Beyond the EVM - Computation and the World Computer w/ 0xToki (Umami DAO)

Transcript

[Music] thank you hello and welcome back to the strangewater podcast I'm so happy you tuned in for this conversation we've got something very special for you today's guest is one of the more technical guests we've had on this pod Xerox Toki is one of the smart contract devs for Umami Finance we've been bothering Toki to do an episode with me for weeks now but he's been much too busy shipping the brand new Umami delta neutral glp vaults and so now that they have finally shipped have been tested and are

accepting deposits he is finally freed up enough time to chat ethereum this conversation is one of the best conversations recorded or not I've had in a long time of course Toki shares his background and how he found himself creating Advanced Financial products on arbitrum we also discuss Umami and specifically what it takes to achieve success despite failed product launches regularly occurring Black Swan events and non-stop Dow drama and believe me Umami has seen more Dow drama than most but the second half of this conversation

takes us down roads that are rarely walked down this is a conversation you can only have with someone who eats zeros and ones for breakfast although believe me this conversation is entirely understandable when you think of ethereum today and in the ethereum end game what do you think ethereum is for 18 months ago I would have said the purpose of ethereum is defy today I couldn't be more convinced that I was wrong when I look at ethereum I really do see the world computer

I see the platform upon which we will begin to Define and master trustless computing when I think of the final boss of ethereum I no longer think JP Morgan I think AWS and Toki will help us understand exactly why using his real world experience and his actual working protocol one more thing before we begin please do not take Financial advice from this or any podcast ethereum will change the world one day but you can easily lose all of your money between now and then all right let's get started

Toki thank you so much for joining me on the strangewater podcast thanks for having me Rex um yeah man I'm so excited about this conversation um and so I guess um I'll cut into this later about how I know you and um how we met but um can you just like always like to start with the same thing can you give the audience uh just a brief introduction of who you are and just how you found yourself uh you know basically willing to line up outside of the Global Financial system in ethereum yeah absolutely so um I kind of started off in crypto when I was quite young um still in high school at the time like when ethereum like just got released so I was just finishing high school and um yeah at that time there wasn't really

much much happening in terms of development on ethereum like I would usually um yeah like keep up to date with I'm the ethereum developer calls and um you know what was happening all through like the bear market and everything and uh in in the uh 2018-2019 bear market and um yeah that was that was interesting like watching development slow but yeah my interest was like still increasing over that time um I just so before you even move forward from there but like what What attracted you to ethereum as it was being born well um I I found that uh there was really nothing like it in terms of a layout that um anyone could participate in um that was not controlled and not

censored by any group um and I thought that was that was really really important in terms of like being able to build software because um yeah some software um you often can't build software without having um without trusting someone to deploy that for you and without adjusting someone to keep that up for you and it also limits this the scope of applications you can build um because like uh you often you can't it's quite difficult to build applications that that touch money in any way um and ethereum just kind of had that by default which yeah which I thought was really really interesting and you know something that um would definitely be used in the future but at the time it

didn't really seem that relevant um one of the things as well that kind of really like confirmed that for me was like seeing the first few DFI applications be born and um yeah so those those first few applications let's remember like um like eat land which is now Ave which is pretty much the one that for me uh made me realize that yeah this is something that I want to work on because um back then it was quite rudimentary it was like peer-to-peer loans and the UI was terrible but um after that then uh D5 summer came along and um yeah that that just confirmed uh what I was thinking all along which is yeah this is this is going to be something real so let's see I met you

um about this time-ish maybe a little bit longer a year ago and by that time we were you were deeply entrenched with Umami finance and um you know we'll get there in a moment but can you just like help me understand the time between like finding eathland and seeing the magic of like Finance in this credibly neutral place and like um you know we'll get to it but like working on these vaults like what was it like to be in this space like what were the things that were exciting to you what were the things that like really engrossed you were there any things that like really made you nervous and want to get away just like talk to us about that time of um you know turning into the token we know today yeah so I would say that um yeah at the start like uh so so I

have a background um working for a payments company and um when I was there like it's payments in crypto and um like working there was uh much more like a traditional like Tech role um yeah like working more on the consumer side of people on ramping um cryptocurrency and whatnot and um like seeing that there like I was able to kind of watch um the industry grow from that position and get like a good understanding of um kind of like the products that I specifically wanted to work on um and really develop like that in particular and what I saw just generally was that there was what people had done really well over like the the first

iteration of D5 was building like um very trust minimized applications like ones that specifically um worked solely on chain and um you build some strategy right into solidity and deploy it and then that's it and then also all the tokens and everything else that comes along with it but um one thing that I kind of saw that was missing was um some applications that didn't weren't just limited by what you could do on chain because there when you're building on chain there are some limits in what you can build and um for example like oracles is a really good example you can't really build like a Oracle just purely on chain you need some data source off chain

um but that applies to um lots of complex Financial products and being able to build them in more efficient ways so that in particular was something that I just saw generally was kind of lacking and I thought that the market would really um really like really enjoy something like that just because of the benefits that come with building something with an off-chain counterpart and that kind of leads to leads to like these vaults so um yeah like these vaults um they have like the significant off-chain counterpart and that's required because we write a model off chain that's used to basically like calculate how much Delta we should be hedging across each of the volts and we can't put that on

