Fireside Chat: Uniswap, DeFi and Regulation with Hayden Adams and Camila Russo

Transcript

[applause] >> Thanks for joining us. Thanks EthCon for having us. Really excited about this panel. Always great to interview Hayden, of course the founder of Uniswap, the biggest DEX in DeFi. Hayden, we're going to talk about you know, everything that's that's going on in Uniswap, what's next, but to kick things off, I think we're in a very interesting moment in DeFi and really curious about your thoughts. So, I think we're kind of in this pivotal moment where DeFi is coming out of the like early days, experimental phase

of decentralized finance and it's starting to get to get more adopted. We're seeing things like Coinbase integrating integrating DeFi in its backend and even non-crypto companies or non-traditional crypto companies like Robinhood even deal the other day. So, it's definitely seeing more mainstream adoption, but at the same time we're seeing just like this crazy scary wave of security exploits. So, you know, from from your kind of front seat leading one of the biggest DeFi protocols, first of all, how how does it feel as a DeFi founder to just be seeing like exploit after exploit? I I I bet it's nerve-wracking. I don't know if

you're sleeping at night. And the second, what's your thoughts? Like is it do all these exploits prove that it's just too early for DeFi to be entering the mainstream? >> So, I sleep pretty well. Increasingly better over time, too. But, I think that there is like this wave of of you know, security incidents we're seeing and I think it's pretty clearly driven by increasingly smarter AI tooling. Um and I think that like, you know, it used to be the case like like back in 2020 or something, you know, DeFi summer, there was this like kind of like mentality of like test in production, we can just like ship code, you know, uh smart

contracts really quickly, uh we don't need to test them that much, um and things will harden over time. And clearly, you know, back then maybe there weren't there there weren't people that even wanted to read your code to try to exploit it. And now we have Claude and Claude's always awake and willing to work through the night and will find exploits if they're there. Um but on the flip side, I think that like I think that there we're sort of in this like um current state where uh there's a lot of, you know, poorly written smart contracts and the AI tooling just came out and so uh it's kind of going through and finding all the issues with them. But I think that like the kind of medium-to-long-term state of it is that uh these tools will allow, you know, DeFi smart contracts to be hardened to such a greater extent. Um

and and I think that like, you know, when we launched Uniswap before, which is processing over a trillion dollars a year, uh has never been exploited uh well, the Uniswap protocol, um but we did uh nine consecutive audits on it. Um and uh the basically how we got to nine is we hired every smart contract auditing firm that we thought could give us a good audit. And then we did a $15 million bounty on top of that. And like I one way to put it is that, you know, when I when I talk internally about releasing uh a new version of the Uniswap protocol, the kind of mentality, the security mentality I say is like we're like it's like launching a launching a rocket, right? Like at some point, you know, a a manned rocket, like at some point you have to do it, um but

it is possible to get it right. It just requires a lot of rigor. Um and I think that, you know, for projects that go through that and really put in the time and and and the effort into it, I think that, you know, it will help them rise to the top. Uh but I think that like it is definitely scary if people are kind of like, you know, busting out some AI slop smart contracts, like those are going to get exploited because we have, you you the automated tools can uh discover them. When it comes to like the adoption of crypto and and the irony of all that, of course, is that like um you know, smart like DeFi ultimately enables uh applications that are far more secure than what is possible without them, right? Like you can remove, you know, single points of failure. Uh you can remove uh you know,

uh admin keys and replace them with kind of automated uh systems. But I again, it requires that those systems and those dependencies and a lot of the hacks we're seeing are also where not uh where the code has been bad necessarily, but where there has been, you a a a remaining dependency on an external more centralized system. And so, it's really all about kind of like the continuing the trend towards greater decentralization, uh which will ultimately kind of uh create far safer applications. And I think that Uniswap is kind of at the forefront of that, but I think that there it's it's you know, it's not impossible. It's kind of a scale issue, but it's also like, you know, uh definitely worth like, you know, investing a lot into into security. Um when it comes to like the adoption stuff, uh we are seeing like there's

this interesting moment happening right now where like some of like the Twitter vibes are like really negative. But then when it comes to adoption of the technology, um and you know, like the partnerships that are taking place, like there's kind of it's it's basically the best it's ever been. Um and there's like so many like every kind of, you know, fintech company and every tradfi institution, every single kind of there's like this huge wave of people uh and projects that are in in in companies that are integrating crypto into their core flows and kind of unlocking value through doing that. Um and so like kind of what like off off Twitter, uh you know, within the kind of meetings that we're in etc., it's like kind of like the best and and kind of most exciting that it's ever been.

