Interview with Zee Prime Capital, Part 2 - with Su Zhu and Hasu

Transcript

welcome to Uncommon Core where we explore the Big Ideas in crypto from first principles this show is hosted by suzu CEO and chief investment officer of three arrows capital and me hasu a crypto researcher and writer this is part two of our conversation with MTI and fantis of Z Prime Capital while the first half was more philosophical in nature this time we talked exclusively about different blockchain projects and how they might connect to each other in the future I believe that with gas fees in ethereum being as high as they are right now the Advent of sharding and layer 2 Solutions

and the first credible ethereum competitors like polka dot Cosmos and Solana coming to mainnet this topic has never been more relevant in this episode we covered why Z Prime invests in polka dot and its ecosystem different approaches to interoperability binance smart chain and what role Bitcoin and ethereum will play in a multi-chain future I actually I want to talk to you about polka dot because um polka dot is a I think it's is a top five I haven't checked for for like a week or so but um it's a it's a project that's very high

in rankings um it has a very large community but nonetheless it is um quite difficult to find good information about the state of its ecosystem and um as we covered in the first part these Investments are actually all about narrative and the memes and so the community is always like a really important part of thesis for me when I want to invest in something that's why I think it's great to have two people here who like have a lot of experience with the polka do ecosystem and can tell us something that we might not be able to learn on on Twitter necessarily from what I know you're one of the one of the bigger investors in the polka dot ecosystem can you quickly summarize how polka Dot's architecture and vision

differ from that of ethereum because we have a lot of listeners who are very intimately familiar with ethereum but may not be with polka dot yeah maybe just let me give you a brief kind of um intro to paa like how did we come across paa so for me it's more of a personal thing so um I actually read the the paper uh the what I don't know it was the first white paper I think it was like December 2016 uh like crypto was a new thing for me back then and um um actually the the first crypto fund that I was involved with um like Kevin was an adviser so throughout

2017 and 2018 I had the privilege of of you know talking to him and uh um for me it was very much also like a personal bet so I I saw this person I know that Gavin you know like he gets like a um he's a bit of a controversial figure so um but I saw this entrepreneur and for me you know the way he talked about the project the way he talked about poad do was something that you know sort of instill this conviction uh within me so I I was lucky to to be there early and to kind of see the um uh division very early on and and Gavin saw it um I I think he even

discussed it publicly is kind of the original vision of ethereum and um that was something that stuck with me and um I for me it was a bet on on the on the founder of the project from from from from the get-go and um then as you know thing kind of progressed um I saw that these um uh these Visions are are materializing and um when I mean when substrate you know this this kind of um you know the tooling um for for polka do was released I mean it was clunky and all that but when we had you know some of our de friends have a look at it they they were impressed so um so it was you

could say that you know I was lucky to to be there uh early on um and to kind of um had this bias instilled in me because I was around this this founder um and then it kind of funny thing is that we actually Z Prime Founders um uh co-founders and you know Partners we have all first met at a paa event that actually I um sort of I wasn't running it well I I I sort of created this event in in in Bratislava Slovakia it was like mid to late 2018 it was before V 3 was even doing poka do meetups it was actually it was poka do ocean protocol And Hive do

one event um so and and we all met there I mean we we didn't sort of like I think fisy uh he thought that I'm some kind of pill and he was very skeptical about me first and it was actually Jacob um that that kind of connected us later on because we we we also met there so chance played a role there so I don't want to say that maybe if I was closer to a I don't know cardano founder I would have a different bias or something like that so um It All Started With a Chance um but then you know the thesis was kind of confirmed so I'll let maybe fisky to kind of elaborate on that no I just I just add that I'm still probably the most skeptical um guy when it comes

to poad do from our crew so I I still you know try to poke H um I remember just reading the white paper in during the Ico was it 2018 or 17 I don't even remember U but uh you know it was like huge buzzo Bingo they they made up a lot of terms like fishermen collators and I was really confused and I thought it's it doesn't make any sense so I I passed on that um and it yeah and when I met Matti you know it was interesting but you know cardano seemed much more interesting to me technically for some reason during that uh that time um it was only like what uh one year one year uh ago when I really started to

appreciate uh the tech and and the vision behind it um I remember e Berlin 2019 you know when Paul cadot had its own conference docon and uh cardano held some sort of a small event somewhere uh with with community and you know the community were like three guys in a suit who looked really beaten down and TI and and padot was this Lively ecosystem of of really smart guys and developers even from ethereum and elsewhere who were really like um eager to to build something on on poad do so this is where where it first kind of clicked for me um I'm also very interested in governance

experiments like I wrote an article about governance where I where I kind of uh duck deeper into Dows and and some sort of uh uh like experiments on on decentralized consensus layers and and smart contracts and I think like one of my bigger criticisms around pad is that its governance seems a bit over engineered especially so early when there is no real validation that it really works and you know they they made it a bit more complicated and I kind of feel that you know they may be focused more on like this power structure and and like this governance side of things than than some other pects that are maybe more important uh on the other hand

