dYdX Abandoning Ethereum?! with Founder, Antonio Juliano

Transcript

hey bankless nation welcome to another episode of state of the nation where we do a deep dive into a topic i'm fresh back from a week off david feels pretty good except i get a little bit of a case of covid and so uh i might be muting through some of this and and coughing but i'm really excited to get into this because this was some breaking news when i uh was out dydx are they abandoning ethereum that's the question we're putting forward to antonio who is the uh the founder of dydx and of course dydx is a very popular very successful derivatives exchange that has formerly been built entirely on ethereum first on mainnet and then on layer twos and we've had antonio on the podcast a couple of

times to discuss this david what are we going to dig into today with antonio yeah this has really taken the uh app chain world by by storm not just the app chain just like smart contracting world because where will the applications live when this crypto industry finally matures and settles into its long-term future is it going to be an app chain world or is it going to be a layer 2 world and it seems with this move from dydx from the ethereum layer 2 ecosystem to the cosmos app chain world that the app chain world has gotten a big a big victory mark a big point uh and so um so we're going to explore this world and explore all of these questions is this going to become a trend is this alpha is dydx leading is

going is dydx the first of many apps to to leave an ethereum layer two and go on to an app-specific chain or from the ethereum perspective is this just short-term thinking and impatience on layer two development we're going to explore these things you're going to understand why dydx decided to make the move to an apt specific chain why uh cosmos was the right place uh and all the the pros that come out of this and also explore some of the cons as well yeah i'm really excited to dig in and get a lot of questions from antonio as does the bankless community i think you guys have been feeding us some questions we'll get those into the episode as well of course uh one other thing to discuss is well all of the centralized not all of them but many of the centralized

lending and borrowing exchanges are kind of melting down uh there's still some safety and still some solace in d5 because defy has actually performed very well and our friends at notional wanted to remind you that you could still get a fixed rate defy loan uh and let me share some of the the rates here on usdc um so there's a fixed apy four percent annual usdc loan you can lock that in for up to a year also uh eth as well on uh notional and um it's really i i think not it's definitely exciting to see how well d5 performed particularly the lending and borrowing protocol side

of defy throughout the bear market so far it's held up what i love about notional is you can actually look at one of their dashboards and see where all of the the money is being backed uh right and see where all of the liquidations are taking place so the nice thing about everything on defy in the collateralized lending and borrowing spaces everything is fully transparent on chain there's no black box and you don't have to give up custody of your funds to a third party so if you guys are interested in that now is the time to make some yield with with some of that capital that's sitting idle go check out notional there will be a link in the show notes you can uh tap into as well and we know this because it is defy that they are just not rehypothecating your

funds right back to three hours capital on the other side of things and it can also never with uh prevent you from withdrawing the assets because it's baked into code these are the things these are the properties that have saved some people in the world of crypto from gridding rect because defy has those powers uh david i could ask you the question we begin every one of these episodes which is what is the state of the nation today oh ryan the state of the nation is tugging there's a tug of war of going on between these two communities the cosmos people got the got the dub uh and so they have uh tugged over dydx over to their their cosmos ecosystem meanwhile the ethereum layer two's ecosystems are fighting back and saying no this is

short-term thinking there is a tug of war going on and dydx is in the middle of it uh and so ryan that is the state of the nation uh we are tugging it's good to have some uh competition some tugging going on i uh my hope is of course the the winners at the end of the day are the users the winners are the product and the winners ultimately are um those that uh those that are going in a more decentralized direction so we'll be back with a lot of questions for antonio about all of these things when we come back but before we do we want to thank the sponsors that made this episode possible rocket pool is your friendly decentralized ethereum staking protocol you can stake your east with rocket pool and get our eth in return allowing you to stake your east

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the cost of the average gas feed if you're a developer who wants low gas fees and instant transactions for your users visit arbitrum dot io developer to start building your dap on arbitrary if you're a d-gen many of your favorite dapps on ethereum are already on arbitrarily with many moving over every day go to bridge.arbitrum.io now to start bridging over your eth and other tokens in order to experience defy nfts in the way it was always meant to be fast cheap secure and friction free hey guys we are back speaking with antonio about dydx's recent decision to abandon ethereum that's what it looks like moving to a cosmos app chain of course you guys know antonio he is the founder of dydx he left coinbase about five years ago because he wanted to make

a better exchange and he did make a better exchange on ethereum main at first and then more recently uh dydx moved migrated to starkware and ethereum layer two and they've been there ever since last week though antonio and the team at dydx just announced they are moving towards uh to their own app chain something built on the the cosmos ecosystem we're gonna talk a little bit more about what that means uh antonio it's great to have you back at bankless how you doing i'm doing well thanks so much for having me and looking forward to the conversation yeah i think we're gonna have some fun questions for you right because like more than anything i think i'm i'm just curious about this move but like gotta say it could have been worse you could

have decided to move to tron or something like this it was cosmos your own app chain uh so um can you tell us about the reason for this one thing we've appreciated about talking to you uh in our conversation with you in the past antonio is you've always pitched yourself as hey i'm not a chain maximalist i'm a product maximalist okay i want to make the best possible product experience exchange experience for my users and that's that drives all of my technology uh choices and all of my platform choices can you talk a little bit about this starting tweet here uh i'm gonna i'm gonna actually pull this up this was your announcement tweet and you give us some context for this um you said and this is when you're you're announcing the the

move to dydx's own app chain for everyone with hot takes on why dydx is developing its own chain we believe it gives us a chance to develop the best possible product and that's it that's all we care about i'm not sure how many times i can say product i have to say product in in the past five years product means the best possible combination of user experience features decentralization and security so that's the lead in antonio uh tell us about it well you heard it from me first i mean i feel like i've been one of the most product focused founders in d5 for a while there are a lot of great products that are built on d5 but i'm proud that dydx is one of those as

well and you know i tweet about it constantly talk about it on all the different podcasts really what we're aiming to go out and do is build the best possible product like if you look at the success of tech companies throughout literally any tech company success usually means for a tech company the best possible product times the best possible distribution so you can't really win without having one of the best products and that's really what we're going out to to be able to build really don't care too much about any sort of chain of maximalism um i would say we're sort of intentionally and this is a trade-off it's not you know necessarily better or worse but we're not really ingrained deeply in the

community of any particular layer one or any other technology for that matter and some of the ways that other d5 products are and i think that's been an intentional choice we've just always really been as focused as possible on building the best possible product adopting the best technologies and i think that is the fundamental driver that led to this decision excited to dive into the details and i think that's what always matters like why do we think that we can potentially build a better possible protocol better possible product on top of a cosmos based chain than ethereum we can get into that but at the end of the day it comes down to what i would describe as the opportunity to build the best possible product and that's one of

the other things that i'll say about this decision i think i said this in my very first tweet kind of announcing uh the the move to cosmos but this is a risky decision like i think this is a risky decision uh we don't know if we can build the best possible product on top of cosmos or not but we really wanted to try something that was fundamentally different than a lot of the different approaches that at least the most popular defy apps have taken so far and we feel like this gives us a good opportunity to potentially continue to push the needle on what's possible with the technologies and then the last thing i'll say is you really saw dydx be a super early adopter of new technologies

in the past right we were one of the very first uh legit d5 protocols to move to layer two we're by far the biggest uh protocol on layer two today um and at least we think we wanna continue to push the needle what's possible with technology um i always say this to people that we interview for dydx one of the things that continues to excite me about the blockchain and crypto industry is that the technology is always improving in a lot of different ways like ethereum is improving layer twos are improving app chains are improving but the way that it's improving is exponential and that's what gets me really excited right it's like we can process 10x more transactions than we could last year the

