Bringing XRP, ADA, BTC, and LTC to DeFi w/ Larry Lyu of Dango

Transcript

so we have a very specific User Group in mind which is Traders who wants to trade on Blue Chips but they don't want to trade on crazy high leverage like 20x 50x for tokenomics our objective are two one is at least half should go to the community meaning non- insiders and objective two is as much as possible of these Community allocations must be liquid immediately at launch at tge regardless of where you hold your token you can hold your token on a central exchange you can hold your token in wallets you can put in a liquidity pool wherever it may be it acures value from the activities on the [Music]

Chain hi I'm here with Larry founder of left curve software left curve is building a number of things including Dango which is a new def5 protocol that was just announced a couple weeks ago a lot of folks know Larry in the space as a kmw developer who used to work at Deli labs and left the team in 2024 to build his own uh defi protocol so we're going to be getting deep into Dango today how it's Unique and what it brings to defi um hey Larry how's it going hey up uh doing pretty well and happy to be here yeah so you were last on like I think like a year and a a half ago or almost two years ago and back then we were talking about um your your CWD uh

infrastructure project which was trying to build like an a cosmos SDK like thing that was entirely built in kmom um you were still at Deli back then and you still since left Deli to build your own project um full disclosure inof Ventures are investors in uh in left curve and um it's been really really interesting seeing you sort of go from that you know like go from working at Deli to now like building your own project um so congratulations on that um but yeah now you're working on this new thing um and recently you guys announced uh Dango um but there's a lot of components to this

so there's also grug which we'll talk about so yeah what made you want to work on this yeah I think we can very many two reasons one is our project didn't start from dangle is that it started from another thing our company is working on called grag so grag is a new execution environment for blockchains it is meant to be a replacement for existing VNS such as the ethereum mer machine evm or the cosmos SDK so after we buil gu the the next thing we need to figure out is how do we how do we do go to market right how do we sell it it is really

difficult to sell a a new blockchain infra project you have to be 10x better than the incumbent which we do believe to be the case but it takes some effort to convince people right So eventually we decided Well instead of trying to sell this thing to people why don't we just be our own customers right uh we we're going to build a consumer app using Grog ourselves that uniquely leverages some capabilities of Grog such that this app can only be built on Grog it cannot be built on any other platform and and this can be a a success story we can use to

eventually sell Grog for for to spin up even more chains but why do you want to build a new VM like that that is like that's the first question maybe that's not obvious to everyone right because we already have like the evm there's a salon of VM there's a move VM I guess it's like cm right or like Cosmos SDK which I guess you could kind of think of as a VM like why why build a new one what what what are these other VMS don't have where we need a new VM yeah I think generally speaking I feel there's a disconnection between infra Builders and app Builders so there there are a lot of things that app Builders need that you just don't find in in in in the VM side so you know those VMS are typically they're called

touring complete so theoretically you can build anything like but that's pure theoretical practically there are a lot of things that you just really really extremely difficult to to realize um so you know I I I I worked on some def5 projects I understand what are the missing things so I just decided Well let's just build a new VM for app developers right so like give an example like what are some of the things that are are missing from the the VMS well so I I can give you two actually one is native smart account

so in existing VMS like the evm an account is simply a private key or or so you have the private key you the user have the private key you put the public key on chain and that that key is your account it is not programmable it's just a stream of zeros and ones it is not programmable and that that tremendous limit what kind of ux we can build user experience we can build using the account so you know developers have been asking for smart accounts for ages but like only a short while ago it was added to ethereum but in my opinion it it was still a quite incomplete solution um however in

grag n a smart account is built in as a fully fledged solution into GR in fact we don't even have the traditional private key account all we have account smart account every account is a smart account so that is one yeah and and the second feature is Crown job so if you have not heard of the term um what you have to understand is if you want to trigger a state change for example I I want to send some coins that is a state change because it it it involves decreasing your coin balance and increasing the recipient's coin balance right so all the state changes on the blockchain is triggered by

somebody sending a transaction it needs in other words it is triggered by a manual intervention in traditional VMS you you cannot enforce a state change automatically right so for uh but in many cases we do need to enforce State changes automatically one one easy example is you you run a Perpetual Futures exchange there's a key parameter in the per exchange called the founding rate funding rate is determined by the open interest long and short in the Market at a given time so in in a per exchange you might want to update your funding rate let's say every five