especially you know being close to uh to guys from Hydra DX I I see a lot of uh unique features that substrate and poka do offers that other um like layers or platforms really don't offer and are nowhere near uh offering so I'm I'm getting more bullish on it as time go time goes um with some reservations of course and yeah being being part of Z Prime you can't really be too Bish on pado because you know you wouldn't last too long I'm just kidding um so yeah so that's my personal experience with it so far maybe to kind of um what what people often um I don't want to say don't get

but when starting to explain polka do um I don't like being at frame as another L1 or being a ethereum killer um I always kind of try to explain it as like layer zero because it is it is a layer I don't know below or or above but it's um like ethereum could be a part of poka do I mean in theory um so you have this this this kind of relay chain that is kind of connecting the uh the universe of poad then you have different sort of what they call parach chain um being on top of the on top of the relay connected for relay which kind of allows you to to

have this um joint security or this um uh kind of um big um I think fisy how did you put it like it's a it's a NATO or something like that yeah yeah I I have this I mean it's analogy and analogies are usually like pretty weak arguments but I I like it because it kind of explains it pretty well um ethereum in my eyes is like centralized Empire with one loss one consensus layer and you know everybody tries to build businesses uh within that Empire and maybe have some colonies like some side chains or layer twos outside of it as well um Cosmos is another like extreme where all these like up specific chains

Cod zones in Cosmos they are like independent they need to bootstrap their own security have their own validator set and uh they then connect freely via some sort of uh uh let's call it trade agreement so they are like independent nations uh within a free trade zone but they still need to uh figure out their own like security and rules by themselves and PO is somewhere in the middle where um you have these like semi-independent entities called par chains where they can build their like layer from ground up but then they uh if they want to be connected to the overall pad ecosystem they need to uh be part of this security Alliance something like NATO where they

pay some some tax or some tribute to the ecosystem in forms of uh uh dots paying for para chain slots or like bonding dots in Para chain slots and for that they get shared security and like better composability with the with the rest of the ecosystem uh what what some people don't understand about padot is that uh you can have your own blockchain built on substrate which can then communicate with maybe rest of padot maybe with Cosmos ecosystem or with ethereum and you don't have to have para chain slot so it's it's an option so let's say Hydra DX aims to be a par chain of course but if we if we didn't get it somehow um if Hydra wasn't a par chain

uh it still could serve as a independent substrate based chain with its own validators with its own security and it could still work quite well it it wouldn't it it doesn't have to be like this part of of this Inner Circle if it doesn't want to but it brings a lot of benefits so obviously we and like almost everyone else in the PO ecosystem tries to be a par chain so the way I understand the par chains is that you don't have just have one application per par chain right you might have one defi ecosystem that is one par chain yes so and you you're saying that Hydra hydrax is a project that you're incubating it's a de centralized exchange correct me if I'm wrong um so what is the logic there

to getting your own par chain instead of joining some pre-existing D5 par chain I really wish like some some more tech technical uh guys would be here from from Hydra but uh there are some parach chains that are generalized so you can there are like ethereum are smart contract um friendly and you can build stuff on top of them something like moon beam and actually I think Sushi swap is uh is extending uh itself into Moonbeam to be part of pad ecosystem this way without needing to be a par chain or anything like it um but when you design something which which is more complex let's say and which is probably um which aims to be an integral part of the

infrastructure I think it's very beneficial to build build it from the ground up to design your own consensus and to kind of run your own chain because then you are able to tweak a lot of parameters which you wouldn't be able to tweak if you were built on some separate base layer uh where you inherit all the flaws and design choices of that base layer like ethereum is a good example you can't really mess with block time right if you are just building a smart contract project on top of it but when we are building Hydra we we don't think about it as just another Dex like some I don't know some unisoft clone it's it's very different from it it's the design is much different and we think about it as a liquidity layer for

for pad ecosystem and maybe maybe the future of fin in the future um so uh so so for that reason um there are lot of things you can really play with uh one short example is that uh when when you when you have uh an exchange you can have multiple types of transactions some of them are just simple trades and others may be let's say liquidations and when you are building it from the ground up you can actually differentiate between these type of transactions and you can let's say prioritize them in in in a different way uh you can you can just uh you you are not forced to just you know accept them in in a simple order you can play with it more you can

maybe assign them different fees or or different auction parameters or something like that I just wanted to add that that basically this means you don't have to compromise the use case because of the underlying Tech or you build a tech for specific use case and um you know if you're building this liquidity chain um um par chain uh hopefully um you know you can you know these critical issues uh defi critical issues can be prioritize say on a consensus level so um you know increasing chance of um executing even in har condition Etc so um it it allows you to um yeah to sort of to custom build a technology uh for

for the specific um applications that hopefully will emerge on top and yeah there is this larger point maybe you have read the article from multican Capital which is basically their Solana investment Theses which says that like you know the world computer should be architecturally centralized meaning that you know all the all the projects all the defi or like crypto Financial projects should have like common uh shared uh layer you know below them and it should be like super fast and and scalable and all the all the Jazz but uh I I I mean we are bullish on Solana we are investors in Solana and we really think

