Elixir's Trustless & Permissionless Liquidity Vision for Order Book Exchanges | Philip, Founder

Transcript

imagine if we had like 50 to 100 million in liquidity it's very easy for us to begin um you know for for exchanges that are coming in to want to tap into that um and and actually use that to build up the liquidity on their Pairs and so um that is something and then users will be able to just acrew these rewards from these different exchanges and it'll be like a native yield bearing uh product collateralized one for one with ethereum that you could just redeem out at any time um for each we teed up with the worm h Foundation stewards of the Wormhole protocol the leading interoperability platform powering Crossing transfers for 200 plus multi-chain teams came your unique worm NFD just for zerox research listeners today pair is an Innovative

pair trading exchange built on top of Simo users can trade trending narratives with one click from Blue Chip narratives such as long BTC short e right through the whiff versus Bon the Hat stays on Sim's intense Centric architecture enables deep liquidity source offchain and Broad on chain and combined with pair has democratized access to complex trading strategies typically reserved for institutional Traders before we get into today's episode just a quick disclaimer the views expressed on this podcast by either myself or any guests are their personal views and do not represent the views of any Associated organization nothing in this episode should be construed or relied upon as Financial technical tax legal or other advice all right let's jump into the episode what's up everyone welcome back

to another episode of zerox research we have an awesome episode lined up today today with Philip the founder of Elixir which is a project aiming to democratize access to LPS Who wish to provide liquidity to onchain order books today is Wednesday March 20th so I think this episode will be airing next week uh but as a reminder you can use code0x research10 at app. blockworks research.com for 10% off your annual subscription philli thank you so much for coming on how are you today I'm doing great thank you for having me yeah yeah of course we're excited to to dive into this one can you actually start by explaining to the audience who maybe isn't familiar with Elixir exactly what it is and the problem it's iing to solve

for sure so Elixir is a modular dpos Network built to power order book liquidity and so essentially allowing for anyone to supply liquidity to order books and so to date if you were a token project or an exchange you've had to go through four or five large market makers for liquidity on your pairs right and so if you're if you're any sort of orderbook you're struggling from this inherent problem where it is much more difficult to get liquidity versus something like an amm right so uh like obviously you look at like some of the biggest amms and they have a huge amount of liquidity locked pancake swap has I think over two billion in liquidity Unis swap has multiple billions of dollars in liquidity as well um but you look at the

largest order book based exchanges and they have fractions of that right like dydx um at any given point in time they have only like 40 to 50 million in open orders on their book right and they're they're doing I mean two to four plus billion billion dollars a day um in trade volume and that I mean obviously depends on the day and so order books have this like inherent problem where it is very difficult to bootstrap liquidity and there is no way to trustless bootstrap that liquidity until Elixir so when supplying liquidity through one of these native Integrations our protocol will algorithmically build and deploy that liquidity on the order books in a delta neutral fashion right building up the order books tightening up the bid ass spread and deepen the

liquidity on those pairs um we have over 30 exchanges that are building out their own trustless features like native features in their exchange powered by Elixir and so um currently we power roughly I think we power 60% of the order book liquidity on Blue Fin we power 40% of the orderbook liquidity on rabidex I think roughly at 30 or 40% of the order book liquidity on vertex we're going live with uh hyper liquid dydx uh Apex a bunch of these others orderly woi um bunch of these other exchanges in the in the coming weeks and so um yeah that's the super high level for for what we're building um you know everything is fully trustless non-custodial um and so yeah we we have our own dpos protocol comes to consensus once a second and um

yeah essentially allowing for anyone to to actually Supply liquidity directly to these order books and um for exchanges to launch their own products um to power like trustless liquidity on their exchange gotcha that's that's super interesting and I think one interesting point of your architecture is that you guys are a blockchain yourself um and I think like if you had to ask me to conceive the idea of sort of like this order book liquidity protocol I might not have gone through like the idea of like having an own standard on blockchain so why go off with an independent blockchain secured by a validator set as opposed to perhaps like a different architecture yeah so the first thing that's important to note is that you

need something that's inherently active right so if you look at Cross at a lot of the layer ones um they all kind of have the similar a very similar um kind of process right you deploy a smart contract on the actual blockchain then you interact a user will come in and they'll interact with that that smart contract on the blockchain and then um there's like a series of transactions that are made and then that user gets their funds out right but there's no the actual chain itself is just storing the latest state of that chain right and so this is something that is different um and it is a different use case right where the actual orderbook data that you're getting is changing every second right and um if you're powering 30 plus

orderbook exchanges right each each of which have like a 100 plus pairs you're pulling in a ton of orderbook liquidity and you need to compute actively updates based on all of this changing data so it's inherently just it's not something that can be done um well with any sort of smart contract right that's not something that smart contract can't ingest that amount of data you can't build things like a trustless liquidation engine on a smart contract right so it's something that um you introduce me you need something that is purpose Built For This use case and so that is why you know we decided we actually looked at all of the available options right even if you were to build your own like CM wasm chain there are a bunch of like issues with that as well

where um you know if you were to use just like if you were to build off of that number one there's issues around the actual data that we're ingesting like it is just a huge amount of data um on like and so we obviously want to be able to take in that data we have a set of validators that um that come to consensus once a second on a snapshot of that data frame and then send those off to the exchanges um through essentially using um this relay infrastructure which is decentralized MPC infrastructure um and it allows for us to sign orders without ever actually having the keys ourselves um to uh to the to the actual funds so the full process is non codo so that that this was purpose built for that use

