Jose Macedo: Mars Protocol – Red Bank' Credit on Cosmos via Osmosis #493

Transcript

welcome to epicenter the show which talks about the Technologies projects and people driving decentralization and the blockchain revolution I'm Felix Lodge and I'm here today with Brian crane today we're speaking with Jose macedo who is head of Delphi Labs that Fight Labs is part of Delphi digital a pioneering crypto company that has three divisions research Ventures and Labs the main focus of therefore Labs at this point is Mars protocol a new D5 focused Hub build leveraging the cosmos stack welcome Jose to epicenter thanks very much for having me big fan of the show and of and of you guys as well yeah awesome yeah so glad to have you on after uh so many years of being back in a similar space so um as is customary on on epicenter I guess the first question

we asked generally is sort of you know how did you end up in crypto so I think for you this is a is a quite interesting story so excited to hear a bit about it yeah it's a long it's a long story I I started off playing uh in my mits kind of playing professional poker which was uh the way that I first got into like economics and and Game Theory and stuff like that um then I went to to University studied politics philosophy and economics there started a couple businesses including uh like very random businesses like a cleaning company a martial arts academy all sorts of different different stuff and then actually someone came like a friend of a friend came to train at my

martial arts academy and this person uh who's still in crypto but I think doesn't like to be Ducks has quite a big kill count as well in terms of getting people into crypto but uh they they kind of talked to me about about ethereum um and it just made sense to me pretty much instantly like no one I had heard about Bitcoin a bunch of times before uh people had even offered to settle kind of transactions back in the poker days in Bitcoin and stuff but I just never bothered to look into it and also it wouldn't have clicked for me I think the the kind of just pure non-sover money thing but the world computer thesis really really did click for me um and so pretty much uh like a week later I had put everything on hold like all the businesses and everything and

was just kind of diving down the rabbit hole reading everything I could on on crypto and on like monetary history and all sorts of stuff like that and then yeah I started working in the space pretty soon after just because I wanted to find more smart people to to kind of learn alongside um started off as a as an analyst at a at a company called like amazics back in the days and I don't know if you guys remember that it was like a community management company from from the Ico days I was just like speaking to a bunch of Founders assessing a bunch of projects we worked with like bangkor and a bunch of other kind of cool projects um and I was writing research on my blog in my spare time and kind of connected through that with with Delphi I'd written a post on ethereum backward

ethereum just was just kept going down um and people were saying that that uh that it there would never capture value that it was going to zero there was the famous Tetris Capital blog if you remember that where they were like short ethereum uh and I just wrote a piece just basically saying why I was bullish ethereum and value capture it actually talked about eip1559 uh which was already being discussed in the ethereum forums back then and um yeah Delphi cited me in one of their research reports and then I went on their podcast we started collaborating and and kind of yeah the rest is history started Delphi Ventures co-founded that and then co-founded Delphi labs yeah so definitely sort of like an interesting and you know unusual type of

organization I'm curious if you can talk a little bit about you know how did Delphi get started and like you know what did it look like when you joined so when I joined Delphi was a pure research company so and that's kind of how it started so most of the so the the kind of co-founders on the research side come from traditional Finance actually from from equity research at Bloomberg and Deutsche Bank and in 2018 they fell down the crypto rabbit hole and thought you know if we can get paid to just like learn about crypto and write about crypto that's like the dream job so uh they started that and just started writing like really good research right I mean I remember at the time when I started uh in crypto

um I started in 2017 but but by the time I was really looking into this stuff stuff I was writing by far the best research in the space and what I was doing was mainly Consulting amazing so I started off analyzing projects and then I kind of figured out that the main problem that every project had was just like token economics like the the a lot of times the project was cool but the token just didn't make any sense it was just like a medium of exchange right like you in order to use this network you need to use our token and that was like never going to capture value and so uh I had kind of built in a niche just focused on designing good good token models and and that was going really well and basically I came to Delphi to help with research but also lead the

Consulting side at the time so uh top at the time was mainly focused purely on research and then when I joined we started labs and started focusing on Consulting where we did like token design mechanism design eventually smart contract work as well for projects like Ave and Thor chain and balancer and and stuff like that and pretty much at the same time we started the Delphi Ventures which is which was our fund so that was a long story but we basically spent all of 2019 trying to raise money um we had this anchor investor that was like started off in for 20 then for 10 then for five then like didn't didn't end up investing anything and had a bunch of other uh funny fundraising stories from 2019. I mean I think we're

we're pretty bad at fundraising but it was also really hard in 2019 with the bear market and stuff everyone thought crypto is dead had a bunch of meetings like all around Europe and the world with people that was you know super frustrating like I remember having one dinner with one guy and and at the end of the dinner he was like oh yeah but I'm I'm in but can I pay cash and I was like no we can't we can't lower your money sir I'm really sorry um so yeah it was really frustrating but in the end we didn't get any external investors for for ventures and so we ended up putting in just our own money so we found synthetics was it was a project we really bullish on and we worked with them on the risk framework and stuff and so we made a bit of money there and