latency is 10x lower the decentralization is you know 210x better whatever metrics that you care about with the product and then i'll just bring it back to kind of my second tweet there what does product actually mean i think people have kind of a misconception um in d5 about what product means and they think it's only like ux and features but when i say product i mean what i said there the best possible combination of ux features decentralization and security because that's at the end of the day what people care about and i think those four properties are really going to be a road map for this conversation because those are the parameters that we are trying to optimize for and i think this move to to a cosmos app chain is saying that these four parameters are

they score higher the aggregate score is higher on an app chain than they are on ethereum layer two so that will be sort of this like guiding north star for for this conversation but also i think what's uh whatever happens as a result of this dydx move to a cosmos app chain what we get as an ecosystem is a ton of information a ton of data and something i've always appreciated about you antonio is that you are a product maximalist you are here to make dydx the best product of all time and you've used decentralization in order to achieve that goal and like we this has been the explicit ethos of you building a dydx from the get-go which turns this opportunity that we have as an ecosystem watching dydx something that has clear user adoption

clear volume obvious product market fit uh when it migrates from an ethereum layer two to a to a cosmos app chain we're going to see as an ecosystem the data that comes out of this as a result as somebody who is going after the product first approach this is going to be a learning this is going to be a lesson that we learn from the entire ecosystem so i'm just really excited just to see the data that comes out of this uh and just to go back to those four parameters uh ux uh quality of features the pro the level of decentralization and the degree of security uh along those four parameters above can you can you just like give us a high level pitch about why a dui dx app chain produces a better optimization on those four parameters yeah for sure and the first

kind of premise i also want to come to this conversation with i don't think that cosmos is 100 better for all cases dydx just has a really unique kind of set of trade-offs that we care about just to kind of set the groundwork roughly on dydx right now on v3 on our current system with starkware the way the system works is there's two pieces one of them is decentralized and one of them is centralized the centralized piece is the order books and the order matching engine that run on our servers on aws right now of course it's still non-custodial but that handles a lot of the heavy lifting for the throughput and then of course there's the decentralized system built on starkware that's effectively the the smart contracts for

our system um so going into v4 uh so maybe on v3 like how do we rank right now for d5 like very good for ux on d5 i would say you know still getting to the level where d5 in general is on the level of centralized exchanges for ux but i like to think we've pushed that forward a lot features like i think we do pretty well for features as well i think probably more features than pretty much anybody else in d5 but again like a lot less than centralized exchanges it's just harder to build in d5 and it takes more time to build things decentralization sort of like not that great like it's non-custodial um which is really great for and you guys talk about the benefits of that a lot which i certainly subscribe to it's not fully

decentralized it's not censorship resistant so like sort of not super awesome on that one and then security is pretty high because like obviously we always always care about security so the real thing that we wanted to tackle in v4 is this third thing here um in decentralization going to a system that is fully decentralized um and we mean that and and one of the pieces that i think is important to understand about decentralization is decentralization the decentralization of a system is really equal to the minimum decentralization of any of the components that make up that system to use the entire product so you could look at something like a stark net or an optimism um and look at those kind of

systems as decentralized in the sense that people can withdraw from them right like you can always get your money back but at least for our current deployments on on starkwear and a lot of other rollups that rely on a centralized sequencer you they don't necessarily have decentralization of that kind of sequencer layer you can still get your money back you can like get out of the system but there could potentially be censorship of the core product experience itself itself so we wanted to get to a place where the entire system is decentralized so okay let's like move to v4 and cosmos like how should we rank on that ideally the ux and features are pretty on par with v3 and that's actually pretty hard to do like to make the the ux and features even stay close to the

same level on a fully decentralized system so our goal basically is to get those as close as possible to what we experience on v3 so v3 right now it's super nice if you go on it it feels just like using a centralized exchange like you place a trade confirms immediately there's no gas keys when you trade all of that good stuff on v4 i think we can get it to a similar level um likely the latency of trading will be slightly higher um i think it will still be a really good product experience just there are certain trade-offs where like this system is decentralized and it like takes the speed of light you know 400 milliseconds to go around the globe or whatever so probably like this system will be slightly higher latency but still well

within the bounds of what you would you know not that far off from what you'd experience on a centralized exchange from a feature perspective we want it to be at least as as many features as v3 um talked about we'll just continue on v4 with our focus on perpetuals which is the core type of derivative product that we offer and then likely scale that out to other types of trading like spot like margin potentially other types of derivatives over time so probably even better on the features over time decentralization you know talked about this we believe that this is the system we can build that gives us the maximum decentralization if you think about decentralization in that kind of

definition i just gave where it's the equal to the minimum decentralization of any component of the system and also i want to call out what i was saying when i began this which is that our level of scalability is very different than the requirements for like the the scalability of most other decentralized apps um roughly right now we handle about a thousand order places and cancellations per second on our centralized matching engine which is pretty similar to what a lot of centralized exchanges experience probably even on the lower end of that and then the actual trades or transactions that go on the blockchain is more on the order of 10 trades per second sometimes flexing up to like 30

or so but it's it's not anywhere close to like a thousand so we approaching this we kind of came to it with like okay first of all what do we want to build and we actually took that question to heart as well we were like okay is the dydx products like the best possible product that we could build or are there other things that are worth building like should we pivot to an automated market maker should we pivot to like a request for quote system and these could have significant impacts on the level of scalability that we require and kind of the conclusion that we came to with this is from a product perspective it's really important for us to continue to support this water book trading experience um the main reason for that is we've actually been extremely successful over the past six months getting a lot of the

institutional traders on crypto like pretty much all of the top market makers are trading on dydx now a lot of the institutional firms are trading on dydx and they trade on dydx before they trade on pretty much anything else in d5 because we built a product that's really approachable to them and has an order book has a lot of the advanced trade types so we're like okay we still want to have this order book based system we still want to build this product that we have yes we want to build more features into it but we'll do that eventually so okay how do we do that and we took a look at the problem we're like okay um we have a thousand order places and cancellations per second so the natural question you would ask is what

blockchain can handle a thousand order places and cancellations per second ideally with minimal to no fees right because on dydx v3 right now again if we're not trying to take a huge step backwards in terms of ux we want that to be basically free or as close to it as we can manage took a look around and we're like no blockchain cosmos included is even close to like a thousands transactions per second right now at all let alone like it doesn't even matter if you pay like the highest gas fees ever it's just not within the balance of the throughput of the system so then that brought us to this pretty quick realization that we needed to build a second what we call off chain network to run

this order book in this matching it's kind of a similar idea to how dydxv3 works right now in terms of there's a separate network if you will which is just like our centralized servers on v3 running the order book and matching engine but in v4 this order book and matching engine function will be taken on by a decentralized network but importantly one that does not have to come to consensus and what do i mean by that like the network doesn't have to come to consensus because all of the validators will effectively store their own version of the order book and they don't have to come to a consensus on it so like let's say the three of us are the only validators on the dydx chain obviously it'll be more but i could have like orders a b c like you could have orders like bcd

um and then you know somebody else could have different orders and and that's okay and we realized that that was actually a decent trade-off to make from a product perspective and that realization that we didn't have to run the order book on chain allowed us to let the scalability of the order book be orders of magnitudes higher because the the fundamental bottleneck in all blockchains is coming to consensus so if you don't have to come to consensus it's just way more scalable so we're thinking about it and you know there's a lot here so i'm sure we can dive in more into any of this that you want to talk more about but just to finish the story um we were thinking about it we're like okay uh we need to develop our own network to run the order book and matching engine what's the best