it's it's a great uh ecosystem and it will be a big player in in the future um even even now it already becomes one uh but we or I don't think that uh this is how the world will like unfold or the world of crypto I really believe that uh there are enough reasons for for projects to build their own application specific chains and they may connect to Cosmos they may connect to pado they may you know choose some other way but eventually we will see like all this heterogeneous future of uh some big uh single specific uh use case chains or maybe some generalized chains like ethereum that will be used for Launchpad

as a Launchpad for ideas and and for quick bootstrapping of of ideas and then maybe this this uh dii protocols which are built on ethereum they will span multiple ecosystem they will try to I don't know uh boost up their own validator set and become their own chain and kind of basically what I'm saying is it won't be neat and elegant and unified one layer and then multiple apps on top of it but it will be a huge mess of all these different kind of solutions for various reasons and you know like even Financial use cases there are so many of them and they are so sometimes specific that being constrained to one layer and its rules even though the layer should could be super fast it's still very

limiting and it doesn't you know unlock the full potential of of what crypto offers so two things that I've become very skeptical about over the last years one the first thing that people get disillusioned about the scalability right when they realize that scalability is actually distinct from throughput and it's not actually scalability if you scale the throughput um while also scaling the need to consume resources for example making it harder for people to run notes in the network um and then you immediately realize that all these transactions per second numbers are actually completely meaningless right that that that all the new projects quote that specialized in that but the other one and that's kind of where this

hooks into our topic is um interoperability it was a very popular narrative for the last years that like interoperability between blockchains will be possible it's always right around the corner and I feel like like your entire thesis around polka do kind of hinges on this idea that power chains can communicate with each other like in a seamless way and um for example it's not enough right that you can communicate with like a a one minute delay or whatever right that's already not not great because it breaks the atomicity of transactions so I'm kind of interested how that works and if you have actually seen any like any real

proof that communication between chains is actually as seamless as they say yeah well I I will start with the first point um because that's it will be a quick one um we we are seeing even now the generalized layers uh even even though they they could be scaling like too high TPS um if if you have too many dexes on on top of one layer and heyden Adams pointed it out recently on Twitter there will always be Arbitrage opportunities and you know that means that the more Dex is you have the more like price differences you you occur the more trading activity happens and on ethereum right now it seems like like it looks like a cancer a bit like there is

growth uh in in number of dexes and number of of trading Pairs and And Trades but the growth is killing the host it's not healthy anymore the the marginal new Decks that is launched on ethereum is harming the space more than it's like helping anything so this is one of the reasons why even though you may have like um super high TPS you know you will you will reach this limit sooner or later like even binance smart chain it's basically ethereum with with much higher throughput because it's like centralized but even there if there will be too many like uh dexes and too much trading activity going on you know it will it will consume all the block space nonetheless and there is no easy

Redemption for it just to separate you know the various use cases on their own chains and validator sets and kind of make them talk to each other in some way maybe some of them won't won't even be like fully composable with everything else maybe they will be partially composable and they will have delays in some cases not just for like scalability reasons but also from the perspective of being secure because lot of these things are less secure because of composability and I will let Matty answer the second question about po interrup yeah so um um the XMP the sort of the across chain message passing is um is still um not launched so um this is a critical

component that will be released um hopefully very soon uh first probably on kusama um and uh then on on poot as well so that is that is that is a feature um that uh sort of enables relay to to to function um natively um and and there's a difference right between having a sort of this this relay having this cross cross chain message passing and and having a bridge because because bridge is something that you have to build again right and uh um still you know we have very few working trustless bridges in crypto um so it's I mean interop interoperability

as you said is always around the corner um but I believe it um it is this year when we actually see this happening and uh and I mean polka dot in a way is just a um another take on charting um where you have you know these power chains being sort of their own chart their their own charts and um it's you know all of these are just different kind of framing of the same kind of solution um and um we don't know how it's going to look at the end right and what I believe is the future is like very kind of flexible stack um um so layered stack and very

flexible so I can imagine that um there might be application that will be using different layers and you might not even know what layers you're actually using what kind of middleware will be involved in that and um yeah that is also part of our kind of middleware thesis so um but inter interoperability is um um I I believe you know this year um we'll see big things we also have IBC from Cosmos uh being rolled out finally with Stargate update which uh which I mean I'm just starting to play with Cosmos ecosystem right now as well to see how how it works you know what is the state of

wallets and and the ecosystem in general and I think it it will be maybe even less than than a year maybe six months and we will be sure if it's working or if it's if it's like if it needs another couple of years and then you can go back to some like shabby Bridges you know bridges are hard to build everybody uh everybody early in pad ecosystem was like saying yeah someone will build a bridge and we will just Bridge it and it will be fine and now people realize like bridges are hard and there is probably only one really decentralized bridge between two smart contract ecosystems and that's uh ethereum and near protocol um and the sad sad thing is that the

