Permissionless: DeFi’s Next Frontier | Hayden Adams & David Hoffman

Transcript

I think that probably like almost the best market persistence to go after is uh asset issuers. Um people that create you know people that create ETFs, people that create um assets uh you know everyone that sits between them and a person that buys those assets uh is not like people don't love having a thousand middlemen between them and their customers. Um they might have to because of the market structure that they live in. And so I think that one a unique value prop that we could offer um to to a tradi you know to a trady player if they're an asset issuer would be like hey like we can cut out you know the the thousand companies that that take fees on the on the people that ultimately buy your products um and and ultimately lower costs for you and for your users.

Quick shout out to today's sponsor Katana. We'll hear more about Katana and their pre-eposit campaign later today. But for now let's get into the episode. Hey everyone, quick disclaimer before we get into today's episode. Nothing said on bell curve is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and the views expressed by anyone on the show are solely our opinions, not financial advice. Our guest and I may hold positions in the companies, funds or projects discussed. Good morning everyone. How's it going Hayden? Good. Good to be here. Good, good, good. There is a lot of attention on crypto in the year of our Lord 2025.

Um the public markets are pumping and everyone is now realizing that uh centralized companies like Coinbase, Robin Hood are going to be able to create and extract a lot of value from a lot of the innovation that we've made on the onchain side of the world, which I think just really adds even more emphasis as to why the onchain mechanisms that we have need to be so incredibly powerful to be competitive with the convenience of Coinbase and the convenience of Robin Hood and all these things. So Hayden, I think the way I'll uh position UniS swap, starting with Uniswap V1 and V2, which are pretty like primitive versions of exchanges, but still 0ero to one breakthroughs and like what it means to be an onchain exchange,

onchain decks, and now we've gone all the way to unis swap v4 and and also uni chain. I want to kind of like position that as the onchain world just growing in strength, growing in powers that are competitive with like, you know, all the same old like market infrastructure that we see in Tradfi. Uh and so how would you in in this day and age kind of position unis swap uh when we are looking at a lot of centralized companies gaining a lot of power uh in in the trady world. Yeah. So the first uh you know the first version of unis swap it wasn't about creating the most efficient exchange in the world. It wasn't about creating the largest exchange in the world. Um obviously it's done pretty well. It recently crossed three trillion in trading, but you know

it was about creating something that was decentralized and something that offered uh properties that don't exist in existing structures. And so you know the the the core idea is you have something like FTX, right, where they had a huge amount of customer funds on their balance sheet and then it turns out that the funds were not being used the way they said. And I think the core value proposition of something like Uniswap is that you know how you know you can prove it uh not just with company audits. the way that it works in in Trady, but you can prove it with cryptography um and with you know with math with and and so you know unis swap exists to provide something that is that is safer that is u more provable than existing systems and I think that you know the first the

earliest versions uh they were very primitive but they still got early adoption because they offered something differentiated. Um, a a very uh good example is that centralized exchanges back in 2017, they had really ownorous listing processes. They charged a ton of money for any assets that wanted to be listed and people didn't want to pay that. And so when unis swap came out, it provided a way for people to self-s serve create the market themselves and you know just opening and I think a lot of the early you know there's early like the smartest people I knew in the beginning uh were basically all said that unis swap would never work. um and it was because it wasn't that efficient.

But it turns out it doesn't need to be that efficient if it offers something that's differentiated um and and opens up the market to new people and and lowers the barrier to creating an asset. And then uh you know since then right each version of unis swap has gotten increasingly sophisticated um increasingly efficient you know offering you know better prices uh more flexibility in how people create these markets and that brings us through to today with unisoft v4 and uni chain uh which are just you know all about that that continued progression. um you know unisoft v4 opens up the market structure to many new different types of uh you know configurations essentially that that can be optimized for specific use cases. It turns out you know when we

were building uh unis swap v3 right we were we were constantly making trade-offs between you know this this benefits one thing this benefits another thing which do we choose right and and I think that the answer with unis swap v4 is actually let's let the market participants decide uh how they want to provide liquidity and so we opened up this this whole world of uh innovation and then you know when when it comes to things like uni chain it's all just about you know continuing to progress the uh the ethereum scaling uh space and you know do so in a way that is really well optimized and uses all the knowledge we've built, right?

