Polygon’s Comeback & Katana’s Impact On The Agglayer

Transcript

I always think of Polygon as kind of like being this nice thing where like yes, we've got like this chain that can capture like a lot of value, but there's this like much bigger picture, higher potential thing that pretty much anything else in web 3 via the A layer um that actually connects all of it together. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. Explore the gas-free ecosystem at scale.space/ecosystem space/ecosystem and follow their journey on X atcale network. Thanks to Scale for making today's episode possible. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not

financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Block Works team may hold positions in the companies, funds or projects discussed. All right, everyone. Welcome back to Empire. Very excited about this one. We've got uh Mark, the CEO of Polygon Labs. We have Sandep, the CEO of Polygon Foundation. Um very, very excited about this. So, Mark, Sundep, welcome to the show. Thank you. Thanks for having us. Yeah, I'm excited about this. Um okay, so there's a lot that I want to cover. The um the reason I want to do this is you guys uh just launched Katana Sandep.

You also just had a bunch of updates. You're moving back into this CEO role or I'm I'm not even sure I got that right, but I want to like there's all these updates around the what I'd call the broader Polygon ecosystem. And Sandep, you and I had a bunch of interesting conversations uh in Dubai at token. Um not just about polygon and katana, but just about the industry, what it's like to have run a company, foundation uh protocol in the industry for for many years. And um so I just wanted to do this episode to talk about like Polygon Katana but more broadly just like where the where the industry is going. So Sundep I thought that would be an interesting place to start is you've been I mean running this business I don't know if that's even the right word

to say running this business but you've been operating a you know a protocol in the industry for a very long time. What is your general sense of like the industry today and how it's changed? We were just talking about what it was like in 2020 building a bit, you know, building something compared to today. Like what's your sense of what the last couple years have looked like and your sense of what the industry is like today? Yeah, I think in in a lot of sense I mean we all know that this industry basically we literally all joke that you know 3 months is like one year right in this industry and I think like the uh one of the things that you can uh say is that especially after 2022 uh you know the the the change of accel

I mean the acceleration has uh you know the basically Basically what should I say like you know the acceleration of change is is even even more because you know we have seen so many things changing recently the government changed regime changed complete new like I think like last you know uh maybe seven 8 10 months back none of us thought that you know people would be doing like you know you would have the the best performing coin of the market right now is something that is doing direct buybacks on daily basis like you know this is previously I think very uh you know kind of a scary circumstance but I think now that and this is the right way like I think most of these uh you know uh the

the the tokens like previously there was a very very uh kind of like I would say very abstract separation between the utility versus uh your uh you know the liquid utility versus the revenue and all that and I think like now we are seeing more and more of those things getting tied together for you know in various different mechanisms like some are more pure uh like the the traditional protocols whereas like you know app protocols like what I call app protocols they are like you know different way but I think that is changing but uh the point being that uh the industry changes a lot and now the change in industry is even more uh you know kind of like suddenly we saw meme

coins like last year it was like meme coins and then people you see like if you see from a zoomed out level we went from like saying that nothing in this industry works. So let's go only on meme coins and it's like a casino game. Meme coins just do this because nobody is delivering anything. There is no revenue on anything. Why do you need all these road maps and teams and presentations and whatnot? Just have meme coins. No road map nothing. pure speculation to now people are saying that you know okay people are now judging protocols on revenue right which is you know actually the part of the fundamentals and all this happened like maybe like the when did the Trump coin happened like January so like in last five months right like

five months before like memecoin was like Trump was the peak of memecoin right and then after that like now the meme coins are gone and all that so the industry changes so fast but I think the biggest biggest uh kind of thing that I see the change for the good is that infrastructure wars are kind of I mean they are still there like people projects will fight but I think the markets you know markets have stopped betting on purely infrastructure wars or maybe let me think of a better way of some you know saying that thing articulating that thing that this the infrastructure basically previously was we are building this this this crazy thing and this that like you know narrative was there on

