How Robinhood Perps Use Lighter to Make a New DeFi Mullet

Transcript

I I think also onchain technology is just at a point where it's just better, right? Like if you trade on lighter, it's faster, it's cheaper, and it's decentralized and verifiable and more secure than centralized players. Like I think Telegram integration is a is a good example because their their product is actually centralized, but they would still rather use DeFi rails underneath, meaning lighter than than centralized rails. >> Hi everyone, welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shen. First, we'll take a quick word from the sponsors who make the show possible.

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Fidelity is an equal opportunity employer. Today's guest is Vlad Novakovski, founder and CEO of Lighter. Welcome, Vlad. >> Glad to be here. Thank you. Uh just a heads up everyone. Unfortunately Vlad was not able to be in a quiet place. We will do our best to mute the external noise. Robin Hood chain had a big announcement last week and it's already showing promising metrics and lighter lighter was a part of that announcement since your perex is powering perpetual futures directly into Robin Hood wallet. This is a big deal since now Robin Hood's retail traders except for c certain jurisdictions

including the US um will have easy access to decentralized perks. Robin Hood was an investor in your round last November. Was this part of the plan from that time and um just tell us generally how the deal came together? >> Yes. Yes. Well, I it's uh I joked with the team, you know, this deal is uh you know, 12 years in the making or you know, 25 years if you look at it another way because I went to high school with uh Robin Hood founder. We were the two lads at our school and uh 12 years ago I was an early adviser to Robin Hood which had just uh I think their corporate name before that was actually Cash Cat, right? They had just become Robin Hood and were getting their weight list. I've

kind of known their team and been um you know involved a bit at that point but then as as you mentioned late last year they participated in our last equity round uh before we launched the token and um you know we we've actually I think talked about doing something with them for a while a lot of things had to come together for you know for the tech to work for Robin Hood chain to go live for kind of per to become something that's interesting to uh customers in the Robin Hood ecosystem. So yeah, I would say this partnership started a lot earlier than just the that equity round. Uh and uh

yeah, we're very excited about it and it's also kind of the first step of what we hope will be a deepening um level of partnership. >> And what are the deal terms? Is there a revenue share? >> Yes. So the revenue is shared 50/50 and the 50% that goes to us is kind of immediately acrewed to token holders for buybacks as is 100% of the revenue from for lighter. >> Okay. And how does this product differ from lighter's own app?

Well, for one thing, as you mentioned, it has a unique front-end access through Robin Hood wallet, which for many customers, they can bring if they have a um if they already have the wallet app, they can use it seamlessly. But also, if they have a Robin Hood core app, they can fund that the the wallet with USDG start trading per um if they're in an area that has the jurisdiction for it. Um I mean, also it'll it'll be like a different mix of markets. it'll be settled or it is settled in USDG stable coin. Um I think we've already seen like some of the markets that folks are interested in to trade are uh you know more more stocks you know uh tokenized stocks some memes as well. So it'll be a

different customer base, different mix of markets. One thing that's interesting on the back end there's high level of interoperability between Robin Hood chain and and lighter. And so like a market maker can actually quickly move capital around between the two um lighter domains as we're calling them. And that creates a lot of advantages as well, right? Because a market maker can now participate on both and in a much more efficient way than if they were just like you know I don't know trading on one exchange on Salana and another exchange on Ethereum or something like that.

>> Oh interesting. Okay. I wasn't aware, but I guess um since uh USG is the quote asset on lighter and sorry and the Robin Hood app on lighter then um like doesn't that create a little bit of fragmentation anyway but you know with your main app. >> So yeah, fragmentation is interesting to think about like I think it's not as black and white as that, right? Because if it's on the same underlying chain which is Ethereum, you know, Robin Hood chain is also on top of Ethereum like you know the liquidity is very quick to move around where market maker you know can participate on both and quickly provide liquidity to order books on both

and kind of hedge across the two. So obviously it's a it's not as um consolidated as if it were on one instance but it's a lot um less fragmented than like two completely separate instances like one in Ethereum one Salana right so so it's a lot closer to being um consolidated than to being fully fragmented >> okay yeah I guess circuits work to kind of move capital around >> okay yeah I guess it's more that it creates a little bit of friction for the market maker.

