Niklas Kunkel: Chronicle – Ethereum's First-Ever Oracle #516

Transcript

welcome to epicenter the show which talks about the technology projects and people driving decentralization and the blockchain revolution I'm Sebastian I'm here with Felix today we're speaking with Nicholas kko he's the founder of chronicle chronicle is an oracle protocol providing data for blockchain applications and it's also a spin out of the maker protocol so uh Nicholas and his team were Prov were uh basically heading the Oracle team at maker and c and that team has now spun out to form Chronicle as a standalone product so we'll be diving into Chronicle today understanding how it works and also talking about the Oracle Market more broadly Nicholas thanks for joining us

today it's a pleasure thanks for uh thanks for having me so you've been in the space for for some time obviously you were uh part of the maker team and uh heading the uh the Oracle team there uh how did you get involved with ethereum and and uh how do you start working with the maker team actually quite funny I was at uh I was at IBM at the in the research department and uh we were actually working on hyperledger which was this uh permissioned uh Ledger and then the future blockchains yeah yeah it was it was the future uh uh effectively IBM had missed the boat on cloud completely they

were very upset um and they said the next thing that comes along like we're going big and we're going early and uh you know to their credit you know they were very very early on blockchain they just got the the public private Ledger uh kind of equation wrong and and so the ethereum white paper kind of came out and I read this and I was like oh wait like you know public General compute layer that's the thing you know I go to my boss I'm like all right you know we should we should just throw away everything we did right we should just use this ethereum stuff and they're like no that's just vaporware um I think somewhere like uh I think like a year later like uh mainnet actually launches and we're like like

look it's real like let's go like um and I was quickly told you know shut up get in line right uh so so I I made my way over to the ethereum community and uh uh while while like the community was great there were not actually that many like real let's let's say like protocols to uh to to work and contribute to there was a lot of kind of like hobbyist stuff going on but uh and with with grand ideals but not a lot of people just working full-time on on building something um and I think back then there were kind of like the three big teams were like uh I think augur dig stow and uh and

maker um and so out of those uh I I I kind of chose maker because it just seemed like a a circle of like these individuals for felt like the uh the dumbest person in the room and that always seemed like a very uh very productive environment for uh for learning yeah that's super interesting I think also like interesting to hear like these three teams essentially all defi applications if if you want to say it like that right like dig star was about tokenizing gold so kind interesting that the the the early teams were already working on like I guess what became the the biggest use case sure I mean if you think about what dig style was I think it was just a

matter of like you know wrong wrong timing right uh today like a Digi style would would be an rwa right uh a token that is like you know stable coin backed by a gram of you know physical gold in the real world like that's a real world asset um you've brought gold onto the blockchain right that would be uh that would be huge in the The rwa Narrative right now right right so also like of these three yeah I guess like you said the timing was wrong there maybe and also like augur uh sort of the prediction Market thing didn't turn out like that well let's say or uh it's still like sort of it's kind of still around I guess more so

than um with with py Market maybe but also I guess yeah maker definitely is the most successful out of the stream maybe because of you also but yeah or maybe can you tell us a little bit about what about the early days at maker and sort of yeah what was so special about it yeah I mean in the early days of maker like there was nothing right uh there were there were no dexes like this was way before an ether Delta or anything so we were like well we want to make die but in order to make die we have to build all this other stuff first right um so we made the first decks um there were no oracles so you know conceptually

they existed but no one had actually made like a like an oracle protocol that anyone could use no one was planning to make one uh so we made the first Oracle uh we deployed that in I want to say June of 2017 uh in conjunction with like the the prototype for for Sai I think it was called Proto saai and uh you know that that protocol I mean uh one was like the first oracles on ethereum but two if you think about how long that that was running I mean it's it's been running consistently since then right and uh like six years at this

point on ethereum I mean that makes it one of like the oldest kind of almost like a grandfather like protocol if you will so we're we're we're quite proud to have built something that uh that really lasted and like with stod the the test of time what were the early Visions for maker and what were they trying to cheap at the time and you know contrast that with what maker has become now like how how different has that Vision played out sure so so I think um with any kind of um startup with a with a Grand Vision you always have to make kind of adjustments over time right like you you

have to imagine right when the idea for maker was conceived when the maker white paper came out there was no defi the thing that I give like you know Runa and and Nikolai the the two co-founders of of maker Dow so much credit for is that uh to them it wasn't like a a possibility that this like vibrant defi ecosystem would exist right it was a certainty and they were building you know for this like puzzle piece in that uh certain future that they envisioned right and uh uh you know I I I I think Founders always have kind of visions of the future but like you know Runa and and Nikolai were really acute and uh really kind of got it right but but even

you know within with within that right uh you can say okay well in the future there's this vibrant defi ecosystem there's going to need to be some way to transact value that is stable right because people don't want to transact in something that's volatile right like if you're a merchant you don't want to accept something that's volatile right um have thin margins uh if you don't have if you don't get paid in something stable your margins blow up right and you don't have a sustainable business right as a customer you don't want to hold anything volatile right because you don't want to see your wallet your wallet like a value like fluctuate right you want to have like a stable purchasing power so I

think the the need for a for a stable coin was quite clear from a theoretical perspective um but it what you know I I I I I think there were kind of uh this idea that uh the consumer side of using crypto right like in their everyday lives right for for spending and and for earning uh that that would kind of keep in Pace with the more uh let's say Financial infrastructure right and I I think as we've seen the the past couple of years while there has been consumer adoption of crypto defi has just like outscaled uh that type of of adoption massively yeah certainly I mean the the