case there's nothing that exists today that is actually able to do that um and then you have to actually have like when you're when you're interacting with these these apis with these exchanges right they're um either in crypto feeds or ccxt um and if you're trying to do that in a language that is not python it is like extremely difficult and so we would we needed to essentially build something that is um that could compile python um and these different algorithms so that it's so that you're actually able to do something um that is like composable within um all of the across all of the different exchanges so that's like the super high level I'm happy to dive more into the details um but our protocols is processing a huge amount of or a huge amount of data um coming to

consensus once a second right that is not something that traditional block blockchains to date are are able to do um and then we have our fraud proofs post to ethereum main net so there is still um you know we do still it's very similar to kind of the arbitrum uh consensus mechanism so um in that in that um kind of regard right where they they settle to ethereum we do the same um so it's almost you can almost think of us as a a purpose built yeah like Layer Two um but yeah that's that's the super high level on the design design decisions there yeah there's definitely like a lot of moving parts that you just mentioned um I just threw the protal architecture on the screen here and I would love to

dive into it a bit more so for example if Elixir decided to integrate with say vertex everything set up you guys are now online would you mind walking us through like step by step what actually happens from say like viewing the order book of vertex how like the order creation is done how the validator that comes consensus and orders how those orders are posted to like the back to the prex and the entire process and sort of like the entities or like the different stakeholders involved perfect so yeah I'm happy to so the the the the first thing that I'll run through there's there there's the onchain flow right for end users which I'll start there which doesn't um touch as much on this which is the actual back end what

is happening um and then there's the back end process flow right so in the front end what a user sees in the front end of The Exchange they'll see a a dep you know they'll see their buy button sell button like they can right now then they'll see a supply button and then they'll be able to oneclick supply liquidity to that pair um you know the same way that they could Supply liquidity to a Unis swap pair and earn a share of these incentives right so they press Supply what actually happens is their funds on the backend go to a Smart contract that lives on that chain so in in vertex's case it's arbitrum um that then custody is the assets our protocol then use the funds uses the funds held in that smart contract and issues signatures based on the funds held there so we don't actually ever have access to

those funds um but you we're able to trade on the half of the funds held in that smart contract um similar to like a vault or something like like that um when a user presses um withdraw the funds go back into their actual main account from that smart contract um during that time they have a composable LP token that they can use right so there are people that are building on top of Elixir um unique use cases such as leverage um right so for example on vertex you can make I think it's I think it's 15 to to 20% AP are right now on usdt to usdc spot um it's something that they incentivized through their um long-term liquidity provider incentive program um that to date has only been

earned by a few firms but now can be earned by anyone um so now people are like okay you know what I'm you know they're a little bit more far out on the risk curve they could say look I'm willing to bet that usdc does not go to 50 cents or 80 cents or whatever that is they can lever that up and earn you know 50% or 60% APR right so there things that are built there using these LP tokens um so that's they have that they can claim their acrude rewards within the interface when they deposit funds go back to their smart contract so funds never actually move onto the Elixir Network and so that is something that is you know important to note so actually what happens on the back end to get into your um you know the like the meat the

meat of the question that you were asking is that um essentially what happens at a very high level following this this chart that is up here um what you do is our our protocol pulls the exchanges uh all all the exchange feeds from these actual exchanges they then take a snapshot of that our validators all come to consensus based on those orders and the state of the order books um it then essentially we run our algorithm right so we have one algorithm that we use across all of these different pairs it's essentially the uh Unis swap v2x X Y is equal to K curve equivalent for order books so you have a very close uh very similar risk return profile to supplying liquidity on a Unis

swap pool it's like near identical and that is by Design um the goal here is to be trustless infrastructure that exchanges can lean on to bootstrap liquidity to their order books right not like um some proprietary thing where we're hedging to binance right so um everything is per pair per exchange our validators come to consensus um they send that off to the relay infrastructure the relay infrastructure does a check to make sure that 66.67% % of the validators have signed on that order then um if so it signs the order Proposal with the with the uh signatures and then that gets set off to the exchanges so that whole process happens once a second if there is a um like I guess an example say that um so we

currently have roughly 14,000 validators that are participating in consensus um of those a top subset will actually participate in consensus at any given time um say that it's a 100 what um what would happen if is um if one of those one 100 says something different what would happen is they would immediately get jailed and they would fall out of the validator set um they would like one of the other 14,000 would get subbed in to fill their place um so there's no downtime that's there and then there would be an onchain fraud proof that is that is posted by an auditor node which is the right side of this diagram which is a kind of our dispute resolution um what that that would do is it would feed the data frame which you can see that

line going across from the data aggregators it would feed it would take that data frame corresponding to that block it would feed the validator result and put it into the controller um which essentially does an onchain check against provable to see if that um if that result was actually malicious if so it slashes that validator so um yeah that's the super high level um the the actual yeah a lot of these pieces only need one honest participant right so you only need for like an auditor for example you could have 10,000 you know whatever 10,000 malicious Auditors if you have one that is honest right it will submitted

cryptographic proof that will actually slash that validator and reward that auditor so you could submit fake cryptographic signatures all day long right it it doesn't you know it's not going to you know it's not going to compile correctly right so you just need one onon um auditor to actually hold that system together and then the validators obviously there's an assumption of of um of security there as well so that's the super high level happy to dive in um on on specific questions but that's that's the basic flow of um so see that that right side of the the DI diagram only comes into account um when a validator has acted maliciously within that what's within that top set okay yeah that makes a lot of sense

and that's very very helpful there was one question that popped into my mind while you're were explaining that and it came down to the kind of using the univ V2 uh Market making Al algorithm why use univ V2 over a concentrated liquidity type deal like I would assume that may be able to provide tighter spreads on certain order book exchanges but maybe that's not the case can you kind of dive into why using X or Y equals X x k or yeah that's the right yeah I believe that's the right yeah x * Y is equal to K so the the we don't actually use that curve specifically um that curve was actually created as a um like equivalent for a vonita and sof so essentially similar to how you can think of x times