Rainbow Bridge yeah yeah yeah I I I think that one is is uh is ahead of anything else everything else is much more reliant on some some centralized party how does it can you remind me how it works again um not not really right now I I would need to dug it up uh but I remember reading it that uh that it was it kind of uh it uses smart contracts on both ends that just you know lock assets and and it kind of works well together um but uh but the the thing is that near doesn't have nearly as much traction as and hype as as other ecosystems so we may not see see it being to used very soon I hope it will get used and tested in practice because that's always what

matters you know everyone has this like cool technology uh put in the paper and maybe even on some Pro of concept production but only under heavy load you can see what really works and what doesn't yeah and there are also like different concepts of you know of building Bridge like uh you could you can I think what they say is that the you know bridging two proof of stake system is is easier right than bridging ethereum with uh with near or with pad do um but um you know I I think that if we go back to Cosmos uh as fisy was was mentioning um you know most teams that you know most I don't want to say

capable teams but the most capable teams that that that we saw we we invested in um building on tendermint have no allegiance to Cosmos ecosystem like there's no Cosmos ecosystem I mean maybe U there is but like polad do with its first like FB free Summit like you could already see that there is a There's an actual kind of identity of you know polka do and um but you know where do you know do you even know that you know Tor chain is is you know like took tenderman and like completely changed it or pocked you know these are very technically capable teams and um granted I mean tender me was there much much sooner than than substrate but

then again like I don't know uh how much I mean I know that a lot of effort went into sort of changing the kind of the core Tech that they took from tender right so um that's a big difference right that um like I think Cosmos is kind of trying to replicate what paulot has done right now because they realized that their approach probably wasn't um I don't know whether there was an intent to create a community or not but polka do started as this identity um and now they're sort of trying to they're now now technically bridging these these different projects within the system whereas Cosmos just I mean didn't really have that like um as in you know the

tender and and Cosmos wasn't as much connected as as a substrate and poka do I mean that's that's my perspective so maybe maybe I'm wrong but uh this is how I see it one way to look at it is that Cosmos is a bit less coordinated but a bit more the centralizing Grassroots because it's it doesn't have this it doesn't have a shelling Point asset like like dot uh it has atom but you don't need atom to start being a part of even inner Cosmos ecosystem um and it doesn't have uh you know such a big backing of entity such as webtree Foundation uh and parity um so so it's it's a bit more Grassroots it it will take a bit more

time it will be much more messy I would say and like let's not kid ourselves even ethereum which is right now the like the Pinnacle of everything um it it it got pretty bootstrapped uh like pretty much bootstrapped by by Joe luin and and cons sensis and they they ped a lot of money into the space to build a developer tooling which is one of my other like strong opinions that uh you know t PPS and all the J doesn't matter too much if you don't have like really good developer tooling so developers can build cool stuff very quickly experiment and and roll out new features very quickly on your chain um which like ethereum is like light years ahead of everything else and that's why we have

seen like binance chain being built on tender Min not getting too much traction and then they buil binance smart chain which is basically clone of ethereum so they can copy all the dev tool link and and all the all the smart contracts from from from ethereum without too much like hassle so oh I didn't even know that binance pivoted from the tend chain that makes a lot of sense I mean they it's it's kind of messy they still have both so they have like binance chain and binance smart chain for example if you interact with Tor chain you can do it via be which is like the tender M chain but lot of this a lot of this new stuff like pancakes Swap and all these like um clones of unisab and other projects which are popping on binance chain now

are popping on bance smart chain so they have two blockchains one is tender and one is ethereum clone yeah and and when we talk about tender that's also kind of unclear right because um you wonder what the play is there because I think Paradigm is invested in tender so you can say that Cosmos ecosystem has a major player backing them uh but I don't know what the play is there so uh it's it's pretty interesting to to to see it play out um they they from from what I understand they realize that uh for any for any concrete chain to become a hub or this dominant player and to acre value they need to have a deep liquidity um that's why uh atom and or Cosmos the chain is also building be Harvest which

is like liquidity protocol for for Cosmos and you know there is store chain as well which is like um which is part of Cosmos ecosystem Loosely set so yeah liquidity I think liquidity is the key for all of these projects and you know um it's it's it's kind of it's it's cliche to build a DEX now you know there are so many dexes with so many flavors and even with Hydra we kind of feel that we are already in a pretty red ocean however we are proud to say that Hydra is like very different from anything else and we really believe that liquidity is one of the Key properties of decentralized finance and that the best solution should should ACR a lot of value and and this is the backbone of of defi like having deep and maybe even

like capitally inefficient and redundant liquidity I just wanted to add that it's very interesting how you know like 2017 was kind of or even slightly before that was there was a lot of macro bullshitting like you know fed protocols I mean like it for for the time was like great interesting right but um it was like sort of replaced by this very kind of particular I don't want to say m micr masturbation but you know you know D5 very specific things amm Etc and um it's it's almost as you know like an overcompensation from like these you know like befree you know General Theses to like very specific things and now we're trying to maybe you know perhaps correct and uh try to get into you know like find a balance there um so it's

