Lido v3 Deep Dive | Hasu & Konstantin

Transcript

hey everyone quick disclaimer before we get into today's episode nothing said on bell curve is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and the views expressed by anyone on the show are solely our opinions not Financial advice our guest and I may hold positions in the companies funds or projects discussed all right everyone welcome back to another episode of bell curve today I'm joined by friend of the Pod hu and first-time Joiner Constantine lashuk of Lio and cyber fund Fame guys welcome hi Mike thanks for having us hi Constantine guys uh this is going to be a really fun episode uh so we are going to be talking all about Lio V3 uh which was just announced today um and I want

to caveat up for listeners as well hu and I actually did an episode Back In December uh where we laid some of the groundwork um and we discussed uh Goose 2 and some of the uh just dynamics that are going on in the liquid staking ecosystem in ethereum and how that led to this new design um we're going to do a quick overview uh but if for folks that want to go deeper um we're going to link the episode in the show notes and I highly recommend that folks go listen to that episode but in terms of an agenda for this episode we're going to do a little bit of an overview of goose 2 and sort of the Strategic rationale that led to B3 for Lio um then we're going to talk a lot about v3's uh design uh what is public today and then we're going to

zoom back out a little bit and widen the aperture and discuss how this fits into the broader context of ethereum today but hosu could I call on you a little bit as the author of uh goose uh for L just give us a little bit of an overview of sort of State of the Union on liquid staking in ethereum and how Lio is thinking about the world yeah sure so um I think the most important thing to know is that um when Lio launched um Li is a liquid staking protocol and back then the expectation was that liquid staking is by far the most dominant best form of staking because you get full liquidity on your stake and it's very decentralized uh non-custodial like all of those nice things um and uh the liquid staking

Market was you know like the staking Market itself was growing as kind of you know more and more money flowed into the beacon chain and people wanted to secure ethereum and get access to yield and that became more and more drisk over time and like inside the staking Market overall also the share of liquid staking was kind of growing at a very steady Pace every year for many years and uh um Lio was you know always um the leader in the liquid staking category so right now like looking at the all of liquid staking and liquid reaking Li has around 70% market share in that category however um like about two years ago um the liquid side of the the the like the

like liquid category side of the market has started to stagnate and lately even reverse a little bit uh and so kind of the the the trend that we saw was that kind of there were like illiquid forms of staking um that all of a sudden like became much more popular and when we kind of did the analysis on why that is it turns out that um well liquid staking uh is a very kind of homogeneous form of staking like you know everybody kind of gets the same token and yeah that is kind of um that stake is spread across like many different operators that all do roughly the same thing right and get roughly

like the same reward um and it turns out that um there was a I I would say like a big kind of fragmentation in what the users wanted out of uh out of their staking um provider and so much more kind of customization uh I think you saw the rise of reaking I think that was a big topic um like more kind of uh validator side cars that are starting to be created you know with you know you used to have none then now you have M boost there's commit boost that's in development uh you have like five six different uh uh clients around um pre-confirmation and like other types of

validat commitment that you know people may want to experiment with you have DVT uh providers and like all of these are also kind of you know giving points or some kind of you know inorganic incentives and so really like you see that uh the demands like there's a lot of demand to use a lot of different things and uh Li V2 uh up to this point has really been like a one siiz all one siiz fits all solution um similar thing can be said about the institutional Market uh you know there are like a lot of uh folks are basically fine using State Eve as it exists today but then you know some other uh parties have like other requirements on like they want to

exactly select who they know operator is or like they have a very specific requirement for what relays can be used in the me market like there's basically you know this these kind of constraints that like Li being a kind of one- siiz fit Sal solution was not able to serve very well and this was the major and this is the one Central strategic Insight behind Goose tool that really Lio must become a platform in the same way that unisoft became kind of a platform with like V4 and hooks uh it must become a platform on which like a very diverse staking Market can be built um but that all kind of tap into the like extremely strong like broad

liquidity and distribution and integration of State Eve as the kind of feature that ties it all together and so I would say that is kind of the backdrop um yeah from which we're kind of uh coming and yeah um happy to Constantine if you have kind of anything to add to it is like just laying the ground workor yeah you know like I think that the main important thing uh to understand that lier was launched as a mission driven decentralized autonomous organization and the main mission is to make ethereum decentralized or keep it you know like because it's already great

you always were great you know like and are more and also like sensorship resistant you know like why because taking was complex from day one and in general you know like would like to make made it simple with a mission you know like to keep it decentralized and with a goose you know like proposal because it was some challenges you know like in the market in general we commit to continue focus on our not you know like on some short-term business objectives you know like like for example RIS taking with but keep you know like driven our mission you know like focus on Dual governance you know like to keep it and

make it more secure to make it more decentralized by accelerating more validators you know like and also uh keep you know like I mean growing uh maybe like market share because you know like that is a primary solution and in general you know like uh I mean that is a big bad that you know like if we deliver the mission you know like lier will be in general in good position today's episode is brought to you by Ledger the global leader in digital asset security celebrating 10 years of innovation Ledger is trusted by 7 million users secures 20% of the world's digital assets and Remains the most