I think that the role of maker in early defi I think a lot of people who maybe are using defi Now sort of like you know it it I don't want to say it's forgotten but like because um State cor are such an important part of of Defi and and obviously usdc has taken up the larger part of the market um it it's uh something I think it's worth remembering that in the beginning when we didn't have usdc like we we had D and D was the only real um way to get stabil like sort of get get out of risk assets uh in uh in early Defi and played like a tremendously important role so I

think it's like a very important public good and and also something that allowed defi to basically be spawned into existence I kind of think like the inflection point what really hit for me was that the you know in back in uh in 2017 right when we when we released Sai um the moment after we released it uh maker internally started paying everybody in Sai um and it wasn't like planned that way beforehand it was just kind of like well like you know if if we if we actually built what we said we built you know if we actually like believe that like it works like you wouldn't mind being being

paid in it right and uh I I remember uh Andy Andy millenni who was the CTO at the time just being like okay we're g to start paying everybody inside everyone was kind of like shrug okay and that's really cool right that's when you go from like theoretical product you know with like oh it's going to be used in the future for all of this stuff to like no you're like using it yourself right uh you you have so much confidence in this thing you built right that you're willing to you know kind of like stake your your livelihood up um and uh and and you know that continues today like even at Chronicle like we we still pay our team and die um even at maker teams are still paid and die like it's uh you know there's a lot

of teams across crypto right uh that uh get paid and die or willing to accept payment and die you know we work with Auditors more like can we pay you and die and they're like yeah no problem right so it's a it's really beautiful that there's like um really this generalized like economy built built around the whole thing I think yeah it's really cool it's also like something that you see in the like maker community in general I guess were're we were noticing that it's often seen as like one of these most like decentralized or like pushing for decentralization in a lot of ways I guess die being like the most decentralized stable coin arguably maybe to the stay and and that being used there is also a sign of that but maybe

you can also like expand you know how how else this is like taking shape in in like sort of the spirit of of people working on maker and and how it led you essentially to I guess also like now become chronical and your own uh spin out from maker sure I I mean so from the beginning in maker um there was always this focus on on quality on doing something right you know and uh you can I I think there's like this uh this this trade-off right in the development space where you know you can do something fast you can do something cheap uh or you can do something with very high quality

right and like choose two and I I think maker was very much always maxing out on um you know doing something at a very high quality right regardless of of how much time it took right and uh I I think we got a lot of push back at the time for for being very slow to release things but I think uh um our vision was always you know that D5 would scale to the billions the tens of billions to the hundreds of billions so you know when we were thinking about like the financial mechanisms and uh and backing for die right uh that was always the standard to to what we were building to and and and

I think that was uh that was very pre so I think like that ethos um you know at this point we've kind of had like generations of of De like core developers that maker right there just been like several several different uh different kind of waves of of people but I think that that attitude towards this um I like like we kind of like to call it like maker grade um I I think that attitude towards doing something right you know um that that kind of has really prevailed um especially when you see like um all of the the X develop of maker right to uh branching off you know to start their own uh their own projects

right you know you see it with uh with uh the Ashna guys you see it with the uh the summer uh fi guys right you see it with uh with sense um you know I I think that prevailing attitude of of kind of like maker grade has really like pollinated to to those projects as well and uh Chronicle is definitely definitely among uh counts that among on like one of our values internally as well let's talk about Chronicle more specifically why did you guys uh choose to spin out uh the the Oracle from uh from from maker as as a different product and we were we were

talking about this before the show uh Felix and I and I I think this isn't the first like I I feel like pyth also spun out of some project I know that Cosmos like there's this II protocol which is lending protocol they're spinning out their Oracle as well as a product is this a trend or is or are we miss like is there like a Oracle spin out Trend happening here or well so so in terms of our journey out of maker I I think it was like a very like natural and organic uh transition right uh you know maker um really took this path of you know gradual decentralization right it did have you know a foundation at one point

right that helped bootstrap the protocol and then the foundation said and now Mission this done and they really handed over um the entire protocol right to the Dow and and maker is actually like a a true down now right like there's governance votes to onboard teams to give teams budget right to approve or or reject like different projects like it's truly decentralized in in every way uh and so that that kind of transition into the Dao I think was uh was was very um was was like a big milestone for for defi in general right you kind of saw people have Dows but they were always

backed by these foundations that were kind of like uh kind of like shepherding the the the Dow in a certain direction right and uh maker was the one to truly like you know let go of the wheel and uh let the Dow kind of lead itself um and and and they should be commended for that uh but I think the the problem that uh that we kind of ran into is that the Dow was trying to do too much and it kind of uh was pulled in too many different directions and so that's kind of what the the endgame uh was all about was about uh simplifying um the Dow right narrowing its scope right and and targeting it more towards like a smaller

set of objectives um and and this led to like a very natural kind of like spin out of of protocols from maker right you see uh like spark protocol developed by Phoenix Labs right and Chronicle on the Oracle front um so there was a so there's still like a very very close uh partnership with maker right but these are these are independent entities right um and they they kind of just like count themselves like among like this this maker ecosystem almost as like a partner to uh to to maker um but they are independent right they have their own independent set of objectives and I think you know from an oracle protocol perspective like it's great that you can that you can