possible technology we could use to develop that network okay probably it would be a cosmos sdk blockchain built on top of tendermint potentially that could settle to another blockchain and then as we were thinking more through it we came back to that initial definition i gave of what decentralization is and like i'm going to keep coming back to this because i think this is the critical like insight decentralization is the minimum decentralization of a system is equal to the minimum decentralization of all of its components so let's just say for the sake of arguments that we like built this off chain order book and matching engine and then we rolled it up to layer one ethereum and let's just suppose that layer one ethereum could handle the throughput needed for trades and it was

like super decentralized on layer one ethereum and then the decentralization of our network was the best we could possibly make it well like what does that get you like go back to the definition like actually what you care about is the decentralization of the least decentralized components and that quickly brought us to the realization um that we should just build the entire thing on cosmos because that's the maximum decentralization that we can achieve anyways um and you know what is that level of decentralization i think that's certainly arguable i think the level of decentralization is actually really high and i think we care a lot about decentralization of the system like that's the entire reason that we're building v4 but that's the general thought process as to like you know why didn't we just

build on starknet why didn't we build on solana why didn't we build on you know like finance chain or something like that and instead that kind of led us to building our own chain based on cosmos okay so if i'm tracking correct um stark stark uh uh your star start x exchange dri dx is a centralized uh centralized sequencer which is basically like centralized block production and once we go to a cosmos app chain the dydx chain uh the dydx token turns into a validating token allowing a more permissionless level of block production for for the system which i think as a that cool quirk that you were talking about where every single validator gets to host their own order book which

doesn't need to be on chain the order book kind of turns into like a mempool kind of thing every single validator has their own version yeah the order book uh and that adds a bunch of scalability but then it adds a bunch of decentralization because it decentralizes the block production of the dydx exchange um but uh just to play devil's advocate here i mean decentralization is supposed to be a means to an end right you're supposed to be able to achieve something with decentralization not just like going for the heart of decentralization there's like a decentralization helps you get to a goal so going from a centralized sequencer which is what you have currently in your l2 with starkx to going and decentralized block production

with the dydx chain what does that actually get you yeah it's a good question and also so i think basically everything that you just said is pretty much exactly spot on the only thing that i'll mention is we don't actually have control over the dydx token so it's sort of up to the dydx community whether the base layer one token of this chain is dydx or not um but we look forward to engaging with the community on that in terms of your question what do you actually get out of b4 and what do you get out of decentralization i imagine it's pretty similar to what you guys talk with all the different founders about week over week right what we actually care about we care about non-custodial trading we care about no censorship resistance we

care about the quality of access and i think those are a lot of the things that you get with apollo decentralized system um and that's just something we never possibly could have achieved by keeping a centralized sort of sequencer if you will with us just running our own order book uh in matching engine antonio is the centralized sequencer piece of it as part of you know starkx or starkware or any rollup right now is that just a temporary condition isn't the plan for most rollups to have uh to move to a much more decentralized um sequencer and if that's the case why not wait for that yeah great question so absolutely that's the plan um and we've been talking with at least darkware a lot about this and i

know other teams with other rollups have plans to decentralize their sequencers as well but if you think about it we didn't really feel like there was a great reason to believe that whatever could be done on decentralizing the sequencers is necessarily a lot more decentralized than what we could achieve with our own base level validators on the dydx chain if you kind of look at the reputation the brand of what we've built we think that we can go out and build a very decentralized system and that at least order of magnitude will be on a similar level of censorship resistance and therefore decentralization as what any of the decentralized sequencers can offer as well and arguably it's a harder problem to

decentralize a lot of the sequencers as well for starkware and they have some of the very smartest people in the world working on this and i fully believe they will figure it out but it's just a hard problem right like how do you decentralize the prover network in terms of making sure all of the approvers that are doing these pretty computationally expensive zero knowledge proofs um how do you make sure that's as decentralized as a network that's just validating in sort of a simpler way a lot of transactions like any other layer one blockchain would right now so i'm sure that can be solved and i'm sure it will be solved but one other point that i'll make is that we always care about delivering the best possible product right now or at least in kind of a two to three year time horizon i would say

we're not happy to just wait around for something that could potentially be done in the future and again like there are really awesome people working on this we love the starkwear team um and i fully believe they will figure this out in like another year or so um but we want to build the best possible product right now and i think the other thing that gave us a lot of confidence to make again what i self-admit to as being a risky decision at least from a technological perspective is that we're not afraid to move on to new technologies and sort of move past everything that we've built before and i think that's a really unique mindset especially in d5 you talk a lot you hear people talk a lot about in d5 like oh like evm compatibility

like that's so important we need to get like all the developers to just be able to seamlessly deploy their contracts you hear certain d5 founders being like oh we would value evm compatibility because we built up the smart contract system we know it's secure we just want to deploy that on another evm compatible chain and you just see generally a lot of reluctance to build new things and that's not wrong it's just a trade-off it's like you know that's probably a little bit more in the camp of okay let's just like absolutely ensure like security um let's absolutely ensure we don't break what we have but one of the things that i talked about in the blog post um that we came up with is we came up with like company values or

whatever for dydx and going you know it's going into this process i was like most company values or bs but at least kind of articulating them i think it just articulates a little bit better like the way that i and the company think about things and one of our values is is think 10x bigger and the way i kind of articulated that is we should focus on what we can achieve rather than protecting what we have like we should play basically like we have nothing to lose because we don't have anything to lose and i think that's the mentality that we come into this with a lot of people in g5 are like oh wow like look at these amazing systems that have been built and in a lot of ways i agree like we in in unit swap and compound and everybody else have built some really

awesome stuff in d5 saw stuff that just fundamentally wasn't possible before but how do you think about that are you just sort of like championing it like hey look at all this awesome stuff that's being built it's like yeah we'll just keep improving it's at like a pretty steady rate and then eventually like the technology will be big enough we'll be best enough that you know we can build a great product or instead do you like how do you measure yourself and for us at uidx i always say this and i think most people think it's sort of a meme or like we're not serious about it but like i just want to build the best possible exchange and i want to build one of the biggest exchanges in crypto so how do we measure ourselves in that in that world we're about one percent of all trading

volume for perpetuals right now so it's like okay like if you look at it through that lens it's like we have like we can lose like one percent of all trading volume well our goal is like 30 so like what who even cares about like one percent it's just like we should only play for whatever the best possible chance of like building an awesome product that can get us more to that 30 percent you know competing with like ftx and finance mark and again like i think this gives us the best possible chance to do it we looked at a lot of different potential technologies and pretty much everything except this had been done before by somebody that was pretty good so we probably we thought we could probably build it better than other people i have a lot of confidence in our engineering team but this is kind of a

new approach like nobody's built like a decentralized off chain order book network before that handles on the order of a thousand orders per second and i think it comes back to what's that goal and what what are we doing here and i think you know we're not afraid to just like throw away everything we've built before and move on to the next at least what we think has the potential to be like 10x type technology and also like if we're wrong then then i'm you know i'm not too proud hopefully to say well like okay we'll just like go back to ethereum and like go go back to starknet or go back to optimism or like whatever um we'll always build on the best possible technology and we care about like the best possible technology on this like two to three year time horizon