secure Hardware wallet for your crypto and logins follow the link in this episode's show notes to grab your Ledger today I really like this anal olog of I mean there's a couple of different verbes which really resonate with me is the sort of transition of Ste through a product line uh but also I really like this idea of like PL like the platform business model um and so can we just get into maybe starting to describe um or sketch some of the the outlines of V3 you know who are the different participates uh the different participants in this Marketplace model and then we can get into some of the key decisions around the architecture yeah maybe I will start here so first of all you know like we need to to to go to V3 we need to understand where is lighter you know like and I think where is lighter today

is first of all like the biggest Define protocol by TL you know like second you know like it is a made ethereum de centralized from day one of proof of state and in general it's committed to some uh plans or like in general uh some features and consistently delivering this things you know like and we need to understand it you know like for example uh you know like back when we when Lia started you know like it was just permission validator set and it but it was already better than don't if we if you will not have it you know like why because when proof of stake on ethereum

started it was no even professional validators that want to launch an ethereum you know like I spoken with a lot of them because I'm also confounder of P top.org because in general they need to build Special software special smart contracts to build self custody and in general a lot of professional validators they don't want to be a custody of the assets and they didn't have own e and in general Lia solved it because you know like for the user it was better to go to centralized exchange you know like and for centralized exchange they provide this you know like service from day one uh like binance coinbase and also it's even more profit for the acquisition of this users because ltvs lifetime value for their

acquisition of such user for centralized exchange is much higher than for example for professional validator and Li came to all the biggest validators you know I can say let's build something together in general let's build a software that in general will decentralize and keep ethereum sensorship resistant and in general from day one it start to make big job in this decentralization and then you know like we delivered you know like a lot of different features you know like some of them for example we push in production you know like DVT with partnership with SSV and Noble you know like it is also like lighter delivered CSM a community taking model that now made lier permissionless you

know like and now you know like already are ligher is not like this five validators that started it's more than 600 different not operators and that's all is General making the more decentralized and uh also I mean in this quarter Li will deliver dual governance that solve engine problem you know like that Li the token holders can manipulate this middleware to and state this can block it you know like this is a huge thing why because you know like we really believe that people can write some middleware some smart contracts you don't know that will solve some issue and in general Mission driven and in

general light achieve it and uh what is light of3 is we want to make it even better you know like we in general liquid staking and we are going to a new market called ethereum staking infrastructure as I told you you know like in the beginning it's I mean all the taking providers who want to run the know they had an issue they need to write a software they need 32 e they need some other like complex setup and what is light light want to introduce take WS in general a setup that you can deploy to to the ethereum and run your own customized staking not validation

service and also in the same time you can leverage you know like if you don't have 32 is you can have you can launch it with low amount of is you can choose who Stakes with you you can choose a middleware that you can use like M boost like pre confirmation and so on and in the same time to mean St this you know like I think it's a GameChanger why because it can make etherum more centralized more sensorship resistant and even more node operators can join ethereum to run nodes and in more simple way so H I want to kick it over to you here in a second but uh constant said a lot there and just to unpack it maybe

and provide some analogies for listeners is you know I think that like the early instantiation of Lio was you're kind of this two-sided Marketplace in between uh stakers and node operators and you described some of the very early frictions there just around you know there was no software to actually support uh connecting these two Market participants and that's what Lio did extremely well in the beginning and found really successful early product Market fit I would guess probably with some uh combination of uh uh mostly a lot of retail probably but also a lot of some institutional stakers that maybe were in different jurisdictions or had lower uh you know some some group of institutional stakers that had uh you know some specific set of requirements that allowed them to do this uh but now

as the marketplace has evolved right it's become more mature um and maybe Lido has achieved you know kind of saturated its original Market you know it's transitioning to more of a platform model so they can satisfy a more heterogeneous group of customers I would guess mostly in this in uh in this instance uh institutional stakers and I think we can draw analogies here as well to we've talked about Unis swap doing the same thing with V4 where they evolve from a pretty simple interface where you could swap ERC 20s in V2 to becoming more complex over time provide concentrated liquidity and now it's a platform model where they're basically creating a Marketplace for amm designers right there's a huge variety of what they can actually offer on the amm side Moro is an analogy here as well where kind of like a feels more like a managed

product in terms of uh you know one size fits all risk turn profile whereas uh Moro is much more modular and so maybe that's kind of the laying the groundwork here for you know maybe adding a third participant into Lio here or the Lido Marketplace which is coordinated around this neutral infrastructure which you were describing Constantine which is you know there is uh the node operators there is stakers and institutional stakers becoming much more important here but also there maybe this new participant which is asset managers and this concept of curators right and I I want to introduce this this concept of uh St staked vaults um as well so maybe hu you can go a little bit deeper and describe some of the mechanics here around this platform transition of what

it looks like before we go there Constantine do you have anything to say on uh like the caters and asset managers maybe you can first and then afterwards I I can explain like the mechanics thanks hle you know like in think Michael you know like this analogy is really super close you know like for what we mean here you know like and uh first of all you know like I want to say that Stak already works well for a lot of people first of all you know like it works well for eal why because it's decentralized in ethereum you know like and in general make it sens resistant uh second it's works well for lot of users why because they can stake and diversify the stake between a lot of