>> Yeah, so I'm definitely an an optimistic uh view uh for you. It's like, okay, now DeFi is is getting this like massive test where um AI models are are just like running through the code, finding bugs, finding vulnerabilities, and we'll go through this like really tough time of like lots of things getting exploited, but you know, we'll have to come or like Defi will have to come out uh stronger from this from just like learning to like where the all those bugs were and just like better off sec practices um after all this, but we're just like in a in a in that kind of tough transition at the >> Remove your off your off-chain dependencies, remove your single points of failure, stuff like that and you know, again like I I sleep very well at

night knowing that Uniswap protocol is is an immutable smart contract and you know, has been tested more than almost any other smart contract on Earth. And so, I think that like you know, just kind of leaning into that and and you know, the the projects that come out on the other side will be all the stronger. >> Okay, let's let's shift gears. Um want to talk about uh unification. So, this was another just like a a massive undertaking uh that Uniswap did um got approved uh in in December. Uh so, this was all about um Labs taking a a lot of the functions of of uh the foundation um and making Uni the the token um a kind of like a value accrual

uh token uh beyond uh the governance token uh turning on on the fee switches of you know, all of the different version of the protocol um and so on. So, um so far what's uh what's your takeaway? Uh how's it going? >> Yeah, um so there was a kind of a few different components. There was kind of a shift in the ecosystem and kind of Labs and the foundation uh uh kind of you know, like most of the teams and and kind of work that was happening at the foundation now happens at Labs. Um so that kind of uh integration went really well um and you know, Labs is able to focus for a while we were really just focused on our products and now we're getting to focus on the protocol and the growth of the protocol. Uh and so that's sort of strategic alignment has been

really exciting. Uh when it comes to the kind of like uh the the sort of UniBurn system and all that, that's been sort of kind of like uh slowly rolled out over time. So, Uniswap protocol has been around for, you know, a while now and we didn't want to upset like a kind of a well, you know, like a balance like we wanted to kind of test, you know, what is like the fee sensitivity of liquidity providers, stuff like that. And so, it's sort of been like a slow gradual roll out of fees. And as it's been rolling out, there's still some additional fee switches left to turn on. Right, like V4 fees aren't on yet, which is actually the, you know, the largest protocol by volume still. But we had our all-time high fee burn of 186,000 UNI the other day, which is about

$500,000, which is a pretty good single day burn. So, like the the trend has been kind of, you know, up up into the right in terms of the kind of like the the fee generation. And I think that so, yeah, like from a kind of a strategic perspective, it's been really exciting being able to focus on the the protocol and the growth of it as the most exciting as like the kind of the way that we can create the most value for the world. And then like the the kind of actual technical systems behind it are functioning really well. Obviously, the market is in like a funky state in in some ways, but like everything kind of converges towards its like, you know, like fundamental value over time. And I think that like we're really optimistic and excited about the stuff that we're building and the kind

of upcoming sort of growth vectors for DeFi and and kind of you know, even like the kind of recent attraction and trends. So. >> So, um I hate to bring bring up the the price the token price. But, you know this this move was largely about the token. So, um relevant to to kind of see what that's doing. And the UNI token is is still, you know, not doing great. Like it's still near its lows. Even as as you say like burn is rising. I saw kind of the record daily burn.

I saw that it was like cumulative cumulative cumulatively 40 million so far this year. But, that's not being really reflected in in the in the token so far. Um, why do you think that is? You know, what's it going to take for you need to to really start reflecting the burn? >> Yeah, I I think that really like what you see in crypto um is that you know, a lot of it like kind of like largely correlates to it you know, like everything kind of seems to move together with a few kind of uh minor exceptions and then you kind of so you and then you have these sort of like macro impacts that are impa- impacting it as well and then I think that like the way that to kind of get out of that um is really you know, about things like fee generation and and kind of putting

up those numbers and kind of having them uh be consistently up. And so I think that you know, like for for and and then I think everything will like then converges towards its you know, its fundamental value there. And so I think that the the kind of opportunity of the protocol is massive. I think that like you know, what we're really focused on is growth of the protocol and adoption of it. Uh the there's sort of uh again like these like record fee numbers are happening like in the past you know, matter of couple days and so I think that like there's still like a bunch of you know, kind of like a continued roll out there. Um and then there's sort of like all the things that we think will grow DeFi so much more from here. And I think that like the kind of long-term