have a partner like maker where you can prove you know this infrastructure this Oracle infrastructure right is Rock Solid right it's um it's secured you know during the bull market like maker had I think around 20 billion tvl you know like this Oracle infrastructure is like really battle tested right um and then to use that right to bootstrap your credibility right to go and uh bring this Oracle to to everyone right I I think I think there's a very uh there's a very natural kind of like uh product Market fit and and transition there yeah we're definitely want to talk a bit about that like you know your plans of expanding sort of from being the partner for maker to like onboarding

other protocols but I think initially um let's maybe talk about technically Oracles in general you know can you maybe explain a little bit first what the role of the Oracle actually is in maker maybe for listeners that that because we like now talking 20 minutes we're just assuming everyone knows maybe a lot of people know but maybe just to refresh the memory we go uh like that and and you explain the role of the Oracle maker and and yeah we we sort of dive a bit into the tech sure um so in maker and you know uh in general and Def right oracles are kind of used as the like canonical source of truth right for for any kind of data right um and and that can be you

know that that's usually like expressed in terms of like prices uh so in maker right uh if you um lock up some eth to um open up a die position against right the protocol needs to know what the value of eth is right in order to you know decide de side how much die are you allowed to uh to uh to borrow right um it needs to know what the price of eth is right in order to determine which loans are you know at risk of liquidation right so um oracles are kind of like um like this critical infrastructure like you can almost think of them as like the Achilles heel of a of a protocal because if an oracle ever

prints you know e is zero or if an oracle ever prints like eth is1 trillion right um in in you know a second the protocol pretty much blows up and goes and Sol it right so they're um they're really like this Mission critical type of infrastructure like a like like the the way I tell it to my team is that building an oracle is like building a spaceship um there's no room for air right like if you you know if uh you uh have a bug on on a spaceship right you know like people's lives could be lost right if you have a bug in an oracle right you know you could lead to billions of dollars just evaporating

right so it's uh it's one of those things where you really have to be very deliberate in how you design an oracle right and from a from a Dap perspective you have to be very deliberate in choosing the right Oracle right so yeah maybe like you already mentioned One Challenge here in in running an oracle right like a lot is at stake uh can you maybe dive deeper into you know some other challenges of of running an Oracle and then we you know go into like how Chronicles sols them hopefully sure um so so I think the the big tradeoff that uh every Oracle protocol has is this tradeoff between

kind of security and decentralization and cost um and traditionally the way this plays out is that uh uh you can as Oracle protocol write choose the number of validators that you have right do you have a lot of validators do you have very small number of validators and that will affect the uh cost of the Oracle and and the the cost of the Oracle right is like a very important part of creating a sustainable Oracle product right because of gas prices multiply right I think we've been very blessed with uh you know nine gay 10 gay 15 gay kind of average gas prices but if you

think back to even just a year and a half ago right two years ago um during the peaks of the bull market right uh there was a day where we hit 7,000 gay right and uh you know can you imagine the cost like the cost to operate your product right literally going up you know uh 500x right uh that's uh that's incredibly difficult to deal with from a service provider perspective um but also incredibly difficult to deal with right from a a users of uh of oracles right uh so typically what Oracle providers have kind of done is aired on the side of like okay smaller number of validators right um kind of good enough security to

kind of keep those costs in check right uh not OP not updating the Oracle as fre L right if you do less updates of the Oracle right you can save on costs even more and and this these are not real fixes right these are kind of just like Band-Aid fixes right um what you really need to do is kind of solve the underlying engineering problem of this linear relationship between the number of validators right and uh the cost of the transaction and so I think that's that's kind of what Chronicle kind of has solved um you know it's it's certainly not the entire Oracle problem um but it's a very very significant

chunk of it that was kind of holding back uh the Oracle space and and and I think that's that's what makes Chronicle quite uh quite unique in that you know we have this constant time um Oracle verification mechanism so that means that you can have any number of validators right and the cost stays exactly the same and uh the the beautiful thing about this is like uh you know we have some some incredibly smart people on the team who uh who have some very good experience with with gas optimizing um and so we've actually gotten the uh the gas cost of an oracle update you know again with any number of validators right could be one could be 100 could be

a thousand um we've gotten it down to 66,000 gas which is uh to to put that into perspective of of how incredible that is that is less than an erc20 transfer the the cheapest transaction you can do on ethereum right is sending eth to someone that's 21,000 gas right this is the equivalent of of three of those um you know when when you compare this to um like like to put this in reference to other Oracle protocols uh chain link with like 10 validators costs about 280,000 to 300,000 gas so not only have we gotten this down to constant time to have you know a

multiple of those number of validators but we've even gotten the cost down like 80% uh compared to some of these other uh some of these other Oracle providers so so when you when you say validators I me I think a lot of people think of validators as uh Network participants that are securing a chain in the context of uh say a layer one like ethereum or or an app chain what what does a validator look like in the context of Chronicle or like another like you mentioned chain link also has validators like what how how are these participants um interacting with the chain what kind of infrastructure are they running what are they securing exactly so so I think the the easiest way

to um think about oracles sometimes is um like a good layer of abstraction is like a multi right uh you have a certain number of of siners right that's your validators and uh you need like a subset of those to reach consensus around something um so in terms of what that looks like from the tech side it's you get a bunch of you know uh actors to you know hopefully that you know have uh some kind of reputation attached to them um to run a client and uh they essentially right have their own keys right um and and uh what they're doing