validators and contribute to decentralization and also are use it in defy and use and stake is the most liquid asset you know like if we look on any other staking or Solutions and also you know like 25 or 5% of you know like Stak is already used by institutional so it's already covered a lot of this use cases you know like it's still some edge cases you know like why the in general maybe I mean in general liquid staking is about 30% of market share you know like and it is still like a lot of different others taking use cases you know like and and what we try to say is that we need customization and it is different

you know like use cases where for example this take walls can run by Creator or like by institutional I mean for example it can run in coinbase custody you know like and in the same time give all the you know like set up of the jurisdictions that you need as a user as a client you know like or as a validator and launch you know like staking and also the same time get liquidity through meaning St me st e from this wall yeah maybe we'll give you microphone here oh sure yeah I mean I think um Constantine was already kind of laying it out but in my mind there's two

components to light of3 one is the staking infrastructure side of things so I mean making it very easy for anyone to launch a non-custodial staking setup that they can use exact to kind of implement this Market Mike that you were talking about right between no node operators and and people who want to stake and with a difference that it's much more customizable than it it's ever been in L to date okay so you can really Implement any kind of staking setup that you want and then the second major part that um you know the audience kind of can understand I would say is the

liquidity layer so the you have the staking infra and this allows you to make a rich kind of uh you know Garden of like different staking vaults different staking setups and then what the liquidity layer allows you to do is the ability to still mint staked Eve against these walls like you're participating in Lio itself um like you can you can make a very custom setup um and then you know maybe you st you stake a 30 to e in that custom setup um and you know then maybe you can still mint like 27 28 st e against that so in Lio V2 uh you know you can M St if one to

one why because uh the protocol like very tightly kind of controls the way that the the stake is being used and like what kind of software the different node operators run and like over like how many you know it is distributed and what geographies they in and what client they run like all of this stuff right and as we kind of move to a more diverse more heterogeneous staking setups then uh Li will give you the ability to kind of tap into this like Best in Class liquidity and Integrations uh but at like a slightly lower um collateral ratio yeah this anticipates maybe one of my questions getting under the hood here

a little bit you know in the past when we've talked about Lio pretty extensively in the liquid staking season we discussed V2 and the staking router uh we described exactly this right there was basically you can consider a whitelisted set of node operators that Lia would sort of programmatically apply stake to as it comes into the platform and you know the benefits that you get there is very tight risk controls right you can sort of imagine that as a a big benefit of just uh the sort of Lio infrastructure that that underlies that set of decision-making um and one thing that we talked about a lot in that season was the benefit to Ste of fungibility right so it doesn't necessarily matter you're not having a onetoone relationship with with any one validator so you know a steth is a steth but now as we introduced uh this more

modular setup where you can essentially bring your own validator um and that's who you're sort of kyc to if you're an Institutional Staker then the challenge here from my perspective would be how do you manage fungibility because suddenly if I have a bunch of uh steth that got minted from this validator it's different from steth valid minted by another validator because they might have different setups different risk requirements whatever it is so you just describe how Lio now handles fungibility of Ste and if that's related to this uh Bond yes so exactly so I mean you're touching on a very interesting problem right so uh in Lio today all stakers have you know they they have the exact same risk profile and they get the exact

same reward and if you know if there's a user a Staker who maybe has a different risk profile you know maybe they want to take a diff they want to take more risk and they want more reward okay then there's some way to implement that by using stake Eve today so for example you can Loop it right like you can you can leverage your state Eve kind of increase your exposure that way but the options for doing that are relatively limited okay um another example would be well you can like restake your stake de and like get kind of tap into maybe additional rewards that way but the overall problem remains that there is no real way kind of to tune like the risk

reward and like customize the setup exactly how you want it like some share of users may want Lio to go like very heavily into reaking but then what happens to like the users who don't want that right and so that's why Lio um in Regus has made the decision that it is actually okay to add more validator side cars but only if they are very like very very low risk and you know if they basically align strongly with ethereum's you know decentralization and kind of road map so that's the decision that we made so that's this is how kind of like a new sidecar for example could make its way into you know the existing Lio V2 and like and the staking router like as a as

a module basically right but so we have established that we want to serve this much more kind of heterogenous side of the the market right and they can do that through the staking infra and that is exactly how where kind of the bond uh side of things comes in and the reserve ratio so how do you how do you allow people to use a different uh you know a different Vault than the the kind of the main Lio uh V2 and uh well the answer is just that you apply a kind of a penalty like you you you would still allow them to Min stake e against that but because they are taking more risk they are they are more

overall more risky than the main staking router you allow them to mint a smaller amount of stake Eve so you always retain some Bond and that's what the bond refers to the bond is basically the exis collateral that is sitting in the validator that is not encumbered or kind of like borrowed against in the form of Stak Eve does that make sense it does make sense so this is that sounds a little bit almost like an LTV model in a in a uh lending protocol is that an apt analogy to think about here and you know I was kind of even thinking you could depending on how you set this up right you could almost put the onus on the Node operator to bring that capital or

you could put it on the borrower right so on the borrower side of things would be hey I deposit one eth and I get 098 steth back and in the other sense I could say hey uh I I actually I don't want the onus to be on the bar over here I'm trying to maximize what they can get out uh so instead I want every node operator that's in the set to actually bring some amount of excess collateral so I can cover my users in the case that you know there's some sort of slashing event or any risk that I'm taking like how did you kind of think through where to put the onus there well ultimately oh go ahead yeah so you know like uh in general I mean first of all it's is a lot of design you know like in this space you know like