minutes based on the open interest at in time that needs to be manually triggered you have to run a bot for example to send a transaction every five minutes that can be that can cost you a lot of money over the long ter over the long term and if the chain is being congested your transaction might not even get in uh that could it implies also that someone's right in the spot so there's like this kind of censorship thing or then and then like some teams have thought about ways of okay like let's make this you know like the binary that allows you to do this transaction or let's allow anybody to make this transaction let's make that an open thing but just really creates this kind of bottleneck where you know you have to have someone making that transaction

whereas like yeah here like the chain can run its own transactions basically right so this capability is built into GR and and you know these are just two things but there are a lot more uh yeah cool and and grug is is built in Rust and but like so someone cover from the from the kind of Cosmos uhmm side of things like how is it for them to build using grug is it like the S similar development environment or are they learning something completely new well so you know it's it's it's not going to be different uh not going to be too different it's not going to be too difficult and the reason for that which I really love about kosm is that it tries to stick closely to Native rust it

is not building a new framework on top top of rust which is the case for for example uh the anchor framework in salana so if you build a a program a smart contract in Anchor it does it looks like distinct distinctively a Solana program it doesn't look like a native or every every other rust program but in our case both kosm and gr follows a philosophy to stick as close to to the native rust as possible so so we we both we are both really similar so there's there's not going to be a big difference because we have this shared

philosophy and that allows you to also utilize existing rust libraries correct yes and that is actually a big reason I I don't want to develop a blockchain specific language like solidity or move because well there there are certainly benefits in doing so but if you develop a domain specific language you have a small smaller developer Community you have to rewrite all the libraries you have to rein vent all the tool chains and you have to re audit everything in my opinion for for a lot of the applications it's just not worth it yeah it's a bigger lift uh there's there's benefits to that because you you kind of gain the benefits of having very

specialized language but there's like it's it's a huge lift in terms of having to rewrite a lot of libraries auditing Etc whereas with like an existing language you're benefiting from all of that all of that um that baggage uh I guess you could say um yeah so like one one aspect one one example I I always like to point out when discussing this is you know building a compiler is tremendously difficult and if you look at the existing solidity compiler well it's not very good and and the the manifestation of this this is that you notice for a lot of the high performance solidity contracts the developers need to write assembly code which is really

difficult and they have to do that because the compiler is just not very smart it cannot produce efficient machine code from your solidity source code so they have to write assembly however on the other hand we don't invent our new compiler we just use the native rust compiler uh rust to web assembly compiler which is like one of the most optimized software of all time and we just use that we don't have to invent our own right so just maybe for people who are not like familiar with what a compiler does so the compiler takes human readable code and transforms that into machine readable

code um and what you know some solidity developers are doing or ethereum EV and smart contract developers are doing is instead of writing their code in solidity they're writing the code directly in machine code so that they can bypass the compiler uh but that that carries with it like quite a bit of risk right because you have to be very precise and like these machine readable code you know we don't code in those for a reason is because like they're very low level they're very close to the machine now you can you can be much more precise in what you're building because you're working pretty close to the actual bits that are being processed um but there's also like a much larger margin for error uh if you

do kind of mess up right cool all right well I think that's like a pretty good uh overview on grug and I'm sure we'll come back to grug throughout this conversation but uh Dango is this product that you guys have announced um a couple weeks ago on Twitter um there was a really nice long form article sort of explaining all of the different aspects of Dango why you're building it why it's different from existing dexes and D5 protocols uh the tokenomics everything it's like it's all there so um folks who uh folks who want to read that should definitely check it out hold link to to it in the show notes but if you're lazy like me and you like to listen to podcasts you can listen to

keep listening to this episode and um so first like you know what is dango and how is it different from other D5 protocols and like who are you targeting with this like who's your who is the user that you're you have in mind for Dango yeah so we have a very specific User Group in mind which is Traders who who wants to trade on Blue Chips uh but they don't want to trade on crazy high leverage like 20x 50x um so for for doing this their their best best tool is to to use margin but if you look at today's defi landscape there's actually isn't a very good way

to do margin trading in defi which is like a really surprising fact for me because margin trading is such a basic use case you can do that very easily on on binance or other centralized platforms but you don't have a very good choice on in defi so let's just assume you are a Trader you want to take a 3X long leverage on bitcoin right what are your options you can you can use Perpetual Futures you can do dydx or hyper liquid um however a drawback of of per is is generally more expensive in fact on hyper liquid there's a page that compares the fing rate on hyper

liquid and uh margin rate on various other platforms and if you look at that the the funding rate is generally a lot more expensive than what you can get on binance uh if you do margin trading so so that is perf the the only other option you have is using a lending protocol like a um however I said we assume you want to do 3x but you go to a you realize oh you you actually can't do that because Al only gives the wbtc a Max LTV of 73% that means you need if you deposit