We, you know, I think something that differentiates us in the crypto space is that we build very full stack. Uh so a lot of crypto projects tend to pick like a very narrow sliver of the tech stack and say this is what we're building. We're building a data layer. We're building a you know an execution layer, we're building um a a smart contract, right? And um I think that we found that what we're trying to build is is you know the world's uh largest decentralized exchange and that actually involves innovation at every layer of the tech stack. And so you know with Uni Chain part of what we're doing is we're we're uh we're taking all the pain points that we've experienced building on other chains. We're pouring them all into into into a a single chain that that we're focused on and and we hope

that the innovations we bring there are brought back to the other places. Um and and that includes basically, you know, very low block times. People who trade, they care about things happening quickly. Um and it's it's good for liquidity providers, it's good for traders, and then we're we're bringing, you know, better decentralization guarantees uh because, you know, we think that's an incredibly important aspect of the space and part of it differentiates it. And so, you know, these are the types of things that we're we're bringing to the table. This episode is sponsored by Katana. If your assets are sitting idly, they're dead. Katana is built from the ground up to bring your bags back to life. Be early to Katana by joining the pre-eposit campaign before mainet opens at the end of this month. Follow the link in today's show notes to get started. As

always, investments in blockchain technology involve risk terms and conditions apply. Do your own research. I'm going to keep on positioning unis swap against things like Coinbase, like Robin Hood, because I think like if ultimately Coinbase, Robin Hood, centralized companies come to embody all the properties that crypto has, then it feels like we almost we built all the valuable things, but then they were able to monetize it. Uh, and so like one thing that I I want to like lean into is exactly what you just finished off with is you unis swap is building full stack stuff. You guys are building layer 1 exchanges, layer 1 applications, being building a layer two to be a little bit more expressive with what you can do, the data layer, all of all of the things so you can integrate them into a better product. And that's kind of fitting with

what we have seen success in crypto look like over the last I think like 18 months is people realize there has been a trend shift away from chains and towards applications towards like products uh which is which finally good for crypto finally like users are preferring products and no chain can really launch without having a very sophisticated product being built on it in a first party way or or some sort of product that didn't that the market doesn't have elsewhere. So this is what I see UD chain doing is you guys are using your full stack expertise. You are building out a product suite uh that is not just a product suite in the same sense that like Coinbase again Robin Hood has these product suites but it's also a platform at the same time. It's a

platform for other product suites. So maybe you can like juxtapose the nature of the uni chain uni swap product suite with what we would be able to find in Tradfi and how you guys are building this uh to just be market competitive. Yeah. So know a lot of different places to take that. Um but I will say that there definitely is like an interplay between unis swap v4 and uni chain and our app suite. Um right things that we there there sort of like these these fundamental you know benefits. I think like a a really uh simple example is that you know the way that we order blocks on uni chain um allows us to dramatically reduce the amount of value that traders lose to things like me. Um and you know me me as is obviously the the way that people uh you know extract

value from from traders uh based on how the blocks are ordered. And you know I think that when it comes to uh things like I I think for a very long time you know the way that we continued to grow uh crypto was just offering offering something that was differentiated right that I I mentioned that before. Um but to really take on you know bigger financial systems and to win you know not just millions of users which is where we are today but tens to hundreds of millions of users to billions of users eventually you know we have to offer things that are not just like different but they also have to feel better to people um they have to feel better to users than existing products um right it because not every user like we've we've been in this for a world

where there's a lot of early adopters who care about the technology who care about the the unique nature of it and I think that like ultimately we have to build products that are cheaper and faster um and and easier to use even than tradi products and I think that that is entirely possible um but it it sort of requires like you know it almost like we what we do is we basically like systematically look at everything that feels like we're holding you know is holding us back and we try to solve it. um which is you know maybe a novel idea but like you know and and so sometimes that means uh developing a blockchain sometimes that means building a wallet sometimes it means just creating a standard for how wallets connect to web apps to connect to blockchains right and so um and when it comes to like you know

tradi I I think something people sometimes think of it as is like very like as is like monolith um but what you actually have is a lot of different parties with a lot of different incentives and a lot of different problems um I think a good example of this is uh you know a lot of what um a lot of what DeFi does is kind of cuts out middlemen, right? And and you know it it sort of you know most the most obvious one is that it allows you to create it in an exchange. It allows you to trade assets uh without having you know without even needing to have like a major huge marketmaking firm because people can self-s serve create liquidity. Um uh but then you also have and when you think about everyone I think the probably like almost the best market participants to go after is uh

asset issuers um people that create you know people that create ETFs, people that create um assets uh you know everyone that sits between them and a person that buys those assets uh is not like people don't love having a thousand middlemen between them and their customers. Um they might have to because of the market structure that they live in. And so I think that one a unique value prop crop that we could offer um to to a trad you know to a trady player if they're an asset issuer would be like hey like we can cut out you know the the thousand companies that that take fees on the on the people that ultimately buy your products um and and ultimately lower costs for you and for your users.