you can design stake worlds in different way and what we I mean Li is going to launch first you know like it's more simplified solution you know like I mean first it can be an owner is a in general owner of the capitals that can set up you know like and stay own capital and then you know like you can in general or do some other work where you can choose who can you know like permission for example permission deploy this capital or in some other way so in general you know like it will be some customization but what what you should understand that if this are you know like validational you know like for example me steak teas you know like and then produce you know like more or you know like return

rewards you know like then they can in general earn more returns by I don't know implementing some side cards and so on then mediums take this you know like if they are underperformed then they will have a penalty because they get already you know like this rewards through rebasing you know like and then they have some penalty from their collateral but what this collateral also give to all stt users is give a slash protection so if this validator slash you know like then you know like it will be Slash from this you know like you know Bond and it's make even system even more secure you know like from slashing awesome I'm curious what was um

you know when you guys were looking at I don't know design inspiration here uh what were what was some of the inspiration for you like we talked a little bit about like the liquid saking module over in Cosmos which this might rhyme with slightly a little bit at least on the collateral management side of things here but you know when you were looking at uh different inspiration here for the design of the protocol did anything sort of stand out or was it a little bit blue ocean for you guys yeah for me you know like in general I pushed the team already for two three years and in general who are contributing to the design uh and uh I mean but it's still you know like a lot of such things can be in general design

deliver through models you know like in general models and Stak TOS different design that can solve the same issue sometimes even compete uh you know like and I think you know like Stak WS even give more freedom you know like in customization and more flexibility and we will see you know like what different other even maybe isaking protocols and some other will built on top of it you know like so in general will make a lot of you know like space for creativity and uh but of course it is a I mean design of Stak wise you know like they have Stak BS it is a design of Cosmos and some other but I think that when we get this idea you know like initial idea

on Stak WS you know like I mean it was a little bit before I mean it was before when we start to develop li2 you know like with taking CR and models you know like we already uh I mean it was no examples you know like back then and uh but in general because we already start to develop staking RoR and models it was just the most simpl way to give more decentralization for ethereum that's why we prorise you know like to develop State models make them stable make some models with Partners you know like soon it will be I mean it is in some developments you know like and make it more mature and then give you know like the next phe that cover not only liquid staking but you can just take your e

build all your staking infrastructure and if you need means take this yeah yeah I think I this is I mean yeah shout out I think to all of those guys I mean like there's been a lot of inspiration I think to draw from uh personally I think like what made it click for me I've always been a big you know Landing Market guy and you know so uh long-term kind of engaged with makad da and so on and I mean you there is a lens to which you can see already LI or uh you know it is you know the the you know taking Eve putting it in validators and then the validator is like 32 Eve

right and growing because it's accumulating rewards and you you know you you basically mint Stak Eve against that right and you uh you can imagine you know in theory that you don't need to put the same validator or like the exact same type of validator behind every stake e right like you can imagine there is maybe a like a validator that is doesn't exactly follow the requirements of Li V2 um and like the node operator management kind of procedures that we have but that is using like something different hence it is more risk key and hence you you you just mint you still mint stake e against

it but you just mint it at a lower rate right like as you said you apply like a like a different loan to value ratio right if you want to use this analogy which is a little bit of a stretch but I think it you know it can work and so when you see it this way then you you realize really you're not limited by the types of validators that you can put you know you can put different validators you can allow stakers to really customize and like Market designers to really customize and kind of go crazy right you just have to kind of then tune the amount of Stak e that can be minted on the front end and thus keep the overall system over always over collateralized and always in

Balance I really like this it's uh yeah this it feels like this is sort of the the future evolution of a lot of uh some of the early D5 protocols is this platformization and you know infrastructure and I agree I think one of the interesting components about this as well is the liquidity layer on top of it and there's an analogy here somewhere I don't really want to draw it out on this podcast to banking U not that Li's any way shap or form a bank but this kind of this idea of having a heterogeneous you know profile of loans at different banks and having dollars be fungible across different banks it's you know is it all perfectly fungible you know like atomically fungible and in practice like I'm not 100% sure but it works that way uh you know over time so there there's maybe a little bit of an

analogy there Ledger is the global leader in digital asset security trusted by 7 million users and securing 20% of the world's digital Assets in recent years Ledger has built a comprehensive ecosystem of products and services making digital ownership more secure and accessible for everyone Ledger's newest devices Ledger stacks and Ledger Flex introduced the world's first secure touchscreens making it easier and safer to manage your assets alongside Ledger stacks and Ledger Flex they have also launched The Ledger security key app offering a safer alternative to traditional password management follow the link in today's show notes to get started with Ledger today I want to talk a little bit more about this important segment of institutional stakers um maybe we can start to break down you

just look at the three different actors that are in this market and I would love to get a sense more on the ground of what do institutional stakers need this was I remember one of the big challenges from the liquid staking season is that uh part of the challenge of interacting with the staking router at that time is that they didn't know who all of the validator set was they they didn't KYB all the different um Whit listed validators that Lio had and now I would imagine a huge Advantage here and one of the big requirements has been now you can actually know exactly who your validator is I know there's been a challenge as well around custody a lot of funds especially have to bring qualified custodians so can we kind of just walk through you know I'm sure you know the two of you have talked to many

