Liquid Staking in Comos - Roea Mortaki & VishModali of Quicksilver

Transcript

we are live I'm Sev 3.0 and today I'm here with Fish And Roya of quicksilver uh they are the co-founders of Quicksilver and we're going to be discussing everything Quicksilver it's been a while since we had an episode about this protocol uh back on episode two or three I interviewed Joe Bowman and that and since then the protocol has launched uh there's been some uh some roadblocks since then but they've cleared them out uh we're also gonna be talking about liquid staking and Cosmos more generally I'm really hoping to get an overview of the liquid sticking ecosystem in Cosmos and what's the come for Chris silver I'm also dying to find out why they think that users are best to quit to make decisions when it comes to choosing the

validators in terms of liquid staking before we get started make sure to hit the like button hit the notification Bell And subscribe to get notified when I go live every week and of course anything you hear here is not Financial advice you should also do your own research my guests Vish and Roya are coming up next right here on the interrupt [Music] hello hello how you doing guys hey goodbye

how are you I'm good thanks for being here this is a long time coming and uh really glad we could do a follow-up episode about Quicksilver and more specifically you know I really want to get into liquid staking on Cosmos because I think uh it's a topic that a lot of people are interested in um it's funny like liquid stakings existed in ethereum for you know some time now and it feels like it's it's now becoming or for the last couple months at least it's become kind of a central topic of discussion in the cosmos ecosystem and one that I think uh deserves a deep dive so uh before we get started uh maybe you know introduce yourselves and uh let uh my my listeners

know how you got here uh at this particular point in your life where you're on some guy's podcast cool thanks Seb um really excited to be here thanks for having us and I'm Roya I'm co-founder of the Quicksilver protocol and a little information about me initially I have a background in traditional Finance where I worked in investment banking for a short while and then moved on to strategy Consulting and still in the finance industry where I worked mostly with big European Banks and financial institutions um it was super interesting and I learned a lot but you know I always felt this sort of Disconnect in terms of

values you could say and and when I got into blockchain and crypto a few years ago you know it it just clicked and I had the opportunity to join chorus one back then which is a leading second service provider and I joined the team when we were around eight people and I was in charge of managing the company's operation and and the scale up of the team it was uh pretty intense and super exciting and it's where I got to learn so much about you know the uh the business of staking and of course liquids taken and and of course Cosmos and it's also where I met the uh the

people that eventually became my uh my co-founders so yeah yeah well you were definitely uh brought up at the right school I would say um for sure yeah of course one is you know one of the OG's in the space and actually we have some chorus people here in the chat hey hey Rishi hi guys Vish um I wanted to tell you a little bit about your background and how you yeah yeah so I I have a background in economics that's sort of what I studied and then I moved on to working in a bunch of payments based startups I go into crypto I was still working for like a payments processors are still very much in the payment space but then I got introduced to crypto right and there was

no going back from there uh so I left the place I was working for I saw this gig at chorus one as a research analyst applied there uh got it um and that was essentially a research analyst of course for some time uh and our course I was primarily working on the liquid staking research while also doing other General Cosmos research governance based research that and that sort of played into my influence on how we decided how we designed Quicksilver and yeah that's how we got started foreign how big is a team now at Quicksilver um seven people we're uh we're a pretty

lean team so yeah yeah and um yeah so like Quicksilver uh went live last month so just a quick disclaimer here I'm an investor in Quicksilver and I also run a validator uh I thought people should know that um so yeah you guys went live last month I think you know in terms of liquid staking you guys really helped uh shape a lot of the narrative and um yeah a lot of the narrative around liquid's taking in the cosmos ecosystem you guys were you know the first I think uh Team to be working on this um and so like the Quicksilver launch I

think was highly anticipated by a lot of people in the space myself included so yeah how important was this launch I think like for you but also for the broader ecosystem yeah no it was uh super important and it was a long time coming but just a little a little side note there uh Quicksilver was not actually sort of the first team to you know work and design on a liquid staking protocol the uh persistence and peace for a very very long time they're you know um you know also uh present for uh for uh for a long time in the cosmos

ecosystem and they had their liquid sticking solution for uh for a while so uh hype mistake and but um it is true that you know sort of with with Quicksilver it was you know brand new in terms of implementation in terms of uh approach to liquids taking where you could see it with the usual I mean the traditional approaches to liquid staking that worked with a combination of sort of smart contracts and and and such and from that perspective alone Quicksilver was um kind of Shifting that narrative and approaching it in a radically different

uh different way uh first of all and I mean we can touch on that in more details later on in the interview but um yeah in terms of of design we were sort of the first team to approach it as a zone that is you know embedded in Cosmos and that will fully leverage like the entire potential of of of the uh of the cosmos SDK and the IBC stack and and we were also uh you know as far as we know at least one of the first teams that um tried to address like the constraints that traditionally came with with liquids taken like

um like I mean mostly use those constraints that revolve around user choice is and user agency with you know a governance rights and validator choice and and that sort of things so yeah I mean you could say we were super happy to have started this conversation in Cosmos back in February with our white paper and when we came out of stealth and the engagement was was amazing and yeah we we loved having that conversation with with the community and collecting feedback on on our design and seeing that engagement was was really really cool

yeah absolutely uh there's been a lot of I mean I think that there's been a lot of conversation around this and certainly like you guys have I think really helped change the narrative around the design because I mean like yeah peace take was was early but I don't know I mean I to me they they feel like something a little bit unique whereas like Quicksilver is a liquid staking Zone that is meant to be like ecosystem agnostic that works across the entire ecosystem whereas peace take um well you you like one had to move one has to move their assets there at least when I used it and and then there was this whole thing with ethereum it just felt like a very kind of weird um

