the ability to technically support the existing
use cases in RWA operations, but at the same time innovating to
support anything that is new or assets that that they don't have
yet a a similar support in from like technical perspective.
So there's going to be a little bit of similarity, but hopefully
we see also new exciting use cases with RW as with with the
before. And obviously Go by itself is
really helpful because that's Go works in a way that there is
this concept of facilitators that can be created to to mint
go against some sort of strategy and that can be also real world
assets that can be anything that fits the Dow's risk profiling.
Yeah, well, I mean, maybe. Taking a step back on RW as a
little bit here, which asset classes do you think are most
likely to really take off in the next like 12 months and which of
those like you think will have a significant impact on Ave.
markets? I would expect treasuries to
keep growing and and see more initiatives to bring treasuries
on chain. I think there's a little bit of
slight stagnation of the growth because of the yield on chain is
higher than what Treasuries are providing at the moment.
But it provides a really nice diversification for anyone that
is holding a portfolio on chain, on chain yield portfolio, being
able to earn on treasuries, but also diversify their yield
sources and also risk profile. I think tokenization of money
market funds is going to be also a growing aspect.
BlackRock has been doing pretty nice job there with the the
middle tokenization and in a in a fund that they have.
So I would expect that coming quite a lot.
Centrifuge is is doing a great job on technician credit.
I mean, they're O GS in the space and keep always iterating
and and bringing new assets on chain.
So I, I think those type of short term depth instruments are
going to be quite popular for the next, I think 12 months.
OK, Stani, let's change gears a little bit.
So you guys expanded on to a number of EVM networks with
Arbor V3. In the Arbor V4 proposal, you
guys actually talk about expanding to non EVM networks as
well and kind of introducing a central hub for accessing Arbor
and Go. I think the rationale why you
guys want to do this, that's pretty clear to me.
But can you talk about how you think you're going to achieve
this? Yeah.
So the way I think about it is that we'll see a lot of L twos
where they're growing their own ecosystem and need a financial
layer. And when you use a financial
layer, you need the usual suspects, obviously on the D5
side for for actually the technology infrastructure
execution in terms of ongoing support, but mainly of being
able to create a financial layer that supports whatever the use
cases are on those networks. The way I think about these L
twos and EVMS and non EVMEVMS is that they're kind of like
they're they're all their own cities or like countries or
operations and a lot of cities. They actually need banks,
financial infrastructure and to support everything they have in
their economy. And that has been the case with
Ave. so far. And we have community developers
that been able to deploy across multiple networks with these EDM
deployments, which have been like a really big expansion.
I mean, Ave. is is leading in, for example, in in base, which
is now focusing more and more defy and it's amazing to see
there also Coinbase bringing like more and more of like their
business or thinking at least towards an on chain feature to
some extent. The way I think about non EV Ms.
is that it's kind of expansion, but obviously you have a
different tech stack. So which is good and and which
is also like creates complexity. So good parts is that there
might be things that are helpful for let's say D5 from security
standpoint for code implementation, but it's also a
new language, a new implementation that requires a
lot of effort. And the way we think about
expansion is that we can go so far with Ed Miss, but there's
big communities around these deployments where which which
which exist in the non EDM ecosystems.
Obviously that means running codes from scratch.
And I think that's the way to think about it.
So we just have to think these implementations we we have now
are in EDM implementation and how to get it into a non EDM
implementation. And it's obviously it's not as
easy as copying, pasting, it's actually a work of trying to
figure out how to build in a completely new environment with
a new language and whether to make that type of effort in the
1st place. But I do think that's it's
really important to kind of like keep these options open and
treat non EDM ecosystem also as users that are coming into
space. And then obviously that bridges
into the wider of a ecosystem which direction to actually go.
There's also discussion whether obvious should be an L bond
because just in the matter of like DVL, there is, I personally
think that there is argumentation behind of that.