$100 of of wbtc you can only borrow up to $73 of usdt for example and you swap usdt back to w BTC again that gives you a 1.73 X position which is still a bit distance from the 3x you want to achieve so if you want to really do 3x you have to deposit your wbtc into the protocol again borrow USD do the swap and repeat so actually if you if you follow my Twitter you know that I am doing this exactly right now I am taking a 3X long position on bitcoin as we're speaking on

um and I I have to like create a spread sheeet do a bunch of math just to figure out what to do so it's I think it's too difficult for 99% of the users yeah I mean like I've got some long positions on A2 right and it's like you've got to yeah deposit the collateral then you have to like lend against some other asset right so let's say you have eth then you you lens some usdc and then you know trade that for for eth again or whatever asset you want to you want to leverage and and maybe do that Loop once or twice uh if you want to get enough enough you know the right amount of Leverage but you you don't get like a

doesn't provide with you with the um the kind of figures to say okay you're leveraging 3x and like on your entire position let's say you've you've done this Loop twice you know here's your liquidation threshold um you've got to figure that out by yourself and that is kind of complex so you know if you if you're looking for just like a quick and easy way to do leverage well that's one way doing perss I think is another way I think perss are probably like you know I I don't use perss very much just because I I find them to be sort of intimidating if I find him a little bit intimidating then you know the average user probably will too right there's like there's lots

going on and sort of like a lot to keep track of uh to make sure that you you know you're not you're not getting like wrecked on your position um but then there's like the margin account and and you know one protocol actually that I think does this pretty well and I'd like to get your thoughts on how it's sort of similar or different to Dango is noas um so noas is they call themselves a defi lease but you when we reading about Dango and and how you describe the credit account to me it sort of feels similar to what they call a defi Le so when wonder if you could maybe like compare the two and um your opinion how they're different well I'm not so familiar with noas but I I'm I'm very I'm pretty familiar with two other

protocols that are trying to do the same thing which are gearbox protocol on ethereum and Mars here in Cosmos which have worked before these two kind of both figured out the credit account design simultaneously like but separately um so the the main difference uh with them is we we we utilize the smart account feature in gr which we mentioned before um and and the result of that as a result result of that our protocol is about 70 to 80% smaller mean meaning less Cod less computation than

them and as a result you get a lot cheaper gas fees and a lot of better give us some experience yeah yeah I mean I've used Mars a little bit I haven't used gearbox um so yeah you know nist you you have this account you you deposit collateral and you can do up the 3x leverage um on a number of assets so like like a margin account your assets are kind of locked in that account but um all you're doing is leverage right so there there are no additional products like you can't then go and kind of like swap those those assets for something else um it's like a quite like simple um just like Leverage product and

you can also short um since recently there're also it's also a cosmos chain um but um but I guess like with Ango you guys we'll get into this you know have a pretty extensive road map of assets that you want to support and other products that you want to like integrate within this so you know let's talk a little bit about the uh the the ux here like from a user perspective you know what is that going to look like like creating a margin account and then getting leverage on it on on your assets like what's the ux for that yeah so what you just mentioned what noas does is what I would call the minimal set of feature we're going to launch with but after post launch we

have a lot more things to to do to to add because if you only have this minimal set of features what's what what's the point you can do the same on binance so why would you take the extra step to do it on a decentralized platform right um so well my answer to that question would be we have a lot of more defy integration in binance like for for example on binance you don't have to you don't have access to the yield from ethena which is like the most hyped most popular yield protocol of this cycle but on our platform you have the option to to get

to tap into the Etha yield um and that that's just one example so the good thing about defi it is everybody can come in and and build something and it it is entirely composable with with everything else on on the Chain uh so post launch we are going to be pretty aggressively adding new features we are going to start with perss we're going to do some yield farming vaults and we're going to do a whole lot more fun stuff that uniquely leverages gr uh we can talk about that uh but you you you also asked about ux that's another thing we're working on and we're really proud of so in in Dango we we we created a web app called portal

so the motivation of this is there's something I really dislike about the current status of defi which is there are is a lot of fragmentation in ux not not of liquidity we talk people talk about fragmentation of liquidity pretty like enough uh but there's also the fragmentation of ux what I mean by that is if you want to swap some tokens you have to go to Unis swap if you want to do some lending you have to go to a if you if you want to trade per you go to the other website you want to do something else you have to go to 10 other websites I don't think that's that's the experience that users want so at Dango we created a a single

