Chainlink: From Price Feeds to Universal Cryptoeconomic Standards | Sergey Nazarov, Co-founder

Transcript

there needs to be a global standard for how the financial Market infrastructures of the world how the central banks of the world interact with each other and with chains and that is a really kind of long game type of problem that's like a five to 10 year problem how can we get the world on an efficient secure single standard like if I look back on my life and I spent 20 25 30 years getting the the whole world on a single efficient standard across chain across fmis across all banks across all startups I'll I know that I'll be able to sit back look look back at that and and and and be proud of that hey everyone wanted to give a quick shout out to the Wormhole Foundation if you're a bell curve

listener you know that transferring across chains can be a massive pain I certainly do I complain about it on this program all the time that's why we are super pumped to have partnered with the Wormhole Foundation the stewards of the Wormhole protocol the Wormhole protocol connects over 30 blockchains and six different run times including salon SOI ethereum layer 2os and more and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and mint for free you can claim that by just going down into the show notes and clicking on the link all right guys on with the show hey everyone this episode is brought to you by swell a team leading the reaking future with their liquid reaking token r s now I've talked about liquid reaking on this program before I think it is going to be a

massive tectonic shift for ethereum and I am super super excited about it and I like the swell team a lot goes without saying do your own research this is not Financial advice you guys all know the drill again I like this team and if you stick around I'm going to describe how you can restake your eth in swell earn pearls I layer points and a whole bunch of future rewards so thank you very much for swell for making this episode possible hey everyone wanted to give a quick shout out to this episode sponsor flood protocol the optimal decks aggregator now if you are a listener of bell curve you know that me is a massive problem which is why we are so pumped to partner up with flood on this season flood is the only gasless and me free AG agregator that not only gets you the

best execution but also gives you back all the extra Surplus that you create every single time you swap now this is relevant for both swappers and developers but you're going to be hearing all about them later in the program so for now thank you flood and back to the show all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back to another episode of bell curve you got

Michaels one and two Vance and today we've got a very special guest seray nazarov the co-founder of chain link guys welcome to the show great to be here great to see you here s great to be here thank you for having me yeah this is special I feel like I'm reunited sort of old friends here uh so I'm going to be I'm going to do my best to stay out of the way and just facilitate banter between the boys but um Sergey I've I've been a fan of chain link uh for a while um so it's really special to get you on the program we did an interview with chain link god um a couple months ago which was really fun um and it's gonna be fun also to see you in London in person soon but maybe to just kick things off um you know how is

I'd be curious to get your perspective as you know the co-founder here how has chain link evolved over the years from I used to think of it as sort of price but now the way that at least I think about it is kind of a platform of data compute and cross Chain Services so can you just like walk us through what that transition was like yeah sure so in in making chain link with the with the initial white paper I would say that the invention of decentralized Oracle networks led to essentially a new uh Computing environment the Computing environment the centralized Oracle networks generates consensus about all the things that need to become trust minimized with that blockchains do not make trust minimized so blockchains generate consensus by

independent nodes coming basically to the same conclusions against the protocol on the question of a transactions being packaged into blocks that are then connected to each other to form the the blockchain and so the consensus uh mechanism there is used for pretty specific things mainly for transactions in a data structure that are pack pack together in a very specific way with some amount of computation on top of them Oracle networks do not make a chain there is no chainlink blockchain there are no chainlink chains Oracle networks use the same um consensus approach as blockchains but instead of generating blocks of transactions they validate things about the world the initial thing

that oral networks were used to create validation for was price data because price data is a necessary NE condition is necessary input into defi applications and this is why defi was sub 100 million when chain link was live uh for the first time and it grew to over 200 billion with chain link powering something like 50 60 to 90% of the of the entire defi ecosystem depending on how how you count it if you discount Dex so the first use case of decentralized Oracle networks as a Computing environment was price data aggregation and that is a similar pattern to what you see in other platforms out there in the world so if you look at the cloud

platform um history you'll see that S3 which was the first service made by AWS was able to prove that the cloud model worked right that cloud computation was something that you could seed valuable computations and data storage to well that case actually just data storage and then after S3 proved that cloud could could could do things things because there was a lot of doubts about that um then you had other services in AWS appear like ec2 and others similarly with um Salesforce the first uh killer application they made was a CRM but then they made many others and you can even take it to a consumer level of spreadsheets were the first killer application of personal Computing

so every platform kind of begins uh really with a new computational model a new way to do computation and then it successfully applies that new model of computation to something very specific that is also very in demand and that is the starting point of that platform both in terms of having a market for the platform to do something and in terms of proving that the system can do something more so for example chain link has now processed over 10 trillion in transaction value and in processing that much value it has proven that the oracal decentralized Oracle Network model can secure trillions of dollars in transaction value the the next question with all of these um kind of platforms

that are based on a new type of computation is usually what else can it do right so to the to answer the question of what else could it do then uh chin link went on to add proof of reserves to the protocol and Chin link is the largest provider of Market data reference data and proof of reserves then it went on to provide access to other types of data identity data weather data and others it's the largest provider of those data sets as well then we kind of asked the question can networks do computations that are valuable without connection to a data source and that's where uh vrf the random number generator Automation and functions came out of vrf the random number generator from what I can tell

right now is the most the single most widely adopted source of random numbers in in in the blockchain industry across blockchain gaming as a as a single source that the most different blockchain game uh systems use other than some kind of homemade thing which which people generally don't trust for for for various kind of centralization reasons the automation solution secures some of the highest value contracts out there functions is a more advanced form of computation and the cross-chain system ccip is using the same decentralized Oracle Network model and security to provide cross-chain connection across all of these things by the way whether it's data aggregation computation or cross chain connectivity you really have the same fundamental