But I do think that obvious roots are on Ethereum and being
able to support the Ethereum ecosystem, have Ethereum
alignment is beneficial for for the Ave. protocol in the Orve
Tao. But there should be bridging
towards these newer communities that are also focusing on
onboarding newcomers. And we just want to win in the
sense that we get to see more of blockchain implemented into more
mainstream and seeing more users.
And I think that's how we think. But yeah, the hardest part is
actually fighting the code and ensuring it's safe.
Yeah, there's a, there's a lot I'd like to unpack there first,
maybe which ecosystems are are you guys like looking at as
potentially being your, your first steps outside of the EVM
ecosystem? We've looked quite a lot into
move based ecosystems and trust. So those are the the kind of
like a main areas and obviously that's where our head is at at
the moment. So it's actually where and I
think it's a lot where the future is going towards in, in
some sort of process direction. And we want to also ensure that
we have enough know how on trust, whether it's an
implementation or some sort of back end services we build and
kind of like a have that approach as well.
But yeah, I think there's going to be more information about
concrete plans of how we think about the expansion to no need
VMS. Right.
So it sounds like it it's, it's not simply just a kind of copy
paste deployment, but there's more thoughtful consideration as
to, you know, the specificities of those VMS because I mean on
like on movement, for example, movement does have like an EVM
interpreter that it converts down to move into the move op
codes. You guys are thinking about
actually rewriting the contracts in the native languages and
maybe making use of some of the unique features there on those
block chains? I think so, because the the
interesting part is that all these non EV Ms., they, they
decide to build non EV Ms. also because they have some sort of
concrete direction they want to take and they want to focus on
some sort of kind of like propeller in their ecosystem.
For some it might be for example, being able to get low
cost on transactioning. Some might be for example
parallelization of transactions. Some might be that they have
benefits already of charting. Some might be just basically
certain type of activity in their ecosystem that is
basically tailored for somehow more consumer or mainstream.
I do think that Rust based and mood based approaches are
interesting and it provides really interesting tooling as
well from how to think about the actual implementations from a
security standpoint. So they all offer a little bit
their own peculiarities and it brings also a lot of complexity
at the same time, because we have to think from a complete
new perspective of these implementations, specularities
of the the non AVM and environments and, and the
changes we have to do. And all they isn't really the
most simplest protocol. It's really quite an
architecture and and and and and it's a lot of work.
Yeah. No, I, I can, I can see how that
would be a lot of work to, to rewrite all those contracts and,
and roster move or some of the language coming back to this,
you know, the, the sovereignty topic.
I'm really quite curious to understand how you're thinking
about this here, because Ave. has become one of the largest
protocols in Etherium, largest lending protocol by far in, in
all of crypto. Yet, you know, the cost of using
Etherium for for users and, and the the sort of, you know,
challenges that you guys need to deal with regards to MEV and and
and other issues that come with using a generalized purpose
chain. You know, could easily be solved
by building your own chain, which would allow you to have
specific policies around how you capture every VE doing things
like on chain Oracle's and like all these other kind of support
functions that evaluators that provides.
You know, DYDX went down this this this path.
I don't know what the kind of status of the maker chain idea
or I know at some point they had discussed maybe doing the maker
chain. So like, yeah, just maybe
getting your thoughts on like how you think about sovereignty
for Ave. and like what that means, you know, as as being
sort of a theorem aligned what that means for the protocol.
Yeah, obviously I think Ave. as a community is always kind of
like more towards of a line and doing whatever is best for the
of a community and and the the future of this protocol and its
principles obviously like creating more access to finance
transparency and and just better execution.
And I do think that's if there is of a network which is in in
the plans. And the question is whether that
is what kind of file to what kind of differences.
It really creates an amazing design space because I do think
that assets should actually yield how wherever users are
holding them. So users can subscribe to
certain type of phrase score choose not to.