chain just because the amount of computation that's right required to run that if there was a trustless way to run that with like you know a height report and a lot of computation that would be like amazing and something that I'm sure we will have in like the um in the near future but at this moment in time like if you want to build strategies like that yeah you do need a significant off-chain off-chain part no awesome man and I think um so just uh to keep get the audience up to speed the vaults that you're referring to are the very like brand new released uh the Umami delta neutral glp vaults and um I'm sure they'll come up many times uh as we're talking but um what Toki is talking about is that like the computation in order to make

these work is so intensive that like you can't even run it within arbitrum you have to run it off chain and then find a way to coordinate on-chain and off chain and so like while you were just saying that Tokyo I I had lost you a little bit because I was thinking like counterparties like how how does umami have a counter party like the whole point of this is like all the finances are on chain but like what you are saying which is like you have skipped 45 minutes ahead of where I want this conversation to go is that like we think of um everything that we're doing in this Frame of like finance and D5 but like the way that we should be thinking about this is in the frame of computation and and from that's the standpoint that you're talking about counterparties is

that are you following me yeah absolutely um and I think that there are a lot of cool ways that you can um even in like even in the state we are now without having um like the computation purely decentralized you can still enforce invariance in your contracts that require that any computation done off chain um is true and is true to like with the strategy that you're running um and that's really important to what we build but um it's it's also it's very similar to like um like a zero knowledge proof and how like something's a lot of computations don't off chain and then you just post the proof on chain but that proof can be mathematically proven as correct on chain um it's very similar to that type of

design yeah man your Racing's like so far ahead of this conversation I'm tempted to just like continue on but for the sake of continuity let's just catch us up to um to Umami and like the big thing that uh so like you've made it clear that you're starting to realize like the interesting intersection is like how the evm can touch outside compute and like create new Solutions um but something I know a little bit just about your history is that like what brought you to arbitrum and correct me if I'm wrong what brought you to arbitrum was like the like craze and Mania of that first um I believe it was like a kitty-based nft project is that so like can you talk to me a little bit about like how you can be so serious

about computation and building Financial products but like be in this industry that is like narrative driven and like energy driven by memes and things that are like maybe more silly yeah sorry I would say that um that side of the industry I really really enjoy um well I wouldn't say I wouldn't be working if I didn't if I didn't enjoy that side of it but I think um yeah that side of it like the the meme driven Investments and um just all the fun that happens on chain I think that that's just um like a representation of like just the layer that we've built which is like a free and open life like anyone to participate how they want and by by creating that layout you kind of get

like all types of actors and um when there's money involved um that's when you can get um like I would say like very interesting Investments and you know not not even Investments it's just like um yeah some type of scheme that um often you know maybe poor financial design but it's uh it's just like a funny uh funny kind of joke um I guess that's what you could say like a lot of these like Forks are um when you get like all the different like food forks and then um all the different own forks and all that stuff I would say like work industry with um yeah all of this is it's it's fun definitely it's never adult day and when you're checking

checking on chain and like checking Twitter and seeing like the um some of the things people get up to in some some ways that people get wrecked is often quite entertaining as well yeah for sure I actually just read this book it's called Uh I believe it's called the dawn of everything and like kind of one of the main thrusts of the book was that like we think of innovation as this like kind of coordinated result of like science and investment and like problem solving and stuff but it kind of like turns out if you like go look through like the archaeological record and anthropology and stuff it's like kind of turns out that all of our like Technologies and tools are created like in these moments of like exuberant like play and joy and like farming probably was like created because like people

were just like creating these like fun Gardens like while they were you know like moving with their pastoral homelands and then that's how they developed the tools and so we don't need to get that deep into it but um I just see so many parallels to what you're saying about how like we've created this system where there's so much energy and so much creativity and like if you look at it it just looks like Madness and stupid in play but um it turns out like this like that is the energy that brought you to arbitrum that made you realize like hey this is a place to experiment with these computational counterparties and like get into a mommy I mean is that correct yeah absolutely I think um yeah like the fun side of it yeah it was definitely initially What drew me into

100 it's um yeah like seeing all the different projects that launched on arbitrary I mean like the first like week yeah it was it was funny to say the least I guess it was just a lot of um emissions based um and like extreme emissions basically fine yeah some of them yeah you could say were scams and um yeah like I guess some stuck around as well uh we might be being one of them yeah well and as much as you want because I know that there's like 18 layers of this story but like can you just kind of like talk about your experience of being like probably one of the earliest people who do mommies who's still there and watching it transform from a literally waifu based ohm Fork into like one of the most

like sophisticated Financial products on chain right now yeah I have to pinch myself sometimes um but I think when I think back at like how it all started oh yeah so I guess it it kind of started um with a group of anons um who this was um preceding me um that it was was before I joined but it was um you know it was just a group of a nuns who started um as like Arby's finance and that was like an auto compounding um like an auto compounding D5 platform um that was kind of it was pretty useful at the time because like that was when we had all these like a missions based token protocols and then obvious came along and then um allowed you to take like

this like insane AP1 APR and then like use compound interest to like just bump it up even more and then reinvest all the emissions from all of these different protocols that ended up doing really well um during the bull market and then um after that it like everyone on that team pivoted and some new people joined and they started um zero to Ohm which was an own block but um with a bit of a Twist that they invested the treasure in um I would say like more Degen token Investments not like it wasn't meant to be like uh you know like uh a story about you like what I'm is um with like a treasury backing out of like um like Ethan other assets like that it was just the treasury was meant to be backed by a

lot of these like funny tokens and more meme Investments um at the time and yeah so that ended up it grew quite big um during the Bull marketing during um during that time but then they ended up rebranding um to Umami and I joined uh just a couple months after that um and then after joining a lot of people left around that time and there was not really much Direction um in what everyone wanted to build next they were kind of it was also it also coincided with um bone collapsing so a lot of their own Forks went down a lot of value as well so and so sorry just a level set like what you're saying when you join right now you're at a point