web application called the portal and it is going to be the single place where you do literally everything on our platform so we essentially created what I would call a blockchain operating system if you may um and it it makes it super easy for third party deps to to come in build something it's super easy because you don't have to manage all the wallet connectors uh onboarding and all all sort of like that you you just build a widget and plug into our portal and that's it and our portal can help you distribute we have an app store um which can help you get more visibility to

users um so that's going to be another M major Innovation on our side the portal ux cool so let let's talk about a margin account so for those people who are not familiar with this concept that comes from traditional finance and is is used um by brokerage uh brokerage accounts um what is a margin account so margin basically means you deposit some assets of your own let's use the same example that you want to go long on bitcoin you will deposit some of bit some Bitcoin of your own and then you borrow some assets from somebody else it could be the brokerage

or it can be a a group of decentralized liquidity providers in case of defi uh you would borrow an asset you want to short in this case you think Bitcoin will go up against US dollars so you would Bor borrow US dollars or or a dollar stable coin you swap that to bitcoin so you you have you have price exposure to bitcoin and you have liability or margin they're kind of synonymous in the asset you want to short which is uh the US dollar yeah yeah so with a martian account like you're depositing assets typically volatile assets like Bitcoin e

could cos adom um you're borrowing you're borrowing USD against that you're you're maintaining your um your exposure to the Assets in the margin account and then you can go and borrow USD to do whatever you want with like you can um go buy some more BTC or you can um swap that that eat for for some other asset or sorry that usdc for some other asset you can um effectively creates leverage uh like why are margin accounts so uncommon in defi like as far as I know there's only a handful of protocols that do this uh most lending protocols or dexes or purpose

dexes don't provide um a margin account well I think in in in traditional lending protocols they they they just did one thing wrong which is the way a or compound works is you when you bring in your collateral your your Bitcoin in order to borrow you have to lock in your Bitcoin in their protocol so your Bitcoin goes into the a protocol lending pool it no longer sits in your own account right and only after doing that you can borrow assets you can borrow your US dollar stable coin for example yeah uh and you can only borrow dollar stable coin of a value less than

your collateral so as we we we talked about in the example before if you do if you borrow $100 worth of bitcoin you can only borrow up to $73 of of usdt for example um yeah but there's one distinction here that and I think the distinction is is is useful to remember that in a margan account your assets remain inside the margan account uh I can't take that usdc and like go buy a car with it whereas with a that liqu that that that borrowed asset I can go do whatever I want with it um is that that's that's sort of like the right way to look at these two things right yeah those are two different us use cases

right one you you what you would do with margin account is to do margin trading what you the use case you mentioned is I think that that applies more to to protocol Founders for example who who owns a lot of their protocols own tokens but they cannot sell it because if if they do the market will lose confidence in their project um so so what they would do is they deposit their uh their own tokens into into this protocol and and and borrow a lot of assets then they can use to to buy a mansion or something like that yeah so I would say a serves this second use case really really well but it doesn't serve the the

margin trading use case um which is something we we want to do yeah so one of the things you mentioned in in the blog post is that there is this whole category of you call them dinosaur assets uh that are completely absent or mostly absent from defi uh you know BTC I guess like is on its way to becoming more and more integrated in defi of course it has been with uh rapid Bitcoin but it's not native Bitcoin but there's a whole list of other assets like bch Litecoin Doge xrp or cardono uh and the list goes on that

primarily traded on centralized exchanges that don't have really reliable bridging to defi nor are there any places where you can really sort of trade these things or borrow against them in defi um this is something we've talked about on the podcast too as well and I think like there's a huge opportunity here to unlock like tons of like you know tens potentially hundreds of billion dollars of liquidity um for for defi uh yeah talk about your plans to bring all this all these really uh you know longstanding assets to to defy yeah so you know we we start we asked ourselves well we want to bring liquidity to our chain

so what what what's going to be the liquidity we should looking for um there are some liquidities are really sticky that is going to be really really difficult for us to move for example we want to we definitely want to support salana liquid staking tokens in in our lending pool as collateral however I think salana lsts have a has a tendency to stay on Solana they're sticky they are not very likely to just move to another chain right uh so it's going to be really challenging to attract those liquidity but then you you look at the broader blockchain scape you realize oh there are actually a lot of dormant

liquidity that's not being used anywhere and that are these l i call dinos SW chains which is a little I guess disrespective if you're if you're holding those coins but that's the truth right um they were developed ages ago they don't have Smart contracts which which in itself is a good thing you know the chain stays stays true to its purpose um which is not not bad in enough itself but it also means they are difficult to to get bridged to other chains and being used in many mainstream D5 so these are still billion billion dollar assets that has tremendous