I would say weird but like not not a a very um fluid experience in in my in my view like maybe that's changed now but like sure the the vision for Quicksilver I think was was very much aligned with yeah or is very much aligned with like inner chain uh interoperability um oh I'm so sorry I didn't mean to get you off there um but just you know to be fair to the uh to the persistence team it is also true that um we we designed Quicksilver at a at a much different time where uh the uh capabilities for a much smoother um user experience and like a much frictionless liquid sticking protocol

were made possible by the advancement of like the uh the the uh the cosmos SDK uh technology right because uh what what we started building with with Quicksilver was only possible because of um The Interchange accounts for example right and the liquidity is taking modules so um yeah I mean we we worked a lot and we we put a lot of thoughts into crafting Quicksilver but I'm not going to lie like we were also utterly spoiled with the the the the technology that the other teams in the in the ecosystem were were building and that are allowing us to uh to to bring

um like a smoother ux and a much more frictionless uh protocol so the launch was initially planned uh a little bit earlier so I think in October and uh or September maybe but it was delayed um what uh like maybe just explaining here to the community you know like what happened and why the launch ended up being you know several months later after it was uh it was planned yeah absolutely so um yeah initially we were scheduled to launch uh in September but you know after all the audits were wrapped up and everything we detected a couple bugs and

we also realized that we could totally improve on automated test coverage there and in the meantime uh stride launched their own you know liquid taking products the same day so you know after giving it some thoughts we figured that launching a basically quit taking product um you know it only made sense if it hit the market first but it didn't really make uh much sense anymore to um sort of Race To market with a minimal product so we we sort of decided that if Quicksilver was not going to be the first liquid second protocol to launch on Cosmos and and obviously I mean like the first liquids taken protocol using

an ICA implementation and so if you're not going to do that instead let's take some more time test more maybe wait for some core uh infrastructure like stable swap pools on osmosis for example or the liquidity sticking module being closer to uh to to to hit the cosmos Hub and also maybe develop you know the bulk of the other features that we were planning to develop after launch and and then launch with a product that's more fleshed out and can bring more value to users and allow them to experiment a lot more with some new stuff so um yeah this is why we we delayed like

we we decided to uh to delay it a bunch more and we we launched the Quicksilver chain mid-December and we relaunched it in in January after the attack and and we can discuss that also and uh yeah now we're in a position to sort of steadily release you know most of the protocols core features uh early this year as opposed to you know launch a liquid stick in MVP and then develop and then release additional features yeah and so yeah which is you know exciting because we have a bunch of of cool features in store like uh signal and intent and participation rewards and permissioned

cosmosm and such that will be you know rolled out soon cool so let's talk about this uh this chain Halt and and also the vulnerability that led to you guys having to Halt the chain so the just for clarification here is a quicksilver didn't have a vulnerability but there was a vulnerability in the cosmos Hub that um LED uh the Quicksilver team to have to Halt the chain so can you maybe walk us through you know the series of events that led this to happen and um yeah and then we can talk about you know why this happened which is a mystery to me yeah sure I mean

um obviously Joe is the technical guy and he would be in a much better position to sort of you know explain the the technicalities of it all and we do have an incident report live so if if you or your listeners today haven't checked that out like it's it's very detailed yeah but um I'm going to try to walk you through what happened and so after um after launch we started the governance proposal on the Quicksilver chain to onboard the cosmos Hub which was the first chain that was you know set to be onboarded on the protocol so basically chain on boarding um by the way along with any other decision that's pertaining to the to the

future of the protocol it's all managed through governance on the Quicksilver chain so also you have to remember that you know Quicksilver is is using interchain accounts to uh to onboard chains and the way it works is that a controller chain you know in this case Quicksilver um it registers an account on a host chain in this case the cosmos Hub and opens an IBC Channel between the two chains and um the way you know the sort of technical workflow is and feel free to jump in which if you if you think we need to add anything here and the technical workflow is you know holders

of of atoms would deposit atoms into the account created by Quicksilver so that you know the protocol controls the funds and issues queue atoms for users um now unfortunately when that happened uh or rather when that was happening an attacker um used a security you know vulnerability in the in in in the version of of IBC go that the Hub was using at the time and to you know sort of attack and block quicksilvers onboarding on the Hub and because of that vulnerability um while the Hub was being onboarded the

bad actor was able to determine the address of the protocols account and um he initialize it I mean he or she initialized the account by um by sending tokens to it probably but just statistically probably he I don't know you know they and then anyway they initialize the account um and and the way you do that is that you you send tokens to it so they did that before we could do the account registration so so this was kind of happening in real time is what you're saying that like this person was watching the chain or this is whatever this this this this uh this shadowy

supercoder was watching the chain um as you guys were doing this or that it happens afterwards so that's oh sorry yeah that that's an interesting question because like the fact that we onboard zones uh via governance gave the attacker a bigger window of opportunity to to to perpetrate the attack because the proposal was live for like three days you know so they had sort of ample time to to to plan for things also the onboarding and registration time was also known in The Proposal so yeah that's that that provided ample opportunity

this did you want to add something here yeah no it's essentially that like given that it's a governance proposal uh and governance proposals for chain onboarding are usually a good thing right because it gives transparency as to what the interchange account is when it's being registered uh things like that uh but yeah essentially it being a governance proposal okay if so gave it mentally a decade enough to do this in real time uh the information was sort of Open Source yeah okay so so the attacker then gains control of this ICA account this interchange account or not sorry not gains control but but gains ownership not really like that's the Nuance here and that what that's what makes it such