price divergence um from like you know, the the the trend usually comes from kind of like you know, consistent like you know, good numbers. And so I think that like really what I'm pretty you know, excited about is uh uh is kind of those numbers continuing to Yeah. >> For sure. Okay, um uh we we got to talk regulation. Um you know, yourself and and Uniswap have been like so much in in the center of like crypto regulation um kind of uh at large I I guess. In in the previous administration we've talked about you know, all the problems you had in in the whole um regulation by enforcement Gensler era and not just Uniswap but yourself personally um and

and how how much that's changed in this new regulatory regime uh for crypto and and Uniswap. Um and now looking forward uh clarity is kind of the next big milestone that the industry is waiting for. How [snorts] do you, if if that's passed, how do you expect that will, um, affect Uniswap, or does it mainly uh, affect more kind of C 5, or like centralized exchanges, and not really, um uh Uniswap? >> Yeah. So, I think that, you know, this kind of the regulation by enforcement, it, you know, the market structure bill is is like, you know, will be very impactful if it passes, but at the same time, even just like the change in posture and and approach and kind of like some of the guidance and proactive

guidance that's being written already kind of does a lot of the the job of, you know, kind of what was needed, which is like, there was just like this huge chilling effect on the industry, um, from the regulation by enforcement thing, and you know, there's like, you know, we've gone through every kind of lawsuit and investigation that that you could imagine. Um, and I think that kind of, you know, that sort of, uh, chilling effect was really what was holding back a lot of integration of crypto into, you know, the the fintech applications and the the broader products and and kind of experiments with tokens from, uh, kind of, you know, uh, organizations outside of crypto. And so, like the I think a lot of this like upcoming trend of tokenization of real world assets and and all of that, for example, um, and and all of the, you know, when you

see like the Robinhoods and the PayPals and the Stripes and all of them starting to integrate with crypto, that's kind of really a result a lot of that is, you know, at least a result of the kind of change in in kind of regulatory posture. Um, and so, yeah, I think that like we're sort of expect like that cat is sort of out of the bag. Like I don't think that like, you know, you never really know where politics goes. Um, I think that I know about as much as, you know, like the Polymarket odds in terms of whether or not the bill ultimately passes. Uh, I do hope it does. I think it is more about C 5 than D 5, but uh, there's a few key parts of it that we're watching really closely and have been kind of advocating for as uh,

like the BRCA, which is about protecting software developers and making sure that you don't treat, uh, you know developers of open source software uh, like you know a centralized intermediary and kind of really break that out and so we would be really excited to see some of the some of that language kind of make it through and honestly would be very against any bill that didn't have it um but yeah if if we can have like you know it in trying to the law like the understanding that there's a a difference because I think that a lot of what we saw in that era was like an misunderstanding of kind of our role in the kind of technology right where you know Gary Gensler kind of wanted to paint the whole industry with like this broad brush of well it's all centralized none of it and and sort of you know

everyone is kind of pretending to be one thing but actually another thing and and it turns out that wasn't actually true and actually like you know the user protocol is decentralized and you know I can't with steal anyone's underlying funds and that's a really good thing and so having that recognized kind of like within a within a federal bill would be pretty exciting. >> And related to that you know how how this increased regulatory clarity is is opening the door for for institutions and we're seeing this wave of RWAs organization stable coins etc. How how does Uniswap integrate with this world which you know seems to be less decentralized you know a lot of

many of these assets require KYC require more you know gated pools so but but it is just like the the the biggest thing in crypto right now so of course like Uniswap you know I'm sure you you you want to be at the at the center of it of it so how do you work with those kinds of assets? >> Yeah so I think you know you have to start with like the protocol itself which is decentralized neutral infrastructure and so you know the the um I think that like and when you kind of think about like what we're trying to build in DeFi right I think of I like to analogize to internet a lot I'm sure I've done that in interviews with you before but um just to do it again like I think that like when you look at sort of what the internet did

for society, it would there was kind of these two parts. There was like existing businesses uh coming onto the internet, right? And you replace Barnes & Noble with Amazon. And then you and and um and then you had like kind of internet native businesses, right? Like social media and search engines. Um and so like the internet like both of those were massive um and and kind of massive catalysts for economic growth and and kind of for prosperity and access to information and and um and kind of goods and services. And so uh when I think about DeFi and and kind of tokenization, it's really about like kind of you know, increasing access to value and ownership in in financial markets. And when I think about like the and I think it will have that same duality where there'll be