very interesting how how it evolves and uh like you know even understanding amm and you know the the very kind of nuances and and and and the and and the small differences between all of them it's um it takes a lot of time and uh you know you have to have some pre-existent knowledge of of financial markets and Etc and the promise is with with something like poka do and Cosmos right I think it's it's that um if anyone launches a token even if it's on a different Power chain then they can still natively access that token on your power chain right so every token is available on every Power chain yeah I I think that's the end game but there are some reservations to it like I said

earlier the sometimes the composer ability is not desired in every case for 100% of of what you can do with it like there may be like parach chains or Cosmos zones that will for any reason they may um like restrict composability for example they may um just WID list some some assets that are already proven and that are not toxic or they may like um restrict the way how smart contracts uh from other uh like chains uh operate within within their own par chain or or Zone just because they want to they they think that maybe the security is higher priority than full composability right

now in on ethereum you don't really have the choice too much I mean you you can do some things but uh um sometimes you know being fully composable means that you are exposed to all the external risks you cannot really control and then you know when something big fails there is this cascading effect of uh of shocks inside the system which which you cannot really escape and that will affect you um with with fees growing liquidations uh some prices may lose back and stuff like that so um so so I'm I'm not saying that we should abandon like composability no like I think it's one of the biggest features of the space but there will be trade-offs and some of them won't be like 100% skewed towards like the most composability

I would like to go back to what you said bit earlier about the future or the end game of um of blockchains kind of being um that there's like one relay chain and doesn't have to be like the relay chain of polka do or of etherum 2 whatever but the idea that you have a lot of depth chains around that right because the developers really want to control the experience and as I understand it substrate is basically a blockchain builder right it's almost like Plug and Play right where developers can select from different features and parameters and kind of build their own blockchain and control the experience of their users much more than they can today on ethereum and um I increasingly think that ethereum is going to go in that

direction as well so we only mentioned polka dot and Cosmos um but I think that ethereum is going in the same direction due to rollups so there is this there's still the very prevalent um narrative that the rollup game is is almost like winner take all right it's it's like there will be one big rollup and um the projects that coordinate on that rollup right all the projects will be on there in order to like maintain their composability with each other um but I think there's also this completely opposite view of how it could play out and that is that rollups are uh ethereum's version of app chains where

many apps will have their own rollup um and they will be able to customize it and I actually like after learning more about um how rollups work and what actually their like kind of drawbacks are especially with regards to the security model I think that um I think that's actually the far more likely variant um that it's going to play out that way I'll be interested in in hearing like how you how you apply like these views to ethereum from my like let's say business point of view I'm not sure how how to call it better um there is not really that big of a difference between um side chains alternative chains and l2s like all of them require some sort

of bridging some sort of some way how to interact with with the chain you start start off from and then you know there are different Technical tradeoffs and and scalability features and like uh all the things you can you can kind of uh um develop on top of them and you know it's it's probably more of a semantic debate like if if the particular thing thing is side chain or L2 um XD chain Works quite well it's pretty centralized but you know it's it's good enough for like uh uh some projects to to kind of scale into uh some some of them may even span multiple ecosystems I may have optimistic rollup uh base and also be on

on Moonbeam or or on pad do like I I can see I can see this developing further like some definitely some applications will will span into m people directions at once and then they will just you know see what sticks um but but yeah definitely ethereum even even like without ethereum 2.0 Vision Without this like full sharding which would be very close to poad do um ethereum can remain a dominant player just thanks to rollups just thanks to side chains and bridges to other networks as well and like even if like poad do or Cosmos uh um like let's say version of the future will will be done dominant um there is still like a good possibility that major

player will still be ethereum it will it will become let's say a major Cosmos Hub right with with lot of activity lot of liquidity on top of it and if it bridges into Cosmos ecosystem it can it can like suck out a lot of activity into it um and just you know it already happen it's already happening today there are some projects uh which are already being used on Cosmos ecosystem like Tera and Tera is bridging into into to ethereum and the stable coins uh that Tera offers and some other synthetic assets are also being used on ethereum right now so so from my understanding you know if it doesn't mean that when when when we say that you know this is the future like

poad is the future like it's bearish for ethereum it will change the landscape but it can change it in a way that even helps ethereum to to take off to take off the pressure from the gas fees a bit while you know maintaining the things ethereum excels at which is like quick experimentation with lot of Highly com like interoperable and composable like projects I think that as as I said before that you know like all these um you know whether it's poka do Cosmos or or or E 2.0 like these are just like they're I think they're in essence sort of converging on a on a similar Vision right and it's just race uh I don't know if you remember but they was a