Y is equal to K curves as like the standard for an amm um there is kind of the standard in Market making which is Avelon in stoof so back in 2008 um they there was this research paper that was posted by marcoa and Sasha soov stasha stov is actually an adviser but essentially what what it does is essentially says it's I mean if you were to take like a very very basic Market maker right they take a certain fixed price away from mid right and then they update their orders right they place a buy order Below sell order above and they update once a second um obviously what happens is that you begin picking up huge amounts of inventory in one way right when the market starts moving in

one way and so um the all of this algorithm does it is essentially it takes into account the market Maker's books right so if you take a if you take a bid uh you take a fill on the buy side what happens is the buy side when they replace orders this the sell is a little bit closer to Mid and the buy is a little bit farther down the order book right and so um that continues to happen until the books like you know the cell is like right at the mid price and that the bid is all the way down the the order book um and so we use that to actually uh build up the order books and so we don't just do it with one order we do it with like five or six on each side right and actually build up that order book um

but the goal is for individual retail LPS to be able to supply liquidity to a pair and have the same risk return profile as a Unis swap V2 LP so it's it's it's we don't actually use that that same algorithm we use something that is very simple um the way that it works we actually I mean we do Place orders quite to White quite close to the bid ass spread right uh to the uh sorry top of book so we I think we have like for example on vertex BTC and eth I think we're quoting 15 to 20 bips uh spread which is like pretty tight so we're we're quite competitive um that being said like our goal is not always to be top a book right like we're not like we have a 1second um consensus time and because of that we have a 1 second

latency and for every additional second of latency you have to widen out your spreads accordingly and so because time is is information and um and information's time so it's like the more latency that you add you have to quote wider um and so like our goal is never to compete with like a winner mute or like these other big names that are like running with fractions of a second of you know an order whatever they're they're updating fractions of a second they've studied state-of-the-art algorithms and they're arbing to binance that's not what we're trying to do right we want to be trustless infrastructure that exchanges and protocols can lean on to bootstrap liquidity to their order books right and that doesn't exist today and so that's why we made it as simple as possible they have we calculate like

rolling Windows um for like volatility and liquidity on the book and that is why you can spin up elixir on BTC per on dydx and it works great and recoding tight and it's totally fine or you can spin it up on Sand coin to Turkish Lera on some super long tail pair and it'll still work great it'll just quote wider um and that is because there of these rolling buckets so anyways like really longwinded answer but we don't actually run x times Y is equal to k um but the equivalent for that is actually this algorithm that we're running um and our goal is to just make it as similar as possible so that LPS you know the last thing that we need is like more

sophistication with the actual algorithms and things like that like Market making is really complex people aren't supplying liquidity to Elixir for the actual underlying algorithm performance right um you know sometimes if you put in a dollar sometimes it's do5 sometimes it's 98 cents right it like fluctuates right around a dollar similar to like GP um for for GMX but um you're earning rewards by paid by the exchange for doing so so yeah I'll pause hopefully that answer that question yeah I know that was uh super helpful I have another followup question that just seems like a natural one to ask it seems like the shorter your block times are the more competitive Elixir Market making strategies will be right and that additional one second is a pretty hefty

amount of latency to add to traditional Market making Sy you know like most of these per decks run on like pretty low like latency whether that's like a 100 milliseconds and you know in Chad fire The High Frequency trading arm space I think they've gotten that down to like seven milliseconds or like something completely ridiculous why did alixir choose this like one second block time and is it is there like a strategic going the long to to reduce those block times to I don't know 500 milliseconds 200 milliseconds yeah the great question because there's actually you you you hit the nail on the head right like every if we could take there there's even like a bigger um kind of part of this too if we could go from one second down to 0.5 seconds right the spread that we could quote on exchanges would tighten but

what we could do is we could just you know we could quote the same that we're quoting right now and have that that difference right that spread go to like the the protocol uh token holders or things like that right so there is like a a direct benefit to to coming to consensus more frequently even can take it a step further right

like even if we were to take like even if we were to come up with the most high alpha algorithm that exists and we somehow convinced LPS that that's better than something that they understand like it would just I mean it's we're fully open source we're fully decentralized right so anything that Alpha wouldn't exist right people would you know any sort of like so you're almost playing like a l you're fighting a losing battle if you're trying to go the like Hey we're going to get generated a bunch of Alpha and we're have everything fully open source right so that that doesn't like those two don't like work so and it's like the same thing as like Unis swap B2 provisioning right everyone knows the curves like there's there is no Alpha and being a V2 LP generally kind of like bleeds money unless you're

being incentivized which is why like I mean almost all LPS on Unis swap are right like that's why they have like eight billion in TBL it's because like you can pay out rewards to these parties and make it worth it for them to supply liquidity and that same thing is happening with these exchanges right so that is I guess another long-winded answer but we are playing a different game we do have plans on um continually improving the speed in which we come to consensus but just like really reiterate again these exchanges want a trustless way to like bootstrap liquidity to their order books right and what we found is like as an example vertex after integrating us you know before they were integrating us they couldn't add new markets as aggressively right they were