of these institutional stakers and there's maybe some kind of checklist to go down but what are all the different what were some of the frictions that was preventing um you know this group from getting involved in the market to begin with and you know how do you expect that yeah just let's go through that checklist yeah maybe I will start here first of all you know like I think I mean it's is a lot of misleading information on the market you know like especially when you know like some companies who are try to sell you know like to institutional clients it try to in general you know like in general mislead you know like sometimes institutional clients you know like I mean l is already used by about you know a lot of big I mean I mean it's the biggest protocols that's used by

institutions you know and and uh when we go into institutional clients it's different regulation different countries you know like that we wanton need to understand and are I mean in for example Europe is already some ETF providers they try to build you know like uh ETFs we take this you know like and in general they already has I think regulator regulation approvals you know like that can give them to you know like list ETFs with Tes so it's no blockers you know like so I mean ligher V3 is in general not unlocked for them they can use it already now and uh it's isn't I mean a lot of other institutions you

know like that use them some of them in general they are just over care or like it is different or maybe it is different I mean it is a requirement you know like to in general are and in general what they usually want they want to understand you know like that the validator that provide the service you know like they are ready to I mean to be to have a like particular up time in general ready to work with institutional clients you know like and guarantee you know like by something or or you know like the quality of the service you know like and in this case you know like I mean with li with three lier can cover you know like that case where you know

institution I mean any type of institution ETF provider or anyone else can in general choose choose the validator you know like choose the custody you know like choose the other setups that they need and in general be sure that what they do is in general fully under their you know like setup they they want to have to their clients you know like and one of the things here when you speak with ETF providers what they need they need liquidity you know like and even when you list you know like I mean some assets on as a I mean assets are that is you it should have some parameters of liquidity

you know like and currently only St te is cover all these parameters you know like of liquidity if you will go into ETF you know like issuers and I think that what is important to understand that you know like I mean with that customization even if some uh institutional providers has some really like complex request they can cover it and build it and be liquid at the same time and that is a big benefit yeah on the ETF side I guess we can say a bit more about why liquidity is so important to them yeah um in my mind all ETFs are going to compete

basically on one number I mean we know ETFs compete on like you know brand and size but like a lot of lot of people care very much about like the total expense ratio that you basically incur like when you invest like ETF investors are very very very cost sensitive right and thus like if you're kind of an ETF provider then you really are competing at like driving the cost as low as possible and like the you know invert if you want to invert this like the return as high as possible right and um you know the way you do this with Eve is you want as much of your Eve in the fund State as possible like you want that number like that that share of you know

Eve State versus Eve nonstate you want this as high as possible and if you're only relying on the kind of primary Market liquidity which is provided to you by the ethereum withdrawal queue then there is only a very limited amount of liquidity that is available to you because not the not the good times liquidity is what matters to the to these but like the first time liquidity right like you know when Market is going down and like a ton of people actually are selling off their e ETF you know and there's like you know there's a you know there's fire in the theater right like and you know like how big is the door right kind of to reuse this like famous analogy right and so this is exactly where a Stak like a liquid staking

token uh is so much better than like a non liquid alternative yeah I can what is the rough liquidity of when you're measuring that uh yeah because the withdrawal queue is sort of the limiting factor here um you know what is the excess liquidity that uh roughly that Ste has in excess of that like how would you measure that yeah I will not give you the number you know like but the volume is about right now like two I it's about you know like two or 100 Millions you know like dollars per day you know like so it's also like I mean depends how you calculate it you know like we of course has dashboards you know like and because it is also State and rap State you know like so I

mean you can calculate liquidity for both and I mean uh but what we can definitely say that you know like it's the that light is the most liquid token also what's important for institutional you know like yeah I mean hasu make good point that they want to St all you know like 100 because if you st only 50% you know like then you get only 1.5% APR and and it's not Mak sense in general ETF providers want to stay them all and then they need to have a liquidity during the day so in general it's the law you know like and they need to settle it you know like and if it is and it isn't no you know like other

almost way you know like to instead of use te and that's why all of them are interested interested you know like in making yeah in general discovering you know like how they can use take this yeah and also it is some regulation blockers for example in us you know like you know that staking is in general our state is not clear you know like and of course everybody's waiting this unlock you know like where will give you know like uh stake is you know like two two ETFs and uh you know one other piece that we don't need go super In The Weeds on but I I would love to get a sense as well of the and I know this is a very heterogenous group of depending on your

geography and if you're a fund versus a large asset manager or an ETF or whatever it is very had a genius bucket but you know when we talk about the me setup so some of the side cars that exist on eth validators can we can you just describe a little bit more H you kind of Kick this episode off by describing you know it's kind of like me boost I think still has massive market share right something like 90 plus percent market share but uh there might be institutional setups that require you know more sensoring or something like that for relays or also you know we're getting a lot of different side cars as well right now with things like pre-confirmation Etc so you describe you know the the me infrastructure here as a as a component and then is it mostly do you think going to be competing for okay