problem of validating commands computations or data and that's what Oracle networks do so I I think the thing that people really need to understand about Oracle networks is that they are a computation they're computation environment right they are a type of way to do validating computations on really anything including interacting with AI models interacting with other chains the the most General way to think about chain link would be anything into chains out of chains or between chains is is what chain link will basically have a very big role to play in and then there's also another level of this where the validation that the chain link networks

create I think will ALS and I've started to see now are also valuable for web 2 systems because those systems will also prefer to have a more reliable source of data a more reliable source of computation a more reliable connection but all of that once again assumes that that's not what the blockchain does so chain link creates all of this consensus decentralization security validation about everything and anything outside of a chain and the chain continues to act as the kind of data resource smart contract code resource transaction execution resource um and that's you know a great thing because they're very good at that and Oracle networks are very good at validating everything else so um you know just kind of play

this back a little bit in 2019 I think is when you guys announced some of the first Partnerships for the price orical solutions for defi um and and maybe the the dates are slightly off but 2020 2021 where brf and these functions uh capabilities and now you know ccip the cross-chain communications protocol is is sort of the the place where you guys are moving towards and I think one of the things to note about chain link RIT large is you guys have been ahead of the curve in terms of you know what is going to be the computational need for these different types of application categories you know you were about a year ahead of defi summer with price feeds that enabling so much of what happened within defi in 2020 and obviously the games ecosystem and and

you know the functions capabilities are you know what's powering many of the games that exist today ccip is you know kind of the next leg up in terms of complexity but also where you guys are moving in terms of where you're focusing your resources maybe it' be helpful just to talk about some of the applications that ccip and and kind of the Cross chain Communications protocol that you guys are building are going to rely on and and you know maybe after that we can talk more about how the protocol actually works because I think it' just be helpful to better understand you know what we're talking about with ccif yeah sure of course so because the chain link system has been building these other parts of what Oracle networks do such as the data part and the compute part the cross chain part is

built with those um portions of the protocol in mind so other people that build cross-chain protocols generally make a protocol that we don't consider to be um smart we consider it to be like a dumb simplistic protocol that will just do um anything people ask it to do and it won't consider the risks and it won't consider the security issues and it'll it'll just power through and and send $600 million without any verification of if it should do that right so this is where a lot of the cross-chain hacks happen from so the the first thing about how ccip is built is that it's really both um a data transfer protocol and the token and value transfer protocol it's both of those things that at the same time there are people that have built

value transfer protocols there are people that have been trying to build data transfer protocols but there's there aren't many people building data and value transfer and the reason why pro providing a protocol that does data and value transfer is you can actually connect data 2 value in very uh powerful ways so for example in ccip we have a feature called programmable token transfers PTT and what PTT does is it allows you to send a token a stable coin for example to another chain with a set of instructions for what that token will do on that chain so it allows the the token to reach the destination chain to trigger a specific contract and a specific function in that contract and

to basically execute the outcome that the sending the value there was meant to execute and this is because data and value can be connected in a single system now this is actually a very powerful thing because the way that bridge Bridges most bridges work today is you take value out of your wallet you put the value into the bridge application you bridge it across you take the value out of the bridge application then you put it into into your new wallet which you were forced to generate in some new place and only then can you use the desired um capability of the application of uh the exchange or the lending protocol or whatever you wanted to do on that chain ccip compresses all of that down into a

single um basically event the single kind of transaction and problem for the developer where they can basically Define I want to go to blockchain x I want to go to smart contract Y and want to and I want to execute function Z and they can do that because the data as a set of instructions and the value can all move together the the the second thing that that ccip does is something called risk management so the way that all value moves across the current Internet is that there are various methods for managing risk risk for determining how risky transactions are and at what speed they should move and how much should be moved and so on and this is the basis of moving value across the world today this is not something that

amazingly enough exists in other Bridges and this is why they have a lot of bridge hacks and this is why a lot of transactions that happened that people didn't want to happen actually end up happening so ccip has a configurable part of the system called the risk management Network where you can essentially encode various policies that determine how value can move and this will actually be the Crux of how value will move over ccip between the traditional Financial system trafi all the big Banks all the big asset managers and Defi and I personally think that this is one of the main goals of a successful cross chain system there there's kind of the ability to make web3 transactions happen across public chains there's the ability to make private chain transactions happen across Private

Bank chains and then there's the ability to merge all of those chains into a single internet of contracts so that's really the fundamental goal of ccip and then by the way all of those transactions across all of those chains will require various pieces of data in order to happen so they will for example require price data to do settlement they will require identity data to be able to be accepted by a counterparty they will require proof of reserves in order for someone to be assured that what they're receiving is actually backed by something so the the way that ccip has been built is to interface efficiently with all the other parts of the chain link system in an increasingly efficient way like it's it's moderately efficient now it's going

to become more and more efficient where not only can ccip allow you to move value and data but it can actually allow you to stay informed about what's happening with the asset as it moves across different chains because the data can flow through ccip across those chains and back so as a cross-chain protocol it's not just meant to solve a single problem of I just want to move a token to another wallet and then and then that's someone else's problem the point here is to make the cross-chain process secure efficient and able to transmit data along with value and so those those three goal goals are really why it's taken um you