then we found Georgian which we wanted to be the first investment for the fund because we thought it was just synthetics but for a use case that had like more product Market fit you know like it was clear that people wanted to trade Bitcoin on chain whereas synthetics like it wasn't as clear people wanted to trade synthetic assets so we wanted to invest in it make it the first investment of the fund and we we made an OTC deal with the team and then at the time it was going to close uh our investor pulled out and we just like put in our own money basically levered up like credit card debt and everything and yeah started with about a million dollars of our own Capital uh the seven of us together and kind of uh grew it from there yeah that's really cool and I think you

know obviously today we're also here a lot to talk about Labs which you're ahead of and and you sort of mentioned it was created in parallel sort of for the Consulting first but then you also you know started basically incubating or building your own projects can you talk a little bit about how how that came about for sure and so yeah people get confused about so we're all equal Partners in kind of the three businesses roughly and then we we all focus on different parts so there's the research the ventures and the labs and different uh so a seven uh we all focus on kind of different parts of the business so yeah uh lab started off focused on Consulting so yeah I did did some work with with Ava and torch and stuff and at some point we realized that we gained a lot of Ip and and built

a really good team doing consulting and Consulting tends to get like a bit frustrating after a while right because people don't always take your ideas on um and you just you just feel like you want to be in their building rather than like kind of Consulting on on on how to build um and also it's just like sales cycles and Gantt charts and stuff like at a certain point you kind of get bored of doing all that stuff and so yeah we started um kind of incubating our project projects from from scratch and at the time we identified kind of Salama and Terra as the two ecosystems we were most abolition um started building building on on on both of those but quickly kind of realized Solano was way uh earlier and more difficult to build on than Tara

this was like in early 2021 like even getting your transactions included in a block and Solana back then was difficult and there was a bunch of like closed Source libraries and stuff that made it that made it challenging so we ended up making the kind of fateful decision to focus most of our building efforts on on Terra and that started off uh really well we launched kind of uh Astra Port first and then and then Mars on Tara yeah it was they're they're pretty successful while while Tara was successful asked report had about you know one to two billion in tvl it was a top five decentralized exchange by volume within like a month of launch yeah and had a pretty exciting roadmap plan and then Mars also had about nearly a billion in in qvl and and um

was yeah it was just getting kind of getting getting started when when Tara collapsed since then we've been kind of obviously working with those projects to to help them find a new home uh did a bunch of research on that ended up choosing Cosmos as the new home and and you know wrote a big research report on that and yeah astorport is now live on on a bunch of different chains on Cosmos Mars is is its own chain and then has its first outpost on on osmosis and yeah I guess the evolution was started off with with Consulting then we went to kind of building our and incubating our own our own projects and the idea of that was always that uh Mars and astroport would be kind of an example of of showing people what we can do and and like how how successful we

can be and the value we can add to projects and then we would use that as an example to kind of attract other smart Builders to come to come and build with us and scale it out from there but um Mars and ask report kind of became so successful at a certain point that they that it didn't make sense for us to do anything else um and and now we're we're uh and also like they required a lot of our attention but now those projects are are pretty much independent and so um we we were focused back on the on the accelerator and on kind of attracting new Builders to work on like all the other ideas that we think are exciting as well cool yeah I definitely wanted to talk more about the accelerator later so if you're to Terror all right so you guys

are focusing on the tarot ecosystem what what are your biggest learning from that episode we we went into Tara with with our eyes like wide open to be honest so like we had been involved in ESD before and and like we'd always been kind of fascinated by decentralized stable coins I think maker was the first project we ever covered on the on the research side as well so we kind of understood the risks and we always pointed out the risks and and like wrote threads about the risks and stuff so it's hard to say that that what happened was uh like people call it a Black Swan it definitely wasn't a Black Swan right it was it was it was a known risk um but I think probably one one thing I learned in general from from 2022 was

just that like building wrote like in crypto um everything that can break will break and so I think building robustness into your systems and building for the long term is more important than kind of like short-term success um and I think you saw a lot of examples of of like stuff breaking in in 2022 that looked like it was super successful right whether it's whether it's Tara or FTX even like I remember FTX at a certain point uh had like uh even I think well into sort of 2021 they had like 100 something employees and I was like that's not that much bigger than labs and and look what they've built like damn this these guys are like super smart you know where we need to we need

to catch up we need to work harder and then you realize that they were like holding private keys on a Google Docs right and doing all sorts of crazy stuff like taking all sorts of shortcuts um and I think 2022 ended up revealing a lot of that that a lot of the projects that you thought were successful were taking uh shortcuts that you couldn't see but that became obvious as soon as there was like Market stressor um and and I think a lot of the times uh the projects where that happens is where the flaws are sort of covered up by charismatic leaders of of some sort right um where you know humans were naturally attracted to kind of like charismatic leaders you want to follow and I think the projects where that ended up being the biggest problem was was when where there was that where where people kind

of look past the flows of the project because they had this this charismatic leader so I think one big lesson that it reinforced was kind of the yeah don't trust verify um and just be more annoyed like kind of our our GC game Shapiro says like be more suspicious of uh of what's going on and uh I think that was probably one of my biggest Learners from 2022 and it also affected how we like build how we incubate how we think about the space we've always been pretty long-term oriented and actually like Tara was a was a long-term bet when we made it like Tara when we started building on it was nowhere near what it ended up as like UST Supply was under a bill um well under a bill and and so like and we we felt that if that wouldn't take