infrastructure that this infrastructure will achieve something in future now that infrastructure thing people are asking what is happening right now tell me what is happening right now right what what is the revenue right now how many people are there and all that so the the parameters are actual parameters and it's all about users how many users you have and I think like more and more chains implicitly are becoming app chains like app specific chains even the mainstream chains that you see the general purpose chain some of them you know are already choosing like I would say polygon poss even though it's like by nature by by design it's like a you know it's a general purpose chain but if you see in the last six six eight months we have focused very heavily on payments RWAS in a way you can say that that's the core

focus area it's a app specific chain for payments and RWAs right while you know poly markets like you know of the world and courtyards of the world still exist on that chain and they get benefited with that but I think that is one the biggest you know kind of change I see that narratives are no longer the you know the the part the main thing of the industry so the best marketer wins it's all about now the products and how can you have more users and distribution do you think it's easier or harder to run a business today in crypto than last cycle or a a chain in compared to this this cycle or last chain is chain is definitely harder to run I would say any kind of token uh you know kind of venture token based venture uh instead of equity based

venture is much much much harder like even previously uh I mean previously they were like you know markets were good there was liquidity for these assets in the market and all that now if you see the token literally I tweeted about it also the token literally added adds two key values to your project like first is that it can give you early you know uh investment ability right you know I I was just talking like few hours back to a founder they had raised like prominent project they raise like $80 to $100 million and you know while on the white paper and you know this hype cycle and all that and I said like you know if you were in web two $100 million means like I mean no matter what kind of profile you have you could raise like 20

$30 million but beyond a certain time then to raise the $100 million round you have to have like revenue users this that it's very hard so cryp tokens were you know you could you could do that before before u and The second value that token added is that okay if you are a founder even if you are not like exit scammer and all that but you know after first year of your listing one year you will get like maybe some percentage of your tokens and you can you know be financially safe and all which is which is unheard of in web two world right like you have to grind for 10 years and then after you know some sort of exit happens and then also if you if you don't have too much of you have not sold too much of preferential shares and all

that you probably make something which can you can which can save you or can make you comfortable on the financial side. So these are the two main values. Apart from that probably airdrops give you brings you some early user metrics with that too also like I think only 10% of that is real. But apart from that like token is token adds net negative value to you right like you are constantly being ridiculed if the token price is not doing. It's funny you say that. I mean, I I was at a um I was at a thing uh a couple couple weeks back and there were like I forget if it was like six or eight of us around a table and um uh we were we were just I was like asking people like who's having fun like how it was a bunch of it was only

founders around the table and the people with a token it was like let's call it eight people four people they they have tokens they are they were miserable all four of them just miserable and the four the four folks without a token were having a bunch of fun and that feels like actually the first time in the industry where that's happened I remember in 2020 and 2021 like you know I've talked to you about this like Mike and I had a lot of FOMO because all of our friends were building these it was DeFi summer and then NFTTS and our friends were building these businesses and literally making hundreds of millions of dollars it was insane and uh Mike and I are like we're just out here hosting podcasts with no token what are we doing um it does feel like that's a now you're much happier that you are

actually building a business where has actual users actually you have actually like cash flows and all that that there is a you know growth trajectory like in crypto it's so hard to operate like infrastructure side also because every new startup that would come right they would get funded with $150 million like even the cost basis in the industry like if you are infrastructure project like it's so hard to hire people like you know somebody was telling me that even in India like you know I mean polygon you know originally came from India and they were trying to hire in India some smart contract engineers and all that and he was telling me dude you have destroyed the market and I said what what happened? And I said like everybody like even the college graduates asked me 100k

120 120k in India is like a 10 year 15 year experience person salary and crypto people like and not even the smart contract even crypto front end builders would ask you no it's funny you say this because we like in the last market we would lose our people all the time our analysts and reporters and stuff like that to protocols like I you know it's like anyone from like unis swap or arbitr or polygon or or funds right? VC firms would just hire our people and we just we just couldn't afford to pay and we actually hired a head of people in the bare market and I was like get ready in the bull market we're going to lose all these people because we just can't pay what the people with the tokens can pay and we haven't lost anyone actually.