>> Yeah. But just a little bit, not a lot. >> Okay. And so I have to ask for my largely American audience. So this per product is available in Europe, but when do you expect that this offering might be rolled out in the US? So we have been in the process of working with CFTC on uh uh you know a license for decentralized purp and that license would cover both lighter zone front end and uh brokers like Robin Hood plugging into it like right now if you look at the Robin Hood US product you know they of course you know for stocks they obviously plug into uh US exchanges but for prediction markets you They're

plugging into Cali which which um has had a license for prediction markets a long time. But basically the components that need to be there are the integration itself but also the license necessary and we're very um uh you know involved with CFTC on in that process. No one has that kind of license yet, right? But we we think with how innovative this CFTC has been and how you know with the process with that we're going through has looked like we expect that to happen uh you know in in a relatively

um you know short time frame and then then then we'll be able to uh open it up to to open up both lighter core and Robin who will be able to plug into lighter from their US app Okay. Yeah. And I'll ask you a bit more about that in a moment, but let's go back to the USDG um issue because, you know, as we talked about, that's the quote asset on Lighter and Robin Hood chain. And I imagine that that uh the usage of that brings some interest income to Robin Hood since they are one of the corporate partners of USDG. But um you know going back to what we said about the market makers, I would imagine that usage of that also creates friction

just for users because USDG is not as liquid as USDC or USDT. And you know as we talked about market makers would have to um probably charge a little bit more I would imagine to quote against USDG. Um I also would think that it creates a little bit of risk for the venue because um if USDG pegs DPEGs then it could cause liquidations um you know and yeah you could protect against that by like hard co hard coding the value at $1, but doing that also creates its own problems. So how do you account for these issues so that having USDG as the quote acid asset is also a

good deal for traders? >> Sure. Well, for one thing, um the market makers uh there there might be um reasons why they would um be less aggressive on, you know, in the Robin Hood instance, but there are a lot of reasons why they would be more aggressive, right? Because they know they're getting a high percentage of the flow they're getting is retail flow. That's the flow ultimately they want. Like so, so they're going to balance that out, right? and kind of run the calculations on their side, how they manage the risk. Um, I mean there there are risks they have to think about at the same time there rewards they have to think about right and the reward of being on top of something like Robin

Hood chain is that you get a lot of retail flow which is their bread and butter. So you're right there risks to consider here you know from our perspective in the long run we want to support a variety of stable coins as collateral on lighter core as well. I mean we think USDG can be collateral on lighter core as would other stable coins. There would be some you know the risk model would involve some pair cuts when liquidation happens but you know that's all of that can kind of be um factored in to the risk model. So so I guess from my perspective you know we're we're building the core infrastructure. you know, some stable coins um may be

treated by market makers in different ways, but ultimately like the vision we're building towards is that you can use a any major stable coin as collateral. You can also use ETH as collateral, BTC as collateral and tokenized stocks as collateral. And there going to be some, you know, the liquidation model will account for that the way it in the way it measures risk, but ultimately that that gives customers the widest choice of of products to use. >> Okay. And so you also recently um announced an integration as the perplex on Telegram wallet and I wondered how that deal came about and how it's been performing for you. Um and if you have any numbers to share that would be

great. I actually couldn't find any so um I'd be curious to know how that's going. >> Uh well if you go to um we we recently released something that shows kind of all of our integrations. Um it's called Lithub right? You know like GitHub but with an L. Um and there it it should actually be pretty easy to find where we show all the integrations. Um you know in terms of partner attribution revenue uh that the telegram one is right at the top there. has done uh very well. I guess if you compare it to um I mean we we don't um focus on competitors as much but as just a data point if I think one comparison to this is kind of builder codes and hyperlquid

and so out of all of those you know they have many different integrations as do we the telegram one there's only one builder codes on on hyperlquid that has had more revenue or that has had more volume than our telegram integration has so So, Telegram is right at the top of our list and um it's it would have been number two, you know, if you compare it to the kind of builder codes list. So, it's pretty good. We'll see where Robin Hood ends up. It's only been you hasn't even been first week yet, but but yeah, Telegram One has has has done very well and they were very happy that they picked us as the partner.