off until there was some pressure on on centralized stable coins which would which would take a while and so just wanted to kind of build towards that definitely didn't expect this the the success it had and think like in hindsight it's pretty apparent that like anchor was a mistake keeping yield that high was a mistake um yeah and it was frustrating because I think it ended up being the mistake that every other algorithmic stable coin made which is just a gross apply to too quickly um compared to like the the base of real demand that there actually is so um yeah I'd say that was the that was the biggest lesson and did you like I guess building Mars uh Back Then and Now building like its own

cost your own Cosmos chain with it did you apply like these learnings would you say like in practice in some sense like could you give an example maybe of how you yeah it's a great that's a great question um yeah first of all we we always focus on like five years from now or like 10 years from now when we're thinking about making these decisions like um in terms of product in terms of protocol like like and so one example could be when we were looking around for where to build like layer twos looked really exciting um but realistically like layer twos are still extremely centralized right you're relying on like a centralized sequencer uh most of them don't even have like fraud proofs in in production of the czk

is very far away and so for us that was like something that we didn't want to deal with like we did we didn't want to deal with those centralization risks and those like potential technical technical issues uh the same thing with kind of Aptos and sui it was like they were exciting ecosystems but uh still very early for us and like Cosmos for us like the the kind of Cosmos SDK stack was super battle tested right even Terror itself the collapse of Terror was like kind of a notch on on that Stacks you know um yeah like it it made it it's really robust so that was like one of the one of the big reasons why we decided to to stay on Cosmos and also why we decided to kind of uh or the project decided to launch launch our own chain because

it's just like the way that gives you the most control and flexibility over over what you're doing and so yeah that I think that was a big thing um also like why I decided to kind of launch on osmosis because we thought that team was very long term oriented I thought it was a like uh again very battle tested stack so um that was an example of of of kind of that that coming into play but I think in general you can kind of see it in a bunch of like small decisions that you have to make day to day about how to do things uh whether to take shortcuts or not you know like if you want to list even listing something like St atom right you see a lot of other money markets list that uh and just use the atom Oracle price you know and that's

that's like most of the time that might be fine but there's some percentage of the time where where it depends in the protocol actually ends up with bad debt and and sort of Mars will never will never use take shortcuts like that right it's always going to be if you're trying to do it the right way even if it takes longer even if it means it's not as not a competitive not as competitive the short term yeah and there's as I said there's like loads of I think when you're that an exercise that we did actually at labs and which was really cool was just doing the values thing like I always thought that was just like corporate um you know like a very corporate thing you know because because most values are just like sound bites right like honesty or or like Integrity or whatever and I

think the way to do those values right is to have values that actually have like meaningful opposites right where there could be where like let's say you you choose for example um long-term oriented you some some companies value like Facebook is is like uh ship fast and break things right which which is like in a sense the the opposite of long-term oriented like long-term warrants it might mean you actually ship slower and you don't move as fast and so I think like having those setting up those values is really important and for us we're definitely more on the slower uh more careful side especially after what happened then in 2022 it just kind of reinforced that and it also means like certain projects that are out there right now uh I don't really want to mention them by name but like certain budgets that are out there

right now they're like growing really fast they definitely have like problems with their with their Tech stack whether it's like multi-cigs holding you know billions and billions of dollars or um just like unstable chains or like the the that have like deep uh reorgs or whatever um I think those things are things that we're much more careful with uh right right now when we think about launching somewhere so let's talk a little bit about Mars so on a high level like what is the vision for Mars and how has the vision changed since the time you were building on terror versus like where it is today the best way to describe kind of the vision for Mars in my mind and obviously

different people have it's a decentralized project so different people have have different Visions for it and different beliefs on where it should go but for me it's like like an FTX like experience for D5 and like that sounds even uh like that was a vision before FTX collapsed and I think now it makes even even more sense why you'd want that right why you actually want it decentralized and not centralized um and the idea with that is just having this this sub account where you're able to to have like all your D5 positions your your yield farming your LPN your staking you're trading uh all in one single account with a single kind of like margin threshold um and so the the way I think about it is kind of like building a sub account

for for D5 where you can do all your own chain activity from this one account and perform like leveraged interactions with with every single protocol from from one account and and for me that was the real that was the reason that I that I liked uh the end that I used FTX over over other exchanges right when you use something like Finance um it's like you you have like your spot account and then your isolated margin account and your cross margin account and your futures account and like everything is separated out you have to transfer from account to account and it's like everything was built by different teams they don't really talk to each other and it's just not a great user experience you can end up getting liquidated on your futures account even though you have a bunch on your on your on your spot account right it's just not

as capital efficient so and I think that's ultimately um the name of the game in in defiant Finance is like Capital efficiency right you want your your Capital to sit somewhere where you can do the most things with it um and I think if you build that there's a bunch of stuff stuff that can they can come off it because um for example I think stable coins actually is is also a capital efficiency problem and something that can be that can be built on top of a system like this because um like I think algorithmic designs are kind of like dead or at least I won't be you know [ __ ] around and finding out with with a algorithmic uh designs anymore and so I think what you have