not like a 10-year time horizon because we're willing to throw out everything we've built before and just build on the next 10x thing yeah i think no one would ever accuse your team of being overly cautious uh antonio i think you guys are definitely pushing the the envelope here and i we do want to um talk a bit more about the trade-offs a little bit later specifically this um decentralization piece before we get there this is probably the second or third time you've mentioned that you personally think this is actually a risky decision i want to hear you get into that why do you think this is potentially risky what do you think the risks actually are yeah it's a great question i think there are a couple risks probably the biggest risk is it's just like really really hard to build it's like there's so much

stuff to build it's like we gotta build like the base level of blockchain we gotta build all of the different modules into the base level blockchain that you know knows what a deposit is knows what a transfer is we have to build this off chain order book network we got to build our own oracle network we got to either integrate or sort of like build bridges um to different chains we have to build sort of like the alchemy like indexer level equivalent of this chain we can't just use like the graph we can't just use like alchemy um to make a really easy user interface for our uh for our users we have to build our own mobile apps that's sort of like an unsolved problem in d5 obviously we have to build like a website so it's just like there's

so much to build um i think that's probably the biggest risk is that we've just bitten off a lot more than we can chew and here we are actually like we started this project from a research perspective uh about that the beginning of this year and we committed to open sourcing the finished protocol by the end of the year and that's actually an extremely aggressive timeline like if you look at the timelines of pretty much anybody building other chains that are out there it's usually like two to five plus years and we're saying we can do it in one and not only will we do it in one we're committing that like we're going to build this amazing product not just this kind of base level protocol that other people can build on later so it's a lot to build i'd say probably a couple other

risks um you know there are potential risks with the technology like one of the things that we're obviously betting on um to improve is bridges and we can dive more into that later we do think that's improved quite a bit the one thing i'll say on bridges that at least buys us a good bit more time is dydx is a derivatives exchange not a spot exchange and that actually matters quite a lot for this decision because the one thing that a derivatives exchange needs from a bridging perspective is one collateral token um rather than like you need every single like asset that you want to trade in a spot way to be on that chain so if we kind of reduce the problem at

least right now to for for when there's a single collateral version of dydx like there is on v3 it means we only need one really good decentralized kind of collateral option on on v4 um currently on dydx v3 that collateral is usdc and we're in talks with uh with circle and center uh to potentially get like a u.s native usdc deployment as well which i think would make the the collateral at least as decentralized as it is right now you know we don't have to go unattended and get into the the fact that like usdc itself isn't decentralized which i'm fully aware of but it would at least kind of maintain the the kind of level of censorship resistance that we have for our collateral on v3 so those are

probably the two biggest things like maybe we've just like bitten off way more than we can chew from an implementation perspective and then maybe the technology doesn't increase fast enough and then the last thing i'll say is like maybe i'm wrong like maybe like the ecosystems that are built up around a lot of these blockchains like from a community perspective are really important maybe like the it's just important like people want to be on ethereum they like really believe in ethereum they like you know use all their unislop and different apps on ethereum and they just want to be on one chain and like the people that are on solana like really believe in solana and they just like want to build you know use products that are on the native chain that they care about i think that's wrong personally but i

could be wrong um so i think that's like another risk um i'd say those are probably the biggest things and tony do you guys have to like rebuild all of kind of the wallet infrastructure as well it's like so i can't use metamask with this thing what am i going to be using or can i use metamask yeah it's a great question actually so you will be able to use metamask and every wallet that you're normally used to using um but we do also have to rebuild the wallets interface and we we have to like rebuild wallets like what do i mean by that we've actually done something similar to this for dydx v3 as well when you use dydxv3 there's a separate key pair that you're storing which is like a stark public private key pair that metamask doesn't know how to

handle similarly for dydx v4 it'll be like a cosmos if you will public private key pair that metamaskin won't know how to handle we've effectively built a wallet into our products which is a whole other like class of complexity um but that lets you just connect to dydx with any wallet that you might want to use but i think i sent out a hot tweet about this at some point too like there will be no like using dydx chain like won't feel i think like using any other like blockchain that that you're used to using like normally if you go to a different chain it's like okay you gotta you're shipped off to some random bridging website that seems kind of sketchy um like maybe that works and you can

figure it out like maybe it doesn't um sometimes you have to get different wallets that you may not be used to using like the current one on cosmos is like kepler if you're trying to use something like a solana for the sake of arguments there are great wallets but maybe you have to download phantom or something and that's different from the metamask wallet that you usually use on dydxb4 we care again about the product experience so there's not going to be any random like downloads that you have to do for other wallets there's not going to be any random bridging websites of course there still will be the concept of wallet and the concept of bridges basically what i'm saying is we want to build everything full stack into dydx we want to build like the best possible bridging ui into the product so it's just like okay i click deposit on

dydx yes behind the scenes maybe we're you know going through like a bridge or something like that and we'll be transparent about that of course um but fundamentally it's all within one product experience so again there is quite a lot to build but i think that's the way you build the best product so antonio let's say let's say uh the community does move forward and say something like dydx the token is is the designated staking token inside of the dydx um app chain like how many you mentioned this a few times decentralization of kind of the order book that very much depends on a diverse decentralized set of independent validators independent stakers how many independent validators are you are you hoping for in this new app chain is

there going to be obviously you're going to have to start paying like fees issuance maybe block rewards if you're going to fund it that way or transaction fees at least to this new validating staking class this is a new entry into the dydx ecosystem how does all that work so how many stakers how many validators and how are they going to get compensated yeah this is still something we're researching to be honest like how many what's the upper limit and what's kind of the trade-off on tendermint between the number of validators in the performance of the chain especially when we toss in what's the off chain order book system look like roughly we'll probably start with somewhere on the order of 50 to 100 validators and continue to build up from

there and i think that's more than decentralized enough to start and i think if you look at something like the evolution of solana over time or the evolution of some of the other layer one blockchains normally it starts at about that level like 50 to 100 sometimes less if it's a janky blockchain but usually you can you can bootstrap the validators fairly easily and then it continues to grow from there and then i think the most important thing to realize is it's almost like less about the number of validators than it is about the distribution of the l1 token itself and like who the holders are right because the holders are the ones that are actually staking to the validators i think people sort of has this misconception that in

that like number of validators is extremely important and i think it is important but i think it's not the only thing that's important um let me go through an example of that like in tendermints uh tendermint basically assumes that at least two-thirds of the validators are honest so then if you look at that you might be like well okay hold on antony you just said there's going to be like 50 validators if you're telling me that only you know only one-third of those validators need to be dishonest and then like something bad could happen and that's like you know 15 people or something that's like not that many people it seems like it's not decentralized right but what would actually happen in that situation so there's kind of two failure cases for tendermint consensus the first is more than one-third of people are dishonest

and what can happen in that case is the chain can get halted they can't actually like double spend they can't like steal your money or anything like that but the chain could get halted if let's just take like the most conservative case there's 50 validators um if like you know 17 out of those people 16 out of those people are dishonest yes like 16 people could freeze the chain yes that's the case if there are 50 validators but what would actually happen then um you would probably go back to the community you would probably be like okay like the dydx chain is frozen what should we do about this and we'll be like okay let's just boot out these like 16 validators that for some reason decided to freeze the entire chain and instead stick to new actually active validators so yeah

degradation of performance and like clearly that shouldn't happen but if you like game period out the whole way it's not just like there's 15 people and they can steal all your money um there are other like failure cases for the chain like in the worst case if like two-thirds of the validators are dishonest they could potentially steal funds but one of the cool things about cosmos and layer ones in general and one of the thing kind of arguments i was making on twitter is i think a lot of people have the misconception well maybe not the misconception but sort of like the conviction that different layer one chains are definitely less secure than call it smart contract systems built on secure layer one chains i would argue that is maybe the case but not