where zero two ohm is huge has a giant treasury a lot of it has been frivolous invested in like stuff that obviously wasn't going to do well but you walked into this situation where there's a ton of money a bunch of anons a lot of them are leaving because like the the big problem is no one knows what the purpose of any of this is is that correct yeah absolutely that's a good fight to describe it it's pretty funny um yeah there was at the time I don't think the treasure was it was way bigger before but you know a lot of those um the way it was infested was um you know wasn't the I would say we didn't have one around that's for sure

yeah man okay so um you're you've entered and like stuff is like just like kind of chaos people are leaving like people are happy that there's a lot of money like and and like just do you have any Reflections on like what it takes to take this like kind of Rat's Nest of like money and ideas and like drama and like turn it into um like you know this team of people that are like that are so resilient to um bear markets to drama to everything and at the end of the day can just put out like a compelling like product that actually pushes the boundary of what we're doing here do you have any thoughts on why you guys were able to do this yeah absolutely um have a pretty strong thoughts on this I think that um during that time like the type of person

that gets attracted to a protocol that's pulling apart is someone who wants to build something and like wants to stick around and that's just generally who who Umami has attracted from the start being like kind of a mess and not really having much Direction like all the people that joined and that really stuck around to kind of it acted as a filter in a way because anyone that didn't want to really contribute and really don't like you know put in a lot of work to get it where it is now like they just wouldn't really stay around stick around because you know it's too much work there's lots of easier money in the space like why would I stick around and you know work on something that's really

difficult when you know I could just you know go do something else that's a lot easier and I think that generally like the team that like came together was just you know I would say like one of the best teams in TFI um just everyone on the team is like so dedicated to working and like you know working together and solving problems and I mean from the start like everyone um I think that that is definitely like the most important part um and why we managed to finally get something out um after you know some failed attempts and lots of work and I think that yeah that's how we got there in the end is I'm just like a very very resilient team yeah no man and um again for the audience like I

it's crypto so like things are weird and it's gonna sound weird that I say this but like I worked for Umami for one month and like during that time um you know like I I I bet but you know I met all of you people and I met like you guys not in a way that's just like on Discord or whatever but I spent time um you know doing very little amount of work but like spending time understanding what the ethos was and like why you guys were here and just like just to see how much fun you're having and I guess kind of the last thing I want to ask um in this realm before we pivot more to like the development and being on chain is like do you just have any reflections of the end of the day that now that umami's Flagship product is out

um is Umami more like the let's say like 10 of you guys that happened to coalesce around this um kind of like dead treasury or is it like really about the products and like the uh the thrust of the things that you guys are like putting out there and putting on Shane yeah I I think it's it's much more to do with like how we work together um and how um the team came together and I would say like I guess like it's the circumstance that attracted everyone together um but then it's also the circumstance played a lot in like who this paper were and like how we all came together to work on it and I think um yeah it's it's much more about

um yeah like how we work together and how how effectively were during uh many times and that's it's been like very important in like you know being able to like assess like whatever situation we're in and then uh work out like you know how we can like make it make the best of this and how how we can um you know like build something amazing for like the community and uh yeah I also want to mention that like during that whole time like we have had like an amazing community and everyone like the Discord has always been Lively and everyone always liked chatting in there and it often attracts like many people from crypto Twitter just that pop up in the Discord from time to time and that's that's part of it as well like having the community

around um and the support that's it's definitely been really important yeah I mean I I don't know if um this is like the the critical ingredient to every project but like Umami has the three like Magic ingredients that make things work like one is the idea or the concept of the product one is like the team that can get it done and the third is like the community that like will back you through failed product launches through like team drama through bear markets through all this stuff and like I don't really know what the takeaway is like I don't know if this is like okay 1B gets the other b gets the other or if it's like you need to breathe all three you need to bring all three together or what but um anyway I'm sorry to have

just thrown such a like leading question for you like is it the team or the product like um but like I just like really want to hammer home that um like umami's been through a lot and like the takeaway I have from it is like okay like in certain circumstances it doesn't even really matter what you're building what matters is like the people that you have like brought together in the journey you're going on as a group and so to me like that's the Umami story and it like turns out there's also like Financial products in it too yeah there's also really cool Financial products for building but then there's a lot of names and a really fun Discord so it's a good combination cool so let's pivot into um actual building

um so like before we like dig into it like can you talk to me a little bit about like your personal interest in like finance and like in the when you're building these products like how much of this is it like an engaging intellectual side on the computer science level and how much of this is about like the financial systems level I would say that um specifically for um the products that we've built oh actually I would say that when you're designed like choosing a product to build next or something that you want like looking at the market and looking at somewhere there's a gap or where there's something that you could improve I would say that that's much more related to financial systems and being

able to identify like some Niche or some some area area which you can build a product that will work and so that would be sustainable be able to attract capital and it's something that provides value to the market as well so I would say that that side of it um that's like I would say early product development you definitely need like a strong financial systems understanding to be able to like Identify some area that you would like to build or something that um it could be really useful for the market but when it comes down to like actually implementing it and from everything from implementing it to launching it like that is much more related to um like Financial modeling and um like computer science and computer science