left is just like that based designs and the issue with that based designs is like a capital problem right it's really hard to bootstrap uh enough enough Capital to actually to actually make a stable coin uh that's large enough to satisfy like the demand for for a stable coin and so um what you end up seeing is they have to take on centralized collateral and they just don't grow that fast right and so all the successful stable coins end up being built around centralized exchanges because they have the most Capital right like usdc was built around coinbase tether was built around bitfinex back in the day and busd was built around binance and those are the three biggest centralized stable coins by market cap and so my kind of hypothesis is that the winning decentralized stable coin will

be built around the winning decentralized exchange because it's just a debt product it's like another debt you can issue against your account and so I think whoever ends up building that decentralized FTX um will end up having uh like being in a good position to build decentralized stable coins and a bunch of other kind of uh like important things right and because because back in the beginning uh you know you were building on terror right so it was basically like an application on the terror chain whereas now it's sort of like its own chain but like you know this Outpost concept which uh I think maybe we can get into

is that is that um how what what does what changes that did you did you also when he was on terror for example did he also imagine that you would like I don't know try to integrate lots of assets from other chains via some sort of bridges so like how how did you imagine that back then yeah I think with Mars actually the the plan was always to eventually be its own chain we kind of saw that as a as a as an interesting model um and like we didn't it's like obviously there's two ways to yeah well so yeah when it started off it was an application on on Tara I think we always

saw the appeal of being being its own chain but um it was more so so that it could be anywhere because Mars is a is a credit protocol right and so ideally it should be available anywhere that there can be demand for credit and at the time the most demand for credit was on was on Tara Tara had the most growth the most like um stable coins as well and so it had the most demand for credit but we we definitely saw like we were never Tara Maxis right we we knew that there would be other ecosystems that succeeded and so we wanted uh uh like a chance to to be on there and this sort of Hub and outpost design which actually Sunny um was was one of the one of the original people who who kind of

described this to us made a lot of sense to us because with with credit it makes like uh there's kind of two options when you build these app chains right the one is you put like all the assets on the on the app chain basically and make everyone move that move their assets over uh or you keep all the assets on on the edge right on these on these outposts and like the first model is kind of like Thor chain right and the second model is more like sushi where it has outputs on a bunch of different chains and for us for for a credit protocol the latter always made more more sense because if you want to build um a decentralized FTX like experience and build that winning decentralized Exchange

you you kind of need synchronicity and atomicity right you need things to happen fast and and ideally to be on the same execution environment so you can do things like liquidations right where you need to a contract needs to observe another contract State and then call a you know call liquidation function this kind of thing we wanted that to happen synchronously and also just like trading itself it needs to be fast like already five second blocks aren't that fast and so like if you have to wait for for IBC relayers and stuff it's just not really really feasible and and so yeah the the vision the cool thing about the Hub and outpost model is it means Mars can expand like anywhere anywhere that that the Hub can send messages to which uh right now is a lot of places there's a like with IBC obviously it's Cosmos

chains although there are people working on Bridges to ethereum and stuff as well um but you can use other Bridges to send messages anywhere uh Mars could have an outpost anywhere right um and then it becomes similar to like a traditional uh like the metaphor we use sometimes is like the a traditional business or bank right where you have the headquarters of the bank but then they have Bank branches all around the country and sometimes also in in different countries right and that's kind of how we see uh Mars where you have the The Hub which is like the headquarters which does the accounting the staking um the and governance and then you have all these different outposts that serve uh different chains at different different markets as it were with with credit

um yeah so you you know you mentioned this Vision right of this FTX decentralized FTS like product and then you mentioned and I think it is also you know like spot trading like lending Martin derivatives and yield it's a lot of different stuff do you imagine that Mars would build all of those and where are you focusing right now or would it be sort of that like Mars will leverage those in different places and I don't know have some sort of yeah can you can explain a little bit like yeah to what extent this is all like built within

Mars versus you know kind of assembling different pieces together for sure and so this was always the so I think the answer is when I assemble different pieces together when I integrate with with stuff that already exists rather than build everything um and that was always the vision for Mars right and on Tara there had this primitive called smart contract credit lines which kind of Leverage deal farming is an example of that which is just like um you know if you think about Ave or or compound you can only borrow less than than what you put in right because uh you could do anything with with the capital so I can never give you more than what you have as collateral because you could just run away with it right

and there would be no incentive for you to ever pay back um with with Mars uh the idea is that uh Mars can lend to Smart contracts that are performing a certain action so for example margin trading or leverage deal farming right and then this market so so in the case of margin trading for instance let's say you want to go along Adam Mars could lend you uh stable coins and then buy the item and hold the atom as collateral and then uh effectively liquidate you if Adam drops below a certain um like threshold that's specified in the smart contract and so that's much more similar to what a centralized exchange does right where centralized exchange can give you 100x leverage on something because they hold the the collateral and what they loan you and

they can liquidate you right whereas for a normal money market it's difficult to do that so the idea with Mars is just to extend that concept to any kind of uh smart contract or or a borrowing activity leverage taking uh leveraged out being even nfts like if they have enough liquidity uh could also be included into this particularly anything that you can do on chain where it can be like the activity can be encoded into a smart contract and the collateral in the smart contract has enough liquidity that Mars can reason about how to liquidate it if if the activity goes wrong uh Mars can extend credit for it and so it's like a very cool concept because eventually as more and more things get tokenized you