tremendous amount of trading volume on centralized venues that defa has failed to capture right so so we decided well this is going to be a group of users we want to Target um so we are building our own bridge for for these chains you're building your own Bridge yeah cuz okay there there isn't a very good one available at this point right uh and what about like Solutions like thorchain these are not sufficient or like I guess they don't support all of these assets well Thor chain doesn't support all of the assets and there's another concern which is that store chain is building its own defi right now

after the acquisition of of kuira and I don't know if they acquired Lavana but they are teaming up with at least so they teaming out with Lana it yeah so so you can you can argue we are going to be competitors so it's going to be a little weird if you are relying on a competitor for for asset on boarding what if they charge us a fee right yeah uh that's going to be risky right so you guys will have your own IBC compliant bridge over npcss uh so it's it's not going to be

so well it is going to be operated by our Chains validator set so the bridge is going to have the same trust assumption as our our chain itself the technical well the technical specification we're doing still working on that so it can be uh stal signature it can be something else okay and are you guys like uh kind of working alongside osmosis because they're also building something similar for um bridging native Bitcoin to osmosis uh but I I guess a bunch of native I guess like a bunch of assets right with this Polaris product well at

this point we're not okay interesting but but we can definitely look into that yeah I mean so they're they're building you know this Polaris product which is I guess like you know you could look at it do a cross chain swap product that also introduces this idea of being able to create Bas an account for basically any chain whether they support it or not so like if you want or whether or not you you have a wallet so let's say you want to trade I know Bitcoin for ton their validator set will create a key for you uh that will allow you to hold native ton um even if you don't have a wallet so you know I was as I was reading this and like reading about the Pasty stuff you guys are working on which we'll talk

about um it just yeah very similar to what OS is working on um which is great I mean I think like we need better uux and having an ability to like Bridge assets natively to to any chain leveraging a out is set to run uh an MPC kind of like threshold scheme is really cool um I wish more shines would think about doing that or but that practice would become more generalized and therefore like more secure and and um and yeah the whole yeah I want to talk about py thing too so um you you've described in this post like the the user experience of using Dango as like a oneclick kind of you

know create an account using a pass key um and that your keys are linked to an account with a username you know so you could have SE 3.0 on Dango um I'll I'll make sure to register that on day one and it's a keyless approach um so what are some of the challenges with working with pass keys and like what are the security security assumptions people need to have yeah well so before pasy let's have talk a bit about the broader picture so nobody likes to generate seed phrase and memorize or keep keep seed phrase uh so you know the the biggest everybody agrees the the the way to improve wallet ux is first we need to get rid of this

the pneumonic phrase or seed phrase yeah um but there are broadly speaking three different ways of doing it uh there's NPC wallet which mention is what Polaris uses and then there is a social login so login with your Google account or Apple account or Twitter account so and then there's Pass key right so for the first two options the main drawback is they're not complete self self custodio you you don't truly own your own key so either if the validator that clue to steal money they can do it or if Google for some reason wants to freeze your account or take your money they can do that yeah so but Pass key is a self- custodial

solution so Pass key is a new uh well authentication standard that that is been worked on by VAP 2 uh an alliance of of VAP two corporations so you know we hate SE phrases in VAP to they they hate passwords as well so pass Keys is a solution they designed to replace passwords um so but why is Pas ke not being adopted in in in in blockchains well so actually uh Sunny from osmosis gave a talk on this at cosmoverse last year uh yeah no it was in m not not last

year M yeah two years ago again yeah so but but but the short story is that pass key uses a a cryptography scheme called uh secp 256 R1 that's a long name but you just need to know the R1 part While most modern blockchains use another scheme called secb 256 K1 so R1 K1 and the reason that we are not using r one in the blockchain world was because when Satoshi created bitcoin he believed that the US government has a back door in the

R1 scheme right okay I didn't know that with which we have found no evidence so far um but you can't be sure it can be true it it's it's it's not provable it's provable you never know no uh so so Satoshi used this different setup which has uh a different cryptographic properties that you can be more sure there's no back door uh and every other chain since Bitcoin I just just adopted it so so that means blockchains these days do not have native support for the R1 scheme

and because most blockchains as I said don't have Smart contract accounts so you cannot it's not possible for you to program the R1 scheme in a smart contract either yes so how how do blockchains get around this thing because I mean there are a few uh Pass Key enabled wallets and um you can now create a pass key so oh I think I just answer my own question so you're using smart accounts then to the the pass key controls a smart account rather than the the cryptography on the the onchain cryptography yeah so those Solutions more or less all rely on some small