kind of the like tokenization of existing kind of real assets or or or kind of you know, physical space assets and companies and and and businesses. And then there'll be kind of uh crypto native assets and and businesses, right? And so you have um you know, and and stablecoins are kind of like the biggest, most adopted RWA in some ways, right? And and then um you have assets like UNI which are kind of a backed by a decentralized protocol. And that's sort of a more crypto native asset. And I think that like I don't know which one will be bigger in 10 years. I um it kind of feels like to me almost like I don't know which will be bigger like, you know, Apple as a manufacturer of phones or Google as a search engine, right? It's I think they're both going to be huge. And I

think that it's really exciting because I think that the technology that we've created uh gets to be used and useful for more people and for more things. And I I don't think that like for what for what it's worth when it comes to RWAs, I don't think that it's like a binary on the um like KYC stuff or on the like uh compliance methods. I think there's like more permissionless versions. There's more permission versions. A a lot of that is really being decided at the issuer level. Um but like what what what we're expecting is just a massive wave of the amount of assets that trade on chain and kind of uh the sort of like decentralized nature of of blockchains can really, you know, make these assets available to a much wider market, and kind of have them trade 24/7, have them global, self-custodial. So, I you know,

we definitely view that as a as a good thing, and you know, see Uniswap protocol being at the the center of it. And so, we're kind of we've been talking with a lot of different asset issuers and projects that are doing tokenization and kind of have seen a lot of interest in in, you know, automated market makers as a way to create liquidity for them. And so, yeah, I you know, we're we're pretty excited about it. I think that I I think that it's going to be pretty huge for the crypto space, and so, I'm excited. >> Yeah. The other kind of big thing in in crypto right now besides RWAs and tokenization has been perps.

Obviously, you know, on the DeFi side, Hyperliquid has been leading, but you know, we're also seeing a lot of movement on on on the like centralized front, and even movement on the regulatory front with maybe a compliant perp coming to the US. So, you know, uh lots of activity there, very popular. How does Uniswap fit into this? As you know, you're kind of the the place for spot. Is there a way to build perps on top of Uniswap?

>> Uh in short, there definitely are ways to build perps on top of Uniswap, but to kind of step back for a second, I think one thing is that like the world of financial markets is massive, and so, there's like huge room for growth, and like broader growth and adoption of crypto is is generally a good thing for us. And and Hyperliquid has definitely reached crazy success, and so, definitely big big shout out to them. I think that when I when I think about kind of the roles that we play, it definitely is a very different role today. So, Uniswap is like the dominant spot, you know, decentralized spot venue.

Hyperliquid is, you know, very focused on leveraged synthetic assets. Um I think they're also like very different projects in their kind of construction. So, Uniswap is kind of very focused on being like maximally decentralized, neutral infrastructure uh that that anyone can build and express uh you know, kind of uh very decentralized markets on top of. Um and and there are definitely ways to do uh perps within that. And then I think that like Hyperliquid is, you know, uh has has taken some different approaches in terms of like the levels of decentralization and open open sourceness of it and stuff like that. And so, I think it's a kind of uh you know, focus on its own sort of uh area around again like super leveraged uh synthetics. And I think that they obviously have spot trading. And >> [snorts]

>> uh we've, you know, seen experiments on top of Uniswap for leverage. Uh but uh I I think that they're kind of in some ways serving different different mar- uh markets right now. Um that said that like uh I I think that like one thing that's really cool about Uniswap um and Uniswap V4 we're bringing this protocol to all different uh to to many different chains. I think you've seen I you know, I'm pretty sure we're I'm adding about 10 chains a year right now in terms of uh uh kind of growth there. And then you know, a lot of these chains are, you know, L2s or or other L1s that are that are scaling. Um obviously we're still continuing to grow on mainnet as well.

Um and I think that like, you know, a lot of like like our approach is really like we're not just like I think I almost think of like Hyperliquid's approach as like we're like almost building like a an exchange as a product. It almost feels like we're building Binance to kind of do it on uh on some decentralized rails. And I think what we're doing is like building this open platform that people can express a million things within. And so, if you have a you know, ultra-fast chain and you can use a Uniswap V4 hook you to build leverage within that, like you can essentially recreate that same thing. Um and so, a lot of, you know, what we're uh and and so, we're so focused on Uniswap as a developer platform. And so, I think that like some of these like experiments will likely be built on top.

>> And and so, that leads uh um good segue to my last question, which is, you know, I I know. It's hard to say in these like 3 minutes that we have left, but like uh what's what's next? Like what are you excited about for Uniswap? Because like you've been at the forefront of DEX innovation with concentrated liquidity, then V4 and hooks. Is that kind of the main thing that you're still focused on? Is there something else? Like what's kind of the the bleeding edge of AMMs on DEXes right now? >> Yeah, so you know, one thing that's really nice right now. We spent so much time building these like foundational like we built Uniswap V1 and then we immediately started working on V2. The second V2 was done, we actually had already started working on V3.