could extend it to like real world things right like a mortgage is effectively just a smart contract credit line right as long as the house could be could be tokenized and and put into a smart contract then that can be included into this and so the the idea with it is is not that um Mars would go and like build mortgages and build spot trading and Market trading and everything like that but that it would integrate with with existing Primitives and act as a sub account built on top of all these different D5 Primitives now there's like sort of a an edge case there which is with designs that have their own leverage built in um because there it's it's slightly different so for example like a CDP like a maker like CDP if if Mars were to

integrate with something like that then um the whole point of Mars is that you have this credit account with one liquidation threshold right but if you integrate with something like a CDP there's actually two liquidation thresholds there's the the CDP the liquidation threshold and then and then Mars's like credit account liquidation threshold and so there there's sort of two different approaches on on how to do it the the first one is just to do like a D5 saver like thing of rebalancing right so um if your CPP is is uh is about to get liquidated but you have extra like borrowing capacity on your credit account it would just borrow from your credit account and add collateral to the CDP for for example or pay down some of the debt of the CDP and vice versa or Mars can build those itself and kind of

integrate them into the account account itself um and I think like one interesting case where that comes along is perps where uh I think like there's no no perps currently live on on Cosmos and so uh some more contributors are considering kind of building that out as as part of Mars so that can be offered as as part of this yeah maybe we can take it back a bit and you can sort of I guess we talked a lot about Nars already but maybe it helps to sort of break it down into like the components that Mars has for the listeners yeah for sure so um I guess the best way to think about

it is Mars has lenders on on one side right which uh are lending like similar to how you would land on Ave or compound or a traditional money market um and then on the other side you have borrowers which on oven and compound it's people that like borrowers are always lenders as well right you have to deposit Capital into the into the protocol in order to lend because you need to have collateral on on Mars uh you have non uh lender borrowers right which are people who are who are actually just like trading or they're leveraged LPN or they're doing something like that and they're not actually lenders they're just borrowers right but they want to um for example use some usdc to go long on Adam or they or they want to use some

atom to to short Adam right um so I think that's the big the big difference that in on on Mars you have this other classic borrower which doesn't need to have collateral on on the platform but actually just wants to do some activity with the capital that's that's being lent out on the on the platform and then in the middle of that you have um middle is probably not the the best way to say it but you have like governance which decides on uh the risk parameters for for for this different lending activity and uh effectively like stakers would have skin in the game and decide how the protocol should work what kind of use cases it should lend to and what the risk parameters for those for those use cases should be Yeah so basically for each like sort of

collateral type you're setting some sort of ratios and this is done via governance votes on mars or is there like some algorithmic component or is it like purely governance yeah so so Mars right now is is um it's like the the V1 is is more like a traditional um money market so yeah each each collateral type would have a would have a governance vote regarding risk parameters and asset listings go through a governance vote um with with uh V2 that'll be kind of where the credit account functionality goes live and then like every specific uh integration would have a governance

vote so for example if someone wants to go margin long um atom that would be a specific integration where Mars would integrate with uh the amm on that chain whether it's osmosis and in the case of Osmosis or or if it's elsewhere some other amm um and and basically uh like integrate that margin trading functionality instead of and set risk parameters for for that as well like liquidation levels Max leverage this kind of this kind of thing and like for example the the rates at which people can borrow and land is that sort of a little bit like in compound or are we that you know it depends on kind of you know the supply and demand and is it's updated continuously based on that

yep it's very similar to that it's like a curve right like a curve that uh tries to Target some optimal utilization and uh and rates go up like you know Kings at the optimal utilization and then rates go up very aggressively to to punish kind of illiquidity um we did play around with like a dynamic interest rate model using uh control theory but it was just like too many variables uh to launch it to start but I still think that's that's interesting and yeah there are other things that are interesting there too but I think for now it's we're using like Mars is using the kind of algorithmic formula so you talked a little bit about sort of the components in terms of you know borrowers lenders um what about if you look at it in terms

of technical architecture you know what are the components of Mars protocol um you know the technical components of Mars protocols I think like Larry or someone would be best positioned to to speak about this but there's basically Mars Hub which is the the chain level um where where governance happens staking happens um and and fees get get sent there as well um then you have the the Red Bank which is kind of like the the Ave or compound like module where you can do lending in and borrowing and the interest rate uh formula is is is enforced and all of that and then you have like the the credit account which will be it's its

own module which is called the credit manager um which effectively like manages all the different Integrations that of of different borrowings that can be done with Red Bank assets um yeah I'm sure like someone like that I could probably go into more depth but that's that's uh the yeah my understanding yeah makes sense I think maybe also like interesting to hear so sort of this Mars I guess one of the first to have this like happened spoke model with with the that you have do you think this is like gonna be the standard design for um interchain applications I think so I think in a way it already is the the standard model like um

something like Ave or uni swap effectively has a model like this right where the the Hub sits on ethereum but then they have outposts on like polygon and Avalanche and stuff like that and uh it's already actually governed from from ethereum I actually don't know uh how how that's done um I think there's some form of of like question messaging that that's used there but that I think that already is like the model for a lot of how how D5 Works um there are there are advantages to to doing it the the cosmos way to having having your own chain instead and in terms of what you can do with that but yeah I do think this is going to be like um a pretty standard model for how frog