>> Okay, great. All right, so in a moment we will be talking about just the massive competition we're seeing in per. But first, we'll take a quick word from the sponsors who make the show possible. If you hold crypto on your phone, your biggest vulnerability isn't your wallet. It's your carrier. AT&T, Verizon, and T-Mobile have been breached again and again, and SIM swaps are still one of the easiest ways for attackers to drain accounts. That's where Cape comes in. America's privacy first mobile carrier. Same premium service, but Cape rotates the identifier on your SIM every 24 hours, deletes your call and text metadata after a day, and protects

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you're cryptosavvy or crypto curious, as long as you have the passion to make a real impact at a company striving to make finance accessible to all. Explore crypto careers at Fidelity today and make the decision that could change your future for the better. Visit crypto.fidelitycareers.com to learn more. That's crypto.fidelitycareers.com. Fidelity is an equal opportunity employer. Back to my conversation with Vlad. So, there's a huge competition for the per space that's shaping up here in the US.

Kelshi now has its Bitcoin pers. Coinbase is now cleared to route US customers to derit PEPS. Kraken now has CFTC regulated uh per in the US. Coinbase also has its own perpetual style per futures that are just longdated futures. Um, DYDX also just launched AR Arcus, which is a stock token plus per stacks, and that's also on Robin Hood chain. And meanwhile, we've actually, you know, while this is shaping up, we've actually been seeing the onchain per volumes are falling a little bit while, um, RW RWA per volumes have been hitting all-time highs. Um and then if we sort of you know look back and um kind of see how lighter has been doing during this period the top volumes

and lighter were actually during kind of the points farming period. So I'm sure you have been thinking so much about how to compete in this space. Tell us a bit about your plans. >> Yeah I mean I think just to um clarify like I think RWA per also on chain right? So I think it's true that per on crypton native assets haven't said haven't seen as much growth in volume the last 6 months whereas per on rs assets have but all of that is onchain right like the growth that we've had with others and growth that competitors like trade xyz have had that's all onchain so I I I think the thesis of onchain growing relative to centralized

like I think that thesis has definitely uh played itself that I mean when we started building lighter like onchain perks were 1% of the overall market. I think now it's between depending on how you look at it between 10 and 20%. So um you know so I think there's that I I think also onchain technology is just at a point where it's just better right like if you trade on lighter it's faster it's cheaper and it's decentralized and verifiable and more secure than centralized players like I think telegram integration is a is good example because their their product is actually centralized but they would still rather use defy rails underneath meaning lighter than uh than centralized rails. So now of

course there's a lot of like legacy reasons why different platforms want to keep doing things you know uh not move to new technologies right away but but I think overall like if you zoom out the the ratio of decentralized to centralized is moving and I think more and more folks are understanding the value of the tech. I will now to your other point about like RWAS versus cryptonative you know cryptonative assets in general there's been a lull there right like we can talk about why that's happened but like if you look at BTC if you look at ETH look you know others like they're kind of down on the year rwas on the other hand there's tons of stuff going on between um you know like AI and uh uh you know

geopolitics that there's like tons of activity there. That's so there are these market cycles. We expect by the time we get into Q3, Q4 that'll correct itself back to closer to where it was last year. But but yeah, we we do go through these market cycles. Um but I think that's that's separate from the point that like more and more trading is happening on chain. >> Okay. And um I heard you say on the roll up that tokenized stock on Robin Hood chain will now be collateral that traders can use on lighter but um first of all I I don't think that's in place yet. Is that >> correct?

>> It's it's not in place in the first week of that product roll out which I think is is reasonable right like you don't want to um have that kind of risk um you know like when you roll out a new chain. I mean, think about Robin Hood, you know, the ambition of what they're doing, right? They roll out a whole new chain, bunch of products on top of it. Um right >> new forms of collateral. So, that that's all going to happen in the weeks to come. >> Okay. Um, but so that in and of itself also feels like it will carry some liquidation risk due to the fact that tokenized stocks and the underlying could have dislocations in the price because equities don't trade 24/7.