a weird attack the attacker has no control or access to or ownership of The Interchange account all they do is cut off our access to the Quicksilver zone so okay there's no financial gain to be had from this attack it's like pure sabotage uh which is why we would have been caught off guard because all of our Audits and internal efforts were focused on ensuring funds never get lost right that's your core testing and your core security mechanism uh but this was your sabotage this was just done to uh but so here's where like here's where this falls apart for me because like okay there's there's and it's not to put any blame on on anyone

right except for like maybe like a malicious person who you know wants to do harm uh but um when audits are done obviously like the code that you guys have written gets audited but there are dependencies right an IBC is one of those dependencies how you knowing that this vulnerability was known um and we'll get to like why the Hub didn't patch this thing you know there's been some debate about that but knowing that this thing was known and then like the audit knew that IBC and interesting accounts was a dependency how did the audit not pick up

that whatever chains you guys on board like is that outside the scope of the audit because it seems like it should be in the scope of the audit to say whatever change you on board should be of this IBC version because there's this this bug that's been discovered and that is a dependency of like I know nothing about audits but it just seems to me like the scope of the audit should go beyond like just the code that you write but also the things that your protocol is dependent on yeah I mean that does technically make sense but in terms of like discovering this bug it's the first time it's ever happened there's only been a handful of ica's own registries so that must have definitely been one

element of it and the second thing also I think it has to do with like Cosmos hubs IBC versioning uh the differences between one version and the other are very subtle uh yeah so I wouldn't be surprised if this was missed especially when all the focus was directed towards how to make sure the funds are absolutely safe yeah but um yeah no I mean point taken and what what we did is now you know preemptively we added we added that to the sort of hard technical requirement to get onboarded on Quicksilver now moving on you know like up until now the

the only sort of technical requirement was you know enabling interchain accounts on the native chain with a bunch of um sort of message types that needs to be enabled so now we also added the requirement of you know having the chain run on IBC Go version 3 or above so that you know it does not it does not happen in the future right um and uh yeah I mean I suppose you know there is um to to to a certain extent it is going to be sort of trial and and error process and what we are going to do is that you

know whenever we like our attention is is brought to something uh we will you know make it public and add it to the sort of requirements and and good practices yeah so why why is it that the Hub was running on a version because I mean I I talked to some people and apparently this had been discovered back in March or it was alerted back in March and there was a patch that was I mean this is this is like a six-month-old bug how is the cosmos Hub not running the latest software like I I don't understand how this is possible do we have do we have ideas for this or yeah again I can't answer this question

is the question for uh The Hub folk but yeah my guess would be that because like this vulnerability wasn't really known that and I I think I I suppose that such an attack wasn't really envisioned so yes but it was no it wasn't wasn't it known I mean like didn't it was it was known that it was essentially on that in the chain accounts the creation of interchange accounts can be deterministic and like the IBC is running in a version where that's possible we're going to connect a and b to uh sort of make this happen uh so whoever the attacker was I mean props are there very intimate knowledge of yeah I was uh

but yeah so I I would potentially make that as a reason and also because this was supposed to be part of the draw upgrade which kept getting pushed back so I think they were waiting for the upgrade uh to just add it in um do you have a sense of how many other chains like because you guys now have this as a dependency do you have a sense of like other chains if they're also running old software or I guess for me it just opened up this yeah it just opened up this um this kind of idea that like chains are not running chains may not be running the latest software and I wonder if we have an idea of like if other chains are also running the latest software or on like older versions of stuff that might

be vulnerable I think as far as I'm aware last we've checked most of the other chains which have inputee and accounts enabled uh are running the latest version all the chains that are you know currently at a you know high priority in terms of onboarding in our pipeline uh yeah they're all running the the appropriate version okay what like I guess the the question I I always ask after it's you know encountering stuff like this is like what do we learn here and and uh I wonder I mean obviously like internally you guys have learned that there's uh there there's a there's a dependency on

you know also versioning of the protocols that you know the dependencies that other chains have but do you think that there are broader lessons for the ecosystem here as well because it feels like as ICA and IBC and like you know interchange queries and all of these interoperability protocols um start rolling out and becoming more um just yeah more used that this sort of thing really needs to be taken seriously and um and it just opens up the problem space like it just just makes it much harder when you have chains that are you know connecting and having to keep up with you know the versions of all the other

chains they're connected with and yeah do we have a sense of maybe like some best practices or things that we we should be looking out for as an ecosystem to prevent these I mean in this case it wasn't you know in this case okay like I know some people on your team lost some some funds and you know the amounts were were reasonably small but um yeah like what's the lesson here sorry this is kind of a long-winded question yeah I think see that personally I say to areas um like as more products use in the chain accounts and into chain queries uh we should start looking at things in a two-chain manner like currently uh

you know like when we think about Security on blockchain we think about it on one piece of code running on one chain and that's how you view security right but I think that perspective has to change and I think it is changing right oh with the time and as more cases of interchange accounts and queries goes live the second thing uh is also like governance Thrift so to say uh is important right like I think one of the reasons the change governance has to be nimbled enough for upgrades we pushed out fast and you know like I don't blame Folks at costume soft bread like I fully empathize with that situation like how

difficult it is to get everything together on Cosmos output of a proposal get that passed uh it's quite an Endeavor so it makes sense that they batch a lot of things while on smaller chains you can have governance proposals go out and yeah also there there's also the not issue but the matter of decentralization here also you know trying to be mindful of that like the cosmos ecosystem is this super decentralized ecosystem where there's no you know one or two teams running the show and yeah you know even though it's like it is a great thing and it is sort of a something to be to to to to Aspire