is essentially querying all of the data um processing the data themselves right uh modeling it and then spitting out like an answer of being like okay ethusd I think it's this right um and they sign that with their key and then they push it to um kind of a peer-to-peer layer um and so now you kind of have like all of these uh kind of gossiped price attestations kind of like floating around in like a big like primordial soup of like uh of uh you know like attested to information and now you can start aggregating all of those together right and once you have um enough

aggregated information right across enough participants to reach a quorum right now this uh this information can be can be pushed on chain to the Oracle the Oracle will process all of the attested to data right and then publish that uh publish that piece of of data right or publish that that price so typically um uh it it's very very important right or or not I I shouldn't say typically no it is very very important that the validators you choose are very credible right um and and this is something that uh you know some protocols aren't very open about right who is who are the

validators or in cases of some oracal prod who is the validator so in terms of Chronicle right uh we we've kind of gone to this approach of saying look um there is a whole ecosystem of daps that people use every day right uh maybe you have a nois safe uh maybe you use matcha swap uh to to trade right uh maybe you have like a Argent Mobile Wallet right um maybe you use uh defi saver right to manage all of your def positions and so people have built up like an implicit trust um into these protocols and so who better to run the validators for an

oracle protocol powering defi than all of the you know actors in the ecosystem all of these protocols themselves so we have like so Chronicles validator set right consists of you know people like uh ZX protocol or dydx or gcoin uh ether scan infura um nosis and a handful of others right and and we want to keep expanding that that validator set and and kind of like what we're going for is that is we want to be able to go to the community and be able to say here's an Oracle and you can trust it because it's already like powered by the community right and uh even though you know in theory right

you can always have an oracle attack right you can always have the the validators kind of try to do a malicious attestation right ATT testing to to uh incorrect data um it it it kind of in in practice if you have enough of the uh if you have a big enough validator set of all of the biggest actors in crypto uh you kind of just negate any anything uh like that ever happening right because it would be like the industry kind of just like cannibalizing itself and like swallowing its own tail so um our our kind of mission right is just to kind of on board everyone that you know feels very strongly that we

need to have like a truly decentralized Oracle um that that we can that we C we all don't have to worry about you know this this Oracle attack Vector anymore and that that want to be a part of that and I would say you know come talk to us um let's add you let's you know not have you become a Chronicle validator and uh you know you can even use Chronicle yourself in your own protocol right and and dog food it yeah that's actually very interesting like speaking also from experience like running chain link operator with choros and like sort of this model of where more the infrastructure providers are more like professional validators or like staking companies that run like

infrastructure for on the daily basis versus like this model of letting the run it and I think in pith actually a lot of their sort of validators I guess initially at least were like actually the data feed the providers that actually generate let's say the price data so literally the exchanges and things like that so I guess there's like different like participants you can choose can you maybe speak a bit about you know are there issues maybe with like um availability if if it's like run by you know people people that don't run infrastructure as their core business or you know how how are you thinking about these things or or should you have like

maybe validators from all these different constituents or or you know I guess yeah curious to hear what you think so so I think you you really want to just design a protocol that's resilient um so you know the protocol is designed that it's fine if like a handful of validators go offline right it's uh it's it's designed to to expect that kind of scenario now in terms of like uh do we actually see that happening very often no not really the these protocols run an enormous amount of infrastructure internally and they're they're very good at running infra and they have entire you know devops teams

to uh to monitor this infra and and keep everything online so in practice right uh we we don't really see that happening very often they're they're very Adept um but what I would caution is like why do people necessarily trust infrastructure companies as validators sure they're good at running infra that stays online but from a trust requirement what like uh like the the security of your Oracle is relying on these entities that are your validators to be you know good honest actors that uh you know the user either the DAP or you know the end user that's using the Oracle or the end user of that da right that they have some

kind of you know trust relationship with and I would argue that uh these infrastructure companies are relatively unknown and they don't really have like a reputation for integrity and uh it it kind of seems strange to me that we would like you know build these like decentralized Oracle protocols and then Outsource the security to uh these like relatively unknown validators right that don't really have any reputation to to protect what kind of like are you talking about like uh not as a service company specifically or some other sort of of actor here um so what what Felix was alluding to is that there's a ton of like um like

entities in the space that just run infrastructure right maybe it's staking infrastructure maybe it's RPC infrastructure maybe it's just like hosting in general or they just uh run validators for a bunch of different chains right yeah like a like a figment or chorus or a you know Kiln or any one of these companies yeah sure and so you you think that these companies have have generally low reputation and can't can't be trusted to run infrastructure I I think as a user you should be always questioning like who are the validators like that should be your first question when um trying to choose a protocol right and uh I think it's quite clear that if you compare you know like the

amount of implicit trust that a user has in uh you know top leaders in the space like someone like nosis or or dydx or or gitcoin or ether scan right that uh you know that reputation and that need to protect that reputation by those uh by those different protocols is much higher than you know an infrastructure company that seems like are just spinning up by the Dozen nobody really knows who they necessarily are they're not very public facing um and they could just kind of like spin up if if they do you know uh run into any reputational problems right

they just Rebrand spin up a new entity somewhere else right and uh you know back to business as normal right um there's the the incentives like us being a validator right than being an honest validator right are are really tied to do you have a reputation to protect and uh in in the case of many of these validators right uh I don't think they do I mean I don't know if I would fully agree with that maybe feel as you have a different view on this I mean or certainly you have a view on this since you know you work for course one but I I feel I feel like validator infrastructure companies do place a lot of at least in well from the perspective of like where I know infrastructure