controversy with afre uh when he once tweeted like uh Serenity or E 2.0 like or PA delivers what what e 2.0 should deliver right so basically he was right in a way right like these like these are very similar um sort of goals um and um in a way you could think of it as a as a as as a race right like who gets their first and who offers this interoperability scalability whatever you want to call it um first so it's going to be interesting I I don't know how how it will end obviously um I just think that um like they're like these ecosystems

are not like mutually exclusive right it's not like it's going to be one or the other um I I think that uh the problem with ethereum is that you know in a way it is a victim of its early success right because there's a you know ton of infrastructure or you know sort of apps value on it right locked uh in in etherum defi Etc so and I think that you know that kind of you know not only adds pressure but um sort of um you know do these upgrades you know break sort of composability or you know the uh break existing kind of um infra um existing smart contracts Etc so I think that uh for them it's like for ethereum is very

difficult to kind of to experiment at this stage right so poka do Cosmos they probably sort of you know can be more take more Liberty with experimenting rather than um just being very careful um with regards to l2s there is one thing I I forgot to mention and this is like zero knowledge proofs in general I would say that they can change how this all this works very drastically in a way that are very hard to foresee right now but you know know all like every like opinion and thesis I I personally have about application specific chains and layer ones I think it can all be like changed dramatically if zero knowledge

proofs will uh will be more developed and uh we will solve the computational intensity of them um so this is this is like let's say um black horse of uh of scalability and infrastructure uh topic of of block CH like if we somehow um make some breakthrough in in using zero knowledge proofs we can maybe we can throw all the rest of the stuff we are like talking about right now out of the window so this will be interesting to see in maybe next three to five years yeah I mean it's going to be it's going to be interesting to see because there's a lot of different things going on now in I guess what I

would call like deep Tech Primitives in crypto where we don't we don't know how it's going to play out because it's it's a narrow band phase of defi so like everything is super narrow band we we're really feeling the narrow band of ethereum now and we can kind of all imagine how great it would be if it was just Broadband but we don't know what Broadband will look like and we also don't know how value will acude to the things that bring Broadband so like you know e the you know fees weren't really high and now all the layer ones are going up a ton because people are like well if these things can bring scaling if these things can can um help solve then that would be great right so you know avac near do kusama and and

like Cosmos as well you know the past few days have been doing extremely well off of that um and I I do agree with you guys too which is that it's actually better for ethereum in the long run if sort of many other smart contract chains are trying to solve the issue of scaling uh because they can one learn a lot from these approaches right I think a lot of the E2 road map has changed from seeing what has been explor it on other chains uh yeah and I also think too that it just gives it a lot of Vitality and it gives it a lot of uh Ro like robustness to the process um so right now it's really interesting to see on E layer to where you have like

optimistic road map and then you also have like the ZK uh syn road map and the trade-offs there are like quite different um and I think a lot of teams are now like looking at polka dot they're looking at Cosmos but it's still very early days as well so I kind of see it as like it's very difficult if you're if you're trying to build on ethereum right now and the frustration is real among aot a lot of the application teams like we you know we've invested in app teams where they have to delay main net because there's just absolutely no way they can get users to to kind of interact with it right and there's you know there's this big Dark Horse which is I mean I think the real dark horse

has been BSC right where you know they've just come and said okay you know like even though it's basically a POA it's basically proof of authority but they said well it's almost like it's almost like ethereum it's almost like Defi and then a lot of people are going and playing with pancake swap these kind of things and you know I think Andre he said during a clubhouse um Talk he said like you know if you're a def5 builder today just build on BSC like don't for Layer Two like don't do this just put it out on BSC and then at least you'll have something that people actually use for now uh because you know it cost you like 15K to deploy smart contracts on ethereum right now and you know the the the par chain auctions they're still ongoing and you know it's in terms of

the spirit of like the Grassroots experimentation my my fear is that ethereum will lose that for a while and so hopefully with ler 2 it'll come back but um I do agree that I think ZK uh would be a very strong approach in the long term but there's the tech is still very new um so so I do generally see the next few months as like kind of a a very volatile period uh in the whole application layer layer one space uh you know there there's some people I speak to that predicting dot flipping of eth there's others talking about you know salana flippening of eth and all these kind of things I mean I generally don't buy any of this kind of stuff as much like because I think ethereum has a

massive Network effect from the from the erc20 uh Network effect and just from the uh metamask and usability and composability and developer mind shares I think that's a massive Network effect and I think ethereum actually benefits net from the idea that blockchains are actually useful and that people are actually using web 3 uh it's actually the biggest beneficiary like of it uh I think to to to even the detriment of Bitcoin um in that sense yeah right um I mean I think ethereum can maintain itself for a long time by being like a an a place settlement layer and a layer for very high value use cases but that shows very nicely how ethereum benefits from all

these other chains because if ethereum is only for high value use cases then where is the place where people actually use a blockchain for the first time or developers actually deploy a blockchain project for the first time it can no longer be on ethereum maybe right I mean maybe it can be on a layer to but more more likely it will be on something that uses um basic is basically a copy of ethereum um but it's more centralized right something like BC um so it seems like BC is is going the the route that kind of Tron tried to go and kind of failed at it almost a little bit right I mean it feels like they are realizing this Vision a lot better at the same time I think we see now like didn't