to um this can be sort of I mean not the perils but you know what what comes also with with decentralization so yeah just trying to be mindful that there are lots of Team involved and a lot of things to tackle and a lot of things to coordinate on and that mustn't be you know always uh the easiest thing to do so yeah like you said thankfully uh no funds were you know really lost and all users were were compensated and the impacts were were minimal financially at least so yeah I think you guys said there was something

like uh 3 000 atoms from your team and like 300 from other other people so yeah that's I mean you know we're not talking about millions of dollars here at current prices at least we're talking about like several tens of thousands maybe um so much much more manageable I guess in terms of yeah uh paying that users or yeah making users it's not permanently lost like it can be recovered it's just yeah that's weird that's that's the thing too yours got always it's like this parody bug it's like you know or or like yeah um yeah maybe they're lost until the next Cosmos help upgrade but that's about it I mean I don't know I mean I

feel like their their software wasn't patched like they should they should issue a patch to return these funds you know um maybe that's something that that uh that can be done you know even if it's not that much money but it could be at some point yeah um you know the guy I team was was very responsive and you know we we got in contact right away and they were very eager to uh you know help in in any way they could and um yeah so all right well let's uh let's leave that aside for now um but yeah thanks for clearing all that up I'm sure people uh people appreciate it um so yeah let's talk about Liquors

taking in Cosmos like you talked about earlier about the constraints that uh exist uh when implementing liquid sinking in the cosmos ecosystem like what's unique about Cosmos and liquid staking with regards to mistaking and you know what are these constraints uh that we have to make up for yes sure sure so um I suppose these these constraints like they're not like they didn't come up with liquids taken in Cosmos they were sort of like attached to liquids taking generally speaking um you know it's the the but especially when you when you consider Cosmos there

was this this issue of scalability you know where Cosmos is this huge ecosystem with a lot of chains and obviously if you want to build something native to Cosmos like the traditional uh model of you know smart contracts like it's it's not um massively scalable and and then there was the issue of uh user experience where traditionally it's it's a very sticky uh user experience where you know you have to unbonder assets wait through a non-bonding period and then you know sort of stake them with with a liquid staking provider um but uh you know just generally speaking also there's there are some

specificities to Cosmos that make it like very different from you know ethereum for example in a lot of ways because you know ethereum is sort of where where everything uh started and I mean just just to maybe introject here one of the things I think that you just mentioned that sticks stands out about ethereum is that whenever liquid staking started in ethereum there was not this idea that you had to unbond your assets because the assets were effectively on you know not stake so you just like have all the security move into the mistaking which supports and Cosmos is different yeah but please yeah yeah absolutely and obviously like potentially there there was certainly some some constraints in ethereum but historically

it was a much easier deal you know building liquid second in in ethereum because you know originally um in ethereum in any way like you couldn't delegate anything less than 30 32 East or something like that which is you know a lot and most people most users don't have that that amount so you know naturally what that meant was that you know you needed staking pools to sort of aggregate people's people's funds so that they could get staked and you know when you when you consider that like it it sort of meant two things like it meant that first of all delegators like they did not have this sort of

close-knit relationship with validators uh that you see here in Cosmos where they would I don't know like research a validator and try to figure out which one is is more performant and or participates in governance and you know allocate their sake accordingly so you know back then like validator Choice was not really a thing in in ethereum the same way that it is in in Cosmos and I suppose it it also meant that you know people with eth they were already sort of familiarized with this model where your eth is sort of staked for you so in that regard like liquids taken at least as as brought up by by

Lido back then it was kind of the natural progression of of the staking model in ethereum anyway like it wasn't a huge sort of cultural shift uh for for people from my perspective and I I I really believe that that must have been super powerful in in driving up usage for liquids taken in ethereum also and you know the the sort of other thing that is a huge difference between the two ecosystems is is governance you know obviously um you know each validator can only say 30 eat at the time and so validators had to spin up you know multiple notes and stuff and so this thing uh as a user the more you delegate to a validator the

more it it increases their voting power you know conceptually it it wasn't like it wasn't as much a concern as as it would be in in Cosmos for example so you know from from from our perspective back then when we started iterating on on the first ideas for a liquid sticking Solution on Cosmos um it was clear that the Lido model of of doing liquid stake in which was designed for ethereum uh would just not work in Cosmos all that well um because for starters like there's there's a vibrant ecosystem of validators uh in Cosmos like in in the ecosystem they don't just provide

infrastructure they are you know they they they produce educational content they give their opinion and they weigh in like in in all sorts of community discussions they contribute um in a number of ways including including pull requests in some cases um you know there's also a higher like a much higher level of accountability with regards to governance uh with validators where the community is super engaged um and you know they also hold validators accountable for for their votes and and how they vote and yeah I mean you know there there isn't a week that

goes by without like a community-wide discussion about one proposal or another on osmosis or Juno or the Hub and um yeah I mean also on a on a sort of personal level my introduction to Cosmos was made through governance a few years ago uh because back at chorus one I used to keep track of governance proposals you know across multiple ecosystems to work on you know what was going on and how we would be voting on proposals as a validator so Cosmos really stood out to me pretty quickly in terms of well like the number of proposals that were live every week for starters but also the level of Engagement uh you know that that you usually see around

um those proposals so um yeah I suppose like to to sort of sum things up the delegator validator relationship is very very special in in Cosmos and and governance is super important as well so from from that perspective alone the Lido model was great in ethereum but we had a sort of strong feeling that you couldn't you know replicate that in Cosmos like you couldn't ask people in Cosmos to forfeit all of that in order to liquid stake and you know also I mean in hindsight also there was like this realization that liquids taken was a kind of centralizing force in ethereum and you know again the the the