like look we have to basic scripts do it and there's no

reason a decentralized protocol couldn't do it and that's why we found such strong product Market fit with these exchanges launching their own products to build up their own theity on their exchange wormo is the leading interoperability platform for multi-chain Bridges and applications with over 1 billion messages sent and 40 billion in value transferred wormo leads the industry in Cross chain message volume and total value transferred if you're a builder wormo has an extensive sued of tools and infrastructure to securely build multi-chain applications you can use worold to power D5 nfts governance and so much more and Wormhole supports over 30 blockchains and six different run times came unique Wormhole nft just for zerox research listeners today fill out the form prove that you've listened to today's episode to receive a PO app and you'll get an email

over the coming weeks to claim your limited edition nft pair is an Innovative pair trading exchange built on top of Simo users can trade trending narratives with one click from Blue Chip narratives such as long BTC short e right through the whiff versus Bon the Hat stays on Sim's intense Centric architecture enables deep liquidity source offchain and Broad onchain and combined with pair has democratized access to complex trading strategies typically reserved for institutional Traders you mentioned too a little bit ago something that I found interesting and that like you were like it's kind of like glp for GMX so like I know I think it's drift and Hyper liquid have both order books as well as these amm

liquidity baskets would you view Elixir as kind of like a un Universal GP hlp DLP equivalent that can be plugged into any order book to kind of combat the cold start problem for these prop Dees yeah that's it's a great that's a great analogy I think so there is a bit more flexibility obviously with being a standalone like dpos protocol so number one we are fully transparent that is like like I personally I mean yeah we love the hyper liquid guys they built something that is great I personally trade on hyper liquid quite a bit um they're like I think the the issue that you saw with FTX was that the exchange itself was like trading against its end users um because you like for example if

you're FTX and you see that a user has a $50 million leverage long that could get liquidated if you drive the price down $3 like why wouldn't you Wick the price and take that 50 million and then just take it yourself right like and then Wick it back like there there is a clear Financial benefit to do that doing that um and so having um The Exchange be the market maker is is something that is like like obviously like I mean Gary Gensler like all of these guys have like very much made it explicitly clear there has to be like a clear delineation and we are like kind of the solution to that as well because it's like go and view our GitHub like like you can go and see exactly the liquidity spin up a validator you can see exactly like how like the algorithm that we're that

you're running right and it's the same thing that is in our GitHub right it's the same so we really want to be fully transparent there um yeah EX exactly you're right right so um one of the things that we're launching actually with with our Apothecary is a cross-chain um liquidity provider token essentially that will back stop liquidity across all the top dexes right imagine if you could like mint one token and you're providing liquidity on dydx hyper liquid vertex like that so that is something that we've um we've actually kicked off we have roughly 20 million um we launched the Apothecary like last week we have like 20 million that is in this um it's called elx eth um that is that is going to actually back stop liquidity across all these users will earn exchange rewards from all of them

and um they'll also earn Elixir Proto future protocol fees down the down the road um if the Dow were to to vote to turn that on um but yeah so um but yeah so that's that's um there are like unique use cases that you can have by having this unique cross chain um positioning that we have and there's like a whole host of like interesting use cases that are being built out on top because Elixir controls the actual funds and all these smart contracts across all these chains right so there is nothing stopping someone from leveraging up their their LP position right using these these LP tokens or um there's like a whole host of of things that people are building um there's like a decentralized liquidation engine that people are building right because there

are some exchanges that are like look we're not going to take your money we see these issues we can use a Elixir liquidation so there's all these different use cases that are that are being built out um but yeah you're exactly right right like providing liquidity glp is slightly different because it is um this is the last thing I'll mention is that like G glp is slightly different because you're directly the counterparty for the the gains of other Traders right so um the issue with glp is that it's not all per pair per exchange and so if GMX adds m m Pepe and I go 100x long and M Pepe rips 50x I've now just like drained all of glp right so that's why glp will never

be used for like longer tail Pairs and that's like the big issue too because like there's this like existential risk and you're directly the counterparty whereas like elixir does not have that direct risk right um it's um you know we begin quoting wider and wider as volatility ticks up if the books become skewed past a certain amount there we just won't quote on that side anymore right so there's it's it's like a a strictly I think Superior Solution um um but obviously I'm biased so yeah one one interesting statistic that was kind of surprising to me to be honest was the validator set you mentioned the number of 14,000 and that seems like pretty large in the grand scheme of like crypto and the validator sets out there so I

guess a few questions there like the first thing is how have you managed to achieve such a distributed validator set and the second is like what does the delegation landscape look like you know is it like 50% of el is delegated to like the top 10 or is it like a lot more distributed in that yeah so first off I think there is like I mean there's definitely we made it as easy as possible to set up a validator that's like the first thing right I think how many validators you have is directly like inversely correlated to how difficult you make it to spin up a validator right so um if for us we made it as simple as pulling and and building a Docker Docker image right and you just run a Docker container in Damon mode and that's it right so super easy like if we

required oh you need you know 48 gigs of RAM and you need like you know all you know you need all of this processing power and you need like this crazy connection speed and you know you need this server similar to like running like a like a Salona validator right like then it's a lot more constrictive there's not going to be 14,000 people that are willing to pay because it's just a it's a dollars in dollars out expectation right so for validators it's a very much like um profit driven Endeavor um right now there is no incentive for validators I do think that like maybe some people think there's like um like an air like air drop potential or something like that um which I won't comment on but the the the actual validators themselves are not