know I think over three years now to to make ccip and the security I think is actually one of the main reasons it'll continue to win it's because it's the same thing that let us let change to be widely adopted in the data space there were other ways to do Oracle price data delivery they simply weren't secure and people continued to be hacked and when we look at the security of other Bridges we see a lot of faulty assumptions that I think will lead to the loss of value and real security issues that ccip doesn't have so so our goal is to have um a system that provides security as the value going through the system grows and and that's really I think the thing that has made chain link that the standard it is today and what will

continue to make it um the standard uh for years to come so so just to ask a little bit more about that so it sounds like you know you could have these private chains that that have basically like security configurations uh established by ccip in terms of what value transfer can happen what messages can be passed Etc like is that kind of the the fundamental value prop for a lot of the kind of tokenization plays that the large inst are are looking at or like what are the other reasons why they use this versus versus anything else that's one of the pieces of value I I think what you see when when people in the web 3 infrastructure space build

things is they build technology that is sometimes shipped quickly and not securely then there are some people that that actually care about security but they they focus on one set of requirements namely the web 3 requirements so ccip is built across two sets of requ requirements it's built across the web3 requirements and the capital markets requirements and the reason it's built across both sets of requirements is because the capital markets are where the money is like defi applications and protocols don't really care where the money comes from money is just money it doesn't matter if it comes from from an anonymous um wallet address or if it comes from a

Goldman Sachs blockchain address fundamentally all defi protocols will simply want the most tvl the the most usership the most adoption that's that's just how economics and the creation of application works right and so at the end of the day you'll arrive um you arrive at a world where everyone will realize the very basic arithmetic that while there is another few trillion dollars in the in the non- trfi non- Capal markets economy there is literally tens to hundreds of trillions of dollars in the trfi economy that needs to get bridged in so to to answer your question more specifically yes the the ability to set various policies about how a PRI a

private bank chain interacts with another Private Bank chain and how that private bank chain interacts with a public chain defi contract for example and to set those conditions in ways that allows the bank to do that at all instead of ignoring those conditions is is definitely an important requirement that needs to be met for the banks to do that because because my my fundamental my fundamental goal is to make the blockchain industry and the blockchain smart contract Oracle Network powered format the format for all value right how does all value get originated managed and transacted in a blockchainbased Oracle Network powered way that's the that's the fundamental goal and you're you're just not going to

achieve that goal unless you create an efficient path for all of the world's value to flow into that format and there is a part of the world where that value doesn't need certain features doesn't need to meet certain requirements and that's great and that allows that part of the world to move very quickly and do Innovative exciting things that's a great thing and I'm a big big believer in that and a huge supporter of it and we've been supporting Defi and ethereum and all these great things as much as we can but there there's just a simple reality that there's all this other value in these other systems and the key thing is one of the key questions is how does all of that value transition and that transition is is the big transition that is it that is what

we're all fundamentally kind of kind of trying to work towards here and so yeah to to answer your question that is that is one of the features the other features that people like are the security guarantees so for example we've been working with swift since 2016 and Swift powers quadrillions of dollars of transaction value and we have a our second public thing with them but there's been extensive Security review of how our system works versus other systems and there's just a certain higher level of security that you need to meet for institutions that have been moving around value for 50 years because they've been trying to be hacked for 50 years rather than five months and so they have they have all these really really high security requirements so I would say there's the risk management

requirements the security requirements for example ccip I think now has gone over 10 audits successfully and continues to be audited as anything is added so I would say those those are two important things um and then the other thing is we already have a good amount of of people that people want to transact of of counterparties that people want to transact across in the capital markets getting on ccip so our our goal here is to create an internet of contracts at web 3 powered by a data standard and a compute standard that allows people to transact reliably and to do that also in capital markets with a different slightly different set of requirements maybe 20% different set of requirements often around Identity or something else and then to merge those

two internet of contracts powered by a shared set of data standards compute standards and cross-chain connectivity standards into a single internet of contracts that that that like the bank can use a dii protocol because they know it's secure because it's powered by chain link data and it's automated through chain link Automation and they connect to it through chain link ccip and that meets their security requirements and therefore they can use use that defi protocol and the defi protocol can you know rely on the bank system because of the connectivity guarantees and other similar guarantees of chain link that are present there because you you need these guarantees in order for people to be able to transact people need to arrive at a shared agreed

on standard for Price people need to agree on a shared connectivity method in order to transact and so those standards those shared um guarantees is what Chen link is is providing more and more what what else are you guys doing Beyond tokenization in the capital markets like you alluded to a little bit of like other use cases or things that you might be be kind of doing but would love to hear more about what what chain Link's doing Beyond tokenization yeah so I'm not sure how detailed I can go into things here because of some of the the discussions we're having but I'll give you more of a historical context so if you look at how the Global Financial infrastructure of the world has evolved you you'll you'll eventually in this

you'll reach something called called the paper crisis in the 70s and the paper crisis in the 70s is what led to the digitization of the Global Financial system because basically there was so much paper moving around that you couldn't finalize transactions because of the volume of paper things that had to be sorted through at any one time basically and that created various bottlenecks and um Market risks and various other issues basically so there is um a dimension of of how the financial markets will evolve based on what banks want to do and what asset managers want to buy and what hedge funds want to buy and what you know asset issuers want to do and that's the market Dimension that's how does the

market function what real world assets does the market request what real world assets do asset managers want to hold on their books for their clients what real world assets do asset issuers want to create that is the market Dynamic that will essentially pull various implementations out of the technology and push into the market right then you you also have the um Global Financial systems um FMI Community the financial Market infrastructure Community which are the people that run the infrastructures that power The Current financial system and there are there are questions there about how does the financial Market infrastructure Community work with these