valid companies right so like uh in Cosmos we we have a lot of infrastructure companies that run infrastructure that run validators and other sorts of infrastructure and they do place a whole lot of importance in their reputation certainly through um their involvement in in governance um being good stewards of the ecosystem uh in terms of like contributing to open source software Etc like sure there are lots of maybe you know less reputable companies or individuals or like semi-professional validators that are running infra but by and large I feel like infrastructure companies um I mean their businesses right so like their longterm uh their long-term incentive is to build a company and so build build reputation

and maintain that reputation yeah so so I I I think in the end the point that we can all agree on is that like the validator set matters right and uh that's absolutely for for any Oracle protocol right from a technology perspective right you can you can always Fork the technology but you can't Fork the network right and so the the really differentiating factor that uh you will have as an oracle protocol is like you know what is the value of your validator set right how expansive is it um you know what is the like you know both the individual reputation and the aggregate

reputation um and the the number of validators in this set right and and that's really your your mode right and that's why you know I Chronicle we're kind of placing like a huge value on just um you know onboarding more and more of these of these highly credible validators yeah I think it's really interesting this discussion for sure I guess in in general the the interesting thing I think for you guys in a way seems to be lying also in that the complexity of the protocol or also like that it's possible to run potentially like relatively easily uh for these other actors or like can you maybe describe a bit because like I guess from

experience running a bunch of different networks at some point becomes uh like a big issue and you have like you have to have to focus on that and obviously all these companies you're mentioning they have like products to build and like other things to focus on and I don't I wonder what I guess maybe because they're like building on this protocol they're they're running it and the Oracle is important enough or maybe it's easy enough to run I guess um yeah curious to to hear how you achieving that so from the validator perspective is um they're very they're they're blockchain agnostic right remember earlier I was saying like what is a validator or in chronical lingo what does a feat do um they're just querying data and then they're signing it and

they're pushing it to this peer-to-peer pool right that's all they do right so they're not even interacting with um a particular chain right so if Chronicle wants to expand to you know 20 30 different blockchains uh it doesn't mean that the validator actually needs to run 20 or 30 different you know blockchain noes right um they're they're they're they're agnostic from from their point of view and so that really limits the complexity of of what they need to run right um and so really it's the um relay kind of side of okay taking all of this data from this peer-to-peer pool and pushing it on chain right and

uh and a relay only needs to support the chains that it wants to support right so if it just wants to do polygon zkm it can do that if it wants to do ethereum zkm and um I don't know something like uh mantle or or base chain right it it it can do that right so there's like actually a second sort of role with the relay more or less and then you have the I guess that makes a lot of sense and then in terms of the fee model or like I guess business model which is I think in Oracle space generally quite a interesting topic since you know a lot of the protocols run on these oracles uh a lot of value rides on them

but kind of no one wants to pay for it more or less so you sort of have to finance it or like and uh yeah I be curious to hear your thoughts how how scono thinking about this how you feel this play out in the future also is ever always going to stay as it is right now that it needs to be like sort of subsidized or um yeah how do where do you see this going I I think that's an amazing question uh because it's a it's so creative like what we what we do in the Oracle space so after kind of uh going through the right we talked earlier about right in the bull market you had these uh these crazy high gas prices right and the Oracle

protocols who are not making any money right we're just kind of like bleeding VC cash right had we're spending millions of dollars a year just on the gas right and so all everyone kind of collectively noticed oh well this is not sustainable right um and and started introducing those measures that we talked about earlier right you know reducing the number of validators right to make the transaction cost cheaper reducing the frequency with which the the Oracle updates um Al to try to kind of keep the cost down and so um in particular when it comes to like monetizing oracles I I I think there's a pretty clear path to monetization right

uh in terms of just a subscription right it's an oracle as a service right and uh you can pay on some Cadence right either uh on a monthly you can have some kind of monthly deal annual deal I don't know per block right um to have access to this Oracle so so that part's not very complicated um I think what is kind of complicated is like the metag game uh surrounding like the um constantly changing context of the uh the crypto macro environment right so you know you can imagine right during the bull market right when uh VCS are funding a bunch of companies right uh all of these

companies or protocols right have a lot of cash right uh they're very much willing to pay um the you know sometimes exorbitant costs of of these oracles you look at kind of the current environment right uh where you know the VC funding Market is has been rather tight and you're seeing teams and protocols needing to you know tighten up the belts right uh you're seeing them do things like layoffs right to extend their Runway and they really are looking for a way to like reduce costs right and uh uh one of those areas that they look at is is Oracles right and so um there's kind of two interesting effects I think we've seen in the the past year uh so one is