Uh I actually literally remember thinking that I felt bad for like every company that had analysts because they would literally train them for like a year or two and then a protocol would just jump in and it sucked. It sucked. Yeah. But but now we don't lose them because the to because the token performance has been okay. So maybe this is a ne the another question and we'll get away from this topic in a second but I'm just curious because you guys have been at this for so long. Can the people can can you recover just like to to bluntly put it like if you've been doing this for a long time and you've got a token um that's been down for a while like c can can you can you recover? I'm not talking about you specifically. I'm not talking about polygon or you mark but like no no

you can talk about polygon also. it's fine like you know you can talk it's it's it's a publicly traded thing and then you know whatever like views are public and uh I think like recovery is it's all dependent on macro right like so especially if you see polygon and you know all the like layer 2 ecosystem arbitum optimism all of them they have been badly hit because of they have a double whammy right like first they got hit with the macro cycle and the second problem with them is like you know because of the you know the Ethereum Ethereum's L1 position like little bit like you know shaken like you know people even thinking that oh this this might not be true ethereum might not have won right previously like I

remember 2023 October September October before the first memecoin mania cycle we were in uh you know very prominent event I think uh anti-maridian from dragonfly people and uh there the topic was and I was also on the panel the topic was Ethereum has won stop fighting Ethereum right something like that right like that was the title and then you know the memecoin mania came and you know situation changed in 2024 and all that and so that created a lot of pressure on everybody who's building an Ethereum ecosystem of course obviously and then obviously the macro you know liquidity situ situation is is very very very bad right yeah yeah but I also think you know like the I I I like refuse to believe this idea that if you build a

great product that people want to use that people are not going to attribute value to what you're Right. And I think like that's that's the hardest part, right? Which is um it's so easy to steal users with like a new token sending money around and like you you take away users. But if you actually have like a long enough like time horizon on this that you can associate with it. Um I think the perspective changes a lot like when you can start saying, "Hey, I've got one application that is sticky with a lot of users. I've got two. I've got five. I've got 10. And by the way, like go look at like the the rate of change in the development of the protocols that we're building and go look at the kind of innovation that we have at like the

front end of like what's coming next. I think what people start seeing like very quickly is like, oh, this is something that actually is is built to last. And that doesn't right away turn into like something happens to your your token price immediately does. But I think as the industry matures more and more and Cindy just touched on this, right? Like the idea of like actually going to fundamentals a little bit uh away from like just like you know pure like pumpamentals um you are going to start having people like attribute value to that and people want to see like how sticky is it and and how real is it and I think when you prove that over a long enough period of time there it doesn't matter like what your token price looks like at that time like it's going to be impacted in a positive way. Yeah. Um

there's a phenomenal episode of Invest Like the Best with Patrick Archonnessy with this guy who um it's about the it's about Carvana's stock and if you look at Carvana's stock uh this is what this is what Carvana's stock looks like. It it during COVID it ran up from like 40 bucks actually earlier yeah 30 40 bucks to 360 and then over the course of two years proceeded to go from 360 to $4. And obviously everybody thinks that's okay. CO, you know, it's only a COVID business. This business is cooked. It's over. And now it's actually back to, you know, a $70 billion market cap at 330.