new blockchain challenges how do they provide the value that they provide how do they provide legal guarantees identity guarantees whatever guarantees which by the way is a hard requirement for those Banks to bring their trillions of dollars into the system so we are also working through solving that problem so we we are working through solving how do we get use cases off the ground how do we tokenize private Equity how do we tokenize real estate how do we tokenize carbon credits how do we tokenize more gold how do we tokenize you know whatever frankly the asset issuer or the asset purchaser the counterparties want to tokenize and there's double digits of conversations now with top institutions where that is is relatively far along then you have questions of how does

doing that comply with the kind of requirements that they have to comply with in order to make that asset how does how does all of that interaction happen in a way that they can be legally comfortable with it happening and there you also have to do various um data connections connectivity around various What's called the CSD a Central Security depository there's one in each country actually and so there's this other infrastructure level that we are also working together with various infrastructure uh providers on to help them essentially provide value to that transaction and allow it to continue in a legally compliant way that allows it to happen and if if that doesn't happen

then all the value from the banking system doesn't go it just doesn't come in and if that does happen then the value does come in and then we're not talking about you know one trillion or two trillion or three trillion on blockchains then we're talking about tens of trillions to hundreds of trillions on blockchains um and and once again that's the goal that um at least I have set in my mind for what it is that I'm trying to achieve here right what I'm trying to achieve is that in two three four five 10 plus years all of the world's value across derivatives equities Commodities real estate gold um ad networks global trade gaming is in a blockchain format it's

interoperable across multiple Chains It's able to be understood and transacted around because people understand the data needed and they have data standards in order for do to do those transactions and it's all being kind of managed and transacted on blockchain infrastructure with a shared set of data offchain compute and connectivity standards so maybe like a philosophical perspective that I think you're trying to describe maybe a summation of that is sort of you're trying to provide that public private partnership where the public blockchain is now able to be connected to the private institutions and you're facilitating some of the connection connectivity and uh requirements Etc that are required by

those private institutions to be able to bring that value on chain I'm just curious like when you guys are thinking about new product development moving from Price reads to function to to ccip and connectivity and value and data transfer how are you thinking about it when it comes to are you building the infrastructure first and then kind of showcasing what the proof and concepts are what the applications could be is this more kind of demand Le where you're you're having the institutions come and say hey we want to bring this stuff on chain how do we do this like you guys have been Forward Thinking just about everything that you've done so far and ahead of the curve I'm just curious like how do you ideate and think about you know how to continue to be ahead of the curve and you know in relation to the

institutions and partners that you have yeah sure so so there's three there's three kind of Worlds here the first world is the web 3 application developer world where you have you know great teams like a GMX thetics and and others right you have these these these great teams that are building these Cutting Edge uh things and we're working with all those teams and we're we're trying to listen very closely to what it is that they're trying to do in their application and then we and the larger chain Community is trying to implement that in some technical way into this public open- Source shared Global protocol that they're all using right and that is um a process that happens

through conversations through Dows through through a number of different channels those features that get made in the web 3 world are 80% transferable to the capital markets the the the large benefit that we have is that in making all of those features and making them securely we are able to prove that they work for real value in production and by working for real value in production that puts us significantly farther ahead of a lot of the Enterprise blockchain companies which don't deal with production they don't deal with a live system they deal with an idea that they want to make a live system but it's going to take them three to four years to get through the process with an with their counterparty uh with the

Enterprise client so we already have systems that work on production solve 80% of the problem on production live trillions of dollars of transaction value through the system um highly secure for many years and and has has the features developers need right so that's great so that that we have through a very rapid customer development iterative process with the chain link Community the the great teams that we're very lucky to work with and what we focus on there is security and and that sometimes creates friction points where people want to do something that isn't a secure way of doing it or isn't a secure feature and that creat certain amounts of delays in releasing things but once again the goal here is not to release features that everyone

wants whenever they want them the goal is to release features that there are good assurances are secure and secure enough to handle the purpose and the value that they're meant for and that is that is the thing that I think will will float any infrastructure over time that is the thing that has float at AWS Swift all these systems over time is that they are secure over time right so that's how we deal with with the web through community rapid customer development with a focus on making sure things are secure and that sometimes does create friction and does create delays but it's net better for everybody because the system is secure and their application ends up being secure sometimes people go and do things without us that are not secure often times they find they're not secure and come back right that's the the most common experience we frankly

have and their logic for doing that was oh you're taking too long or something costs too much and we're like okay that's totally fine go do something else and then if you have a problem you can come back and we have pretty good reason to believe we know why they'll have certain kind of problems so great highly iterative development would focus on security then you get to the second uh second group the second group is the capital markets the world's largest asset managers the world's largest banks the world's largest hedge funds the world's largest sent wealth funds that all want to have real world assets want to generate real world assets want to do tokenized private Equity tokenized carbon credits tokenized real estate tokenized whatever tokenized money markets tokenized treasuries they um have an additional 20% of

requirements and they generally move slower the big thing that has changed there is that they now have dedicated digital asset teams so what I did not see a year ago for most people is a dedicated digital asset team I did not see dedicated Engineers with a digital asset engineer title dedicated digital asset product manager dedicated digital asset uh product marketing digital ass said this digital ass said that I did not see that one year ago in most places and I saw it only really start happening two years ago in in a few small places and so these folks now have dedicated team members dedicated budgets dedicated plans dedicated goals