and being able to actually like you know obviously like write the code but also able to like test the idea before you put in the effort to write the code so yeah like both I would say both of those sides really important but they play like a role in different parts of the development um of like a day five product yeah I mean in in the way that you talk about that are you kind of saying that like look these ideas are like just um demarcating the same like they're demarcating different parts of the same like design process and like these parts don't have hard like starts and stop and therefore like they're kind of meaningless like we shouldn't really talk about them or are you saying like when you're designing a robot system you

need like people with the like Financial systems uh standpoint and then you also need people with like the computer science standpoint and then the name of the game is to like get them to coordinate yeah I would say that it's definitely more coordination thing uh but you do need both you do need input because like um you can talk about like building some Financial system but if it's just not feasible then you know you might as well like you can't build it anyway so I would say that yeah you do need like import um on that side as well from the dev side but um when you're building like some Financial system I would say that it's kind of like the sky's the limit because there is always ways to implement it but it just you know can take like a long time and develop it depends on the size

of your team and whatnot so yeah like definitely um it's definitely a bit of both when when designing a product but when you're building something that's um yeah like for example like if you're building like uh some like novel amm design um or possibly like um some yeah some new stable coin design like both of those I would say that yeah you definitely need to have very very good understanding of financial systems in order to to understand like Market structure to understand if that's going to actually work specifically for amm as well like you know the market might not need some new novel topical design amm because you

know it's just not that useful and there's something else already out there but um yeah so I'd say definitely more leaning towards um like you're having a good understanding of financial systems before um yeah before you go out and build a product yeah and I think maybe just to like generalize that a little bit outside of like our little define niche like it always makes sense to like have a plan and have a vision before you embark on a like a journey you know and I think um it always makes sense to know what you want to build before you start building it and then like also have like you know evidence-backed conviction that the destination is like feasible and like worth it and all those kinds of

things and so um yeah I don't know I mean I there there might not be um anything more interesting to say than like in order to build good D5 products like it starts with a good vision and a good economic model and ends with like Rock Solid computer science yeah I would say yeah exactly what you said just before um like evidence-based um it needs to be evidence-based absolutely and um that can often like take a long time as well to be able to like find evidence because the evidence often isn't isn't there um when you're when you're looking to build something so that that can be like modeling out the system even before you build it as well to like make sure that that actually is going to work yeah and then so like when you think of your role

like with a new mommy and not even that like the Toki that you want to be throughout your career like do you consider yourself like a like um very good programmer that understands it's like working to understand Financial systems or do you consider yourself like a very good Financial like a good systems modeler who's like getting better at programming like how do you see yourself yeah so um just a little bit more on my background like before um like I I had like a really strong interest in science um as well so um and Science and like modeling um modeling systems in science so um like modeling diseases and um other stuff like that since when I was um you

know so that was back when I was studying but um and that's what I thought like yeah would could be a possible career path as well but um yeah obviously like I'm able to apply pretty much the same the same math and the same like the same practices for modeling like Financial systems which is really useful um so I would say that like that site has become really helpful specifically in D5 but and then programming I would say yeah relatively strong programmer as well but I would say that um less strong on the financial side because I didn't study Finance or um and I haven't like had experience working at like some firm or anything like that so I'll say still learning on that side

um but yeah I'm able to apply a lot of the same type of techniques that I've learned in the past to working in finance and I do I do have like a lot of help as well so um yeah like lots of help in Miami and people that work in the industry um and getting like lots of insight from them as well specifically in the finance industry and traditional Finance sector yeah and so as like someone who um you know like comes to the table with you like I'll rephrase like your your interest in science as like a um like a statistician like background or like somebody who's interested in models and um like a computer scientist do you have any like Reflections on like how people that come

with a finance first background like understand um development in ethereum and like is there anything you wish you could like kind of uh help them understand yeah I would I would say this is like really interesting because you um with ethereum like um things don't apply exactly and things don't work exactly the same way as they're doing traditional Finance um the main thing that like anyone um who works in traditional Finance would would say is like that there's a big latency issue like straight off the bat like you know there's latency is a big problem and it's something that's like that's kind of what you're out for is um working in traffic but

um yeah with ethereum there is just like latency like everyone's working on the same playing field um for any blockchain so um when you're Building Products um they kind of have to work around latency in different ways and there's often ways you can like extract value like Mev is just one that's pretty much taking advantage of um the fact that you know everyone's working off the same well the same time essentially and um yeah so I'll work from coming from Child fire and then wanting to move into ethereum and default I would say that um it's probably a good idea to like get some understanding of like if you don't

already know how to code and don't know solidity I would say that that's something that's really really useful being able to understand the systems and how they work um because then you can just like I mean look at them and see how they work as well and that there is a lot of like limitations imposed just because we're working in a trustler system as well so you don't quite get the same Freedom um when building products and yeah Building Systems you have to you know impose some limits because they can be risky if you don't impose them and and how like I think one of the like most powerful Parts about um ethereum is like the composability right where any code that you ship like assuming you just sign it well but even if you don't right

other people can build on top of it and create something that like you never could have even imagined before do you find that that is like something that's soup for computer scientists that's like table Stakes right like that is kind of the point of um object oriented programming and like all the stuff that we figured out in like the 80s right for finance people I don't really think that's the same at all I think these concepts are like almost novel um do you find that like that is attention you have to like work through it all with the the finance Brands yeah um compressibility is definitely um I think generally I think some people just think it's dangerous like it's like you know like unbounded composability

um can be dangerous in some respects but it's it definitely becomes down to the to building like um rock solid components and imposing limits um because imposing limits in your in essentially your component so that if people were to use it then you know they're not pushing the boundaries of your product and that's yeah I think that's that's a good way to elaborate on what I mean by imposing limits in your in in your design um because we do get like we do see exploits um just based off the fact that things are composable um like lots of like lending Market exploits and yeah Oracle exploits and that type of stuff is um yeah that's that's just like the

nature of it so you have to make sure that your individual component when building out is Rock Solid before um allowing just like free composability yeah I mean this is like a little bit uh tangential and a little bit like Galaxy brains but if you'll bear with me for a moment I think like on the one hand you know like let's take this latest multi-chain hack as an example like you can look at this as like kind of a risk case of composability and how you know um the the vulnerabilities and multi-chain like not only have like sunk basically like any protocol that has decided to like make that the canonical bridge but like really looks like it's going to take down the entire like