being incentivized but it's also very very easy to spin one up right you can spin it up on your laptop and it would totally be fine right like the actual bottleneck for our network is um is is on like it's connection and and like throughput right so like that's the main running an actual algorithm our algorithm is not like we're not running some like crazy neural network every time we get a bided and whatever we get a we get a p we pull the order book right like it's not computationally intensive on the CPU side right so it scales up in a linear time I mean it's all just basic like uh if you look at the algorithm it's like pretty pretty standard um so you can support a 100 Pairs and then supporting a thousand pairs is not like you know a thousand times harder right it's only

like 10x harder right so um and they're all like very basic computation so the bottleneck for our system is not going to be actual on compute um it's going to be on throughput so that's something that makes it very easy for people to spend up validators um and then the second thing on the delegating side so our test n V2 allows for people to delegate to different validators we do see a um there is no I think the first thing that is important to note is that there's no Financial like risk for these users so there is really no reason to like like if you run a validator and you just like submit a bunch of like false transactions or whatever you you get slash you lose testnet elx right on gorilly like you don't there's no like

actual cost I do think that like when like these big players begin running their validators guys like steak fish or like coin whatever these bigger bigger players um it is there will be a bigger incentive to delegate to like an infrastructure provider that like probably has better up time and and so we obviously want to like there's ways to counteract that um where you could have like differ fees right where like parties that like everyone knows and Trust they tend to have higher fee percentages right so for example um Ren if you if you delegate to coinbase validator or whatever they're probably going to have a 20% fee or whatever on their elx right so if like every if you were to make a $100 or 100 elx is

staking returns they would take 20 right but like the and those bigger guys will have higher fees just naturally because they know they can command it on the market and then the smaller validators that are a little bit riskier will have zero fees right so there will be kind of like a natural um it kind of like self fixes itself whereas like if you have a fixed all validators Max they can take as a 9% fee then why wouldn't you delegate to coinbase or right right it's like you have that or you can take on the additional risk of going to a small guy but there's no there's no additional return right so um we do we are working through those things right now um but but we uh don't have hard numbers for specifics on like delegating in a real mainnet environment which is what we're

currently simulating right now so you mentioned that you have Integrations with blue fin vertex as well as rabidex and you have some for dydx and Hyper liquid on the way how do you prioritize which Integrations to to go after and like where does most the leg work fall is that on the protocol doing the integration themselves or is there a lot of leg work that you and the team actually help with or what does that actually look like in practice so our long-term vision is to have Elixir fully permissionless infrastructure and anyone can just build out their own connector build in right and um have our protocol support um that's like the super long-term vision for um these other product like these other exchanges

that are currently building out their own products right so like rabidex has their FM um you know or vertex has vertex Fusion they'll soon to have their own kind of like native yield bearing uh kind of like a like LP token as well that we're working with them on um and we'll share more info on that soon there's like all these different things there's a there's differing levels of like support that we can we can offer we definitely do like handhold some of these exchanges through um what integrating with Elixir actually looks like like for example um you know if if we are like there's like a fair amount of like we don't have the best documentation for how to integrate with elixir that's public right now because

it's mostly just like us talking with the you know whatever the teams and saying hey like DDX or whoever like here's our apis here's how you can like actually deposit here's a smart contract right um but we have we have a we have a version of that smart contract that holds the funds on chain built out in solidity and cmsm and we've just been using those um those are audited by tra bits um but then we have other teams that have built their own smart contracts um that are like completely external right so blue fin built out their own smart contract to integrate with Elixir right um the aftermath guys built out their own smart contract to to natively integrate with Elixir right those are built in move right we have

teams we have team building out the Vault smart contracts for their integration of elixir in Cairo right um so those are not like Community those are like you know we obviously want those to be audited um so you know we may like that would be like a great idea for like a grant or things like that in the future um once you know once our grants program is live but um for right now yeah like generally we have the version of the smart contract that we can just use the team can wire it up to their own deposit withdraw functions um and then we essentially would just the most of the lift is actually building out the wiring up our protocol support to their apis um but usually it's pretty standard right like every exchange wants their apis to be as close to like

binance and those people as possible Right to onboard as many market makers as possible POS so it ends up being pretty standard across the whole whole Space so um yeah there's definitely long story short there's a fair amount of handholding that we're doing for these native first few native Integrations um and uh you know we'll likely help out I we have like a native integration team that just all they do is like push these along um but long term we want to make it so that like any exchange could just like spin up use Elixir to to uh to build up their order books I wanted to follow up there and just ask a clarifying question so theoretically if Elixir wanted to could you guys build your own Vault for say drift Zeta without like asking for like

these protocols permission because that seems like it could potentially be a move you know you guys become like the go-to like Vault creator for all of these uh prop Dees you don't need to ask for the permission and you just have like a vault for like every single one of these per Dees and that kind of ties into your sort of like a cross chain like back stop liquidity token that were talking about just now yeah I mean I think the the main thing is like so today we have thought about that right like we have so right now we have this like Community run um endorsed like aggregator page and it already has like a bunch of like I think it almost has like a hundred pools on it right and there's when I think about the future of Elixir it's like do we really

want to have like like 50,000 pools on this like aggregator page right because like hyper has like over like that would be like just Al loone is another 150 right like some of these exchanges that we're integrated with they have plans to have like fully permissionless per listings right so um just being in this space you see that like they want to have like a thousand pairs or 5,000 pairs they want to be like the Unis swap for permissionless like like Perpetual Futures right so that that is like and as we're kind of heading in that direction for uh like just these these dexes they're all pushing in that same direction so I think that I mean it is possible um you know really what what we found is that it's less like it's yeah