dedicated things they have to do like they have to launch a token do a transaction so with them we get their requirements we layer that into the already 80% we have working on live on production and and that's really where I think there's this big Advantage right where we can make systems on production but we also understand Capital markets requirements because our goal is not to kill everybody our goal is to make everyone work together right my goal is not to kill this group or that group my goal is to get everyone to work together and if somebody doesn't provide value to the system then they naturally won't be in the system like it is not my job to remove them from the system my job is to create a very flexible system together with a large community that can allow

anyone who can provide value to participate in transactions that value can be identity related value market data related value whatever other value right connectivity related value as a node operator so this second group provides you the requirements to do Capital markets s then there's a third group and the third group is the financial Market infrastructure world that's where people like Swift live that's where csds live that's where um certain identity providers live this is kind of the financial Market infrastructure world that processes quadrillions of dollars in transactions every year and this uh World also has a certain role to play and how they will

interact with all of these onchain transactions and there needs to be a system to facilitate that interaction there needs to be a way how csds interact with blockchain transactions there needs to be a way for identity solutions to irac with blockchain transactions there needs to be a way for Central Banks inac blockchain transactions all of these systems are going to continue to exist and they need some technology they need some way to interact with this more and more fragmented more and more value securing blockchain ecosystem of various chain technologies that that that that by the way also need a data standard in order to transact so that third group is the

slowest moving group because um and I didn't understand why they were slow moving until few years ago but after after being part of building a system that secures this much value I actually do understand when when you secure huge amounts of value you you really have to understand what you're doing before you do it um because because it's it's it's a different um set of responsibilities versus I'm a startup with three people and I'm just going to throw something against the wall and see if it sticks and if it doesn't stick I'm back to where I was 10 minutes ago right so you you have to come up with ways to continue to provide security while creating new new features that's what these people in the financial Market

infrastructure Community are trying to do this these are who the these are the people you see us interacting with when we go to like cbos and when we go to these other conferences and there there needs to be a global standard for how the financial Market infrastructures of the world how the central banks of the world interact with each other and with chains and that is a really kind of of long game type of problem that's like a five to 10 year problem but have already been doing this for well over 10 years and I like it and I'm totally I'm totally into doing it for as long as it takes to get to get the whole world on a on a single single standard that that's the thing that's actually very exciting to me personally is how can we get the

world on an efficient secure single standard like if I look back on my life and I spent 20 25 30 years getting the the whole world a single efficient standard across chains across fmis across all banks across all startups I'll I know that I'll be able to sit back look look back at that and and and and be proud of that so there's this there's this other group that people really don't understand which is like the total total long game of of blockchain infrastructure and um financial markets infrastructure T is not going anywhere you've been living in the future for a while I like it hey everyone wanted to give a quick shout out to the Wormhole Foundation if you a bell curve listener

you know that transferring across chains can be a massive pain I certainly do I complain about it on this program all the time that's why we are super pumped to have partnered with the Wormhole Foundation the stewards of the Wormhole protocol the Wormhole protocol connects over 30 blockchains and six different run times including salana soie ethereum layer 2os and more and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and Min for free you can claim that by just going down into the show notes and clicking on the link all right guys on with the show hey everyone this episode is brought to you by swell a liquid reaking protocol in the issuer of the ru liquid reaking token now if you're a listener of bker if you know that I am just so fascinated

by raking and liquid reaking I think it is going to be one of the most important Trends in ethereum and I am really excited for the benefit that it unlocks both users and also ethereum the protocol itself now disclaimer whenever there's yield involved in a product do your own research this is not Financial advice you guys know the drill but swell is a great team they have a non-custodial product and they are Missi driven on giving you the best liquid staking experience if you take one benefit away from using liquid reaking make it be Capital efficiency now you can earn passive yield from ethereum you can earn yield from multiple actively validated services that stack on top of that and then you can still use our S as collateral in Defi and because I know y'all are a bunch of Deens there's a points angle here as well but in swell

we call them pearls so pearls equal points and if you stake your e with swell you can earn pearls and future IG layer rewards when there's a token generation event you can swap your pearls for swell tokens head over click the link at the bottom of this episode again just pause what you're doing right now go click the link at the bottom of this episode check out swell thank you later hey everyone wanted to give a quick shout out to this episode sponsor flood protocol the optimal decks aggregator now flood is the perfect partner for this episode on the multi-chain future because flood is solving so many of the issues issues that we're going to be talking about this season and this is relevant for both Traders and devs so if you are a Trader you should definitely head over to flood Swap and start trading because

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just curious like it kind of touched on it and I think you know the answer we've seen so many of these Enterprise blockchain like the JP Morgan chain type institutional pron UPS come out do you think there's any room for that in this world that you're describing yeah absolutely I think there's I think there's a ton of room in this world what role would that play in kind of this this description you'll see basically what I call securitization 2.0 so securitization 1.0 was was the thing that led to the market B up until the global financial crisis and securitization 2.0 is tokenization so securitization 2.0 is the not nice way to say it and tokenization is the nice way to say it because uh well

tokenization actually provides you security guarantees and uh transparency guarantees that securitization 1.0 didn't provide so it's actually a good way to describe it but I think what's what's going to happen with all these Bank chains is they're all going to have their own stable coin they're all going to put all of their clients on their own chain with their own address for each client they're all going to make their own real world assets about whatever they're good at doing I mean think about what a bank is Investment Bank an investment Bank packages stuff into a financial product that's what this is about that's all we're really doing here we're just packaging the financial product into a