contract components to out the authentication okay so the the the chain the chain doesn't support the pass key cryptography but you can have the smart Account Support the pass key cryptography yes yeah got it oh okay I didn't know that uh interesting and I guess another thing about pass Keys you know like I use pass Keys one password and and this sort of thing but one thing that's unclear to me is how pass keys are non-custodial because like my pass keys I guess the the keys to that are somewhere in my secure Enclave but they're also backed up to iCloud so if I were to lose access to my iCloud account like let's say apple doesn't like being they like cut off my iCloud account can I still access those pass keys and like

what are ways that people can you know mitigate that sort of solution maybe have some kind of a backup or an encrypted backup so that they don't lose their paties cuz if like all of a sudden you have you know millions of people start using crypto um and on boarding with pasis you know be being being aware of the of the risks to your sovereignty is quite important I think yeah so my understanding is Pass key is stored as said in a secure Enclave on your device it is not synchronized to your ioud account when you want to use the path key on a different device it is used it uses a sort of uh the secet sharing protocol I believe is dy Helman so they

use a squet sharing protocol to to basically transport the key from one device to another without having to go through a third party gets decrypted or something like that okay got it so the pass key the encryption keys are on the device and they're shared across devices and there may be some kind of like secret sharing thing encrypto secret sharing thing well at least if sorry at least if you use the Apple keychain or the Google password manager that should be the case if you use uh some password managers like one password I do believe it is uploaded to one password server in the encrypted form of course uh so so it really depends on like which which key ring

provider you use yeah and you could also have a UI key um which is like a physical device looks kind of like a ledger where I think there you probably have some kind of a like seed backup or something I've never used actually I've never used UB key so I'm not sure but right so our our smart account the way our smart account work is you can add more than one authenticators so you can have a pass key on your Apple device you can have a pass key on your Google device you can have a matam mask secret uh secret key you can have a phantom wallet um and then you send a transaction you only need to submit a signature from any of these authenticators and of course if if you

you don't feel comfortable with that you can also add a two- Factor authenticator so like a onetime password yeah uh you can also do that and can you um so one of the things osmosis uh wants to implement is this kind of um uh permissioned approach to transaction types so for example ex Le um if you're say swapping under $100 worth of assets you may be able to do that with your pass ke but if you want to like move move tokens outside of your account then you'd have to sign with your Ledger or maybe sign with two devices is is this uh something that's possible with the smart accounts on Greg well it it is possible because our

accounts are smart contract so programable program that um the the the exact feature you just mentioned we we don't have it backed out uh but but we we can totally program the contract if there's need for that like if there's demand cool um coming back to grug a little bit um so grug is its own Sovereign blockchain it uses tendermint as consensus and one interesting thing about grug is the valer set and the way you're going about um yeah running consensus on that chain can you discard a little bit what you guys are doing what motivated these decisions yeah so our chain will be running on a so-called

proof of authority validator set so proof of authority basically just means it is a determined set of validators it is not generated for example by proof of staking it is uh which is different from almost every Cosmos chains today so you know you know on Cosmos Hub or osmosis is you you would stake your tokens and the top 150 or so validators who has the most stake becomes the the the current active validator Set uh so that is proof of stake with with delegation on Thor chain you also have

Pro of stake but you don't have delegation so validators have to bring their own tokens um but the the common feature of these two mechanisms is it is permissionless to entry and the validator set is dynamic uh some some can drop out new new people can come in right but in proof of authority which is basically the creator of the chain the foundation will choose a set of people to run nodes and it's going to be a static set of of nodes so the only other Cosmos chain which I know that runs on this is noble and and in the ethereum world I think a lot of the rollups are going to

are following the same approach yeah so the reason we opt for for this is it is really to have a focus on our product because if you look at existing Cosmos chains I feel a common feature of them is that the security aspect of the chain is intertwined with the product side of the chain so what I mean by that is uh on osmosis you can do you can swap on dexs you can provide liquidity that is the product side but you can also delegate to go to to validators stake your tokens participate in governance uh discuss how how how to how to spend

the community pool money right those are the security and governance aspect of the chain and you may disagree but my assess m is a lot of the users don't like to spend effort on the security side they don't want to lock up your their token for 14 days 21 days they don't want validators to take x% of their their rewards as as commission they don't want to get involved in the governance drama so for for Dango we want to really focus only on the product side we don't want to get users to be distracted by the security and governance