And being able to have a have a network, it actually means that
there are a lot of benefits where the network can be tweak
and adjust it towards being very driven by D Defi behavior and
transactioning. And I think that's a really
powerful thing to do. I I do think that whatever the
orbit out chooses in terms of like an implementation, I do
think that even that design space should be as simplistic as
possible. And just to prove what actually
AD 5 specific of a network as a liquidity hub can actually do
and benefit for the users, especially the newcomers that
don't really mind or care about it specifically what network
they are, but wants to tap into a good brand and A and a good
product. And with the cross chain
liquidity layer benefit from all these movements between
deployments of Arbeit across different networks.
So what I think is going to be fascinating is to figure out
that delta and design space that is going to be really powerful
for the ABA users and the whole ecosystem here.
And I think there's a lot of benefits that could be created
within our ABA network. So zooming out, when you think
about D file or open file and so however we'll call it then in
the 2030, what will that look like and how will others role
look like within that ecosystem? Yeah, I would say that's, it's a
great question. I think the idea of the ARBE
2030 proposal, which essentially includes a completely new brand
identity, you know, taking ARBE into a more kind of like
approachable fresh look with the V4, bringing new innovation,
bringing a lot of flexibility, module architecture, pace, not
only a good way to build iterations, but also support
institutions as well coming into the space.
And I think that's what's going to happen over the next years
and obviously of a net for bringing efficiency and to the
whole kind of like organization of capital and TBL across these
networks with cross chain liquidity layer.
I think just looking the upcoming years, we have to have
infrastructure that is actually really, really ready for
adoption. And, and I'm thinking about
mainstream adoption, institutional adoption and being
just a infrastructure that can be used in many different ways
with all the, with all the Dow or whatever that particular use
case is. So I I think that the idea here
is that DFI is definitely, you know, better way to organize
finance and financial infrastructure, but it will take
a decade to actually mature because it just needs that
maturity to scale. And then thinking about the
overlaps role, we want to build the things that we, we, we think
are necessary. The overdow is growing.
There's more contributors there, technically technical and
non-technical contributors. It's probably most interesting
Dallas out there at the moment all the way from from the early
D 5 days. So effectively, hopefully the
other labs kind of like moves more towards other types of
initiatives that might be supportive for the Dow or the
other ecosystem. But the actual technical
architecture is solved to the point that if there is any
changes in the future that needs to be made, they can be done
very locally without upgrading the whole system.
I think a lot of inspiration of, of the Linux ecosystem, kind of
like whole way of how things work in Linux Foundation and how
different people can work on different parts and being able
to kind of achieve that. Where student team can focus on
optimizing liquidation strategies, certain teams can be
focusing on improving borough modules and and so forth.
I, I think that's the kind of like a big vision here and
obviously governance minimization.
To the extent that governance can be really much an overhead
and I think when it becomes an overhead it, it removes the kind
of design to to to people what we basically try to go away
from. And as of a matures, some of
these parameters can be immutable dataline and reduce
that governance overhead. So I think that's the kind of
future I would love to see. How do you see the future of
stablecoins evolve? I think it's a price point
question. So they lower the price point
the more adoption we see and also the UX tooling.
I actually think that's for stablecoins especially to get
it, getting them into payments, a validio might be a really good
option because you can hit a really low price point for the
transaction costs, which is amazing.
And with things like smart wallets kind of obstruction,
embedded wallets, even you can, you can have an experience that
is really smooth. Stable coins have taken adoption
in places where there's a lot of uncertainty.
Argentina is a really great example where stable coins have
taken adoption and there's numerous other examples in I
mean, in general, they work better.
Like it's so amazing to send someone go and, and then seeing
it on chain directly that it the transaction landed.
You don't need to deal with banks and figure out whether
someone received whatever part of this.
It's just that kind of like the middle where we're like the the
ends, the, the, the the ends of the whole stock is, is where
it's broken. The off boarding on boarding.
When once we solve that, I think we will see a lot of stable coin
adoption and especially in. Payments.