token thing on a blockchain rather than into a digital thing on a web system or a paper thing on a piece of paper which is what they did before banks are um Financial product packaging machines that is what they are and they are a stantly looking for more assets to package and B they are constantly looking how to package them and C they are constantly looking how to move those assets to counterparties that want to buy them so that everyone can make a ton of money doing that and so all of these banks will have multiple chains for multiple verticals multiple geographies where they will tokenize pretty much everything um and then they will have stable coins and when a JP Morgan client wants to buy Goldman Sachs carbon credit

they will use the GP Morgan stable coin point to buy the Goldman Sachs carbon credit but they will need to know that the Goldman Sachs carbon credit has proof of carbon credit proof of reserves they will need to do a marketto market operation they will need to settle against a certain price so they'll need price data injected into that they will need identity attached to that carbon credit through some kind of identity data source putting that in all of those things chain link will do and then they will need the the the What's called the DVP they will need um Del versus payment transaction they will need to send the stable coin over to Goldman Sachs chain and they will need to receive back the carbon credit through a protocol and through ccip they will be able to take

the stable coin wrap it in an instruction that says go to Goldman Sachs chain go to carbon credit smart contract and execute the buy function and then return back to me what was given to you from that buy function which in this case is the carbon credit and this is something we we've already publicly done with someone called called AZ Bank um this is the one of the two largest banks in Australia with a trillion in assets under management so we have a user that we have publicly done something with that one user one one one single entity has a trillion in assets under management that's one user and there there there's over 10,000 of of of these Banks or these people

they're not all at that size but that is um is what will happen everyone will have multiple chains as a bank they will all have multiple assets they will all have stable coins they will all need to transact they will need data to transact they will need computation that is offchain to help the transaction move along and they will need a connectivity standard that all the counterparties agree are how they connect and then they will also want to use public chains and we will all want them to use public chains and public chains will be kind of the hot bed of innovation public chains will be where the consistently highest risk highest return yelding coolest new stuff comes out of that eventually gets repackaged

in some Bank form but the the the defi Community will continue to be the place that generates the most Cutting Edge Financial products um and the banks will will will want to access those products for their clients and so everything that I'm saying is hugely beneficial to to the to the capital markets because frankly it'll work much better than it does now because you you won't be able to hide data and you won't be able to manipulate transactions to create problems for people in the in traditional system if you put it on this model of functioning and it'll be a massive benefit to the blockchain world because this is this is the net new buyers the like the whole blockchain industry is driven by net new buyers people

understand that as being the Bitcoin ETF and the ethereum ETF are going to bring a bunch of net new buyers you know what's really going to bring a bunch of net new buyers when when every net new buyer can just directly interface with all the public smart contracts without having to deal with ETFs or anything like when everybody can just use every smart contract efficiently and and securely and in a compliant way that works for for them and their legal requirements yep that that's exactly the public chain private chain relationship that I was talking about with that unified you know interoperability layer and and standard in between I love it I love Vision I was curious uh Saray just about anything that you could say about

the security model um or the chain link approach to security when it comes to decentralized Oracle networks like one of the things that you know I love to hear that your your guy's value is just security uh moving slow all that stuff that that sort of aligns with how I think the protocols that ultimately are going to win in defi um that's what they're optimizing for um but around things like oracles or Bridges or or whatever there have been security concerns in the past like any details you can say about the underlying sort of security assumptions or Chan links approach I think that'd be really helpful to understand sure sure so this is just another dimension of maybe understanding what what Shing does so some so so there's like basically three ways to make an oracle

decentralized Oracle Network thing work one way is you can make a server or a bunch of servers that you control you can control those servers privately and you could say you've made an oracle or an oracle Network that is not an oracle Network that's just one person controlling either one server or one key controlling 1020 servers this is what a lot of bridge hacks look like frankly is it looked like there were multiple nodes but there weren't multiple nodes there was actually one key controlling all the nodes or there was one um operator for all the nodes and it was just one set of nodes it was just it was just one node basically spread out out across something controlled by one key this is

like multi-chain was shut down by one key a whole bunch of other stuff was shut a bunch of native Chain Bridge hacks get hacked because somebody gets access to a single key and when you go to their website it's like up and down the centralization is the key to our lives and we love it and it loves us and we're going to do it and then when you actually look at how the system work it's like yeah I just have the one key here on my laptop and you know that's you know the thing that can make the system stop so that's the first thing right that's the first way that a lot of people make a lot of orac calls whether they're for data or Identity or for whatever and just to be clear there is nobody who has made as many Oracle networks or oracles as us we've never

made oracles that way and and generally speaking um nobody makes oracles about all these topics like Shan like does right which will actually get to a later version of the answer to your question the second way to do this the second way to make an Oracle in Oracle network is to make an Oracle in an oracle Network that does one thing it just does one thing it's very good at bridging from specific chain a to specific chain b or it's very good at providing one specific piece of data and we just have a protocol that's just very good for that one thing just does that um or not even very good it just it just knows how to do that and there you might actually have multiple nodes trying to do something and then there's a lot of other problems there where people can manipulate the data and do

other things and to my amazement some of the business models of some of these places is actually to manipulate the data in order to steal money from the users as their revenue model which is absolutely you know kind of Fantastical a little bit but but that's a whole other that's a whole other conversation so basically the second model is I make one Oracle on one specific topic the third model is what chain link does chain link is a system for making Oracle networks about anything you want basically and it has core security assumptions core security properties core security guarantees