Phantom ecosystem where which you know like was an ecosystem with people that uh you know in any way like composability can kind of be seen as this like uniquely dangerous thing in which like you no longer have control of your own destiny but I don't like part of me just looks at like that the real world you know and like I don't know about you I like I was I was in high school when this happened but like I in 2008 I didn't have any ability to like um you know stop the the world from crashing around me or in 2020 as well and so like part of me is like just wondering if a lot of these things about composability are um just the same problems we have in this like Dynamic globalized interconnected world but just reframed in computer

science yeah definitely um yeah you just take whenever you have like layers on top of allias you're taking on um leverage and risk and that's just it's compounding risk as you go as you go further with more composability I think bridges are like something that um everyone kind of just takes as this thing that's always going to work but um at the same time and time again there's them not working like when you use a bridge like you're like you just expect it to work in like what like 10 minutes or whatever and that's it but um I think like keeping stuff in bridged assets or something people won't won't be doing any longer yeah and I think like at the same time that bridges are getting scary and scarier like we're

mudding the waters more and more with like what it what even is a bridge and like you know if you're a layer zero token that has like the layer zero contracts on each of these chains like is that is that a bridged asset I don't even know anymore um I mean honestly I guess it is yeah I would say like they're still Abridged offsets um they're all representations is the same thing but the token depends on how the tokens built if laser was used um to like just deploy all contracts for the same token then you can kind of say that they all kind of have very similar properties and kind of is the same token across different chains or the same asset but um yeah like it depends if you're wrapping it on one chain then all the other representations on the other chain

have the same um are one asset on another chain which is kind of like a Harry Potter in a way which is how a lot of other Bridges work yeah and it's even scarier when you have a third party that's wrapping your assets like for example Wormhole is like wrapping certain um you know tokens and like that's not that's not like the canonical token that's just the Wormhole version and it's it's just a mess it is a total mess yeah that's yeah that's definitely the that's the danger for sure while we're still in this realm of like okay what's it like to be a um systems designer and a computer scientist and work with financial people um just like any final Reflections on like things that you wish like you could

kind of tell Financial people and and I know it's an open question I'll give you mine first because like the deeper we get into this bear Market the more I'm starting to like get really nervous around like this work Capital efficiency and like the more I'm starting to feel like the finance people are so locked into like Finance stuff that we're not realizing that like the other side of capital efficiency is like riskiness and um and and leverage and like all of these things and you know do you just have any like kind of like thoughts on what's going on in this industry um that can only be given by like a computer scientist and not somebody whose brain has been melted by money I would say that

um I'd say it's very important to focus on building um like strong base layer protocols um and even regardless if they are less Capital efficient um than like centralized counterpodies or counterparties that you can build with taking on more trust assumptions I think that building that strong base layout just makes for a much better ecosystem overall um and we'll will improve like products down the line it does it and does like really like favor well to strong composability rather than um yeah composability built on like a like a leg shaky foundations and I think that's yeah it's very

important that even if um yeah like some Finance people maybe maybe they won't want to work on stuff like that it seems like boring and maybe less sufficient than something else they could build but I think that that stuff's very important and there's a lot of talk right now on about uni Swap and uh how like everyone's like qualifying um lots of us rebalancing and stuff like that and how it made it Maybe not maybe less efficient than having an audit book but I think that just to trust us and trustless property is the beginning Swap and being able to deploy markets for tokens that um generally you probably wouldn't be able to like have an audible for and there isn't enough liquidity um but I think that that in particular

is very important um yeah doing protocols like that even if they are slightly less Capital efficient yeah and look like you know someone who has like real Trad fire experience and not like trading stuff but like using Finance to like make a business operate like when I get excited about what D5 how D5 is going to change the world like the things that are exciting to me are uniswa Ave like honestly the most exciting thing to me is as someone who has wired over a billion dollars in one sitting before that doesn't even make sense like you start the wire process us takes at least five hours you call your Banks and they tell you the money is in the FED wire system it's at the correspondent

Banks we can't tell you where it is they'll be done when it's done like what I'm excited about is like sending money via these rails you know and so I do think that um that yeah like everything you're saying is right is like please go have fun we've already talked about that that's like the source of innovation and like go do crazy stuff but like if you're really here to like change the world with ethereum like it's all about like bringing it back to basics simple and these like Rock Solid Primitives that um you know like the the entirety of humanity can like use to build upon yep I totally agree with that that's yeah that's it so actually that a good