Oracle Proto protocols kind of recognizing that there are potential customers don't necessarily have the money to pay for this stuff and the Oracle protocol may or may not have the uh the capital right to to subsidize uh this like in the red for for some period of time and so um what what you really saw was this proliferation of like pull oracles which were um right so instead of the Oracle protocol pushing the data to this Oracle and now someone can just use the Oracle it becomes the protocol itself that is using the Oracle that is like doing the actual push update to the Oracle right so still using the same

data from the validators it's just uh instead of the Oracle protocol pushing it right it's the the the uh the protocol that's using the Oracle but what's really happening is that what the protocol that's using the Oracle protocol will do is offload that cost to their users right um so like like if you use a protocol right uh it's almost like a hidden tax like you get a Oracle update like bundled into your transaction right and as a user you may or may not even know that uh you paying for this right and so um from Oracle provider perspective this is attractive because now you don't have to have this volatility in gas prices which is

determining if you're like in the green or in the red um from a Dap point of view it's great because you're getting oracles but you're not actually paying for them um and then from the user perspective kind of you're getting screwed but you maybe don't even know it um so so I and then from a marketing perspective this is all kind of dressed up as like it's an on demand Oracle you know there's no wasted update it only the Oracle only updates what exactly when a user wants to like use your protocol right like it's seen as very like uh no waste or something um but it's mostly just marketing spin right um

it's really just a way for everyone to kind of like just be like pass the buck around in terms of I'm not paying for that right um and then the the second well and and I I will say like a little personal remark I think this is very shortsighted um I think in the startup World typically the business model is you want to subsidize the cost that your users or your customers have um to uh to accelerate growth right um if you look at you know the early days of uber right they were using VC cach to sell you rides right for less than it costs them right and that's how you bootstrap product Market fit for a for a new

product right uh same thing with all of these like food delivery apps right they got a lot of traction because at the beginning they were really cheap and now that they're charging you for the actual cost right everyone's like why am I paying $40 for like delivery of a pizza and like some some cheesy bread or something right um and this is like the antithesis of that right this is like these polar oracles are like you're adding like attack to those users right and while maybe at the current gas prices it's not very noticeable when gas prices start to um increase again and they will uh when you start getting back to 100 200 300 Quay um it's really going to start to cannibalize uh the user base

of these protocols because the users are just going to be like this is too expensive to use right it's the cost to use this protocol is more than the utility than that I'm getting from it right and so so I think uh these these polar oracles are kind of like a forbidden fruit in in that sense and that it it seems like a like a magical solution with no downside but uh it's um it it can be very dangerous um kind of going forward and and so the the second I I did mention that there's two kind of uh things that we've seen change in the meta the the second one is that uh Oracle protocols have gone from um you know after having this realization of

saying well well the daps themselves don't necessarily have the money to pay for oracles who has money right now and they look at like all of these new chains right they look at all of the l2s they look at all of the uh the ZK rollups the optimistic rollups the uh maybe alternative layer ones right um and they they you know they acknowledge that like this is what money has been shoveled into in the past few years you know these uh chains are very cash and token Rich um but and need but don't have necessarily have an ecosystem and they need to spend money to bootstrap that ecosystem and so it's actually much

easier right to go to chains and to sell them on the Oracle services and being and being you know rightfully so saying that look you want to start up an ecosystem um but uh all of these daps on your chain are going to need oracles and they're going to have to to Bear those costs right and so if you want to be like a a catalyst for um for teams being able to build on your chain right uh you should uh pay for the oracles uh yourselves right and so essentially the chains become the customers and the daps that are using the Oracle become the users right so it's interesting that you

have like this user customer kind of kind of split um ultimately I I don't think that chains want to be in this position where they are permanently kind of paying for Oracle infrastructure so so I don't think it long term it makes sense anyway um but but in the end right uh someone is always deriving value from the Oracle and so someone will be willing to pay for it right ultimately I do think that will be the daps uh once they do find uh find traction I want to ask you about um the uh the use of ticles in in app chains I I don't know to what extent you follow this but uh in say like in a cosmos SD

chain um there there's been some there have been some uh changes to uh essentially the the the protocol where the the U consensus talks to the application this protocol called ABCI and um and so validators are now able to uh effectively add Oracle data price feed data in their blocks and the uh other validators in the in consensus also vote on this data along with the block information and so effectively what this means is that app chains can now kind of run their own oracles they can sort of like ask their validators to

provide price feed data and and not have to rely on an external third party service is this something you guys are thinking about and how do you see the use of oracles and you know ethereum smart contracts versus rollups versus you know app chains sure so so I think what's important like to uh to convey right is that uh as an oracle provider you don't like I have my own personal views of like you know what chains or you know or uh kind of chain types I'm I'm bullish on or or bearish on um but as an oracle provider right we don't really make those kind of bets right in terms of uh who will succeed or who will

lose you kind of just try to support everybody right so it doesn't matter right who who wins and loses right um so from that perspective right uh you always want to think of Oracle protocols from like a general mechanism point of view um like what is an implementation that basically is general purpose that scales across every chain right every user user base every ecosystem of daps that is out there and so so I definitely do think that there are um interesting synergies like within um certain chain ecosystems right like uh in terms of like uh what you mentioned right with Cosmos IBC right uh validators being

able to to send and attest to data right um in the evm world right you can uh you have like these native message Bridges um and there's interesting applications that you can do on those like specific chains or on those specific chain types um but as an oracle provider like you really want to stay as as general as possible and just kind of um support one implementation because the the moment you start to try to support multiple different implementations um things start to get really dangerous um the context of different chains in terms of how their

environments work and what like the the gotchas are in terms of you know even simple things like overflows and and underflows or um the implementation like you can have uh for example multiple uh evm chains right that say that they're all evm but under the hood um the implementation is different right and if you're not aware of these minute differences uh you can really get yourself into trouble and so you really want to have one implementation that you're extremely confident in right that you can devote kind of your entire security budget to to auditing to doing uh right bounties um pen