validator whitelist model where you know a liquid staking provider would sort of curate validators and vet them and make sure that they were performant and they had good infrastructure and all of that well you know like that that model that wireless model like it you could say that it made complete sense in ethereum um and ethereum has I don't know like a couple hundred thousand validator node or something it's it's which is a lot and it's it's a whole different story on on Cosmos and as you know like most chains only have a valve set of around 120 validators so that was a huge concern for us in terms of what would

our liquid sticking solution look like so um yeah like this this is why sort of even from the early days um it was clear to us that in order to make it in Cosmos a liquid sticking protocol really had to take into consideration um you know everything that made Cosmos unique uh because otherwise we thought that it just it would not work out the same and it was also informed by our sort of own experience uh back at chorus one because you know as you know um of course one belt Lido for Solana and you know we had a front row seat witnessing you know how the Lido model worked well in ethereum but it didn't

really take off on on Solana in the same way so we had a hunch that we needed something different for for Cosmos yeah um yeah I think I think one of the things obviously that the that stands out here is it's like you know liquid staking in ethereum or on Solana or on any of these kind of like monolithic chains implies a single liquid state asset usually right it is like the the chains token whereas in in Cosmos there are so many different approaches you could say hey I'm going to build a liquid sticking product for this specific chain in fact there are chains I think that probably I mean there are chains that have that approach

so like osmosis being one of them and certainly there's other chains I think that want to do their own liquid staking I think Atmos is one of those changes as well and and then there's the the Quicksilver approach and and also you know the stride approach which is to say here's a protocol that is cross-chained that works across the inter chain that allows people to stay to do liquid staking on on any chain on which uh we're on boarded and that that just opens up I I think a whole uh new um kind of like space like defy space as well that like we haven't we haven't

talked about and I I I don't I haven't heard very many people talk about it but like I feel like Quicksilver itself can become a a you know it can become a very important platform in terms of defy liquidity and then like what does that mean in terms of attracting liquidity to Quicksilver and like the importance of quicksilver in terms of attracting liquidity so I wonder if maybe um you know looking sort of forward here what is the um what is the place that a procolic quicksilver occupies where as a as a pillar of defy when it has let's say you know

50 of staked atom and staked uh uh what like staked like maybe you know staked osmo and like the top chains in the ecosystem uh as as Q assets yeah and you know like what you just said right about like attracting all of this D5 liquidity to Quicksilver I I don't think that realistically Works in Cosmos or any change that tries doing that essentially gets into like a pissing match with every other machine right and I think this is where I put silver needs to like reorient or like think about it differently like where

we have this interchange infrastructure we have interchange accounts we have interchange queries and the Quicksilver Zone issues as you said or might issue 50 of add them 50 of all the major chains I think the question for us then is how do we bring this value onto the Quicksilver chain not necessarily these assets right uh and just to give you examples of like what I'm talking about here like you could have your assets like Q assets on an osmosis pool but use them on Quicksilver right if you have an interchange account in osmosis uh you have in the same query step check the state of this asset every Epoch or whatever time frame you want you could fundamentally use it on the

quick support chain you could use it to borrow a land on Pixel or you could in stable consequence so you can do whatever right so you don't need to compete for liquidity with other chains so Quicksilver approach is these assets can be wherever in The Interchange they're built to go to places uh but this there should also be that use case on Quicksilver and maybe that use case doesn't even have to be super defy oriented it could be purely governance oriented right like you know theoretically on quick slow you can build governance uh indices of of sorts right like you can essentially ask people to store that governance power with you and you make decisions for them all of this is possible on Quicksilver right you can create validator indices on Quicksilver uh and you can make all

this happen within the chain accounts into your queries and the assets can be wherever they want to be in wow so that's sort of division that I have for quick to run I see the unique role a quick server can play can you expand on on validator indices and governance indices like what does that mean and how how would that um like what will be the utility of that yeah so technically on on Quicksilver you have proxy governance right that's something that we're working towards where you can have your Q assets on other chains but still use them to vote on Native governance proposals so to make it simple you've come to Quicksilver you've minted some Q atom

you've taken it to an osmosis pool what we want you to be able to do is vote uh with that Q atom without you having to pull that out of the osmosis pool and it could be anywhere for that for that matter right uh so you have this infrastructure built out in Quicksilver right now assume somebody builds a cosmosome contract on top of quick server saying hey I'm a protocol politician of sorts I have influencing Cosmos I understand things uh if you guys want you can delegate your voting power to me right and I can make decisions and you can have a whole Market on that uh that's possible to do on Quicksilver right so this is some a sort of governance

experimentation right the cosmos Hub consensus doesn't allow you to vote like this Cosmos of consent certainly lets you give your governance power to validate us but now on the liquid staking layer you could make all of this happen uh without interfering with consensus in any way okay I'm sorry yeah what's the what's this validator in Industry yeah so Quicksilver allows you to Signal intent across validators right so yeah you're new to Cosmos you find it difficult to make validated choices but you trust someone to do it for you you could somebody could essentially set

an intent as a cause of Muslim contract uh and you could essentially subscribe to that intent and everything you stake would be staked account with that allocation because Quicksilver lets you allocate your assets to validated validate Us in great detail right you could go 10 to buy it a 15 battery to B so you can really spread that out and you can have professionals who will Community Trust do some of some of that spreading and you know I'm sure many of the delegates delegates are supporting their own choices and you know more power to that foreign so one one thing that you know I mentioned earlier like in the intro is that you guys think that it's yeah and obviously this is part I think of the the Quicksilver vision is that users are

are able to make decisions about like governance so they're able to make governance decisions with any of the assets they have uh staked with Quicksilver and they're also able to choose their validator set um or like the the validators which with which their their tokens are are staked um why do you think that that it's up to users because like there is a Counterpoint here that says uh you know if Quicksilver is concerned about decentralization they can choose to um they could say well no users are not best equipped it's up like if if 50 of atoms or stake through Quicksilver and for some reason like you know ninety