question applications are are deployed so the advantages being sort of that you have this shared liquidity across the different outposts which I guess on uni swap you don't really have since you have like a new pool and you're not really able to share the liquidity there only like the governance decisions can sort of be transported I guess to to the other chain yeah you could do that I mean like um yeah with uni swap there is no concept of shared liquidity and not with Ave either but like arbitrager is effectively can can do that functionality right uh both on on uni Swap and on Ave you can you can kind of ARB the rates

um I think with with Mars uh the team started off with this concept of uh of a rebalancer at the at the chain level which would effectively like move assets around the different outposts to try and equalize the utilization rates right which just means that if there's a lot of borrowing demand in in one place and not so much in the other then it would move and let's say there's a lot of borrowing Demand on chain a but not so much on chain B it would move assets from chain B to chain a to try and like satisfy that that Demand right um I think now uh the team's kind of moved away from from that design for for a few reasons uh one of them being that there might be a reason why the the rates are lower on a certain chain uh

and higher on another one like people might perceive it to be more more risky for example and it's useful to have that like Market signal and it could also lead to situations where like let's say a chain is being hacked you're just consistently putting more Capital into the chain that's being hacked right and so instead how I think the Mars team is thinking of implementing that is just as a vault strategy where as a depositor you can choose to deposit on one Outpost or you can choose to deposit into this Vault that rebalances your deposit around different outposts to maximize the the rate right and that way it's a it's a decision on the lender side rather than being a a protocol enforced thing so one of the especially moving back in today this is a while ago it was a very

common criticism that you know the ethereum people would have against something like Cosmos was that hey uh you know you really want to have this sort of like synchronicity and you know you can make like one transaction and it calls like you know different smart contracts at the same time and this is like very powerful and the example often used was like the slash loan thing right where like within one transaction you could like borrow some money do something make a profit pay back the money so you could basically like get capital for free without having to put up any collateral and you know this was kind of the prime example now of course Cosmos doesn't work like that with IVC I think at the same time you said that the outposts

can have this sort of like you know instant functionality right but can you can you talk a little bit about you know how do the output how does this work and you know where does the asynchronous nature of like IBC and you know uh interoperability still come in and you know do any kind of like issues arise from this kind of design yeah it's a good uh it's a good point so I think um if you look at the state on different smart contract chains like Solana ethereum and stuff like generalized smart contract chains you actually see that uh composability is is sort of like a meme right that it like the most the

smart contracts that doesn't actually touch each other and most things don't need to to touch each other um so I think that that is bullish for the for for the cosmos thesis that said I think Defy is like almost all the composability happens on D5 and I think that's one of the the use cases where you actually do need that synchronicity and that and that composability um and so for us or for for me rather speak for myself uh the way I see the cosmos thesis play out is um like IBC is is is is definitely like a big part of that but another big part of that is just having control of your own block space and being able to customize your layer one to suit your own use case right which is if if I'm uh

launching on a generalized smart contract chain but actually I don't have any benefit from the composability there because I'm like a step in or or some kind of other application that doesn't like like most applications nfts Etc that don't really leverage composability then why not launch on my own chain where I'm not competing with anyone else for Block space and I can customize consensus and and and like different parts of the of the architecture to actually suit my use case and so that's the way I see I see that happening and then in terms of D5 I do think um and I could be wrong about this obviously but I do think most default activity will happen synchronously in in a single like environment in a single

chain um especially like Advanced D5 use cases which for me like the that is sort of one of the biggest uh killer apps of cryptos is like speculating speculation um and I think uh that like needs to like for that to be to to be like uh um enabled in a way that's competitive with a centralized exchange that needs to happen in a synchronous environment so the way I kind of see it developing is you'll have like many different app chains specialized for their own use cases and then you'll have a few D5 focused options which are kind of like the the city centers um and assets will be bridged to those chains trustlessly using IBC and the financial speculation stuff will happen

there whereas like the real activity will happen in the in in those app chains and if you think about it it's kind of similar to the real world right where you have like if you're building a factory you don't build it in the and actually producing stuff you don't do it in the city center you go you go to a suburb somewhere to the outskirts where real estate is cheaper you're not competing with with like Banks and and like stores for for real estate and then uh when you need to raise money or whatever you go into the city center right and so I think that's that's kind of how I see it happening with with Cosmo where you have osmosis um injective Neutron uh say kind of competing to be like these D5 hubs these City centers and then you have a bunch

of uh different like um app chains that are specialized in their own use cases you know and there's already obviously like hundreds of them but there's there's going to be more and more and those are uh sit on sit in the suburbs basically and connect to these D5 chains via IBC and so I don't see D5 apps themselves being built leveraging IBC um just because of how slow it is although there will be use cases for it right you see with osmosis they have their their swap um they're like cross chain swap functionality they call it an outpost but it's very different from from how like Mars or ask reports seeing Outpost where with osmosis it's like uh if I'm on Juno I can swap through osmosis and all that happens is like I say I want to