Pivot Point to um what I'd like to use the remainder of this uh conversation to talk about but but is like thinking about ethereum as um as the system of distributed computing and not just as like this new way to do finance and like I am a huge huge believer that the next narrative full cycle to be clear narrative Because the actual bull cycle is just like a reflection of macro we don't have anything to do with it but the next narrative bull cycle I'm like more and more convinced every day is going to be not about Finance but is going to be about like ethereum as distributed compute and so um before I like kind of just kind continue spewing at you I

wonder um if like that initial uh thought like evokes anything to you do you have any response to that um I think that yeah like um naturally it's like ethereum develops more you're going to like see all these different layers and um computation will be cheaper you'll be able to do more um that's yeah that's just like kind of like the natural development of ethereum as it moves to like a just a better layer um but I think um that computation will allow for for a lot of applications that can't can't run right now but you're still going to generally I think that um the next narrative I would say

before we're at the point where um computation is being run on chain I think that a lot of with what will drive the next narrative is um these like layer 2 networks or bespoke layer 2 Networks that Implement like some computation off chain whether it be like trusted or untrusted I think that that that's going to and buy um by bespoke L2 I mean like say if you were to um Fork optimism and then um Implement um your like a matching engine or if you were going to implement like a game engine or something off chain and that that side of it I think that yeah that's going to be like a very strong narrative

and it's something that we're able to do now which we're only just starting to see happen but I think it's that's going to grow definitely no man like okay we are completely aligned because like when I say distributed compute I don't mean like we are going to run more and more stuff within the evm in fact like I think the more ethereum develops the more we're going to realize like you want to do as little within the evm as possible like tiny tiny tiny amounts because it's expensive it's slow and it's like it's just a sub-optimal developer experience like I think that um like what were what you just referenced and like what we're like

starting to see like explode are all these different ways that like computational resources can touch ethereum and interact with the evm but like not um we're gonna see as much as of the compute move out of the evm but like because we keep the settlement within the evm like that's how we're going to call it distributed compute yeah yeah absolutely it does matter it's it's more about like yeah what what you choose to store in the AVM and how that can be bounded by um yeah buy something variant and if that if that is always true then you can say that yeah I generally trust this system or whatever

that's happening off chain as well yeah and so um earlier what like you brought up ZK proofs and like my mind just like went racing I've been waiting 40 minutes to come back to it or 30 minutes to come back to it because so um gotten like seven months ago now I flew up to University of Washington to meet with sriram Kanan of eigenlayer and like one of the things that um he made an offhand comment to me was like so it turns out that if you actually want to run a um Planck verification on chain like just just gas wise if you have a full gas block 30 million gas like the maximum amount of uh plonk

snarks that you can prove is like 11 to 15. like you just run out of gas otherwise and so you know like that is a huge bottleneck problem for scaling ethereum like we keep talking about like all these endless Roll-Ups and all this stuff and like um but like we can't actually run the computations on ethereum and so like I have like kind of a solution for that but um before I do I'd love to just get your thoughts on like like this is what I'm talking about is we're going to start to realize like the next narrative is all about like which parts of compute can we pull out of the evm and still be distributed still be trustless and still like you know get what we want from ethereum yeah absolutely I would say

that um you have like I would say that there are stages to like um how trustless that computation can be off-chain like what you're just describing there like um yeah like verifying a ZK proof on chain I would say that that is like pretty much like the gold standard obviously like being able to verify exactly what's happening off chain in a compressed way or like compressing the computation and then being able to say that yeah this is the state afterwards and it is valid um the next is a bit more trusted is yeah like imposing invariants for that computation off chain so that whatever's posted on chain um can be uh is within bounds um that's generally cheaper but you are taking on

um it is generally more risky in terms of you can't impose a variance for everything sometimes um yeah it's it's just generally more trusted and then you just have the other one which is yeah you deposit your funds it's like black box whatever happens I've changed you're trusting the scatter party and that's it um but yeah like I think that it's definitely the gold standard like being able to um like store and verify um see hey proofs on chain but um even if you're not like verifying them one chain is I think it's like a really really good way to do it but if you were to verify it off chain and then you know post some um like I have I have proved this or there's some trusted Oracle that's done

that that's I would say that's equally as quick but it's just you're still you know it still falls into the bucket of you know this like um some trusted party on the outside so there is always going to be even because someone's posting the proof as well I guess so yeah well so okay so um let me just like summarize what you said which is essentially like okay like if we have these like gas limitations like okay the gold standard can be doing running the ZK verification on chain and then um above that we can like use an invariant strategy and then like basically we can do different like Solutions based on the security needs right yeah definitely yeah okay so

here's an idea and like again in this conversation with sriram the um context was I was looking at starting a ZK proof as a service company so what if like instead of actually verifying all of these uh like Planck snarks on chain what if you just optimistically accepted them like Z so zero verification all you need to do is pay for like the storage of the proof and then what you can do is say any third party can challenge any uh like proof and then if the challenge uh like basically what they do is they put up some eth which is the eth that uh the smart contract needs to verify the proof

and if the proof doesn't verify then like you know that there was a problem right and so my question back to you is like in this uh spectrum of like ZK snark verified on chain being like the gold standard and then you have lesser options like where would you rate like this kind of optimistic solution I would say yeah it's like a you could say like it's like a hybrid proof oh hybrid a hybrids like type system where you have um yeah I guess that's I mean I think I've heard of this before where some people are talking about like a hybrid between an optimistic roll up and like a ZK roll up and that's similar to what this is in a way yeah I I definitely heard the word hybrid roll up thrown around a lot of times I never know what