percent of those are staked with like one validator that's a huge amount of power Bitcoin validator Quicksilver could say look like we think this is not a great situation we are going to create different allocations we're going to reallocate essentially you know all the atoms that are stake with us because we're so powerful with a broader set of validators such that such that that staking is more decentralized um that's kind of like a Counterpoint to that to that logic but yeah is a you know why you think like that users are always in the best position to make these choices yep so like personally I think I like I don't think liquid statement protocols should interfere with consensus uh the cosmos or the tenement consensus allows people to choose their validators it

allows people to delegate us to determine who holds how much voting power so I don't think at the liquid saving layer we should alter that consensus mechanism in any way that's one way to look at it right like another way to look at it the approach you're talking about the absolute decentralization approach is essentially what marinated on Solana right they exclude the top how many other violators and distributes take to everyone else equally uh but we think that's that's definitely better than having a small whitelist and delegating amongst them like I view it as like an evolution and liquid sticking design so Lido on ethereum started with a small set

delegated to them marinade saw the saw the centralizing effects of that and went with absolute decentralization but the way we look at it absolutely centralization is probably not the best way to allocate stake right steak should be allocated to validators based on how how people decided to be right you can have validators that objectively contribute more uh to a particular chain and community and might deserve more stake right unless and you can't really quantify this you can't say okay if you run a if you're on a relay or from chain A to B you get this much if you write four articles a week you get this much it's impossible to quantify

like the hundreds of factors that go into determining how evaluators are chosen so the best we can do is equip users to make choice and educate users on what's Happening and here that's the most democratic solution to evaluate the distribution yeah so how is what what are the the parameters that users should um look at when making these choices so like choosing to stake I guess this is less about less about choice of validators or or governance

um and and and I do see the util I do see the the interest in creating a market like a governance market for example where you know you you delegate all your governance um or be parts of your governance to like third parties that you trust and I think that would be an interesting Evolution and in in in the Dynamics of governance but when um when choosing a liquid staking provider because it's I feel like liquid staking is is sort of a a winner take all Market um and I'm curious to or at least like in ethereum and Solana that is the way things have kind of played out

um what what are What are the what are the things users should be looking at when choosing a liquid staking provider uh you know choosing to stake with Quicksilver or with stride or or any other ones that might come up or you know on the other acts axes of this Matrix is like choosing to stake with Quicksilver or using a chains native liquid staking protocol in in the likes of like super fluid staking or or any other protocol that might Implement their own internal licorice taking protocol how does the user make that choice what are the what are the parameters they should be looking at right so I think there's a few things to

this right first and again I'll go with this in the order of priority for me right others might have different priorities sure so I think for me the number one thing would be you know apart from you know safety and and like code Audits and things like that which would be the first thing you check the second thing would be how the protocol distributes which is what most people won't check but sorry hopefully but yeah so like apart from that the first thing I would check is how a protocol distributes uh its take like any liquid statement protocol has two parts to it the liquid saving part in the

distribution part so the distribution part often neglected uh something to be checked out the second thing or the third thing I check on is what are my D5 possibilities you know what's my liquidity looking like with this asset what what can I do with this asset like why am I minting this asset can I does this provide me any extra benefits right now the benefits could be Financial like are there any yield opportunities is that are there sustainable lending markets with this that I think are low risk that's one element to it but there's also like the other element to it like can I vote with this asset like currently if I have atom I use it on osmosis or any other B5 protocol I miss out on Cosmos governance so if I'm a

governance-minded user I have to leave Cosmos D5 aside and continue to stake my assets so this could provide Extra Value to me so foreign other side of the coin in terms of value uh yeah I think those are the three things I'd look at privilege and distribution P5 value and others right and um to also to build up on on what Vish uh just said and to come back to sort of your your question and your comment said about you know liquids taking being a winner takes all uh situation so historically that proved proven true in you know Solana and and Lido but you know in Cosmos I personally

think it's still too early to draw any hard conclusions like right now in terms of liquids taking offering there are multiple um multiple providers with different approaches but you know the overall tvl is still you know very very negligible compared to the market cap of the ecosystem or or you know even compared to the market cap of of the cosmos Hub and in that regard I really think that the liquidity is taken module will you know go a long way to increase usage for liquids taken um because as you know the the LSM will allow users to transfer their delegation to to liquid sticking providers without

unbonding which is which is really great I mean for the security of native chains but it's also really cool from a ux perspective because users won't need to unstake go through a non-bonding period stick again with the liquid second protocol but currently that module is not activated so any like it's taking that happens now users have to have liquid assets in order to stake absolutely absolutely but the LSM is poised to be enabled on the Hub in the next few weeks if I'm if I'm not mistaken and you know sort of just to Circle back to also what what Vish was saying earlier I think

there's also the matter of use cases to consider right because we talk a lot about liquids taking but you know actually liquid sticking is just sort of the first step that you know aims to facilitate um D5 participation and defy adoption and I think that you know the D5 ecosystem that's native to Cosmos like it's it's absolutely brilliant and there's a lot of cool stuff being built and um and you know you could still say that we're not yet at a stage where it's you know thriving in the same way that it is on ethereum or or on Solana for example which you know will will obviously change in the next few years I'm I'm

sure and um sort of just to to to finish on on this topic uh you know at the end of the day Cosmos is about choice right um it always have been you know from from the concept of sort of app chains that are interoperable but still Sovereign to you know the high level of governance participation for example Cosmos is is about sovereignty it's about choice and from that perspective Alone um and and I fully appreciate here that I'm you know now speaking less as a co-founder of Quicksilver and more as a you know as a cosmonaut from from that perspective alone of sovereignty which is Central in Cosmos I think that