I got to check my boxes to make sure there's some sort of sensoring for my relay or is it going to be competitive on yield do you think you know if you onboard a bunch of different side cards like how would you describe that whole sort of side card environment yeah I think I mean my main takeaway would be it's it's a little too early to tell so as you were saying like right now MEF boost in the sidecar Market has 100% market share there's no there's nothing else um I know that you know some folks are working on Commit boost and that's the idea of like making like a more modular version of MEF boost um although MEF boost is also going to support pre-confirmation for example and so there are um several different preon information uh side cards that are being

worked on um and these will in turn allow um you know so different types of pre-confirmation um inclusion execution prec confirmations used for different types of validat commitments um like faster inclusion times uh for base drups for regular transactions on layer one then you you can for example uh Implement blog space Futures this way so you can pre-sell uh your block space so like let's say like in three blocks it's your turn to make a block you can already like make an economic commitment that you are giving this block space to a certain party now like in the future uh and then inclusion lists for

example in theory can also be implemented in this way right because you're giving like an instant confirmation that you will include some transaction and this in particular like building this inclusion list can be outsourced to a third party as a type of like um shared block building right or something like that like and um as we have seen I mean also DVT is an example uh of a side car so really I mean it is you know a way of running validator is a multi6 so you're entering this kind of you know agreement with other uh other people other operators on on the same valad data and we have seen that uh there's like you know many different

like permutations of these that people will at least try out it's too early to say you know if anything will catch on in a big way um and yeah going more maybe to the institutional uh market and side of things um what we have seen in some cases is that uh you know they uh stakers want um like specific agreements you know on you know as Constantine was mentioning like on uptime but maybe also on specific like regulatory requirements around like usage of relays and usage of builders that are like you know of compliant um uh yeah so really I think we're looking

at a very heterogeneous market and it's like very early I think some people are of the opinion that you will have a very rich space of sidec cars and like you know different vals will use very different sidec cars and you will have many like exist at the same time I think I'm personally more in the camp that um you will have like a small number of side casts kind of winning out why because uh these are all individually not that interesting if they don't get a lot of adoption right so you need like a critical mass of adoption in any of these things for really for other uh people to build like uh you know on like services on top that like really make

use of these validat commitments Unis swap Labs is rolling out the red carpet and launching a 15 .5 million bug Bounty this is the largest bug bounty in the entire history of crypto to anyone that can find a critical bug with the Unis swap B4 protocol this bug bount aims to make it the most rigorously reviewed codebase ever deployed to ethereum now the Unis swap name is basically synonymous with security $2.4 trillion in cumulative volume has passed through Unis swap V2 and V3 without a single hack so Unis swap V4 is dedicated to bringing that same level of security and transparency to the V4 protocol so if you want more information or eligibility

or scope or Rewards or payout or any of that good stuff there is a link in the bottom of the show notes I highly recommend that you stop listening right now go to the show notes click the link head over and tell them that I sent you start earning money today this episode is brought to you by Moro Moro is the first and only defi protocol coinbase has integrated directly into their main app giving millions of users access to borrow against their Bitcoin on coinbase just as web two companies like Google Amazon and meta were built on internet protocols the largest financial companies of the future such as coinbase will build on decentralized protocols like Moro whether you're an individual fund fintech or institution Moro is for you follow the link in today's show notes to try Moro today I would also guess and I con I want to kick this over

to you and actually maybe ask a little bit of a tactical question about how you're approaching things from a or how lto might be thinking about things actually just from like a BD setup standpoint here now but one of the other things that occurs to me as well in this uh you know side card option thing is that the vast majority of stake I would guess at this point is professional staking companies on ethereum and so I would imagine it's a it's not maybe as difficult as a BG BD job as it used to be um to get a large percentage of stake and that also you know Constantine I'd be I'd be very curious to get your thoughts about how Lio might approach BD in this new environment because you know now that you you have a much more heterogeneous group you used to call

them modules and the staking router but now just vaults you know I could imagine a large percentage of TBL moving onto the platform being from a small set of big depositors that could be eventually like ETFs but it could also be even def5 protocols like maker right where now you have the ability to create much more custom essentially agreements for large holders of eth and so to me this kind of looks like uh something that's transitioned from something that made more sense to you have kind of a marketing setup where you had mostly like a retail consumer base and it didn't make sense to have an Institutional BD setup now to something that probably does um require more of a BD than a marketing setup and I would just be curious operationally how you might think about that yeah that's a great question you know like I think

that the same questions that the community asking ethereum you know like how you will do BD for ethereum you know like yeah that's what I was kind of thinking actually too I think you know like first of all I mean what I try what I said try to say to everyone that you know like uh to build a centralized project is hard you know like I mean for example I think he have have you know like great execution you know like now you know like and I really fan of AF you know like but it still has problems you know like why because in general it was different regulation environment you know like where you in general were super careful and wasn't so and a lot of pro protocols was scared you know like because it was attack on crypto Founders a c attack on

crypto projects you know like and it was super I mean bad time for good projects you know like not for for bad one you know like and uh now the regulation change you know like you have for example start to be more proactive I think on Li side you know like what I for example my vision here is I is I mean is close to ethereum you need to create a platform you know like and you need to make I mean different companies who built on top of it you know like Prof profitable to make BD and sell this platform for example ethereum we have a lot of l2s a lot of different def5 protocols that in general I mean I I like this tesis ethereum has hundreds of