people are talking about yeah I guess this is what you could class as like a hybrid roll up and I think that you know that that's I mean yeah it sounds like um yeah great and great in principle because you know you have you know I mean you know kind of you're finding a way to get around the limitations of um being able to prove something on like actually within the AVM and yeah that's yeah that's that's good yeah man uh you get it and like this I'm so excited to have this conversation with you because you know I I don't think that like everything that's happening in DFI right now is garbage and like needs to be thrown away or whatever but like I really do think that like we're starting to reach like levels of like contrivance that like I

just can't see like making a real impact in the real world right and like I'm not gonna call anybody out um but like it's just like sometimes I'm wondering if like we're so stuck in like our our ve games that like we've lost um like perspective and like so in these moments when I'm trying to gain perspective like my question is like okay or I guess my my challenge is if defy isn't there to like take over the traditional system in like a one-to-one replacement then what is the point of ethereum and like this is kind of where my mind's going it's about like okay how can we basically take like trustless settlement and then marry it with like

super compute that is only available in 2023 and Beyond and like turn that into this like brand new world that um that man we can talk about what that even means but I don't know how do you feel about what I just said yeah yeah I agree I think that um that's like a way at viewing ethereum where that um where that possibly in the future like a lot of finances done on track well not it's not done on chain but you're you're using this trustless system to um as like as a layer that's yeah well as a trusted layer to kind of like uh record your finances in like some abstracted way where you're doing the

computation off chain and it could be trading or whatever it is but um you're able to like post it on chain and at the end of the day you're able to like trust that execution was was correct that's um yeah that's definitely where I see things going and yeah we are kind of seeing that happen right now with you know what else to talk about like the bespoke l2s but they are more trusted but um yeah building that in a trustless way that would be like you know like pretty much like the gold standard yeah man totally hear you and I think um so like for me ZK cryptography is like kind of the the magic term that um like pulls all this together and again I was thinking about this

um the Z case like ZK as a service company and like so thinking a lot of time spending a lot of time like trying to teach people what ZK means um especially people like VCS who really don't know what it means and like the way that I kind of landed on was like look like we invented cryptography as a science and like the 20s and the 40s like basically during World War One and World War II to like hide and like crack secret Communications right and then we got like better and better and better at it for I don't know 80 90 years until 2008 Satoshi gave us the white paper and he said actually there are two uses for cryptography one is encryption but two is about like

creating this uh credibly neutral space right and you know the the provocation is like okay if we now realize there's two uses for cryptography like do you really think there's only two like of course there's infinite right we just need to figure them out and like within that context like I'm becoming more and more convinced that like what ZK cryptography is is like the ability to um like verify compute like and and why that's important is because it if you combine that with the credibly neutral space like you're you're now able to create trustless Computing but like in supercentralized super powerful like

like really like brand new ways yeah what you just said about um uh like uh like like being able to like bring um yeah like some trusted computation into a credibly neutral space that yeah that's just a good way of putting it um and yeah like again like that's kind of where I see everything going eventually um right now there's no like a generalized solution for that um and people are kind of like hacking it together right now in terms of you know like spoke girl twos and um well and what you're doing with the vaults at Umami right yeah yeah we're like hacking it together in ways and um that's there's lots of different representations of that like you can see

um uh one I guess one way that like people are trying to do it now is building like uh um like a chain in the cosmos um in the cosmos ecosystem and then um you're kind of decentralizing and compute there but with like a ZK using look at ZK solution um you're able to because like I I generally say like one thing that's really tough with getting validators um for a cosmos chain is that like everyone have you have to incentivize validate it's like a whole system but if you just have um it's like the same type of thing running on some ck model you don't have to have you can have like a group of validators that it's either can be yourself or

um some group and then uh bio optimistically like posting these like proofs and then like checking them I think it's just like a lot uh lighter loads and um yeah I generally lighter load than having to like build a full distributed like validator certificates all of that I think that um yeah it's generally like probably where we're going to go and there will be like some generalized solution and I'd love to use like a generalized solution of that I think that would be great um because yeah generally like when building like strategies like the vaults you have like we do have like a lot of trusted computation and if you could put trusted private computation kind of in a black box that executes regardless of

um regardless of like if like our keeper is running and that executes in a way that's defined by bounds and and also private I would say that's another really important thing like having private computation there as well that would be like pretty much like the gold standard for like a lot of these strategies yeah and that that is the magic of ZK right whereas like you can allow it to be verified but without giving up like the the secret sauce maintaining privacy right and I think um yeah and I think to like you know 20 minutes ago I I claimed that the next narrative phase was going to be the distributed compute phase and like maybe that maybe like the better way to

frame that or like the the moment that I'm looking for is the moment that this community like really starts to understand like the special property of the validator and that special property is is like the one place where compute and like the evm actually touch and so like when when I hear what you're talking about like the cosmos validator set like I'm I'm starting to like think like maybe the the the goal or the end state of crypto isn't like all these different validator sets like maybe there is a validator set it is the ethereum validator set but like really what that means it's like a set of computers that

are networked together that have like this ultimately credibly neutral settlement system but otherwise they're like much more competent computers that like have a lot more space to do things and whether that's running all chains or alt services or whatever I like I really think that that is um kind of like the next like leg of development and energy that we need um in order to like you know bring ethereum to its end game yeah yeah absolutely I made that on vitalikum uh he had like a lot to say about um uh running like kind of like leveraging up the validated uh the ethereum validators and um yeah like I kind of like I do agree with like some of what he said and like you should like

risk should be um definitely a factor when deciding when an individual is deciding like how um what they specifically want to validate other than the ethereum blockchain itself and that is important because if ever say if everyone was validating like something that um was risky and then that happened to um yeah that happened to fail in some way and you know like you've got like a large portion of the ethereum validators that exposed to that risk so it's yeah super important to like assess the risk yeah but I think like that's only like within the very specific frame of like we're tying ethereum directly through like Economic Security to like the

whatever extra Services they want to run because like like imagine this right like let's say that you and me pull together all of our money turns out we have like enough money to like start a staking operation like in full force and so like we go decide to like uh I'll use America right like we go decide to like actually buy a data center in Minnesota so to run our staking stuff and like we start to put more computers in to become more resilient and just like make sure like no matter what happens we're at 100 uptime so we have like three thousand percent the capacity that we actually need and then it becomes like well we have all this extra compute like why don't we take a page out of the Amazon Jeff Bezos