multiple liquids taking offerings that have you know different edges and that speak to different users um yeah I think that's that's just great yeah I know I think that's true and and but yeah I think I think that where uh uh you know where with ethereum and Solana you know there have been kind of clear Market winners and there's been I don't follow the Islamic system so much but [Music] um there in ethereum at least there has been like quite a quite a bit of conversation and debate around centralization of power and then like you know I think compounded to that has been this whole like flashbots of

fat compliance thing but with with Cosmos on the other hand like this this fragmentation also uh perhaps causes user experience issues right so the other um the other uh sort of opposite on the spectrum is that we have like very fragmented like mistaking and that I think could affect user experience where you you might have like some protocols that are compatible with where like assets can you know are like you know can be leveraged to do defy uh were on other platforms maybe like those are other D5 platforms so I I feel like this fragmentation can also uh lead to

problems or a more complexity in the ecosystem um where do you think is the the right balance to strike and where do you think things will maybe settle um you know yeah so on this and I'm I'm gonna talk about the MSM now and this answers two questions essentially right this answer is why I think that Cosmos is definitely not going to be uh Winner Takes all liquid seeking Market uh and also how you could deal with liquidity fragmentation right what the LSM does is not only let people transfer their staked assets into liquid staking

assets they also let you transfer from one liquid saving provider to another instantaneously without unbonding now you have yeah you probably need collaboration between the two providers but it's doable now on because another ecosystems like ethereum for example you've had like very sticky liquid saving providers with very loyal user bases that show up D5 Integrations and liquidity and this makes it impossible for anyone else staying to the market right so you have tightly concentrated liquidity around one asset and that and that asset is the winner but you have a very hierarchical structure that

that starts from either having a superior product or being first and then maintaining deep liquidity now on Cosmos both of those don't hold true because of the LSM uh as people can move their stake around to different providers without unstaking you likely see a lot of movement amongst liquid saving providers as they keep shipping out new features and the market will sort of sort itself out right and the second thing and the second part of the thing when it comes to liquidity fragmentation the LSM could also be used to prevent that like let's say I have St atom uh on a lending protocol right the price of St atom or atom false

it needs to be liquidated but I don't have enough St Atomic query you could theoretically transfer that delegation share to Quicksilver get Q atom and liquidate that right so if all of us got together and said hey let's concentrate all of our liquidity all liquid saving providers you could totally like essentially have poor liquidity across different token denominations but if you can transfer between those token denominations instantly then you have liquidity across every asset so if you're a new liquid saving protocol that sort of gets into this alliance with all the liquid saving protocols here uh there's room for you in the market so you can have that decentralization you can have that diversity you can have different

product offerings uh basically yeah just get along um and what about this issue of centralization of governance power and like this is something that a lot of people have brought up in in Cosmos and also uh you know during the whole atom 2.0 debate uh you know there there was at least one uh very loud and vocal voice that uh um had some concerns and I think like not illegitimate concerns about like was taking um and specifically I think at an interchange security uh context where you know liquid sticking providers could effectively um

I think I think so I don't remember exactly what the attack was but it was something in the lines of uh liquid sticking providers on consumer chains of interesting security would be able to pass governance proposals to effectively like unlock all of the stake and then um uh yeah um yeah I can't remember exactly but yeah but I think I think centralization of power is the is the main concern here um how do you how do you address that like does does Quicksilver uh uh does Quicksilver have the ability to overtake governance like technically

does it have the ability to overtake governance on on proposals um or is that like solely in the hands of of of users so the only case in which Quicksilver would have that kind of power and by quick survive I mean the chain not the team right is if uh somebody got hold of 51 of all quick and somebody got hold of 51 percent 100 of all Q atom and that hundred percent of Q atom represented 51 of all atoms right so you're talking about a very long-winded sort of economic attack and such an attack doesn't happen overnight right

like if you see more than 50 of atom being unlocked in Q atom that's probably not a good thing that's why we have multiple liquids they can provide us like delegate to other providers right and with the LSM you can do that instantly uh uh you know I'm not sure I think in ethereum they're having this conversation about Lido voluntarily delegating away the other liquid saying providers right you have the LSM do it and currently we have a good diversity of liquid saving providers are in this five maybe six of them that I'm hearing about so which I mean so there's there's stride there's persistence which are the other ones I think the slide persistence

supernova okay and that was one more staffy if I'm not wrong okay uh and there's steak easy okay you're right yeah yeah so there's a bunch of providers right also now cool products uh so if you see one liquid saving protocol even carrying 20 30 percent of steak like feel free to delegate away right um so that that's one solution to solve governance power centralization is have a bunch of liquid saving providers check right we've done that as an ecosystem the second thing is more inter provider like intra provider if each provider can