BD tips you know like yeah same is for ligher Li is building Marketplace as you mentioned in the beginning you know like and if you make it customizable and profitable for a lot of participants then they will make BD for you and what they can try to say if in general I mean black rock or any other ETF provider we choose a validator you know like they still will choose the validator that they are okay to go who in general cover all their you know like request and this validator can use lighter in general infrastructure and provide what these ETF providers wants liquidity you know

like and in general be the BD power of lighter so the power of it that a lot of different participants can find beneficial to use lighter infrastructure because it's make staking more simple it's in general make it mod centralized in general this institutional maybe like large ETFs should think that I mean this ethereum price will be higher if ethereum will be decentralized because if it will be centralized by four participants it's just a database and it's price zero if it will be decentralized you know like then it makes sense to call it as a world computer and for me you know like I

think the best BD for ligher is in general build this layer where different parties can compete and be successful and on rewards you know like from the protocol and make it sustainable because I I I don't believe in or like businesses foundations or like any economical activities that it can be non-efficient you know like in general it should be efficient I believe in general cybernetic economy but it's another topic and motivate different parties you know like to stake using this infrastructure I can give you example you know like for example we have EF ethereum foundation and maybe they are not ready now to St the first

to the second ethereum Foundation I mean let's talk us about other you know and I think that what is important that they are not maybe ready to stake with lier why because of some you know like in general they want to stake maybe with solo stakers and some others and uh what Li can give with stake tools you know like first of all choose a validator you know for example it can be guest team or like some other for example uh developer of their you know like client team you know like that already in

general they already taking provider for lier you know like and in general ethereum Foundation can stti with them and be sure that they get some fees that they even can manage this fees to validator and maybe they want to donate this Fe you know like from stake this to some project you know like or they can want to have a censorship resistance set up you know like and in general I mean they can make ethereum mod decentralized by using this infrastructure so eum Foundation is one of the client that in general what Li to do is solving the issue it's Outsourcing the ethereum issue of staking because now ethereum

researchers they for example proposing Rayo row staking and some other type of the taking in general with st walls you can build it you know like in general St walls solve the issues that you can stake with low Bond you can run different setups you can use reaking inside and a lot of different other creative things that you can do and maybe need to focus more on scaling you know like or some other equs if in general you know like the problem of taking is solved and for us you know like if we will build their like middleware the software with right incentives then BD you know like all your all then you need education you

know like to educate in general different staking providers different you know like for example client teams that they can stake with thef and donate in general to some uh funds you know like that they want so in general you make it healthy infrastructure and you build a game theory that dobd for you yeah I I think that uh you know talked about we had Paul from Moro on the podcast maybe two months ago and we were describing maybe like a he what he described as a b to B to C model and maybe there's some element here as well of right if you uh if you're the neutral underlying infrastructure on the bottom then you do rely on someone that has more direct relationship with your

customers or depositors which is a little bit of a change um in lighter's model here so I've got a question for you guys is hypothetical um one thing that might be interesting and hust I think I asked this the last time we recorded but there are I could imagine so for instance someone that does not do Native staking or not do liquid staking but they're a large staking pool like coinbase like what if coinbase was like hey um and they're doing this with Moro currently like I've got a bunch of people that are staking currently I would like to take advantage of this neutral infrastructure um and the liquidity of Ste because CB eth didn't do particularly well I think it's roughly a dead product at this point um and say hey uh I actually want to take advantage of this neutral infrastructure

and uh maybe I want to Mint Ste but maybe I also want to Mint my own uh liquid St so how would you approach both of those decisions and I could ask the same thing by the way about any of the other staking providers you could like do rocket pool or whoever but how do you how would you guys feel if some of the other uh staking pools approach to Li to use this infrastructure yeah in general you know like that is our in general why we designed this infrastructure because we want to have more open market you know like in general I mean even coinbase is can you know like first of all earn more if they in general you know like use some type of not leverage but in general they use some type of collateral and more e you know like they

can earn more on collateral and also I mean they can mean take this you know like and in general has have try to build better product you know like that is a one of the use cases that I think we are targeting that if you know like coin B this is not so liquid they can utilize it infrastructure and utilize this liquidity and that's benefit both you know like and this customization you know like but finally you know like the adoption will be of the most secure solution because you know like I mean when people stay they try to you know like eliminate the risk and all this I mean how to say different providers and different setups will make St Mak taking

more decentralized will make it more secure and I think that different lert protocols different exchanges different other you know like uh defy protocols they can utilize this infrastructure to run own staking all like to means take this um yeah both and then follow-up question uh would be what if uh you know I'm coinbase I would bring a massive amount of um you know eth onto and eventually probably liquidity into the Lio ecosystem here but I don't want to meant my own I don't want to me steth I want to Mint my own liquid staking token like so essentially be a whitelisted service

how would you think about that as a business opportunity I think you know like first of all you need to Fork I mean I think Stak walls to in general make all this set up but and I think is great you know like I mean if you will build I mean the same with Morpho you can wall Fork Morpho wall you know like and also build your own product I mean and I think it's great about crypto that you know like are I mean it's a it's in General open code why because it's blockchain because you need to CH trust it you know like and the open source code and I mean everybody benefit from it but I think that eventually you know like for coinbase if they even use this

infrastructure and mean own talking they need still to build this liquidity and I think they can get more benefits by utilizing you know like take you know like liquidity and Mer it or get the best from Stak te they can in some way build their own token on top of Stak te and have a better product got it yeah I mean I would say it's not really something that we're thinking about very much because it doesn't make a ton of sense right yeah like you can the benefit of I mean a lot of the benefit of using the Lio scking infra is that you get the access to liquidity whenever you want right this