And so I think that like sometimes people view uh you know DeFi as like purely in competition with tradi. And I would imagine I I think I would say it's like more in competition with like the more a part market participant is like a a necessary middleman the more it's in in conflict with it and the more it's like a you know a sort of a fundamental value creator asset creator actually the more um the more of an opportunity there is and so it's about like finding you know what what can we do that that you know that helps helps these people and I'll just also add like you know when you like you can kind of like think about Like the biggest opportunities for crypto is to is things like the like credit card fees. 3% that's insane,

right? We can if if DeFi is successful, we will have removed the 3% credit card fee and replaced it with a very very very low blockchain you know transaction and uh you know you'll you'll remove the $25 wire fee. Like these are the types of thing these are like the opportunities and users would love to you know all else being equal users would would love to you know pay lower fees. I'd say shout out to today's sponsor Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR. Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chain Link, and more. Be early to Katana by joining the pre-eposit campaign before mainet

opens at the end of this month. Follow the link in today's show notes to get started. This episode is sponsored by Catria. Catria is the first zero knowledge rollup to enhance the capabilities of Bitcoin block space, enabling Bitcoin applications and unlocking Bitcoin's full potential as a programmable financial platform. With Citria, developers can now tap into Bitcoin's liquidity to build scalable payment systems, privacy solutions, and more. Citria is currently in its test net phase and is approaching its mainet launch. To learn more about Citria, follow the link in today's show notes.

As always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research. I've got an idea that I want you to check me on because I don't know how uh grounded in reality it is, but it's an idea that I've been tumbling around in my head. And there's this uh there's all blockchains have me. Some blockchains have more sophistic sophisticated me supply chains that um just, you know, leak less value for their users. And some blockchains are still kind of more primitive in their supply chain uh of ME extraction. Uh Uni Chain with TEES uh I'm pretty sure is on the frontier of the most sophisticated MEV minimization mechanisms that we have on the market

today. And at the same time we have TRDFI looking at all these different chains looking at them as vendors being like where do I want to deploy my asset? you know, where do I where does BlackRock want to deploy the Biddle Fund? Where does Franklin Templeton want to deploy their tokens? Or where does, I don't know, some off-chain centralized institution want to do their business? Uh, and there are very strict, we don't call it ME and TRDFI, but like ME laws in Tradfi, no sandwich attacks, no no sandwiching, all this, all this sort of uh things. And so my my thought is that all of the investment that uni chain has made into hyper optimized order execution where tradi when they make a trade they retain as many bits as

possible is going to be an attractive place for them to actually land their orders and do execution where on other blockchains where it's a little bit more of a wild west there's very high slippage and very like just un unbridled uh me there's a there's a complian a notion of lack of compliance on those chains simply because the me infrastructure isn't there. Is that something that you think about when you build out the uni chain infrastructure? And are you also talking to I don't know ask the issuers, deployers or traders about what it would be like to get tradi onto uni chain? Yeah, I think the way that I would put it um like mostly agree with what you're saying I think but the way I would frame it and the way I the way that we got there is not like we

should do this because it's more legal in a tad vi context. It's like because it's better for users. And I think that what you're there's a correlation between what's better for users and what's legal. Yeah, for sure there is. And and but the way that we got there is more the latter. And and it's just worth noting because um obviously we you know because like the I think that one thing that has happened that I I think is like because a lot of the projects are not built with like end user apps applications in mind. Like when we're designing you know uni chain we're thinking about unis swap the application and unis swap and the users in our product and so it informs our decisions and so we're thinking from their perspective and it leads to kind of those same outcomes right it leads to

like people don't want people you know uh extracting value from their trading right people want to you know to have like kind of strong guarantees about the the platform they're using and and that it's sort of acting in in their best interest and so um you know a lot of what we're doing is but but it does have the indirect benefit of I do think that thinks that it doesn't it's not just attractive to retail users or users of our of our app. It is also attractive I think to to larger players as well. Um, you know, it's it's if this is a new internet, imagine if like, you know, imagine you could imagine almost like in an internet context like what me is like imagine you had like AWS trying to like play poker games against you know an internet poker website and like the AWS

operators are like inserting themsel like it would be crazy, right? And so like uh I think that like me is not a good business model. Uh I think it's a good thing to for you know I don't think that like if if the business model is extracting MAV I don't think that's like a very good business model in the long run because I don't think that's attractive to to end to market participants. Um so I think that like our goal is to but it is a like a fundamental property and I will say it exists in trady too right like you know a thing that we talk about um actually one thing I can do here is tie uh some of the recent innovations in me to like a trady problem which is you know the what like one of the biggest problems with like the nineto-5 trading hours or