that you can then reuse for bridges for data for computation and this is actually why CCI every ccip bridge and Lane is actually three Oracle networks working together so most other bridges are basically either one Oracle Network or one network sending all the transactions through one place which doesn't really scale or it's one or two nodes trying to do transactions in a minimally secure way ccip is actually over 20 nodes across three networks three separate Oracle networks

are all checking things and they're all checking specific things this is what we call the fifth level of cross chain security when you actually have multiple networks checking things and the reason that chain link can do this is because chain link is a is a framework and a system for making multiple networks work together so there's a committing don don is a decentralized Oracle Network there's an executing Don and then there's the risk management Don the committing and executing Dawn basically verify that transactions are functioning correctly and the risk management Dawn is where you put all those conditions we talked about earlier that's where you

can introduce things like rate limits or other other other security key security guarantees so the way that the chain link system is is really being architected is that you can compose an oracle network with the degree of security that you want and now for cross chain bridging you can actually combine Oracle networks to create greater degrees of security so the whole point of the chain link system is not for us to tell you how to build an a chain link Oracle Network it's for the system to allow you to add whatever nodes you want if if you want a bunch of telecommunication company nodes you can have those if you want a bunch of web 3 nodes you can have those if you want to

combine them you can have that and you can naturally yourself scale up the amount of nodes that you want and then you can modify even how multiple networks work with each other like for example you can actually add a fourth Network to the ccip process right you could say that I don't want to accept a proof of Reserve back token unless I verify that the proof of reserves proof about that token is valid I don't want to accept tokens that don't have solid proof of reserves guarantees into my chain and so now you have the Three core ccip networks but then you can have a a fourth proof of Reserve Network that's

proving something to the risk management Network you see and um another way to think about it is that Oracle networks are really decentralized microservices and chain link is a way to generate um thousands hundreds of thousands and eventually millions of these decentralized microservices to solve all the security and transactional problems like you could even do things like one of the things we've discussed publicly now so I can mention it is Oracle networks as an interface to AI models um and the AI models can be used to check various things for you before transaction continues or before a transaction goes ahead or even do the transaction for you so things like that um which could be another another kind

of Oracle Network you add into the mix but that's really really the model of chain link is is scaling the security of anyone Network and now having the ability to connect the networks into more and more advanced combinations that are then finally connected to a Smart contract which is the transactional mechanism itself and then that transaction is very feature Rich that transaction has all the data it needs has all the connectivity it needs has access to AI has access to whatever it needs in order to function as an advanced secure um basically more robust more um featur Rich transaction that's I guess another way

to look at it how does a risk management Dawn work sure so the the the risk management Network basically has some hard conditions in encoded into it and then uh you can add other conditions and the conditions are pretty much um configurable and they're configurable by the asset issuer the chain Creator all these other folks if you look at how values moved across non-chain systems you'll see that they all have risk analysis teams they have all these folks that are constantly considering how risk works and this is actually the history of moving value across all of all of the web 2 systems in the world it's evaluating how risk works it's not just moving everything it's it's it's

evaluating risk and connecting that evaluation to various data sources systems that evaluate risk properly um and and the relationship between risk is a direct relationship also between speed and cost so this is uh the other fundamental truth of of moving across all value is that if you don't create a fundamental relationship between risk and speed and cost you're you're basically Shifting the cost to someone else um and and that's uh that's the fundamental thing that I think people making a lot of these Bridges Bridge things are not necessarily getting they're they're creating security risks and they're creating various costs that are not maybe even clear to them

definitely are not made clear to the users of the systems and only become clear when the costs and the risks um fall down which once again in line with our goals is not the goal our our goal is to meet a standard where hundreds of trillions of dollars can be transacted over um a globally distribut Ed set of different chains probably millions of different smart contracts and then all of the value moving between those contracts and those chains and all of the data that is necessary for all of that value to to be transacted is properly um secured and and that's that's actually a necessary condition for that if you do not have a mechanism that manages risk in connectivity if you

do not have a mechanism that provides reliable data for settlement that everyone can agree is a good resource for data for Reliable not just settlement because you know whatever but like I can reliably settle transactions that is is a hard requirement for all of this to go go to a new level so we are trying to build things for that level of requirement so that the system could handle that level of of usage along those lines uh I'm curious are for our space to be able to uh you know get to the point of the adoption that you're talking about trillions of dollars from traditional institutions coming coming on board are there any things that you guys are looking at and saying okay we need this or that or or this development we need this capability

are there any missing Lego pieces that uh you're waiting on or is it really just kind of a time you know uh equation right now and it takes time to develop these products and services and and time for you know market adoption I guess I'm curious if there's any like missing components that you guys see right now that we need the capital markets is like this big layer cake of a bunch of systems all working together and the only real hindrance or or delay that we have is the decision making of different parts of that layer cake of the different parts of that kind of onion of different steps in the transaction aligning on a way to do those transactions basically um that's our our biggest

limitation there I mean we've been working with swift since 2016 we've been working with a lot of other um big institutions we've been in um discussions and working together with various market infrastructures for many years now much of that is not public um basically by by way of educating them working with them coming up with shared plans it's it's a multi- multi-year process to get a um a large group of participants Each of which have like thousands to tens of thousands of people um aligned with a single set of global standards but um that is the biggest hindrance that they they will admit to you also that that is