testing um rather than this dangerous game of like oh well we have this Oracle that's specific for Cosmos we have this one that's specific for salana and we have this one that's specific for evm and we have this one that that's specific for like the move based ecosystem of chains and and right the starting to like Port uh features right and implementing them like multiple times across all of these implementations it's a it's a recipe for disaster and so while while we would love to take advantage of some of these like uh really unique and really powerful Primitives of these chains um the the game theory calculus just doesn't really play out that way and we

have to think Much More Much More so let's talk about the the technical aspects of chronic a little bit so you you leverage snore signatur so maybe it uh we wanted to talk a little bit about how how you're using schnor uh but maybe uh first we could uh uh start by just reminding getting a reminder of like what are schnor signatures how different they are from Eesa and uh maybe you could lead use that to lead into how uh you're you're leveraging schnore in the signing scheme sure uh so Shore signatures are a signature aggregation scheme uh so that is to say um you can have one signature

that is representative of multiple signatures um and so uh you know in in contrast to um ecdsa where you have like it's like a onetoone relationship right one validator sign you know a tests and generates one signature and so if you have n validators you have n signatures uh with SH signatures you can have N validators and is always ends up as one signature and what's like incredibly powerful about this property right is that uh um it leads to an enormous amount of data compression um and when you look at uh some of the

constraints of uh of of of blockchains right uh the amount of data is is one of the primary drivers of of cost right if if you look at the composition of what a transaction on Layer Two costs um the innovation of layer tws is that compute is incredibly cheap but data like uh the the data that you pass to a a smart contract is incredibly expensive and the reason for that is because all of that data needs to be essentially pushed to a data availability layer like eum layer one uh so that uh right in in the event of uh you know like fraud that all of

those transactions can be replayed right and and provably you know you can prove that whether fraud or or non- existed right in in the case of in the case of these rollups so um if you can compress the data uh in uh the way that store signatures do right you get enormous enormous cost reduction on on Layer Two for uh for for using sh signatures and so that was that's kind of like the primary driver of the uh of the gas savings that we did right that allows us to have like these 80 to 90% gas savings compared to some of these other Oracle protocols awesome I think we also could still go into I guess the the optimistic

sort of verification and and how this challenge protocol works at another time potentially since we're we're already quite quite deep in the episode um but maybe like more interestingly for the listeners that um you know are potentially working on project and want to integrate oracles themselves can you uh maybe expand you know where Chronicle like sort of is deployed right now or like where can people use Chronicle data and you know what sort of data do you have available at this point and kind of what are you working towards is it you know is it just e is is it going to like other directions um I think that would be a good place to to sort of start

wrapping it up so uh in terms of chains that uh we support today um we uh we we launched this new um kind of Oracle architecture uh with with this uh with this short signature Innovation uh we we just recently launched this on ethereum uh mainnet and on polygon ckvm but we're effectively doing like a layer two strategy or we're just going to be onboarding like all of the layer twos right so when it comes to you know anything really that uh that that you've you've heard of right in terms of what like arbitra uh optimism

mantle uh base chain right um even even something like nosis chain uh we're going to be onboarding uh these types of layer twos incredibly quickly right so I I would expect by the end of the year right uh we'll we'll basically be supporting all of the uh all of the main ones so um you know I would encourage you to to reach out to us right uh you can go to our website chronical labs. org um and uh from there right you can uh you can find our Discord you can find our Twitter right uh get in touch with us um you know let us know what uh what you need and uh we can we can get you set up um in terms of you know what we what we offer right um I think there's

an enormous amount of product Market fit right in defi for Price oracles right so uh we we definitely offer this but really like our oracles are built to be generalized right so we can do any kind of data right so we're even delving into like the rwa space and uh doing like real world attestations of like you know even assets that are held by custodians right in a in a bank right so uh we can we can get really crazy with it um and it's all backed by by the same underlying you know secure Oracle architecture right that is uh securing like the billions of dollars in maker let's maybe just spend you know a few minutes talking about the r World asset

stuff because I think that's probably one of the things that uh a lot of people interested and certainly it's one of the areas that is highly anticipated in terms of bringing more liquidity and more value onto blockchains uh can you can you talk a little more about some of the work you're doing there why you're so uh bullish on on real world assets sure and I should probably preface this by saying I'm I'm bullish on real world Assets in a in a very narrow context um like I'm I'm going to a lot of uh conferences at the moment on panels about rwa and there's a lot of people pretending or saying talking about some far-flung future um when I'm when I'm talking about real world assets

I'm talking about what they look like right now um in terms of the product Market fit that they have achieved right now um so the the context here is right that uh uh you have this Divergence of rates between the real world and between defi because in traditional Finance right the rates are driven by monetary policy right and uh and to an extent liquidity and in defi rates are driven by by speculative demand for number go up um and so number has not gone up for quite some time uh people are relatively bearish and so yields in defi are very low and so uh this prompted um a lot of

um protocols in defi with very large treasuries right or you know uh credit protocols like maker Dow uh to look elsewhere right to effectively say look at the calculus of saying like well if we loan die on chain we can get 1.75% we can get 2% or we can loan die offchain right and get like five six seven 8% and so I think maker was very early in recognizing this and and making moves and so at this point I think cumulatively uh maker Dow is allocated something like between two and or I think that was like three at this point