whatever it is um the the you know the the discontinuous trading hours of tradi you know they why do people have it they have it because they want to go home it you know because their system doesn't isn't automated And so they have to they want to be able to go home and turn off their phone. And um one of the biggest problems with it is that there like a discontinuation in the market means the first person to get an order through when the market opens, you know, using these high frequency rails um will uh you know, basically extracts a lot of mev, right? It, you know, the first person to get an order through makes a lot of money and everyone else doesn't. Um if you had a discontinuous market, we could actually use you know, one of the one of the core like ways that we're

combining uni chain and unis swap 4. Uh, Unichain is using this block building mechanism that uh uses TEEES to order transactions in in a in a very fair provable priority auction. um by kind of ordering transactions according priority we can start to use them in our trading formats um to uh to basically you know for example like imagine you have a unis swap pool right uh most unis swap pools today uh have a fixed fee um for liquidity providers and uh then people are arbiting their pool against the market all the time and you have um uh then with us 4 we added these hooks and hooks give you the ability to customize,

you know, fees based on various things. And when we actually created Unisoft V4, we were imagining probably volatility based fees were the most interesting uh custom fee hook. Um now it's not even close to our favorite one. Um my favorite one is now well if you have because they got more interesting. Yeah. Because they got and and that's one of the part of the point of V4 was to create this design space where we we don't have to rebuild the entire thing each time we come up with a better idea. Um and then so you know we learned that if we we could actually set the fee as a function of priority fee uh which you know the priority fee in some ways is basically is the amount someone's willing to pay to move it up in a block is kind of basically equal to the me

that that transaction generates and so this liquidity providers and and a you know and normally the like the problem liquidity providers have is that they have to pre-commit to their strategies and then all the me searchers that are trading against them have more upto-date information. But when you basically make that priority fee available to the smart contract. So you can have a hook that sets the fee as a function of priority fee. The priority fee is kind of determined out of a fair auction between liquidity providers or or sorry between you know all the different me searchers u to to build the block that can then be sent to the to the smart contract which can then factor that into the price. And so in some ways liquidity providers get the last say in how they want to price their liquidity as a function of the

amount of me they're creating. And uh this is like sort of the the the ideal pattern that we've we've in conceptualized um and kind of an example of how these pieces fit together. But then to bring it back to this trad problem of trading hours uh which I which I did not forget um is that you know I was thinking about it the other day and I was like well in some ways because someone made a hook like a kind of a jokey hook that was like trading hours hook which was like it's a version of a USL pool that turns off when the New York Stock Exchange turns off or when the NASDAQ turns off. And I was like, well, the big problem is that the MEV, you know, maybe that's something.

But then you could actually add a priority fee, uh, you know, tax to the first trade after the trading hours and then essentially that would rebate to the to the the, you know, liquidity provider, you know, to the to the LPs. So even in like Travis, you could do a you know the equivalent of an MEV auction at the beginning of the uh you know the first trade uh when trading hours open and rebate that to all the to the to the order book and that would be like a way to like make the market more efficient and have you know uh less money go to whoever has like the fastest microwave tower connection uh or has collocated their their you know trading infrastructure in the same building. Um, and so those are the types of innovations like every day we're like thinking about how to make markets

better and we're playing in like a much wider open sandbox of of experimentation where like Trafi has such constrained um rules and such constrained systems and so much you know that has been built around it that they don't really have the ability to like innovate in this way um and and sort of solve their own problems. And so one last question because we got one minute left. Um there there's this notion of a financial super app that is being built. This is already like pretty uh common I understand in China and now inside of the United States we are seeing Coinbase again Robin Hood uh financial super apps emerge that they can just do all of your finance all at once. Um unis swap uh uni unis swap wallet your guys's app um obviously is constrained because you guys aren't a bank you guys can't like

do on-ramping all that kind of stuff you have to go have to third party service providers for some of that but talk to me about the future of the unis swap wallet. Yeah, I think that one one place that these um super apps come from uh is sort of a recognition that finance is becoming a little bit more social, right? like the internet, you know, made a lot of things more social and I think that like crypto and decentralized finance is a trend in that direction where like, you know, it's it's it's money on the internet and so there's inherently these like bigger communities that exist around things and um so yeah, I'd say that you know uh that's sort of a trend I expect to continue uh with with the unis swap app. you know, our core focus right now is just to

basically really make it, you know, the best place to to find and trade assets and and um but I I think that like from there as we sort of continue to grow in that, I think, you know, I definitely see bringing it to wider a wider audiences for for more use cases. Um I think that like much like with our chain, you know, we we're building it around this core use case of trading, uh these same things that we've innovated there can apply um and can be brought to other use cases. And so I expect, you know, the same uh across across our our full product suite. Um yeah, amazing. That's all the time we have. Hayden, thank you so much. Yeah, thank you for having me.

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