didn't we see um a decentralized Futures Exchange um launched straight to Layer Two I forgot which one that was but um that must have been a couple months ago and they are actually posting pretty nice volume yeah I think you are talking about Perpetual protocol which are which we are like also an early investor I think we are first money in actually well that's actually great so can you walk us maybe through like their thought process and the challenges of launching straight to Layer Two yeah sure I mean I they they didn't launch straight to layer 2 they had a main ethereum contracts as well they did an LBP and then they uh then they wanted to like launch straight away and they realize

the gas fees are especially for trading use case they are like untenable even it was like last year September or something I guess um and they realized that you know a lot of these defi defi use cases right now are more passive you provide LP maybe you trade some spot from time to time you yield Farm a bit but you know when you want to do some some more active trading with leverage which you are usually doing with leverage you are more active then you know the fees will be pretty cannibalizing to your pnl um so they were researching couple of options uh optimistic rabs as well and they were discussing with this with me and then they went to XI chain and the reason is that XI chain is also a copy of ethereum

uh it's something between proof of authority and proof of stake right now I think it's more more leaning towards proof of stake um there are a couple of validators it's like it's not really too decentralized but but it's good enough U for like some Pro of concept uh kind of boostrapping of fast uh fast def experience it was working well even before binance smart chain was working well I remember experimenting with binance smart chain like last year in summer and the experience was so awful I I like three times I thought I I lost all my money somehow so I I ran away from it and maybe you know I have a negative bias towards it right now

because of my past experience maybe I missed out on it like in recent days but XD chain was working quite well there was some uh there were some other projects sporting to it some nft projects uh that are using it right now um metac cartel is also like proponent of exd chain for for some low value use cases so um yeah so so they just basically tried it and uh they made it pretty easy to kind of start trading there um they and yeah they are seeing pretty nice volume they are actually I think per protocol is actually now like uh um responsible for majority of XD chain volume already um and yeah I mean they

still like they want to attract more users so they will release some trading incentive so the real stress test I think will is still ahead of them but I would say that they are one of the best experiments on how to bridge native ethereum into some other side chain which is very similar and I'm not sure I don't think they will stay there for forever I think they also will move somewhere else in in in the future or maybe they will expand multiple ecosystems as well um but uh yeah I think they are they are early example of this like being viable they are doing between $30 million or something something uh I'm not sure now if if it's like 30 million or or what a day but uh

yeah need to figure it out but yeah they are they are pretty they are pretty successful in it um I mean the biggest challenge is to get users using it on the other chain right where do you guys see the role of Bitcoin in a world of increasing interoperability I think that you know when people talk about Bitcoin and talk about defi like this somehow it's still framed as sort of similar or adjacent but I think it's a totally different thing like Bitcoin is a defensive technology it's something completely else um and um the future probably something like you know like like brand has shown or some other Bridges probably that is the is the only way to connect

it and um I think the defi is trying to do something else like Bitcoin as I mentioned is like a defensive technology it's it's going back to the sort of um um like the I don't want to say Austrian economic foundations but it's sort of it's revist in uh in that respect whereas defa is trying to kind of ride the wave of of the uh current kind of monetary environment um and um it's it's it's pushing the boundaries and it and it's it's going to get increasingly kind of uh disconnected so we still we still will see uh Bitcoin in defi but I do not

think that it's related at its core I think I think it's more connected I think the narrative is like you know still um kind of disrupting uh traditional finance and Bitcoin is let's say disrupting gold and monetary policy of central banks and maybe a Fiat a bit defi is disrupting all the rest like you know Financial Services leveraged prod um all that J so I would say they are kind of connected in a way but you know they have very different core values and uh uh I think it's good that they do because we need both I would say we need we need to have some petrock I would say uh something that doesn't change too

often that is really like super simple and super stable and it's here for you whenever you need to just park money somewhere and and just I don't know be super sure they are there uh five years later um I think I mean Bitcoin has some long-term problems with with like with subsidies and stuff but other than that Bitcoin thrives for this value for this like um being hard to change being reliable for the long run being simple um while all the other stuff is like you know it can change uh under your feet it moves fast you know you don't know what the next big thing will be so you are trying to like cover everything and and just you know diversify whereas like bitcoiners they they don't really need

to diversify they have this one one simple truth one big story that they believe in and and I think it's important story to have and and to kind of uh to be able to go back to if let's say everything else fails it's like it's like a back stop and yeah I mean we see tokenized Bitcoin on like being used in defi quite heavily as well so um I don't think it's going to change too much but I mean it's clumsy it's not something that uh uh that is super elegant but it it's happening and Market demands it so you know Market will provide I think that the fact that you know like Bitcoin can get accepted much sooner than defi