necessarily the case i think there are trade-offs when it comes to security as well um because the chain what you get if you're building your own layer one system is you get sovereignty right you can fork you can like you know do different like token votes to make things happen and i think that's a really powerful thing so like okay let's just say like absolute worst case like the ydx chain gets taken over like two-thirds of the validators conspire together um to like steal everyone's money what happens like that could happen technically but probably you know then we would be in a situation where it's like okay dydx chain has gotten like taken over and then probably the community would come together and be like okay this like is clearly like not what should happen let's just like fork

the dydx chain into like a uid version of the dydx chain where like that attack never actually happened again if you're just like game carrying it out um and that's something that you can't do on a smart contract system right if you're built a smart contract and there's a vulnerability or something and all the money gets hacked it's like that's it money is gone it's not quite as simple as this because there's also like bridges and implications for what happened to all like the bridge funds on your chain but there are a lot more options to recover from attacks if you're on a sovereign chain um so i'm not gonna sit here and say that like the dydx chain is gonna you know have as many validators and as many nodes running on it as ethereum or potentially some other layer one chains like solana

or maybe even what like different layer twos for ethereum will be able to achieve once they decentralize their sequencer networks but again like if you think about it from a pragmatic like product perspective like okay what do we actually care about we care about like the people's money not getting stolen we care about people's money not getting censored from a trading perspective and you like game it out like all the different things that could happen i would argue this is at least in the ballpark if not better than from a decentralization perspective a lot of the other potential options that could be built on other chains antonio you alluded to earlier how it's going to have to be the community that determines whether it's the dydx token that becomes the staking token of dydx

chain uh and i think we can just go ahead and assume that they are going to choose that token that would be like the logical choice for them to make i don't really know what other token that they would they would choose so granted that is the choice that they make uh that adds in a bunch of extra complexity into this whole into the overall system right like we need to play pay validators and so kind of ryan alluded to like well we could pay them in transaction fees so maybe we could pay them in usdc but if we followed the mold of all the other blockchains out there in the world you would just pay them an issuance like new dyjx issuance but then there's a question of like well how much is you at issuance like how much inflation are we going to have in the native duidx token

uh which just begs the question of like dydx needing its own monetary policy uh and so like where is this like there's a bunch of unanswered questions about like how this would work uh and especially with like well how how many how many dydx tokens do we want like on ethereum you stake 32 eth on dydx train how many dydx tokens do you stake have you have any idea about how some of these questions will get answered over time so first of all you're exactly right there are a lot of questions like that and i think that's a really excellent line of thinking i don't honestly have all the answers right now or do i even have the power to just like dictate what exactly we should do um but that is something that we're gonna that is one of the challenges we're working on at

least advising the community on what we think would be best over the next year um so i think there are a lot of open questions to be honest about like the products that we build and this is certainly one of them like what happens to the layer one token of the chain is there as you say inflation is there issuance like what percent of fees should be paid to validators versus like stakers to those validators and so on and so forth and what does that mean for the fundamental value of the layer one token and you know if dydx is that token at some point what does that mean for dydx there's a lot of questions um i would say right now like who knows right like even on a lot of these different like layer ones even on ethereum right like people still don't

like exactly know or like have really good reasonings for why does like eath have value like how do i think about like the value of eath long term like isn't eath just gonna keep inflating like forever like yes i know there's like burning of heat that goes on with the european all of that um but there's a lot of questions right and i think the one of the things that that we try to do at uidx is just like steal all the best ideas from other people right because that's the best that's the best and like easiest way to come up with good ideas you just see what's like working for other people and you do that so i would imagine we would just take like the best possible practices from other chains and try to adopt that and like reason about how that should be put onto a system that is

generating revenue like there are trading fees that are going through the system like where should those goes they go to validators they go to stakers et cetera how much goes to which i don't know but i think that's something that we'll spend a lot of time figuring how it's over the next year or so and i'm looking forward forward to the community member who writes the dydx the uh triple point asset thesis on the uh dx token uh one last question on like the uh if there will be a bunch of validators you said like maybe 50 to 100 to start but the idea is to decentralize this thing there's an interesting relationship between a decentralized network and a high performance order book based exchange where like the more validators you have the more latency orders are going to go through the network and propagate

through the network and i think when we have like such a high throughput exchange that latency adds opportunities for people to front run that latency and i think there's now now if dydx is going to be its own layer one blockchain there's mev to contend with uh have you thought about like how to approach this mev question when there's a ton of volume going through dydx in very fast transactions and now it's its own like l1 validating network yeah it's a great question and like first things first like i don't know i don't have like all the answers of course we're thinking about it yes these are issues but i think just like zoom out and then i promise i'll like actually talk about the real question too but if you like zoom out like nobody in d5 has figured this out yet right

like nobody has figured out like how to fully combat mev um nobody has figured out how to have like really super low latency g5 platforms um so maybe zooming back into us like let's at least as a like first step try to at least make sure it's not worse than all the other at least like the best other d5 product that's out there from like a latency and mev perspective and i think we can get there um i think we can take a lot of like one of the cool things about tendermint is that you know the leader schedule this is a bit technical but the way like leadership elections work and a lot of proof of stake systems is they're known beforehand so again let's maybe take a simple case where there's like the three

of us are the only validators you would know that for the next 10 seconds i'm the validator then like you're the validator after that for the next 10 seconds and then you know you're the validator 10 seconds after that and in that way and this is actually something solana does pretty well so like we want to take some really good learnings from what they've done in terms of reducing latency in a pretty big way on their chain you can sort of optimistically just send the transactions to whoever the next leader is so they don't necessarily just have to propagate throughout the entire network and that can be a way to reduce latency um there are a lot of different approaches that we're considering like that but i think that's the general like high level thought on how we would reduce the latency um and then things

like mev i think one of the interesting uh thoughts that we had on mev is yes there certainly is meb there's like a lot of weird stuff the validators can do with reordering transactions with like messing with the the order book and stuff like that um they obviously still can't like steal people's money or like make people make any trades that they don't want to make um but they can reorder things in the same way that if you send an order to uniswap right now it could get picked off one of the interesting thoughts that we had on the dydx chain is that the incentives of the validators are a bit different right it's not just like there is this general purpose chain that has all this stuff running on top of it and like no one

thing running on top of the chain is significantly important to the chain you know like some ethereum validator is not really going to care about some like random dap your friends launched yesterday it's like not important to the success or failure of ethereum so therefore you should just go like ham on the mev side if you're a validator and extract all the value that you can but on the dydx chain the validators actually in some sense are intertwined with success or failure of the network and you know ideally like it the stakers of to those validators have a vested interest in the success or failure of the network as well so i think from that perspective like they should want they should not necessarily want to do things that degrade the network um they still

may do that if it's still like if they do the math and they're like okay well maybe this will like create the chain this much but i can make this much profit out of doing it and like yeah absolutely they'll do that but one of the things that you can do is you can at least make mev attacks a lot more transparent so you could be like okay like again the three of us are running validators um let's just look at the average fill price of the validators um and we'll say that okay antonio looks like his validators they're not getting that much like price impact like the pricing is really good whenever he proposes a block when you propose a block like oh like hey wait a minute like the pricing is always like way worse than when you propose a block like what's going on here and then like you