So when talking about adoption, you know, one thing that I think
about is just the, the, the, the demographics or the, the kind of
persona of crypto and DFI users. I think it's safe to say that
the majority of liquidity in DFI markets today are crypto native
users and institutions. But we haven't, I don't think
we've seen so much crypto native institutional capital using
Defy. And I think that I feel like
there's a lot of potential here for crypto institutional debt to
enter Defy markets, specifically in the context of restaking
where protocol on liquidity will be very useful to build out the
the restaking kind of market, you know, when it comes to
protocol on liquidity and creating a more fluid market for
for that liquidity. You know, a lot of those deal, a
lot of these deals now are I think are being done kind of,
you know, manually with multi Sags or perhaps even without
multi sags. What's the role that lending
markets like Ave. might play in allowing a lot more crypto
native institutional capital to enter lending markets?
This is a really, really fascinating question because
institutions usually have their own kind of fun needs and
requirements, and we're still in a phase where the markets in D5
aren't clear or strong enough for institutions to draw more
and more attention into it. And for me to explain what I am
saying is that if D fight is overly appealing as a market and
there is enough clarity, how do you track with D fighters
tooling and everything. It's basically that the
insertion adoption will come just basically from from from as
a market opportunity. And what I think is we're in a
stage where institutions are describing kind of like their
own preferences and needs and figuring out with their
compliance teams and figuring out with their own kind of like
teams of how to manage, you know, funds, custody risk and
various types of new risks. Because DFI is a leapfrog
technology from existing financial technology that we
have. It's just is so much advanced
what we have and I do think that people will still do paper
agreements, people will do a lot of simple boring stuff in closed
doors of chain, but it's really creates a a unique kind of like
a global borderless market. So once we hit to a a point
where we have more institutions doing this experimentations with
their own kind of requirements in collaborating with D5
projects, like for example of it, maybe we see more and more
excitement around the space and more education.
But I do think that once we hit into a point where the risk
profiling is acceptable and maturity is acceptable for
institutions, we're just going to see more and more kind of
like an inflow. And obviously the more clear it
is on how to interact from regulation perspective, from
tooling perspective, that will help quite a lot.
So now we are in between where we see the most bravest, the
smartest in institutions, the big brains actually hear and
defy and trying things out, building and experimenting.
But we don't yet see actual this kind of like a high inflow.
But I do think that will happen over time.
That's why I I mentioned earlier that it it will take a decade
for Defy to get adoption. Well, as we're nearing the end
of the podcast here, we've been we've gone a little bit long.
I do want to just maybe circle back to this before proposal,
which I think you mentioned earlier is has passed and that
that the payload will be going on chain as we're recording this
on on July 1st. What's the next steps here and
how can the Avenue community get involved?
And yeah, what what's your call to action to to the community?
Yeah. So we are essentially building
at the moment. So our work has started and our
goal is obviously to to give ongoing monthly reports to the
to the ABBA Dow and and explain the progress.
And we collaborate quite a lot with existing Dow participants
and and service providers interest brainstorming and and
different areas. So I do think naturally
organically some of these service providers or Dow members
will going to contribute to the V4.
And obviously once the actual implementation is done, the
security contributors we're going to contribute and then the
risk contributors will contribute as well.
Whereas they have to set different type of parameters, a
lot of these different strategies as well and kind of
like the the economical pieces together and get ratifications
from the Dow. So yeah, it's kind of like a
heads down type of face for us, but we're super excited about
this because hopefully this moves all the further in terms
of innovation, institutional adoption, but also brings just
better, better tools and infrastructure for for everyone
using D5. So we're super, super excited
about this and also nice to see that the orbit out has a lot of
blessing for us on on this proposal and we're able to do
this and and build it. So it's really appreciated.
Cool. Well, Sonny, thanks so much for
coming on the podcast once again and learned a lot today about
Ave. V4.
Excited to see Ave. moving more into a cross chain, multi chain
world and and definitely like pushing the boundaries of of
defy innovation. So, yeah, thanks once again and
hopefully we can get you back on in a couple of months when Ave.
V4 is deployed and you know, we'll have ample questions I
think about about the progress there.
Yeah, definitely. Maybe takes more than a couple
of months, but hopefully we have a test net by then.
No pressure for us. Good, fantastic.
Thank you. Thank you for joining us on this
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