swap Adam for for usdc the atom is sent to osmosis via IBC it's swapped to usdc and then you SDC is sent back to to Juno right uh whereas with with like Mars astroport concept of an outpost the swap would actually have to have the liquidity would sit on Juno and the swap would happen there so that it can happen fast and then you can do leverage on top of it and use it as part of collateral in a credit account and this kind of thing uh Mars is is also like the martial art for example is also one of those app chains but it connects the those you know kind of marketplaces City centers where you think a lot of the you know the kind of financial activity is gonna happen

yeah exactly I think Mars would want to be present anywhere like that as an outpost it would want to be present anywhere that it thinks might have a chance of becoming a financial center right and then that will have and thus will have demand for for leverage um and then the Hub yeah it's like a it's like a suburb where uh just governance and token econ happens and manages all the outposts yeah so one thing I find interesting here because like you know we've spoken with sunny and when you know Sunny would describe what's the vision for osmosis he would actually be like hey look this is also this should be kind of like a decentralized binance you know and all of the the functionalities that binance has you know they should be there like

you know launch pads you know trading Marketing in a way describe pretty similar to how you describe Mars right but then uh obviously you know it's in a way osmosis is sort of like covering this thought exchange functionality at the moment and focusing on that and you guys take like a very different approach in terms of like how to address this so I think this is very interesting in how you you kind of have like a similar long-term Vision but like completely different architectures and at the same time kind of also like working together now so yeah it's a very fascinating to see that

yeah it's it's it's a great question um I think we have pretty much the the same exact Vision as as Sunny of the sort of decentralized binance or decentralized FTX which is also why it made a lot of sense to to build there um and yeah the way I see it is um osmosis is is looking to become the D5 focused chain and so initially it was an amm chain and it was focused on on spot but I actually think osmosis's vision is is bigger and the the goal is to become like a D5 focused chain and to then have a bunch of different Primitives launch on there to to fulfill that like Finance like functionality and so I think like

osmosis is now working on on concentrated liquidity which also moves it more away from the amm right because I think concentrated liquidity is um like Unity freestyle concentrated liquidity is not really an amm anymore right it's more like an order book it really requires like Advanced users to to be able to to use that properly and so I think there will be other protocols that emerge that provide that amm like functionality that do the the passive kind of liquidity provision and then Mars will provide like the credit functionality that like wraps around all the different use cases there's protocols launching with levana um and a bunch of a bunch of others so I mean I think we have the same vision and and our view is

that like there's so much to build to make the vision come true that the best thing to do is to partner with like really smart builders that they can build they can focus on building different parts of it rather than try and build build everything yourself and I think like the opposite approach is something like dydx right where it's going to be their own app chain they're also focused on the decentralized finance Vision uh specifically on like Leverage trading and preps but they're actually trying to build out the whole stack themselves and they're an awesome team we're investors so definitely have have a lot of uh respect for them but it's just like a different approach right um and it'll be interesting to see which one wins out in the end yeah it makes sense maybe I guess to

sort of wrap up the talk about um Mars can you sort of you you mentioned quickly like Mars V2 can you like sort of talk a little bit about the roadmap for Mars where where is it at right now like you know what's coming next yeah um I think the next big uh launch from Mars is is Mars V2 which will be um the credit manager which enables the the credit account functionality and really like the the most interesting in my view part of Mars which is that that like sub account for defy functionality um and yeah I believe like Mars is also looking at launching different outposts but I think the the most significant sort of for me is uh is that credit account Mars V2 launch

maybe maybe one more thing that does the other side is the is the perp side which um I think Mars will either end up partnering with with with someone to do to do perps and kind of looking at a few a few different teams that they're looking to do that or uh sort of like building them um or having some of the contributors build that build that themselves um because I think we're we've been we're really interested in in some of the kind of modern part of designs like the oracle-based parts because um I think especially designs like games and we actually put it in our list of list of uh ideas for the accelerator are super interesting because you can get

centralized exchange like execution right because you're importing the price from a centralized exchange without actually needing the liquidity right without actually needing like uh to to bootstrap like a really deep order book or a really deep amm or something like that and with something like Gans you actually only need usdc so I think a design like that would be super interesting for for Cosmos uh because you know Cosmos has native usdc unlike something like GMX you don't need like eth and Link and the native assets and unlike something like dydx or or uh or perp like an amm protocol or an audible protocol don't need that deep liquidity and market makers and stuff like that so I think having a protocol like that and

then integrating with the credit account such that you could use your your liquidity pool shares your staking um whatever else you you you you might have in your credit account as collateral to then trade perps that's like really the like an awesome user experience and I think the vision that that Mars is looking to build towards so you talked in the beginning uh a little bit that you know Mars and ice report and I was somewhat uh independent and you can go back to the roots of uh incubating and and you you guys also just made an announcement the other day about the accelerator yeah tell us a little bit about that like was it how does it work and yeah

what has the announcement about yeah um yeah this is actually the initial Vision when we started building as I said was that um we wanted to basically attract uh because we've always like the the reason that we started building was we had this uh we had a lot of views about how things should be built we had like a long list of ideas that we wanted to build and we didn't have like the and and we we didn't see people doing that so we wanted to kind of like uh pull up our sleeves and and start start helping to to make that happen ourselves and the idea with margin asked report was that it would be the initial projects where we take a more active role um and then that acts as like the proof