can effectively just make like the the stats around mav a lot more transparent and it's sort of like a second order way of combating it but you can get to a point where you know you could propose to the stakers of the chain um you know hey look like here are the validators that likely are performing a lot of mev like let's de-stake from them potentially there could be like penalties in an extreme case um and so i think the point i'm trying to make is it's like a bit simpler of a problem if like the validators of the chain are if there's like only one thing running on top of the chain there's not like a general purpose amount of stuff running on top of the chain and that makes the problem a bit easier certainly doesn't like make it go away but i think

it gives you more tools for tackling that problem i definitely do take the point that having a standalone blockchain that does one thing and one thing well can constrain the mev problem down to like community consensus and the community can say hey this was legitimate mev and this was illegitimate mev and the fact there's only one application on the chain makes that a little bit clearer i do take that point however i will also say at the same time you you said at the beginning of this question that like you know no one really knows how to to tackle mev no one really knows about the future of mev et cetera even on ethereum and i want to push back on that because like yes the mev seems to be this like unsolvable problem that always like even after you solve one part like there's

another another part of mev to solve you just kind of push it off into a different direction now you have to go solve that thing however i will say that there's of all the change and this is something that like i generally critique other layer ones for is that no one really seems to be tackling this problem more directly than the ethereum ecosystem we have like the flashbots that was born out of ethereum we have ethereum in the future roadmap we have things like proposer builder separation uh both arbitrage and optimism are generating their own strategies their native strategies for harnessing and capturing fair mev and redirecting that back into the ecosystem uh and so like if you and this is generally the critique of or the thought of staying on ethereum or leaving ethereum as a whole is that if

you stay on ethereum you get to draft in some of these tailwinds like so these innovations kind of are sticky to the evm standard uh and why people generally generally always want to like fork the uh the evm because then you get to have all those like tailwind benefits of like if somebody solves a problem in one direction like you get to draft on that and so like uh the high level question antonio is is dydx prepared to have to face all of these headwinds all these mev unsolved mev problems all by itself without drafting on like some of the research that's going on on the evm side of things yeah so first of all i totally agree with you i really appreciate the ethereum community right like i've been building on eth for the past five years and i do think ethereum has a much

better builder's mentality and like let's actually solve these problems mentality than a lot of other chains so and there have been some great things built like you mentioned flashbots like some other things i think those are not a one-stop shop to fix everything but they do have really good trade-offs and give you some strategies to combat it i mean it comes back to what i was saying before for ryan's question i think like what are the biggest risks for dydx it's we have to develop everything ourselves um again like we don't have to do everything from the ground up like we could look at oh okay hey like look on ethereum flashboxes is working super well like can we work with the flashbots team or can we adopt flashbots somehow to work

on the dyd exchange like would that even make sense um and we'll like adopt all the best possible ideas but there is a lot more for us to build and i think that's the fundamental trade-off it's like not just where i think we're like unislop or something like that and not to pick on unit swap like i could say this of any dap um and we're like oh well now like flashbots was built and that makes the uniswap trading experience way better and we didn't even have to do anything like that's amazing and you hear people talk a lot about composability on d5 i think that's something you guys and a lot of others are really excited about and i think that is something that's really unique in d5 and we've effectively not 100 given that up but we've traded off against composability for

scalability and for decentralization and i think one of the things that's important when you're building a product is you're really honest about the trade-offs that you're making at least with yourself and then ideally publicly with the community as well um like yes we trade it off against composability in some sense to get like decentralization and scalability and we also trade it off against like okay if we're just going to build everything in a vertically integrated way there's so much more for us to build but i think if you look at a lot of again like we sort of compare ourselves more to really successful tech companies or tech products and protocols rather than just d5 and i think if you look at the evolution of a lot of different really successful tech products throughout the years you see them go through this this

evolution where they become more vertically integrated over time it's like okay we like built a great product on on top of you know i don't know like twitter api or something like that now we should like go down one level and like own that api for us like we started with just a smart contract and then we were like okay well we need to own like more of this experience so we build like our own website we need our own like more of this experience like we already like built that we need to own more of the experience like this general purpose thing isn't built exactly the way we wanted to so you just see things get like more vertically integrated over time and yes that's harder and yes that's why normally like bigger like tech products have the bigger tech companies behind them more engineers

that are building that but i think it's like not that ridiculous actually to just try to be more vertically integrated if you just look at the evolution of tech products over time and that actually is a perfect segue into my my last question before we go into a break for sponsors there's there's a theory out there that um this migration to a dydx the dydx chain a cosmos application specific chain and importantly the the decentralization of the block production uh is is one one part a technological innovation technological improvement but also just simply that app chains are a strong legal improvement uh as in if we can separate uh and decentralize the block production that's like as you said kind

of like the last big centralization property of dydxan's current form and once we decentralize that especially after when you say you're building this very verticalized uh system when i when i hear a verticalized system i'm thinking like you know a a trading engine like gargantuan like like the best trading engine of all time is extremely verticalized and extremely robust but it's got like this one pinnacle of like centralization which is the block production uh and so there's this thread out there from uh the twitter accounts uh elia on elian uh that says that uh validium's the what the the basically what stark x is with where we are what dydx is leaving are the perhaps the superior scaling technology from a

technological angel but they are not the superior legal technological solution uh and so from a decentralization perspective um dydx gets further like legal protections by being further decentralized because in the current setup too few entity entities are producing the proofs that create blocks would you say that was a motivating factor in the migration from uh it's dydx when it's current state to dydx chain yeah it's a good question i won't get too much into the legal stuff right now um but it is obviously something that we think about i wouldn't say that was a major factor in the decision again i think it goes back to building the best possible product if you think about the

definition that i sort of gave or what the best possible product is though it does include this level of decentralization and i think that comes back to like what are all of us even doing here in d5 like is decentralization important to people and the question like let's be honest with ourselves like we don't know yet like we think it is to us as like users but we don't know if it's going to be really important to products on sort of a global scale yet that certainly hasn't been proven out or is it just this thing that like some nerds are really excited about because now they can be financially sovereign or whatever you know obviously i think it will get to the the point that it is really applicable and is the better way to build products on a global scale because it does have much better quality of

access it does have non-custodial features it is much more composable you can plug other technologies into it really easily um and i think that that is the reason sort of like subscribing to that narrative um is the reason and sort of also like being honest about where we were at on that narrative with dydx v3 like uidx v3 could never like you know be at a point where it was fully decentralized because it had this like centralized bottleneck we really need to get to a point if we want to benefit from a lot of that stuff in the way that a lot of other people talk about like you know hayden and for uniswap or something like that um where the whole system is decentralized and i think that that's something that's important from a

product perspective for a variety of reasons it's like well okay like why do you care about like a quality of access i mean i guess it could be legal right if your like state is is trying to you know take away your bank accounts or you know whatever they're trying to do i guess that's like arguably legal and therefore like devised answer to that um but i think there's there's a lot of reasons to be excited about decentralization and we just like really wanted to start playing in that ballpark where we were fully decentralized and not sort of like you know like half acid anymore with this kind of hybrid centralized decentralized system antonio believe it or not we haven't even gotten to the spicy questions are you ready for the spicy questions

yes i'm ready all right guys we're going to get to some spicy questions but before we do we want to thank the sponsors that made this episode possible there is a brand new staking feature in the ledger live app today we all like staking the assets that we're bullish on and now you can stake seven different coins inside the ledger live app cosmos polka dot tron algorithms tezos solana and of course ethereum with ledger live you can take money from your bank account buy your most bullish crypto asset and stake that asset to its network all inside the ledger live app through a partnership with figment ledger also lets you choose which validator you want to stake your assets with and ledger is running its own validating nodes offering a convenient way to participate in network validation and it even comes with slashing