is also kind of key uh because you know I have come to realization that that Bitcoin is like has become like a pascals wager for for many I mean for the you know Finance industry in general whereas defi is something you know like completely divorced from uh you know like it is almost a mockery of of financial system in a way and um and it's really like even you know think about it how long did it take to like you know some of the more legitimate um uh in investors like traditional investors to to to accept Bitcoin it was it I mean still there are only few in but defi I think that's uh

and I and I still think that even they're even when they're in Bitcoin they still don't understand Bitcoin um so it's purely a p pascals wager for them and um then try to understand defi um and try to explain defi to someone who who doesn't even understand Bitcoin I think there's a there's a huge leap so that's why I think they're they're totally kind of I don't want to say divorced but they're they're they're separate things but I I definitely think that you know Bitcoin will exist in defi the same way it exists in C5 right so um but I wouldn't kind of think that uh like uh like defi on bitcoin and that sort of thing like that's I don't know

if that's that's interesting um one one sad realization I had um couple of weeks ago was when I realized that Bitcoin is actually very uh CFI friendly it's it's something that that needs centralized infrastructure to to kind of work well and to get adopted and uh you know now all these banks are realizing it as well and instead of bashing it and calling it red poison they are actually like on boarding Bitcoin codal services and some other Investment Services to kind of uh uh profit out of Bitcoin um even without needing to fully understand it because it's it doesn't allow for like

independent uh you cannot build independent infrastructure on top of Bitcoin right now and everybody was super helpful about lightning Network and how there will be laps like lightning applications that will be decentralized on top of lightning and I don't see that happening anytime soon you know there is like three years you know later and we still don't have any meaningful use case for lightning Network and partially that's problem of incentives like you cannot really make too much money running lightning node and and farming on Lightning like you would do on these but I would also say that the tech still has some challenges to overcome before it's really usable for for like the mainstream so Bitcoin

as it is right now is pretty it the product is pretty finished it's digital store of value it's it's simple to understand Banks can like offer it as a service to uh to their customers and I don't think it's necessarily bad but it's definitely not what we are here for and to see full potential of crypto and this consensus we kind of need to also look elsewhere while being able to go back to bitcoin when we need to when there is some you know when there are hard times or something like that and and maybe one thing that I kind of um I didn't say is that you know they obvious I mean we do see like um some kind of Legacy uh players like market makers

coming into def5 right so um there definitely are specific players that do understand the uh the new on of it and uh um and and yeah so it's um there there are some um sort of C5 players uh that that that do get def5 but I still think that this might be a pascal wager on this side as well um you know coming into Def and trying you know like uh be on top of these you know uh amm uh experiments Etc so um yeah um so do you think that Bitcoin is already mainstream I I think I saw you Tweeting something about it or maybe it was our

discussion yeah I think it's actually very close to if not already mainstream in the sense that um I think just a few weeks ago I saw something where more people thought Bitcoin could could double within a year than people thought Tesla could double within a year so I think there's you it hard for you to find someone who doesn't know what Bitcoin roughly is these days um including the the latest narrative as well for Bitcoin which is as a store of value which which has a fixed Supply I think pretty much everyone knows it and I think that for that reason like Bitcoin has a really has a relatively safe positioning over the next few years just because

that um it has that kind of inflow of people who say okay like you said the a Pascal's wager where you know they think stocks are expensive they think you know the the things they see in the real world are expensive so this as a piece of digital scarcity it it seems like it's fairly priced or it seems like it's accessible to them and they need to put some percentage in um but at the same time like I I recently kind of thinking a lot about the um kind of the idea of like of of the M's regression of money of of of uh of how monies compete and thinking about how ether you know it it is really trying to go at it from a very

different angle at this point right where you see massive amounts of ether coming out of exchanges almost every day uh you know the the amount of eth on centralized exchanges at alltime lows and kind of uh you know at the same time like the transactions being paid on ether uh on the ethereum network have gone you know to incredible PR you know to incredible levels the value transacted on ether has recently flipping Bitcoin and so like at the same you know I kind of hold these two truths at the same time in my head and it's I I often debate with you know the three Arrow Partners about like how is this really going to play out because because also you see in the backdrop of this kind of Bitcoin uh mainstream you see ether outperforming relatively and you see people really get excited about

using blockchains and transacting on blockchains and and so you know there's some part of me that wonders like is the M's regression not over right like where we are still regressing what is the base money and you know people still you know because because ultimately it doesn't matter what OG's own it it if a billion people come in space and they all buy a different coin that's going to be the money right and that's there is a demand for Digital Store value so I think that it'll be power law it will definitely not be maximalist as it has been since 2017 uh but I think that that Bitcoin ether kind of back and forth is definitely not over uh if you just see how the two approaches are evolving I think that was a great um way to end it

thank you guys so much fisky and mty for the discussion and sue for joining us yeah thanks guys thank you pleasure it was a pleasure it was really a pleasure guys have a great one byebye uh all right guys that was all for today what do you think about the questions raised in this episode please let us know on Twitter we love hearing from you and as always you can help us out a lot by leaving a rating and review in the podcast app of your choice thanks and see you soon