Design Systems which maximize decentralization and maximize decentralization I mean you have to create the least predictable system right the more predictable your delegation system is the more likely it is to get bling right you can have someone direct the system to get more of your foreign I think what we do or at least this is this is our thought process and why we chose the choice based model right because how people choose is the absolute least predictable like you you cannot gain that uh yeah and it's good that other providers have different strategies so

it's good because you need a diversity and strategies also so I think I think we're good so what's um what's the road map uh what's the state of the chain uh what features can people expect uh in the coming weeks and months foreign sure yeah and yeah so basically now as I mentioned earlier during this episode we're aiming for like a sort of steady release of of features and like all the features that

that make up the Quicksilver protocol um will be releasing um you know the unbonding feature pretty soon as well as signaling intent which is the mechanism through which delegators can you know let the protocol know which which way they want their stake to be to be to be allocated to how many validators in which proportions um we also plan to release a little feature called participation rewards um again you know in the spirit of trying to uh you know not impact in a negative way decentral the decentralization on on the native chains

we have have this this feature that um basically gives users quick tokens based on you know their validator choice so essentially yeah I mean yeah it's it's it was really this the sort of designed with decentralization in mind and as a user the more you take with validators that are smaller decentralized more performance Etc uh the more quick emission you you get and that changes every Epoch to sort of you know make up for the the the the the the flow of

stake that moves across validators and it was also sort of a cool idea for us to you know a line chains and and align Quicksilver with with the rest of of the chains that are onboarded onto the protocol so basically for example if you know you you stake your your um you're an atom holder and just take your atoms through Quicksilver and you make um you know good validator choice quote unquote uh then you get exposure like to to to the quick token and you sort of become also a member of you know like the the quick token Community or or something like that so that's that's

also a cool feature that that we will be um releasing soon and we obviously governance by proxy is is a big one um and the other thing that we're looking forward to it even though realistically it will happen a little further down the line um is you know Kazam wasn't on on Quicksilver uh permissioned cosmoplasm of course because Quicksilver technically is not like a smart contract chain um but essentially here the idea is oh we've been you know sort of innovating a lot with with the Quicksilver design and uh sort of spearheading The Interchange

account implementation and building some cool stuff around uh interchained queries as well and that will allow users to you know leverage cool features on on the level of quicksilver but from a builder's perspective as well it could be super interesting because there's you know a bunch of you know I don't know D5 protocols that can be built on on Quicksilver leveraging in all the implementations that that that we that we rolled out and uh yeah that could be super interesting in terms of um in terms of innovation and in terms of uh the possibilities that that opens up for you for for for users for Q

assets and um yeah that could be you know the base Ground Zero for um for for for defy Innovation leveraging Q assets on the Quicksilver Zone um that's that's really complementary to uh to you know the the traditional defy offering in in the ecosystem and yeah I'm personally really looking forward to that so yeah I say this is what the next few months look like for Quicksilver and obviously in parallel we will be on boarding uh chains um across the ecosystem and so yeah again we're looking at a

steady you know measured onboarding of chains and you know creating use cases for for for for those Q assets and uh working with with those teams and with those communities which is really exciting very cool and um you know I think early on in your in this journey there was there was uh a lot of chatter about Quicksilver uh being on interchange security that uh ended up not being the case is that still in in the cards like or is there an incentive for Quicksilver to go to interesting security at some point or yeah so yeah we were we had a lot of

talks with with the team and we were you know super interested in implementing an onboarding interchange security V3 you know and um however like it was always clear to us that we wouldn't be sort of launching with interchange security because that would create like an unnecessary sort of schedule independencies between you know the Quicksilver chain and uh the launch of interchange security so in any case like from from our perspective like the The Interchange security V3 is super promising and um you know if and when that becomes available I'm not I'm really not clear

on the timeline right now I'm not sure when that is is is planned and where that's headed but um when that becomes available I mean at that point it will be now that the the Quicksilver chain is live it's going to be you know a community discussion and it's going to be up to to the community whether Quicksilver is onboarded as a consumer chain or not so V3 means that you're benefiting from your own voucher set but also the Hobbs values that effectively yes exactly I think that if it makes exactly at that time like if it if it makes Economic Security economic sense from that perspective to do that uh yeah it could be like a a good option

and uh I I'm asking this question because I know a lot of people want to know you know what the question is it's one airdrop god um yeah airdrop is q1 2023 so yeah in the next the next few months okay and and in any case like just one thing to mention about the Quicksilver airdrop is that it's not going to happen just at one moment in time so obviously when that happens uh hopefully at the end of this quarter um the airdrop is going to go live for

all the chains that will be you know onboarded on the protocol at that point um but in any case it's you know interesting to consider that the Quicksilver airdrop is going to be continuous and basically whenever a new chain is onboarded onto the protocol the you know stakers on those chains are going to receive a portion of of earthquake and the you know sort of the idea and philosophy behind this is that you know firstly we want you know we're a new chain and we want the quick token to be spread out as far and wide as possible in the cosmos ecosystem and we want the Quicksilver Community to be as

diverse as possible and we also want to take into consideration like the future uh Cosmos Community right of of new cosmonauts that are going to to be joining in in the next years with new chains and and everything and it was also important for us to sort of align incentives between the quick server chain and the other chains that get onboarded onto the protocol and make sure that you know there's as much overlap between the the respective communities of of each chain so yeah like back then when we when we designed this this sort of airdrop model we had this is sort of the things that we had

in mind for Cosmos there's a question here in the chat Tom's asking if there's any plan to being integrated into Mobile Wallet like I guess Kepler probably is is what most people are used to using yeah yeah with Bowden and Kepler and Cosmo station we plan to be on their mobile wallet awesome well um we went a bit overboard here but uh thanks uh thanks for chugging along here and uh yeah this was really great I'm really happy we got to dive into liquid staking but also the long-term plans for Quicksilver um I'm still I'm incredibly bullish on

this product and uh yeah I think you guys are one of the most competent teams uh to be working on this uh on this on this whole idea of liquid staking in Cosmos so thanks for being on thanks Seb for having us it's been really nice hanging out thank you and to our listeners thanks for tuning in uh you can subscribe to the show obviously to get notified when I go live every week also be sure to share this video with your friends if you like the content I'm putting out you can also uh stake your tokens with interop on two networks I'm on ethmos and also

Quicksilver although I think right now uh tokens are not liquid so but if you're listening to this in the future and uh and they are don't just take your tokens with me I'd appreciate it thanks so much and see you next week