really this is the the liquidity layer is is the differentiator right and um like if you don't need this then you know you can still use the infrastructure but we're not like not going out of our way in order kind of to to facilitate or like encourage that it doesn't make it doesn't make a ton of sense and this is you asked like earlier about like BD what the BD focus should be right and so I mean I I I I just want to highlight again like yeah that that that on the void creation site like we're really seeing a kind of change like from a two consumer type of business to like a two business to Consumer type of business yeah um but

and this is the one thing that I wanted to add to that discussion is the Stak e liquidity and Integrations That Remains the other huge like other side of the coin and so for Lio it will always be of utmost importance to like make sure that staked Eve is the most liquid staking token and that it's integrated everywhere it's available everywhere and then you make it like really attractive to build vaults on top of Li V3 all right um very helpful uh so so one one thing that we didn't really talk about um I just kind of want to touch on you know as we sort of start to wind down here is this kind of like this new

Asset Management curator uh type market and I would love to get a sense as well of who you envision that being and when I look over at Moro today it's sort of uh like the steakhouses of the world um it's the gauntlets of the world Etc so is that roughly the the group that we see here as the initial curator set or do you see a more um a more like trafi sort of curator set and you know I would be curious because we talked a little bit about Structured Products here um and we haven't talked about like The Leverage looping use case for for vaults in general but two-parter I'd be curious who you see as the initial curators here and then you know what are some of the early versions of Structured Products that you see being built on top of that leverage

stee yeah first of first of all you know like I think that cat are all the same you know like they on the market they working with different you know like protocols they work with Melo they work with you know like Morpher and some other protocols and sometimes it's when by themselves you know like I mean it's still a question you know like of Regulation you know like because creators sometimes can have you know like more RK of Regulation and in this case you know like you still it will be fully self- custody product you know like and and also you know like I mean what Li can do it can adopt you know like their walls to some other wall for example you know like you can you can

see a mellow volt you know like where user deposit is it's sted in light volt and some of it's in general Loop it you know like and they get more a APR and at the same time you know like part of this is can be restak in uh like I or symbiotic you know like protocols and in general I think that it is protocol for structure products like mellow that give you this way to manage your position and it will be aurat there what is you know like light is under layer you know like for liquidity and for staking you know like particular you know like and then

um I mean yeah it's can be utilized in case of some uh cators cators from you know like traditional Market I think they eventually will come because you know like we all understand that all the assets will be on chain long term you know like and it will be a lot of interest in from traditional markets to figure out how to work with this markets and adopt this infrastructure and I think that staking infrastructure will be adopted first and then we will see more complex products you know like that can be built on chain yeah um not a ton to add to that I mean catas in my mind I mean yes like you have the curators that exist today

but like they can be yield prod calls they can be lrts they can be institutions uh and they can also be existing node operators so like from talking to them like if you look at you know look we talked in the beginning about this spif forcation of the market and like liquid staking and and non-liquid staking right and a lot of the same node operators for example that operate in Lio in a liquid staking manner they also have other clients outside of Lio in in a kind of non non market right and uh we found that they can also benefit from bringing that stake to Lio and they can offer the exact same terms to their clients uh you

know inside Lio that they can offer outside so for example they can have lower fees they can have you know restating custom setups all kinds of things but they get basically they get the they get the liquidity for free right and they can use the liquidity to further drive down their costs or give like more rewards to their users right and so um if you if you're anyone who has existing customers in the staking market and they are not currently making use of any liquidity then you can bring that stake also to Li and benefit got it um okay guys uh I know we're uh running a little bit low on time here and you guys have already been super generous uh I guess just like

logistically here so we're talking on a very interesting day we're sort of announcing all of this you guys give any details that you can share in terms of a timeline for sort of next steps or when people can dig into more technical details or kind of just phases of this roll out here like just maybe cover some of the logistics yeah I mean first of all uh I think that the goal is to go fast you know like and it will be some pre-launch soon in a week I think or maybe like a little bit more it will be anoun forward you know like and then it will be a test net you know like U where you know like different providers and cators can try already their technology you know like and then they I mean it's still you know

like difficult to predict you know like development because it's really has a lot of dependency you know like especially Audits and security is the most important thing you know like then the main end is planned during the summer excellent okay guys um well look this was really fun um and you know Lio uh and liquid steak in general is one of my favorite subjects to nerd out on so I really appreciate both of you coming on and if you are a potential institutional Staker or a note operator or depositor and this all sounds interesting where can people find out more yeah first of all you know like it is a special you know like website you know like especially for li3 you can in

general join it and it is are I mean a way to communicate with a team who is building it you know like to in general to be on boarded you know like in the first wave or um I mean to the first wave of uh validators creators and institutional clients so if you're part of that we also can share it with you maybe you can add it you know like in a podcast or somewhere else you know like it is a channel that you can join and I start to be the first to be in the first wave of you know like people who want to build online3 first wave baby I love it um well yeah we'll um guys uh Constantine hassu really appreciate both of you

joining and uh yeah we'll have to do this again sometime soon definitely thank you very much Michael it was amazing yeah that was a lot of fun thanks guys