like we found is that these exchanges themselves are building out these own products and and kind of offering it and it's less like vaults right like it's it's more of like oh we'll have like a one place you could just like with Apex for example um so Apex is launching their FM and it's going to be like a one place you just deploy liquidity and it routes liquidity on the back end right because they want to they don't want to have like a thousand po um but yeah there's there's really the two ways right like there's the two future you could have like you could be like Unis swap which has pools everywhere for every exchange or whatever for for every pair on Unis swap right and you just type it in and you find it um or you go the other way and I

think just like with how things have gone we've already locked in Native Integrations with like most large perpetual dexes and like they're really excited about what Elixir is doing because it's like needed and like I mean there's it's like no cost to them right like they just they build in support and we say hey look you guys are paying out a million dollars a month right now for liquidity on your protocol like just like pay a portion of that to like LPS right and have it scale up and like obviously the LPS want it because it's like 100 plus percent APR like because it's only two or three big firms that are participating in that same program so yeah I do think like while it could potentially be a thing um we definitely like I mean I don't know why we would would probably do that when we could

work really closely with with the team and make sure that's a good a good success and like build it into their infrastructure um in a way that they're really happy about and make sure like on our end that we bring you know we put support behind it and really make sure it's a good success I have another follow-up question there this one also really theoretical um but I want to ask would it be possible for Elixir to Market make on centralized exchanges um or is that just not possible given like the technical architecture it is possible it was actually the original vision for Elixir um but it's it's obviously tricky because the it all comes down to the the custody of the funds right it's like so today what I mean we have a a team that

is build trying to build this um they're called eliptic they're just like working in the background but essentially what they're trying to do is you essentially what you could because what you could have is um anyone can come in they they link their own individual exchange account and to our protocol and then protocol tracks their liquidity that they have in there and builds up liquidity on the actual order books and then you can actually do token Market making for that right so say okay as Elixir say we really want more liquidity on our binance or gate or okx pair we could put on chain just a certain amount of liquidity and incentivize this pool and people will go and they will add liquidity to their their binance account and our protocol will use their

liquidity in each of these individual siloed users accounts and build up the order books and that that is possible today um the the tricky thing obviously so that like the tricky thing is figuring out obviously you it's almost like a separate like team um that is going to need to like do that because obviously our our hands are full with the actual Network um but that is definitely a part like something that we want to support and it's going to be one of the big areas that we want to support with a grant um is like allowing for a team that is built on the Elixir Network to actually go out and and support centralized exchange use because it's a huge issue that was actually the the main the main like vision for Elixir right there's just like the these token

projects need the same service but they need it on centralized exchanges and it's pretty crazy that like there is no like way to incentivize that get you know get that liquidity from your community right you have to go through one of the big three or four firms so um yeah I think that that's definitely a big opportunity so you mentioned the Apothecary a little bit earlier the conversation can you explain exactly what that is maybe what the incentive to join is and I'm assuming I know the answer and I'm also curious about you've kind of alluded to some ideas for eventual token utility in the form of a slash uh collateral for for the validator set as well as maybe pocketing uh some of the spreads uh because

obviously you're not optimizing for the hft trading but yeah just any other further elaboration you could give on that would be great yeah so the Apothecary is is essentially a way for us to Mark the contributions of end users to our protocol and so um we are Distributing 20 million potions over over the course of I think it's five months um and that leads up into our mainnet launch which is going to be in August of this year so um users can come in if they have any liquidity supplied on any native integration they have earned potions um and we went through essentially in the backat we we went back we've anyone who's ever deposited liquidity as earn potition and you can

actively earn them um by having liquidity in the protocol um the we also are launching that elx eth um cross chain liquidity uh products essentially that will well you know allow for us I mean imagine if we had like 50 to 100 million in liquidity it's very easy for us to begin um you know for for exchanges that are coming in to want to tap into that um and and actually use that to build up the liquidity on their Pairs and so um that is something and then users will be able to just acre these rewards from these different exchanges and it'll be like a native yield bearing uh product collateralized one for one with ethereum that you could just redeem out at any time um for eth um we yeah and so that is kind of yeah

you'll be able to earn these potions um the next I I think kind of point that you had mentioned was around like elx so yeah that we have a we have a token that is um planned we uh that'll be going live with our mainnet launch in August and so that'll be um it's a utility token it's also going to have governance rights so um obviously to stay can run a validator it could acrew protocol fees right so um to put this into perspective right um the the like a very healthy fee that our protocol could decide to charge would be yeah like like I said earlier on the spread and so imagine that instead of our protocol quoting at 023 % we quote at 0 28% right so that

additional 0.05% could go to our our you know go to the protocol as a validator security fee and so um just alone like if we were to turn on this fee today just with the amount of like I mean we just yeah with the amount of volume um that is that are like we power what like 30% of the order book liquidity on vertex we power more than half of the order book equity on bluin WE power like you know 40% order book liquidity on Rabbid X each of these guys are doing a billion dollars a day in volume um and so it's like if we were to take just like with very conservative estimates we would be like one of the top two top three def5 protocols by Revenue um like overnight um and I mean

if we were to turn on the fee switch today we'd be like like significantly profitable but at this point really obviously um it comes down to the the token holders long term um so they will come so that that's that's the first thing right it'll come with governance rights you'll actually have to stake Elixir to secure validator or you delegate to a different validator you you'll likely be able to use it to Mint some sort of this like LP token um and and earn these protocol fees so um you depending on what the Dow says so anyways there's like a bunch of different uses that are there for this token it's actually like very critical in the actual functioning of our system um so it's used quite a bit it's not like something that like is just like slapped on um and so so yeah that that's