three billion dollars into uh different real world assets uh predominantly uh treasury bills right because treasury bills are a very safe um asset right that if as long as you don't have liquidity problems you can just kind of hold to maturity and earn like a a very very high guilt right on the order of five plus percent. um and so you know from the perspective of Chronicle right when we look at real world assets we're really look we're really building for what we see uh where we see like the pain points today right maker is kind of not just talking about real world assets or planning to do them in the future right uh maker is doing them right now at scale like and if you

think about what is the entire real world asset market in terms of like Capital delegated I I think maker probably has somewhere between like 80 to 90% market share at the moment right and so we're uh we we obviously work we're the Oracle for maker right we work very closely with maker to to solving the problems and so you know we we think we're going to have like a very big piece of um the actual practical side of R World assets and then use our practical experience right to expand that right and offer those services to everyone trying to get into real world assets because uh I I think uh very few people understand like the boots on the

ground problems associated with real world assets um and it fundamentally boils down to that protocols right on blockchains right don't really have any insight to what's happening off chain um and they have very few kind of recourse mechanisms off chain right uh maybe you have like a foundation that can serve as a legal entity as the face but they are not the protocol right so it's very difficult for a protocol to act like autonomously in in the real world and so especially when it comes to credit delegation right uh you know what recourse do you have when someone runs off with your money that is like the big question when it comes to credit

delegation and so the the pain Point here for a real world asset is how do you how does a protocol delegate you know something on the scale of billions of dollars into a um real world type of infrastructure where it doesn't necessarily have the same capacity right for uh liquidating you know in the next block like it does on chain and so uh really what you have to do is like deconstruct like uh what does this web of entities look like in the real world to create a real world asset and typically you'd have something like a trust which is kind of like a the representative of the the protocol in

the real world so you can kind of have the trust be subservient to messages from that have been ratified by a dow right by by governance so the the protocol would extend you know the the money to this trust right the trust then interacts with the broker right what securities or Structured Products are you trying to buy right so you could have a broker right like someone like BL Tower um or uh I think in the past someone like genesis before they before they blew up so the broker right will buy and sell you know what whatever uh whatever kind of Structured Products or or Securities you you want to purchase

right and then you have a custodian right the custodian is frequently someone like like a bank right and then you may have like an auditor right who is like auditing the uh the activities of uh what what the bank has in custody or maybe auditing the activities of the broker right and so individually you don't want any you don't want to trust any of the data that any of these different actors kind of report because they kind of all have moral hazard right uh if uh you know maker turns off the tap in terms of credit delegation right uh all of them will not make any more money right and the part's over right um so you don't want to trust any of them

individually but as a as a set you can kind of overlap and like phase shift all of their individual reporting on top of each other in a real-time kind of automated fashion and then you can actually derive a uh like a high confidence in the consensus of what actually is in the real world and and give uh that representation on chain in the form of an orle right so in terms of the messages like of instructions that maker governance gave to the trust right those should be those should be symmetrical with the orders that the trust gives to the broker right uh those instructions that were given to the broker right should be symmetrical with the actual purchase and sell orders that

the broker executed right uh with respect to what the bank holds in custody those should be symmetric to what the the broker uh you know confirmed right that they purchased and sold right same thing with the data that the auditor is reporting right and so as you collectively aggregate all of this information you can confine you can determine what the kind of consensus view is in a in a decentralized fashion and so now you can have this data on chain um but what's interesting here is it's not necessarily price that is um that is the most interesting right um You may be interested in you know what is the yield of this rwa bucket uh you

may be interested in you know what is the um what is like the term of a lot of these Securities right especially if you're holding like a treasury bills right uh treasury bills mature right and then what do you do do you like roll those back into new treasury bills or do you say Hey you know we want to have some more liquidity in the maker protocol right let's recall some of that some of that money yeah and blockchain we kind of take those S of credit because that data is usually available on chain or right like right in the contract you may be interested in the composition of the portfolio with respect to exposure to certain sectors or certain types of Securities right and

so now once you have all of this data on chain uh the protocol can react in like an automated fashion right it can like extend more credit or it can you know cut off credit uh it can determine oh well this bucket that we have over here in real world assets is generating significantly more yield than this one let's reallocate some of that Capital to here right and so it it enables this enormous amount of like automation that uh that crypto Protocols are kind of known for but now in a real world context and I think that's extremely powerful and and that can be applied you know in a general case at scale to way more things and what we see today right

which is just treasury bills right and it can be expanded to way more context than right just uh defi protocols extending credit right in in thisa a real world asset Oracle is really this bridge from piping in um data from the outside world onto a blockchain so now we can kind of achieve this cross Automation and and that's where the real the real value is going to be it's not going to be that D5 replaces traditional Finance or traditional Finance like you know kills defi it's going to be this hybrid system where they um both both of those Realms are able to interact and Leverage The the strengths of the

other I think that's a great note to end on thanks uh thanks for for expanding on uh on real world assets I think it's it's one of the things that I'm really hopeful that will will start coming into uh you know D5 protocols right where you you can open up say something like a like an A or or or Unis Swap and and be able to to swap like your usdc or your e for like treasury bills for instance um I think that that that will be a huge a huge accomplishment for the space if that were to happen um Nicholas thanks so much for coming on and uh and expanding our minds about oracles and

Chronicle and all the important work you guys are doing and uh hopefully we can get you back on at somewh in the future yeah it's been uh it's been really great guys thank you