aspect and I think this is what worked out really well for hyper liquid right if if you look at hyper liquid they have they had a single Focus which is just to build the best ux uh per de they they don't have a permissionless validator set for for a very long time they only had two nodes in the same data center both run by the team and and the chains close sourced so it's as as centralized as a blockchain can possibly be like many people actually argue it is not a blockchain it is a centralized exchange but but what whatever you think they they they put a lot of focus on product and they delivered and and the users rewarded that and now now after the token launch

they're also moving on to decentralized the chain I think they're introducing uh permissions validat their entry and staking in their next upgrade so this is the path we want to follow we we we remove these distractions we we build a good product first and if we can achieve product Market fit then we think about decentralizing the chain it can either be a permissions Val set or we can either we can even just go go become a roll up on Celestia for example there's a lot of options but for now we don't have to think about that that's great man I I I think that this approach uh should be studied and

and adopted more and more and I think you know product Market fit achieving product Market fit is and should be the most important thing that any blockchain protocol or like application is doing uh and yeah all of these you know sort of like the uh the the the the governance aspect of it you know it's great it it allows the community to be a part of it and and maybe to some extent you know generate some great ideas about the future of a blockchain and for some chains that might be that might be desired it might be desirable for um for there to be like broad Community involvement in the case of Cosmos chains even though that has been sort of the selling point for Cosmos most people

don't vote in governance most people leave it up to the validator sets and and validators end up making the decisions for um the direction of you know the chain software and kind of like road map Etc um and another big another pretty significant um I guess failure I don't know if it should be a failure but like lesson in Cosmos is the cost of inflating your token in order to pay your validator set and chains that are able to generate revenue and and pay their valid ass sets for um in um um in in US dollars for instance right like in the case of uh in the case of dydx I think are you know they don't

have to worry or kind of think about you know maintaining value of their token in order to be able to pay their validators and like a lot of chains and Cosmos suffered during the bare market and continued to suffer and uh I don't think we'll ever recover so I think this is a great idea and um you know we're also investors in Noble and uh like really thought that this was the right way to do it and then later should should should uh the chain be successful and there's there's like a clear go to market strategy that's been executed and there's products people using the product Etc you want to decentralize then there are like lots of options to do that and at that point one can you know study and sort of understand what

the right path and what the right alignment might be with say like Celestia or like s Ling to ethereum or or l or whatever um so I I I uh applaud this approach yeah you know I I mentioned hyper liquid it's one on one extreme of the spectrum On The Other Extreme I like to think about is is fuel V1 so if you don't know Fel V1 is a so-called stage two rollup it has it has fallproof it has forc transaction inclusion it is a based rollup so it is super decentralized and it has a tvl of like $10 so like nobody uses it so I guess it really depends on your your your value

right if if you want to go the fu V1 path you can do it but for us we want to do the hyper liquid [Music] pth excellent um I guess another aspect here that I thought was really interesting in the post was that you guys were doing a ma compatible Ico and uh I think that's the first time I hear of a protocol D defi protocol full fully embracing maika so um what what is the motivation behind this and how are you going to go about uh I guess what what are some of the um perhaps constraints or considerations that you

have to take into account when launching your token um for it to be compliant with with M regulation yeah well so Ico the alternative to to o is to do private rounds so so basically instead of uh making the token available for public trading the protocols will uh raise funds in the private market and if we do a series of rounds each rounds has a higher valuation and as the valuation goes up the founders can also cash out their shares in the private market and and then the the token eventually

becomes public the valuation is already so high that very likely it it just start going down only in terms of price and everybody who who buys a token lose his money and is unhappy right so the the reason a lot of the protocols have adopted this strategy in the past year or two is regulation that that's literally the only reason there's no other reason is because regulations are hostile to to iOS um that that that's the reason why like consumers like uh retail investors are basically become being being prayed

for for for AIT liquidity um however we are seeing things turning uh Europe made this regulation they usually hate Europeans for for making too many regulations but uh I I guess MAA has a lot of positive and and one of them it is it makes a clear guideline for for launching a token and and it is uh pretty feasible for for for us to follow and then of course uh the the the US now has a pro crypto Administration which is also very positive so so yeah we want to go with this Ico path I think the the big benefit of Ico

is the well well if you an investor and you you buy you you buy your token in the Ico that probably means you have a lot of faith in in the project and you are not very likely to sell in the short term so this group of people who buy the SEO is going to be a very strong community members and as the product uh getting built more features coming in uh hopefully the token will gain in value the early investors make money and they will help spread the word and the community get stronger and uh and bigger so and I think I is really an effective way of of building a community and the