the of what we can do and the value we can add and then we can we could like scale it out and do more of a white combinator style thing although we were never going to be um like more of a combinator style thing in the sense that we work with external teams to help them build out their Visions right um I guess the the difference between what we want to do and what combinator does is rather than uh why commentator is is obviously like more of a spray and pray approach they do have their requests for startup lists but they accept kind of any kind of idea in any kind of space and then they have this this program um for us we wanted to go out there with the list of ideas that we think matter like we always wanted we we think about

the space a lot and so we we we have like lists of things that we think should exist and then find like really good Founders and teams to come and help build out those ideas um and for a lot of those ideas we already have designs and and stuff like that and so yeah that that was kind of the how we saw the accelerator and and the the sort of the reason we want to do it is just that since like we've been in crypto six years and we've helped like we've been involved in investing uh Consulting and building like multi-billion dollar super successful protocols we've seen all the different uh we've seen the first of all how hard it is to build a crypto project right there's like a bunch of things that make crypto way harder than building a normal

start up there's like the legal side that's super challenging and that everyone spends a lot of money and time on there's like mechanism design and community and how to make these things actually decentralized which people spend a lot of time on um there's hiring which is hard because it's like recruiters don't really work um and so we wanted to just kind of take all the lessons that we've learned doing this and really transmit them to like a new generation of startups and help build the next kind of generation of really important protocols so yeah we thought really hard we spoke to projects that we've worked with and also thought really hard about what would we have wanted to to have a support and what we have wanted to know when we when we started off in this journey and that's kind of how we designed the the

accelerator so the idea is that um we're gonna pick a few teams and like that the hackathon which we can talk about is a way that we we get to know more teams and and get more data on on teams to potentially work with and then with those teams we're gonna work with them uh like very intensively for kind of three to six months although we're obviously work with them forever and the goal there is just to get them get them set up get their legal structure set up get the protocol designed done um help them hire help them set up good operational practices uh upset everything like that and then like get them to their first successful fundraising round help them help them raise that um and then obviously we'll keep working for with them from then on but that's really the goal to take like five

um or or more but for this first cohort we're focusing on five like early stage projects and really like share everything we've learned about building in the space with them and like help them get to that first Milestone of a successful uh fundraise and can you talk a little bit about I guess what sort of ideas are there on your list and maybe also I guess ecosystems you're looking at is this like specific to you know build on Cosmos SDK or are you like more broadly like whatever substrate chain you're using work yeah so uh for the first first cohort we're going to focus purely on Cosmos um we think it's easier for us to add value uh if we focus on one ecosystem

that we have deep knowledge of and that we're excited about um and also like we we just have more of a network there and stuff like that but we're for the second core and like third and stuff we're definitely gonna kind of consider it again and see whether it makes sense to stay on Cosmos or go to an Ethel 2 or even something more kind of speculative like an enoma or something like that um we'll kind of think through everything from from fresh principles there the approach we we kind of take to this is just to think about um from first principles like five years from now if crypto is to succeed more broadly and if specifically cosmosis to succeed um massively like what things need to exist uh for for that to happen and then

how can we have the hackathon and the accelerator be um places where those ideas get get built kind of thing um and so we think about it in in every sector as kind of as I was saying sort of like defy metaverse and gaming um nfts and and also like identity and governance and think about each of those sectors one needs to exist and what doesn't exist now and then trying to like spec out some some solutions for that to get teams thinking about how those how those could be built um yeah because I think like ethereum is is the clear leader right now in terms of uh like traction Dev activity liquidity all of that but it's still pretty small in the scope of

things right and so I think every ecosystem is sort of one or two killer apps away from from kind of uh unseating ethereum in in my mind and so um I think part of it is there are some things that are clearly successful in ethereum the other ecosystems need to have but there's a lot of things that haven't been built yet at all uh where I think ecosystems can differentiate and are you going to be spending most of your time on the accelerator or on mars or sort of like split your time or where is your personal Focus yeah um good good question so I think for for for me yeah probably split time amongst like Mars and ask report are still

really important to Labs they're like the first they're like our babies and also I think they need to succeed for for the accelerator to to succeed like um they're they're the projects that were more deeply involved in so really important for us that they succeed but they have like independent teams that are super smart um that are that are thinking about this stuff all the time so I think we we take more of like uh an advisory capacity there um and so uh I'm mainly focused on I think my main focus is going to be the accelerator moving forward and really like building up and you and also because the accelerator especially this first cohort well actually if it's successful um be really important for for Mars and

ask reports success too right uh because it's going to attract a lot of really important projects to to Cosmos hopefully and also a lot of projects that um actually can be potential Integrations for Mars and National Park too yeah thanks so much for coming on Jose I think we we covered a lot about like yeah Mars the Delphi story and the accelerator I think yeah really excited for what for this to exist in the in the cosmos ecosystem and yeah thanks so much for coming on to epicenter to talk to us and yeah see you see you around in in Lisbon yeah I really appreciate uh you guys having me and thanks for all the smart questions hope it was hope it was useful for people

absolutely thanks so much Jose