what elx is and um yeah that'll be launching in um you know probably Q3 this year in August that's super exciting especially the fee Revenue aspect I I definitely get excited about that stuff and you know per dexes have demonstrated product Market fit that way they generate a ton of fees so very excited to see that go live one quick follow-up question there is the cross chain eth uh LP position is that going to be like an a layer zero of token or what is the architecture plan for that yeah we're actually um so it's not yet live what you're doing now is by when you lock your e your eth you will be minting elx eth at mainnet so there's actually like kind of no um like you're

not there's no like like you're not minting it right now um but that will be launching at mainnet along with our um like actual Network main net launch um so yeah we are actually chat chatting with the layer zero team around potentially making it a um like an of or something along those lines there's also some other like interesting angles that we've been thinking about there's like obviously with like Athena these other you know big players um there's like kind of this really interesting use case right because they're long day long perss and then they long spot and then they short perss right to collect that that yield which is like pretty much like directly like up what what our protocol is doing right we're trading on

these different exchanges anyways so it's like there's some like interesting use cases that people have been flagging to us so yeah we're keeping our options open now but we'll definitely post more information um as it becomes like available um you know on our Twitter and everything as it as it uh gets finalized I have a question which is a complete uh changing gears but I wanted to ask um so thex V4 has moved to this app chain model um and obviously one thing with their inmemory order book is that they need to sort of like measure me and sometimes it's hard to tell whether it's like actual me or anything malicious being done by the validators versus Network Jitter or just like a latency that a single validator may be experiencing due to for example their

geographic location does alexir have that problem of like you're not really sure whether a a validator is like actually being malicious or he's just experiencing some like Network Jitter or is like everything sort of like deterministic when it when it comes to consensus yeah it's fully deterministic which is like because there are some really unique it's it's a completely different like problem obviously if you're having like validators that are storing these these like the stateof the order book and things it's like oh like can you yeah you get into these weird issues where it's like the validators themselves could try to like see and then try to front front run things or like you know it's like we don't we

obviously don't have we don't have that issue um because we are directly pulling from the websockets of the exchanges and directing like orders through their U private Market maker API essentially so it's like those those apis um there is no me that is available there um where we would have faced issues um is if we were to try to have like takers so our protocol to like to like clarify our protocol is never a taker um and that is done by Design because um imagine that like even in the scenario where if the user has like say that um on a pool we hold some inventory at some point in time and then someone sees oh on chain someone is trying to withdraw and they

know that we have we're long right like they're like oh well they're gonna a market cell is going to come or something right and then there's like an unknown amount of slippage that's associated with that and then they could try to front run and like so we actually our protocol is never a uh is never a taker and so that actually reduces a lot of the me considerations there um and so because nothing is on chain except for these actual fraud proofs and those fraud proofs are already happening when the spell validator is jailed right they get jailed right off the bat so we we don't have those issues um but I mean I I do actually really agree with with DX's approach and and Hyper liquids going the same way right where there I mean um like all like if you're going to run a successful like if you're yeah if

you're going to run a successful perex exchange you need to have it like likely either you have to have some sort of offchain infrastructure and I could talk about it for a really long time why but um if people if it's fully on chain every order is going to require gas and so it's almost like an extreme form of that latency problem I was talking about earlier where if every order update you have to pay gas market makers have to quote super wide like because it's just okay well we're updating once a second and every time we're updating we have to pay this fee so it's like ideally we don't update once a second we update every five seconds and so what we've seen with a lot of the little the larger onchain per Dees is that market makers don't update they only update once every

five to 10 seconds and that's just because they don't want to pay the gas right it's you know you could you just have that as an ongoing like variable it's like an almost ongoing fixed cost just to like operate in the system and so you can reduce that fixed cost by quoting wider so it's like why wouldn't you um so then there's a trade-off where it's like oh well then now I'm earning less like liquidity score and so it's yeah it's just for market makers it ends up resulting in pretty wide spreads um and so you know people have have said that like drift is fa facing this issue um the yeah and like we've we've talked a lot with the drift team obviously there's like an ongoing gas cost if we're updating once a second and it's like okay well like should LPS pay this

like it's not I don't know and then it's like we're quoting wider and then so anyways I do think dydx hyper liquid they have their heads on straight I think it's I mean if they can solve those issues um we've thought a bit about like using sgx for validators if like you really want to hide what like the the orders are right but you can actually introduce entropy later on in the system to actually make it to where you can verify that the the validators came to consensus correctly but you can't actually predict what the orders are going to be on the exchanges um which is kind of what we do so anyways long like I have a lot of thoughts on it but yeah I think I actually think what they're doing is great and they'll they'll work through those issues and that's just an engineering problem to

solve no really appreciate your insight into that question back to the non nony side of things I guess like a long-term sort of question are you highly convinced that onchain order books will win of like the onchain deck architecture Wars or what do you think about like the long-term direction of just onchain trading in general I think I think without a doubt anyone who's a Trader is going to be trading on a per order book decks I think I mean or or a an order book based decks um and we see it right like think about Unis swaps direction right like Unis swap started it was V2 you come in you provide your liquidity right and that's it's like there's one thing you can do and you set