>> So, how does that work on the back end? like what do you need to put in place that would from from you know unfairly getting hurt >> right well they do trade 247 on on lighter uh there you know obviously liquidity >> no but I'm talking about the underlying >> the underlying as well right the tokenized stock would be traded 247 too um so the per and and the spot assets would be traded 24/7 um I mean the liquidity in the middle of the night would be less and you know right in the middle of market open I think we can agree on that but yeah the basically essentially the liquidation model like lighter or for or let's say Bitcoin right if

you're trading the liquidation fee is 1%. Right? If if if your collateral is is stable coin now if you're trading your collateral isation fee may not be 1% it could be higher that that's that to to kind of account for the risks involved in using that as collateral. So >> you're saying that's if the if the collateral is tokenized stocks. >> Yes. Same thing as if the collateral was you know Salana or something right?

So maybe the liquidation fee in that role will be you know 2% or 2.5 and that's where kind of these risk models come in but but ultimately you know the LLP and its equivalent on the Robin Hood chain trade these these assets and then you know like that that's like the LLP collects the liquidation fees and then uses that to um protect customers when liquidations do occur. Um, as we know in October 10th, we've had the best performance in terms of the least amount of ADLs and liquidations. And so, we we think our risk models are pretty good.

Obviously, they'll stand test of time and we'll we'll see how they play out with various forms of collateral. But, but yes, I mean, it's not it's not going to be the same exact. It's not like you can just say, okay, like 1% liquidation fee will just work for any form of collateral. You have to price um the risk of that collateral into that as well. Yeah. Yeah. Because like obviously on weekends um it would be much more thinly traded. All right. So um I know you have to run in a little bit but let's just talk about how um you were recently appointed to the US's CFTC innovation advisory committee and I noticed the lit token is issued from a Delaware CC Corp. Um so it sort of feels like you know these are somewhat

strategic moves. What do you feel like may might be a way for dexes or other DeFi protocols with tokens to find a regulatory path on shore? >> That's right. So, as I mentioned earlier, the CFTC leadership under chairman Celig and his team in the chairman's office as well as a lot of his staff, they were very forwardlooking, right? Like they want to make innovative products available to us customers. They've already done it with centralized purpos like there's there have been no new products like that in 10 years that that the CFTC approved and they did right now

they're working on decentralized perks with us and others figuring out you know honestly some of these same questions we're discussing now right like how how's how are different forms of collateral treated how do ADLs work um and uh yeah we expect this pathway to end in a good place. I mean separate from the process of lighter working on a license, you know, I'm uh happy to serve kind of on this broader committee which helps um the team at CFTC think about onchain trading more broadly as well as things like prediction markets and even other things like agentic trading and AI. Right? So, uh, we're going to have the first meeting of the committee soon.

Um, I'm sure there'll be a lot of fireworks there, right? Because it'll it will be mixed. Some of the folks of Strat 5 will be there, too. Um, as well as some of, uh, you know, some of our partners like the founder of Robin Hood. Um, and as it relates to tokenization, I mean, that's really more perview of SEC. And so I think SEC is working on questions like uh you know kind of when are tokens securities right like how is that all going to work you know onchain KYC I mean I think that's a little bit orthogonal to what the CFTC is working on which is really more around leverage and risk and um you know matching buys

and sells fairly and all that. So anyway, we're we're most of our time is spent with CFTC, but we're also to the extent that it's helpful um providing input to others in DC uh in um you know, whether it's Senate, Congress, or or other agencies. >> Okay. Well, Vlad, as far as I understand, I think you have to run. Um you know, it's unfortunate we didn't get to all the questions, but we'll just have to have you back sometime. But thank you so much for coming on Unchained. >> Absolutely. Great to be here, and yeah, would love to be back. Apologize about the the audio issues this time.

>> Yeah, no worries. All right, everyone. Thanks so much for joining us and we will catch you next week. Bye now. Nothing you hear on Unchained is investment advice. This show is forformational and entertainment purposes only and my guest and I may hold assets discussed on the show. For more disclosures, visit unchainedcrypto.com.