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leverage on your favorite d5 protocols all this without giving up your eath to centralized staking services or exchanges lydo now supports solana kusama and polygon staking whatever your preferred proof-of-stake asset is lido is here to take away the complexities of staking while enabling you to get liquidity on your stake if you want to stake your eath soul or matic and get liquidity on your steak go to lido.fi to get started that's l-i-d-o-f-i to get started hey guys we are back with antonio from dydx making the case for why they decided to abandon ethereum and uh go in the direction of dydx's own app chain and i think in the in the first part of this antonio made the case very well and optimizing for those four features uh

that he mentioned uh ux um the features themselves decentralization and security uh antonio i want to talk a bit more about the trade-offs in this piece we promised we'd get a little spicy right and so here's kind of a take i i know you were talking about um this being an optimization uh towards making dydx a more decentralized but i actually think there's a case for the reverse being true that um this is increasing the centralization of dydx this is a tweet thread from david phelps and i'll read a few quotes i thought they were good um dydx's chain will be able to do all sorts of cool to protect himself that would seem criminal to the crabby defenders of trustless immutable code is law old guard of which i feel like i am

one a crappy defender of trustless immutable code is law okay and so examples of this validator set and dydx it's it's own app chain you could roll back transactions vote for various uh validators block thiefs maybe sensor transactions the worst case scenario two-thirds majority said actually steal funds hell it could take time off for the holidays says david phelps when every project has their own chain immutability is no longer an intrinsic property but a social construct construct communities can roll back time i want to read that again when every project has their own chain immutability is no longer an intrinsic property but a social

construct so to me a crabby old trustless bankless maximizer this is kind of a problem because immutability is the entire point isn't it and if we are just giving a set of validators call them neo banks i don't know what you call them a distributed set of people who control the order book you're giving them access to all of the the mev the order flow the ability to censor transactions aren't we reverting from the system that we left and why is this uh decentralized in the first place in fact if they're if they're voting based on uh some sort of token weight isn't this similar to a shareholder vote and so aren't we back to a corporation like basically a a bank you know structured shareholder

corporation where the shareholders get to vote on what what transactions go forward and what don't what the business does and what it doesn't do respond to that for me tony what do you think what do you make of this am i just being a crabby old salty immutability uh old guard uh maximalist here yeah so first of all i generally agree with you to be honest um i think you make a lot of good points and i think it comes down to what you care about like do you care about like is immutability decentralization like yes but then the question is what other forms of decentralization are there and are they worth doing like is it just like the same thing as like okay let's go use robinhood and i can like buy robinhood shares on the public market so like

theoretically i control robin hood or something um i think it's pretty different right and i think there are different trade-offs for using an immutable system with one that is not immutable but at least as controlled by the community so if you're using an immutable system you can 100 know that code is law like there's no way that it can be changed um arguably if you go all the way down to the level of ethereum nodes or ethereum like validators that's also pretty much just social consensus but i would argue that it's a lot better like social consensus than what likely any one app chain is likely to get to like ethereum has a long history at this point so being like oh you like got

hacks for 500 million dollars like sucks to be you we're not rolling back the chain and like code is law um like dow hack aside which which i think was fine given how early it was so like okay i'm not gonna sit here and say that like 100 like code is law but on most d5 platforms like code isn't law and that's okay um and the platform should be transparent about this some code basically is law like on unislock and i respect them for this like the code of the smart contract can't be changed by governance holders at least for their current smart contract um but for other platforms like even dydx today like you know not to call anybody out but other like aspects of like compound or like ave and like a lot

of other d5 platforms that are out there effectively the token holders can upgrade the smart contract which is basically the same thing as controlling like the base level validator set so i think that there are trade-offs of having full immutability like arguably you there's less like credit risk or whatever for using the platform because you're not really relying on what some decentralized network or set of people is going to do but it also like i was saying before it gives less sovereignty to the platform and makes it that if there's a problem or you want to do an upgrade or something like that there's no way to do it so i don't think anyone is objectively better and i think there are trade-offs to it um obviously we've sort of more chosen the camp that the the system is

upgradable um you know yes there are a lot of arguments as to like why this might this simple case might not exactly be the case but arguably we could get to a point where like the token holders are the ones controlling the entire platform um and that's how the platform works so then okay like second question like is this just the same thing as a public company like i buy shares in robinhood like is is like dydx different from like robinhood at this point and you know not just dydx i would argue any d5 platform that that is controlled by some some set of participants like token holders i would say it is pretty different um because you get to a point where there is code that's in the blockchain that

does enforce that at least these participants can uh control the network in in the ways that is publicly defined like if you buy a share of robinhood like doesn't really matter what you think even if you buy like 10 of robin hood like vlad's probably just gonna be like no we're gonna go like strike this deal with like citadel or whatever and we're gonna do payment for order flow and like damn it i don't care what you think um so i think it is like a pretty different construct that exists in like a public company because it's not laws that are enforcing the social contract and the social structure there is code that enforces like that social contract and like this social structure so i think it is pretty different and i think the other thing i'll say is that it's just much more efficient if you can get

to a place where you're doing liquidity mining where you're giving like stake to the participants of the network the participants of the network ideally are like you know holding that stake or participating in governance that's just like a much better cycle and sort of like virtuous cycle i would argue than a public company like you know you're not getting like robin hood shares as you're trading on robin hood you're not like literally getting to vote on like what markets robin hood should add and empirically that sort of world doesn't exist in in the current world of just regular old companies but i think it could exist even in a platform that is community governed so i think it remains to be seen how this

stuff plays out so again i'm not gonna sit here and say like yes it's the same thing as an immutable smart contract but i think it's pretty close to that and also i think there is really something valuable about community governance got it got it yeah um i understand what you're saying i i i do wonder if decentralized sequencers oh goodbye ryan under the assumption that ryan just got rugged by his internet i will take the next question so one of my questions for you and antonio is you earlier talked about well if we do our own native dydx chain on the cosmos on the cosmos ecosystem uh well then there's all these bridging risks for getting assets over over to the duidx chain of ryan's back

but ryan i'm going to go ahead and finish my question but that doesn't matter as much because we only have we only really need a one good collateral asset which are using usdc which is a trusted asset anyways um but uh all the uscc i've ever touched has all been on some ethereum chain uh and whether it's like from all the ethereum bridges out there i can easily get into dydx in its current form because the bridge ecosystem exists and i can just get into dydx with like just one or two transactions uh how are you worried about losing a bunch of just like possible client customer inflows into the dydx chain simply by just like not being as adjacent to the ethereum ecosystem like

it's going to be more there's going to be more friction getting usdc over to the dydx chain have you thought about this yeah we absolutely think about it and if again you should go back to okay i believe antonio he cares about his products like let's build the best possible product one of the really important parts of any product is onboarding and what does onboarding mean for us it means actually getting our money onto our system so we do think about this a lot and i would say this is and i mean i just talked about this in one of my previous answers like one of the biggest risks in something that we're still thinking about i think we can build something that's really good from a product perspective if you think from a product perspective what do we actually care about people care about people getting their money

onto dydx from the places they have their money and we care about this for our users so okay who are dydxes users they're traders they're like really advanced traders they're probably people that are trading on like ftx on binance like maybe some of them are trading on unislop um so the two things that we care about are actually onboarding to dydx first of all and probably a bit more importantly even from centralized exchanges because okay let's just be honest with where the world is at right now like most of dydx's users at least like the the active traders of the world have their money on finance and ftx um and then of course we also care about people getting their money onto the uidx from ethereum so there's kind of two states of the world like there's the