And then like pretty soon after we launched V3, we were started building V4. I'm really excited that we're not currently building Uniswap V5 because you know, the the kind of idea is like when we went into building V4, we were kind of like really what we thought about is how can we build a platform with it? Like we realized that like anything that we could do to make V3 better had a trade-off. You know, and so like you can make it better for some assets but not for others. You can make it better for some LPs but not for others. And you know, we were so we set out to create this thing in which you can express a lot of different trade-offs. And and the kind of flexibility that we were able to create with Uniswap V4 is is been really incredible. And so there's

been like this huge wave of experimentation. And so when we think about like a way to improve Uniswap as a protocol, we don't have to build Uniswap V4 5. We can build it as a hook. And that's been really exciting because you know, and so internally we're building multiple hooks right now. We have a lot of different designs. How can we optimize for different asset classes? How can we optimize for different types of pairs? You know, things like RWAs might need some custom logic for to kind of improve. And so you know, and then there's sort of like and and so we're really getting to stop and build out like a lot of infrastructure and technology that and and even like partnering with other people building infrastructure around Uniswap protocol. And so that's really been our focus and it's been like a really fun change of pace for me because again,

we got to kind of like you know, like build many more small things that are form this bigger ecosystem versus like building this one massive thing at once. And so I think that like some of the angles that we're most focused on are like we're we're working a lot on the issuers side. Uh like you know swap the uniswap sort of auctions platform has been kind of increasingly becoming a place for people to launch tokens or bootstrap liquidity in tokens. We're seeing kind of a steady stream of of auctions happening. Um and the way that these auctions work is it's sort of like slowly auctions tokens off over time and then feed that into a uniswap pool. Um Uh we're we're kind of working on liquidity provider tools. We're working on hooks that optimize uh fees for different like you know you have one for

stable coins that further optimize there and uniswap has seen significant growth in stable coin market share. Um kind of uh for a while curve was the dominant one but uniswap has become the dominant stable coin venue which is which is cool. Uh we're kind of looking at optimizing for yield bearing assets and optimizing for RWAs and optimizing for kind of more volatile assets and kind of how can we like further improve LP profits. So that's this sort of like this issuer side supply side focus that we're really that is like one big part of our focus and the other big part of our focus is around like uh you know our trading API and developer adoption. Um Uh you know uh and and so kind of like integration and making it easier and easier for people to integrate uniswap as a liquidity source into their own

projects. Um and so that's kind of also we are we're seeing a huge number of companies and projects building on top of uniswap. And so like kind of like that is like our uh like a lot of our core focus. We do have like you know various and fun exciting things in the works that can't you know uh yet talk about but um I think that like um you know there should be some fun stuff in the RWA space pretty soon. Um yeah I you know it's just like kind of a a really fun time for us to build again because I get to like I don't like when I'm when I'm doing the same thing every day I'm usually like kind of miserable and so I like that there's like a lot of variety and kind of um uh different things happening uh on on

our end. >> Nice. So I guess like we'll we'll be watching out for like all the different uh things that are getting built on um on the V4 hooks. Um final question and and sorry if this is like left field but I just thought of it. Um, if you're like if you were just like starting out as a developer and and you were not the founder of Uniswap but Uniswap was around, >> Yeah. >> what would you build on kind of Uniswap V4 hooks? >> That is a good question. I think I might do one of I honestly might try to do one of the like margin things but I think that I think that there's a lot of different angles. I think that you know there's a lot of different ways to kind of like I think people often try to build like

very general case things and I think that like finding something that is more like specialized and specific because there's so many like angles like the best AMM design or the best like dynamic like as we've kind of gotten into like trying to optimize for specific use cases like the amount of depth and ways to do it is really interesting. So like being the best hook for like you know like ETH to yield bearing ETH is its own project and might even be different from the best like to use the 60/40 yield bearing USDC. And so I think that like kind of picking sort of some use case that is like underserved and just like or has like kind of like or like under optimized and then kind of like going in on sort of um I realize now that's counting up not down so maybe we're over.

But yeah, I think that like kind of like the more like applied to a specific need and specific use case the better. >> Awesome. Well, thank you so much Hayden. That was great and thanks everyone. I hope you enjoyed this as much as I did. >> [applause] >> Thank you.