Playbook and just like use that compute for other stuff like whether that's validating other chains in a way that like is not like economically tied to ethereum or like selling it for cloud compute or whatever um I just think that like what we're gonna what we have to realize is that like we're building ethereum to run on these like tiny ass like janky Raspberry Pi's and then we're running them like in AWS or on like thousand dollar Nooks or like in dedicated data centers and like there's opportunity there yeah yeah absolutely I think um yeah I'm definitely of the opinion that like um like uh rather than

um it depends what you put on the validators I guess like what you want to do um I think that it should just be like um everyone should consider like very carefully like what they choose to put on their own validator and like how much risk they want to take but I think that generally like um a solution that I'm really bullish on is yeah like rather than yeah like layering it up just like put it like do it that's bespoke l2s I think that that's a really good way to add like some like trusted like computation or some more advanced applications like on top of ethereum because like it essentially what these um like what layering up the validator

set does is it gives you like uh um it gives you like um access to um different tools you can use in ethereum so it could be like a like an oracle or something like that and I think that that's generally pretty safe to run but if you start doing something like um yeah like you're running like almost like a full-fledged application on um like a much more computationally intensive application that assumes a lot of risk um and then layering that up on top of the validator set I think that that should be reserved for having a bespoke L2 rather than laying up the validator set yeah yeah and I think um you know I think like the Insight is just to realize that like the same

machines that we need to keep our networks running whether that's ethereum based layer or like the L2 and above like our computers and like we need computers for a lot more stuff and like it the intersection there is going to be like what I believe is the Catalyst for like the next round of development like and I guess like what I'm really saying is that I just don't think that like can like the next round of um exuberance is going to be like focused on you know just building the same the next iteration of the Ponzi games that we're working on no either I think that's gonna happen um well actually no I'll take that back I think that will always happen but I think that there's a lot more there's a

lot more happening um now especially that I'm way more bullish on that's going to definitely overshadow all of that stuff yeah so in our last few minutes here would you like tell us like what are the things that you're most excited about that are like coming down the pipeline whether that's um like for like Umami and arbitrary in the ecosystem that you're in or just like the greater ethereum apparatus yeah so I guess like um for a mommy specifically like um I guess like yeah GMX V2 products and then uh decentralized Market making products both of those really really excited about it's a long journey ahead for doing that stuff I guess like the GMX V2 stuff but that's not really that

that much of a leap but then yeah um moving to the decentralized market making that's going to be really fun and there's like a great um I mean it's a great Community already like around that um around that type of stuff already like with the rackets and all these other like protocols popping up I think that's going to be like really competitive space and lots of um yeah lots of like uh benefits for like you know smaller tokens and once that can't get listed on centralized exchanges I think that'd be really cool and generally for ethereum I think that yeah like building more um yeah bespoke l2's really really bullish on that yeah I think like the coolest thing that's happened in the last like I don't know this year is

um like in the same week that polygon sorry the the ZK sync released the um their zkevm polygon release theirs and then when polygon released theirs they open sourced it so like what you're like forget forking optimism to create your like your app chain or whatever you want to call it like we're in the ZK evm era man like we're here yeah I haven't looked at that yet I need to I need to check that out that could be yeah that could be really bullish um yeah that would be really interesting to say that oh then I'll take the opportunity to show my own work and uh I I wrote an article just as like kind of a hype piece for polygon that was um essentially like because they open source their um their ZK evm stack like

a protocol I use the example of frax but it could be Ave it could be literally anyone that has integrated Services can like today like in more in the in the time that it takes for them to read the code they can have it redeployed as like their chain for their ecosystem and then from that moment on like Mev like they don't have to give it to our Bots like they can keep it for themselves they can do whatever they want they like can you know be completely centralized compute wise and have zero fees on everything because they're settling back to ethereum Via the zkebm like man we're in a whole new world because of like the way polygon like chose to release what they did and because like they really are true

ethereans yeah really I'm really glad that open sourced it that's that's great to hear yeah it's that's super bullish cool man all right we'll not take up any more of your time but before I let you go you have to tell the people um where they can find you where they can find Umami and um if they're interested in learning more about these vaults and maybe get involved like what do they do yeah nice so um yeah so you can find uh Umami on Twitter that's Umami Dao and uh yeah so I'm also on Twitter I've decided to Turkey or Xerox turkey on Twitter um yeah you should come say hi I'm just pop into the email we do school it's um it's a great community over there awesome man and uh yeah I will attest to that but uh Toki man thank you so much I

really appreciate the time and um and this conversation just every conversation but this one in particular just like gets me more excited about like the the world computer and like what we're building and at the same time I'm getting more cynical about kind of like the Ponzi games like I'm getting more excited about like being here and it's because of people like you in conversations like this so thank you my friend and thanks for having me Rick thank you foreign