community is really like for a lot for a lot of projects it's everything right so so so how does it work like practically speaking as a well you know is this Ico kind of open to anyone I guess do you have to kyc in order to participate uh as a as a as an investor in this Ico do you acquire tokens using um you know Fiat or like other cryptocurrencies and here's the here's the kicker you know is this Ico also available to American investors given the current um Securities laws there yeah so we're doing this we're going to

do Ico very likely but not 100% but very likely on the platform called Legion so Legion was launched a short while ago they are they already did a first Ico for a for a dpin project called Paul which WIS very well so if you're interested just go check out Legion uh they are actually one of the best ux in crypto I've seen uh in terms of kyc yes unfortunately they do require kyc in order to invest um for for us investors I cannot say for sure right now because the well the administration that offer uh ADM Mission has not taken office just yet so there's

a lot of uncertainty we still have we still have to see um but I I think it's a pretty good chance we can do it in uh offer it for American investors yeah not not certain yet but I'm pretty positive what's the timeline on the IC uh so in the wi paper we we that Q3 but now we we really want to do it early um so the answer is as early as possible we we are going to try get it no later than June or July but hopefully earlier so the tokenomics have also been uh released and I'd like you to talk a little bit about you know what the what

the token allocations look like and also this buyback and burn mechanism uh that you've announced and how that's going to um work yeah well so so first of all everything in this wi paper are just our ideas at this point it can change and indeed there have been a few things already we are going to change for example the launch timing um so so this everything I said is not not down deal but in terms of not binding not not binding yeah but but for tokenomics um our our objective are two one is at least half should go to the community meaning non insiders and

objective two is as much as possible of these Community allocations must be liquid immediately at launch at tge so the current plan is 30% will do the Ico and 20% will do we will do a lock drop so lock drop means you you you you bring your liquidity and you pledge to lock up in our liquidity pool or lending pool for a chosen period of time and that will give you a a portion of the tge allocation um so if you if you remember back in the days uh Sushi swap did this vampire attack on Unis swap uh it will

be a very similar concept uh well osmosis Thor chain Unis swap um you know I don't want to make enemies but you you just made me do do it but yeah um yeah so and we are also earmarking 15% for uh liquidity incentives for over the four fouryear period so that amounts to 60% uh we also earmarked 5% for the

foundation but that might that might actually go to community as well uh we are still deciding on that and the rest would be insiders and uh yeah and can you describe this this buyback and burn mechanism yeah so we're not going to do a token staking so my my assessment I said is you users generally don't like to stake to to lock up their token um in exchange for governance power which they don't necessarily care anyways and they they have to waiting for a 14 day 21 day unlocking period which just they don't like it so why why don't we just build

something that users like um so so we decided on doing buyback and burn so that regardless of you hold your token you can hold your token on a centralized exchange you can hold your token in wallets you can put in a liquidity pool wherever you wherever it may be it acures value from the activities on the Chain right so you're just make you're just like so making away with the entire uh kind of staking uh inflation based um value acral of your token or I guess like yield generation of your token rather uh the Buy back and burn will effectively reduce the supply of

the token which you should have positive effects on the on the token price yeah and maybe it can also be better for for Tex as well depends on your local Tech I think haven't thought thought of that okay cool I think we've covered pretty much all of it is there anything we forgot here um uh well well maybe one last thing that we we are doing differently from every other protocol is we are doing a low Supply token in the white paper I proposed a number of 30,000 which a lot of people find confusing so third part uh well 30,000 is a reference to Y

Finance which uh was one of the Pinnacle of the 2020 def5 Summer it is a fair launch it is a wildly popular protocol and it has a very low supply of 30 ,000 so it it it's a tribute to that we kind of want to bring back the vibe of the 2020 uh def5 summer um yeah but you know we might not not eventually go with 30,000 we might go for 1 million because 30,000 maybe too low but we we still want to stick with the uh low supply high Value Route

excellent so um as we wrap up here uh I guess people should you know check out this blog post uh this Twitter post I'll link to it in the show notes um where else should uh people go to S of stay up to date on Dango and are there any exciting announcements coming soon that people should look out for yeah so the next big thing we are going to do is in January we are going to launch a so-called demo net so that is going to be a public test net for demo purposes uh the first demo net is going to be showcasing our account system as mentioned and after that we're going to release a series of of demon Nets probably on the Cadence of one each

month and each with incrementally more feature as we build them so yeah uh follow our Twitter join our Discord and once the time comes in January give it a try cool Larry thanks so much for coming back on again and looking forward to having you again on the podcast soon yeah thank you cheers [Music] [Music]