world where there is like a native deployment of usdc on on the dydx chain or any cosmos chain maybe just quick side note one of the cool things about cosmos is that between cosmos chains there's this really cool actually decentralized and actually very secure bridge called ibc where it's easy to actually move funds between cosmos chains once it gets on any cosmos chain so like if any cosmos chain gets a usdc deployment we could pretty easily and pretty securely use that um and we're working on that i'm optimistic that'll happen on the timeline that we care about but even if it doesn't then we sort of fall back to using some sort of bridge um and i think there are good bridging solutions that we can use right now and i do think

there are a lot of people working on bridges um like nomad like axle are to name a few um that we are in active conversations with so again like i don't have all the answers here and it is a risk but we will build a really great product experience around whatever the actual bridge is into the dydx product itself but i would say probably like the most ideal product experience for us which again like we're not every dap that's out there is like okay you go on like finance you go on coinbase.com you go on ftx and you're like i'm gonna withdraw usdc okay there's like a drop down menu i'll just like withdraw to the dydx chain and of course we need to like business develop our way into some of those relationships um but i think that that is something

that's achievable on on the timeline maybe a year or so from now that we care about do you know i have another just a follow-up on on kind of the the idea of of uh non-native assets on the dydx strain that's another thing i feel like i'm gonna miss right it's like i remember the original dydx it was on main chain you could do a lot of spot trading with eth right and so it was nice because eth is a crypto native asset that has no external dependencies right in the newer versions of dydx i know a lot of the perpetuals are built with usdc what is usdc of course it is an iou for some dollars in a bank account so it's a much more trusted form of money it's not like a crypto native form of money and the the i guess that the

challenge with uh uh dydx app chain is it can't really have a crypto native form of of money if that makes sense right so if we move eth or some bitcoin let's say to the dydx chain it always has to be wrapped there always has to be some dependency there has to be a bridge or a custodian in order to get the you know uh funds there or even if it's through i i ibc it it has some dependencies some cure security dependencies from other chains and so we lose that crypto native aspect of having a decentralized exchange uh and i guess you know not that it's necessarily the wrong product decision of course dydx knows best but i almost feel like a little bit the way i felt

with um you know when when maker moved to multi-collateral it's like oh we're doing something new which is awesome but we're also losing something we're also losing something that was fundamentally bankless and fundamentally crypto native and maybe once again this is the decentralization maxi in me talking but like i regret that we are losing that aspect of what dui dx has been which was a bit more of a decentralized crypto native um exchange asset platform and where i see dydx moving is a bit more towards again kind of the not not completely but a bit more towards the robin hood a bit more towards the ftx and that side of things uh do you regret that loss at all

or is this just basically would you say hey ryan you know it's cool that you're decentralization maxie not everyone is this is what the market wants we have to go where the mark where the market takes us yeah i would mostly say that but i also would say that i agree with you like we are in some sense losing like the full like extremely like you know maybe arguably like nation state like decentralized version of like okay let's all just have like btc and e and let's make sure there's like tens of thousands of nodes on this network like yes absolutely it's a trade-off but in some sense we have to give the market what it wants right now yes there are like decentralization and security trade-offs of using bridges kind of talked about

that being a risk talked about us being at the forefront of technology to be able to mitigate some of those risks but it is a trade-off i think if you actually look at what the market wants um i would say probably the best example of this for us isn't even a d5 product it's bitmex bitmex did offer this product they did offer yes of course a centralized exchange but one that was totally custodied and collateralized by bitcoin and there were no other collateral options available and then you know that drove a huge rise to bit max's perpetual platform and then binance and ftx and some of the others out there offered the same platform in terms of trading perpetuals but they offered it with stablecoin collateral and this turned

out to be like the real killer use case for what people actually wanted to trade and consequently if you look at the volumes of the platforms now and i think this is a major factor contributing to this um it's almost all on binance and ftx so market is spoken like this is what they want they want to trade synthetic assets on cryptocurrencies uh using stablecoin collateral but even if we think about what does the market actually want right now um if you look at like an ftx or binance one of the really cool features that they have that we don't have actually and we want to have at some point is what's called multi-collateral so you could this is sort of similar to like a multi-collateral die or something if you're thinking about it for a d5 lens but it's basically you can come to ftx

you can come to dydx whatever with any type of collateral that you have or at least one of the supported ones and usually this is a bunch of different types of stable coins like could be dye it could be usdc it could be eth and you can use that as your collateral and you can still hold it and you can trade um so that's like the ideal product that we want to build i think we're a little bit of a ways away from getting there likely the dydx chain will launch as a similar product what exists on dydxv3 right now in terms of just being single collateralized with multi-collateral being a feature that's added in later and then of course that'll mean we'll have to start thinking a lot more seriously about what bridges are we using like what's the product experience for that how do we

make sure it's secure um i don't have all the answers there like hopefully the world will be in a better space in like a year and a half from now when we start tackling that kind of stuff um but i think in the meantime we just have to focus on building the best possible product and giving the market what it wants but you know i again like bringing it back to the highest level like what is our goal our goal is yes to build the best product that we can in the next year but really to build the best possible product that we can five years from now 10 years from now and i don't think it's possible that we achieve our goal of becoming one of the biggest exchanges in crypto before that time horizon so at some points like you know this sounds a

bit hand wavy but i think it's sort of the reality of the situation if you're like a builder and you're you're a ceo it's like you got to take like a bit of a leap of faith and be like well okay like the scalability stuff has to be solved for crypto like in 10 years from now or like what are we doing like some of this bridging stuff like it's very possible it could be solved if it's not again like we'll move to a different technology but like there's some reasons to believe that it could be solved in a pretty high quality way on like that sort of time horizon but okay here we are in 2022 all we really know is what the state of the world is now and we kind of know what it'll be like next year too and move towards that

antonio thank you for coming on this extra long state of the nation saying a few extra minutes so we could get our all the questions because we knew we had a lot from the for the uh for you and i feel very educated informed about what to look out for next just one quick uh set of questions before we let you go i know you have a hard stop here how many people on the team like how many engineers do you have working on this problem and like do you have any sort of like road map for us like where when can we expect the ydx chain yeah so right now the dydx core team is about 40 people with roughly half engineers we have pretty much most of our engineering team working on this problem at this point so have about 10 engineers working on v4

and we're looking to open source before by around the end of the year which like i said is a pretty aggressive timeline but uh we're optimistic about going out and executing on that awesome antonio thanks so much for stopping by we really appreciate you know what you're building in the space and everything that dydx has put together thus far has been absolutely fantastic and so we're looking forward to uh to seeing the the next chapter and um yeah i uh you know definitely appreciate um i guess where can people stay tuned to find out more about this yeah absolutely so people can go to dydx dot exchange which has all of the links to our socials and everything if you want to tweet at me on twitter i've been

trying to respond to everybody who's asking me legitimate questions so at me if you want um and the last thing i'll say is thanks guys i really appreciate the the great interview i was tweeting this but i told everyone bankless was the first podcast i wanted to come on especially after this announcement because i knew you guys were going to give me a hard but fair time of it and appreciate all the good questions well awesome we will ultimately let the market decide and uh antonio we we appreciate you uh forging new territory as always folks bankless listeners wrists and disclaimers all this crypto stuff is super mega risky so is d5 you could definitely lose what you put in but we are headed west this is the frontier it's not for everyone but we're