your fee rate then it's V3 right and now you can set custom bands right and you can customize more like you essentially do like limit orders and then V4 is like fullon I mean Unis sw's like turning into an order book right V4 is now you have hooks and you can pull off data streams and you can like customiz you can place actual like limit orders right and so it's what you've seen is that all of these amm and we talk to am like leading large amm every day that are moving to orderbook based models for this reason um is because daily Traders are the ones that make exchanges money right if you are a Trader and you go and you're longing and shorting like you're slinging like garbage coins

right like whatever trying to make money like that is what generates actual revenue for these daps and so that is where people are going to continue moving in that direction to try to cater to that user base oneoff swaps I could see that like being owned by amm for for the time because it once again it's like like the none of these large order book based dexes are creating markets for like like like these little tiny um like meme coins that are being created on salana like they're not going to be listed on an order book based exchange like it's way easier to just like see to pool and then get people in like so that that will continue for that but actual Traders and and actual trading is going to be owned by by orderbook based xes

and and we talk to them all the like every day like large leading names that you guys obviously are like very well familiar with that are like yeah we're moving we're going to have an order book based model um and then we're going to have the amm and then you know people are going to be able to you know if they swap through the amm and they get the best execution great like but if there's a better order on the the trading side you know we'll route the order across right and then that way they get both and like why wouldn't you do that right so that way you gotta can have your cake and eat it too um and so and then they're using Elixir as the way that they can actually bootstrap liquidity to the order book markets that they're going to spin up so anyways it's like

really cool um talking to these guys but I I am like a big proponent of of order books because it's it's like definitely the best way you can update orders you can you can do way more obviously without paying any sort of gas and then when things settle obviously then you pay you pay gas um and that is like way better than these like amm which like traditionally if you supply liquidity to V2 am you have very low Capital efficiency right we have like if we have a million dollars in a pool like we have a million dollars within like half of a basis whatever 05% of the mid price or whatever right I mean obviously we have a lot of orders but like we turn that over like once a day or 2x 3x a day right like rabidex or like dydx just like round it out like

vertex has you know like 10 to 50 like up to I mean they'll have like a few like midate figures of liquidity but they're doing billions a day in volume right right and it's like that's because there's a much higher Capital efficiency so yeah I I think that's that's why I'm I'm really bullish on order books and obviously like as regulatory cracks down like it just kind of more creates more of this like onchain like PE like things like FTX have done like wonders for these prexes where that like people don't want to have balances on centralized exchanges so yeah there's a lot of factors but I'm bullish on them all right last question because I know we've already had you for almost an hour but are you at all worried about the liquidation engines of specific

dexes because to me it sounds like especially once you have kind of like a unified basket of e providing liquidity on across many different uh applications like you might be compounding risk so I guess what's the what's the approach there no so that's yeah so I think something that's worth mentioning is that we don't have any leverage ourselves right so if if we're quoting on let's say some some whatever like say like ARB per on vertex right and say their liquidation engine like you know they liquidate a bunch of users and we're quoting like wide we just get a fill we get a great fill right so for us the risk is like if an exchange like

rugs right or something like that right if an exchange just takes the money um because for us we're not running any leverage um so there's no there's no like liquidation risk um on that side but um obviously like if the exchange itself like the the biggest risk for exchanges is okay if I have say I launch uh I launch Philip exchange and it is fully collateralized in Philip coin right like everyone has to deposit withdraw in Philip coin like then it's like okay Philip coin goes down 50% which means everyone on my exchange is getting like is getting liquidated which means the whole exchange is like trying to like it just like and then the liquidity itself is also going down

because like the the Philip coin is going down so liquidity is going down users are getting liquidated like the exchange itself is probably not even functional if that so that's where this like negative feedback loop from um like it's it's really if you take if exchanges take a significant amount of their own coin as like the main collateral type that's where like you could get some of these issues it's more pronounced for centralized exchanges um but for us we don't face any of that risk um and actually with the decentralized exchanges um none of these really accept like I mean you could and I've actually we've done like some some tests actually on this question specifically on like what percentage of an exchange can like what percentage of

their collateral can an exchange have as like their own token and it's right like anything up to like 30 to 50% is like usually like 50% is really pushing it but like binance used to take B&B as collateral right and it was it was totally fine because because they had it limited right and there's things that you can do right where bance they when they had it as collateral if you deposit B BNB is collateral and then you open a leverage long maybe you could only open 5x leverage right instead of 50x or 100x if you use usdc right so there's there are like a lot of it's like a kind of a nuanced question but for us we don't run leverage so there's no issues with um like risks from Liquidation engines like liquidations just give us good fills and

like our LPS actually um like it's a good source of like p&l for the these LPS so yeah got some mango PTSD same same yeah anyways Philip this has been an awesome episode I I learned a ton are you able to share uh any last words with the the listeners where to find you maybe or learn more about elixir in the Apothecary yeah um well feel free to check out our website at Elixir XYZ um or or you can follow us on Twitter it's just elixir um so yeah just feel free to check us out there um yeah Apothecary is going to be running for another uh you know three four months it's a limited amount of

potions that we're Distributing so um yeah I think if you if you have extra liquidity feel free to check us out and then but um yeah I think I think that's pretty much everything on my end this has been a great podcast so thank you for having me on thanks for coming on Philip all right guys we'll see you next week we have teed up with the wormo foundation stewards of the Wormhole protocol the leading interoperability platform powering Crossing transfers for over 200 plus multi-chain dabs Wormhole isn't just a bridge it's the leading interoperability platform for multi-chain applications so go and claim your uni wormo nfts just for zerox research listeners today hit the link in the description to fill out a form and to prove that you've listened to today's

episode and receive a p app you get an email over the coming weeks to claim your limited edition nft