always their biggest hindrance because there's just so much value and so many people and so many interests that need to get aligned but you know we're very lucky to be having good collaborative relationships and good working Dynamics with a lot of the people that tend to solve that problem like Swift for example are the people that set Global Financial Market standards we work with others that set Global Financial Market standards and in in in working with them we we can definitely see how you couldn't really do this without them right you you need them to set a set of standards that the the global um Financial system kind of works along and it's a challenging process and they admit that it's challenging and all the

participants it's just there's so much value and so much money that that's the biggest hurdle whatever they want us to build in terms of identity connectivity terms of cross Ching connectivity in terms of data connectivity we've genely never had a problem with that there's never there's never been any problem or limitation there they they generally don't like to to to speedily ship things so they're they're more cautious on Security even even than us sometimes so they're extremely cautious people because they it's been hammered into them that you know they're responsible for people's life savings and all this type of stuff and like they they take it extremely seriously there's all these laws they have to worry about um you know the web three people are also great and we try to ship everything as fast as we can for them just just to

be super super duper clear I I really see it as we have set helped set some Global standards that make transactions happen smoothly in defi there are other people that for the past 50 70 years have been setting similar transactional standards in the capital markets and what we're trying to do is work with the web 3 community and the Global Financial system Community to come up with a single set of shared standards that allows transactions on the data level on the offchain computation level and on the cross chain connectivity level to happen the the blockchain decision the choice of what chain to use know we commonly talk to people about evm we describe those those Technologies we

describe other Technologies but basically that is their decision we we do not have a particularly large role to play in what blockchain technology they will choose frankly because it's it's just something they've already been doing right they've already been in a sales cycle with some Enterprise blockchain provider our main goal is to create a single set of transactional standards on the dimension of data offchain computation that's required for the transaction to happen and cross-chain connectivity that's required for the transaction to happen and and and that is I think going to be hugely beneficial to both the traditional society and the web3 society and and eventually going to merge those two places into one Global um we call it internet of contracts

which is our I guess I would say that's our medium-term goal is is is to start having more and more transactions between web3 uh teams and contracts and capital markets chains and then as quickly as we can get those transactions across across those two worlds to start happening and I think that's going to start happening um you know sooner than some other PE some people expect because the laws are starting to become clear in certain parts of the world so there are parts of the world where the laws are very unclear and probably will remain unclear and then there are parts of the world where they are becoming clearer namely in Asia the Middle East and I think out of those places you will start to see some of those first transactions S I know we we got to start

to wind down here pretty soon I guess you know give folks a sense of give us some of that that sweet sweet Alpha like what can folks be expecting from uh chain link next which we'd be looking forward to I mean I think we've said a lot of the things that that we're trying and trying to achieve um I think chain link really now is a platform that's going to continue to generate more service types whether it's about Identity or different types of data or you know more robust connectivity or other types of com offchain computation that enables the onchain contracts to to do more uh I think that trend of chain link as a platform we're pretty much on that path and you know once you get down that path

you you're really on that path to make a to make a platform um the the parts of the platform I think will continue to interact in more and more efficient ways so that people can build more and more advanced applications uh I think the two things that people can look at as at the end of my smartcon presentation last year uh I I had final two slides at the end the there were I mentioned something called the decentralized Computing marketplace where um people can go with any budget and generate any um Oracle networks they want very efficiently and then also something called the chain link composer which I showed a black and white screenshot of because that's the stage of of design that that thing was in and that is like a tool where you can

combine all the Oracle networks into a single kind of basically decentralized stack of solutions around a contract around a smart contract so those are those are the two things that um that are there I think you'll also see more Capital markets activity um I I don't think that ignoring this group is is a wise um wise move for our industry and I think everyone is realizing that like it's it's really kind of telling to me how people went from we have to destroy the banking system to wow look at that black rock Black Rock bought just bought some Bitcoin man you know those guy I always like those guys you know I was always I always thought their logo looked nice or or whatever right I I think that very basic economic

incentive will will take hold very very strongly so I think I think building the transactional standards the data standards the connectivity rails all of these things between these places that very naturally are going to want to transact and do want to transact even though people can't like clear as they see it how they're going to transact um I mean I can clear as they see it so it's fine and and I think our community can can see it and all the people building it us can see it and I think that I think that's enough to get to get the the the ecosystem to a place where it can be proven to be true and then once once it's proven that it's true that all the trafi institutions want want to and will soon be able to

interact with blockchains on the public side I think that'll be a big um a big deal because the basic the basic arithmetic of that situation is is very very very big um it is the biggest source of all net new usage for blockchain technology so you know that's another thing I guess people can expect more that's what we're going to work towards awesome yeah that's inspiring stuff uh Sergey you know I amum obviously been a big fan for a long time I don't know Michael Advance if you guys have any other questions but you've been super generous with your time no thank thank

you for the time sir guys this is great yeah yeah it's good to get a download especially on CC IP it's somewhere I uh definitely want to focus a little bit more on so yeah thanks for thanks for coming on the Pod um we'll be with each other soon in London in person which I'm looking forward to and and yeah we'll we'll have to do it again at some point in the future wonderful thank you very much for having me Michael and Vance's always a pleasure to see you Michael very nice to meet you here on the podcast it's has been great shining with you thank you very much hey everyone Mike here if you're a bell curve listener you know that transferring assets across chains can be a massive pain I certainly do I complain about it on this program all the time that is why we are incredibly

excited to have teamed up with the Wormhole Foundation the stewards of the Wormhole protocol and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and mint for free click the link at the bottom of this episode take you get your free [Music] nft