And if you compare that to something like maybe Pelaton, right, which went up and then has has not recovered. This was more of a co stock. Like you can I I agree with you, Mark, like in the long run, the that the businesses that do build products and make good money actually do end up doing well. It just sometimes takes longer than the market wants to uh than you want to realize. So, this episode is brought to you by Scale, the next evolution in layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, Scale allows for limitless scalability, and has already saved its 50 million users over 11 billion in gas fees. scales, high

throughput, zero transaction costs, and powerful web 3 infrastructure make it the ideal platform for gaming, AI, and other high- throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X at scale network. That's scale spelled with a K. Thanks to Scale for making today's episode possible. As always, investments in blockchain technology involve risk terms and conditions apply. Sundep, tell me about the return to um so you had this tweet. Um I can try to pull it up, but while I'm pulling it up, um uh you said big update as the largest holder of Pole and someone who has

dedicated his life to the development and success of Polygon from the very beginning. I have decided to take full control of Polygon Foundation and will be its CEO going forward. And there's there's many sub bullets of this but tell us about this decision. Yeah, I think like the most important thing is that uh you know Polygon uh foundation is basically the uh you can say that you know Polygon Foundation holds the you know the treasury traditionally of the of the pole tokens and you know also funds a lot of uh entities in the ecosystem like Polygon Labs which is like the most prominent uh you know kind of contributor into the uh the protocol and but there are multiple small entities also like that and

Polygon foundation like you know when I was building the uh you know the protocol like obviously in back in 2022 2023 Polygon was in 10 to 100 phase right uh before like you know when Ethereum was this thing and I I mean in all this thing like uh Polygon was the first breakout chain which had so many applications breaking out and all that even now like poly market and uh courtyard and many many other applications keep doing very very well. Payments are doing extremely well by the way. So uh basically uh at that point in time like you know I started to build polygon

u you know foundation as a more institutionalized in the more institutionalized form preparing it from for 10 to 100 stage right yeah I mean when I'm saying 10 to 100 I mean like 0 to 1 one to 10 and 10 to 100 stage of of of of ventures and uh that included like a lot of board formalities this that everything set up in a way where like you Now it's a very big ship so you have to steer it very carefully this that right and what I was explaining like you know because of like Ethereum getting into a lot of pressures from the you know the L1 ecosystem and all that that you know I think that that pulled all of us right back into and I'm sure this is the same situation with all the other you know L2 protocols also is that uh

you know it pulled all of us into this I would say zero to like polygon could be like still in 1 to 10 phase But I just try like to think that we are in zero to one phase back all al all together and and then that's where you need like extremely fast decision making bold decision making sometimes you will take you know kind of wrong steps and all that like you know for example incubating katana right like you know is is one of the many many many steps that we have taken right like it's a you know incubated with gsr and external completely external project but you know the katana is a very very important part we believe uh for growing a layer right so the a layer you know as you know like every that that's the main product of

polygon like that's the future like you know we believe that this will be this could have this has a potential of becoming an important element of this trustless internet that we are building you know with the assumption that everybody all you know big enterprise and you can already see this by the way right you know all the big ones you you see that Robin Hood to revolute to stripe like all of them are entering Eventually all of them are going to launch their own chains right and so a layer is basically a you know a service which provides uh you know this crosschain settlement with these chains and whatnot and if you want to create that service and you know you you assume that there will be die separate business activity happening on multiple different

different chains you would need like some liquidity hotbeds and which are extremely fast you know native to it right like those hot beds do exist outside like you know just like polygon poss You have you know Solana base other like you know high liquidity places but they are not natively natively connected to Aglia like you need a native deep liquidity liquidity hotbed where people can easily you know trade those assets. So that's why like that was the reason why we you know kind of incubated or helped in in incubating katana uh because it's a very important we believe that it could it could play a very important role in in the success of a so so that that's why like so basically these decision making was was becoming slower like with the boards and all that

every time you will review what decision even if you took the some decision you go back and many times I and Mark used to discuss and obviously Mark you know running the business team and all that would also you know time and again would say that you know sometimes like when we revisit the decisions change the decisions it kind of affects the morale of the whole team that okay are we not clear and all that and I said that you know and mistakes happen in that scenario also like I said instead of like you know if that mistakes are anyways going to happen let's take them in a fast way like you know let's take faster mistakes if we fail we fail right so that was the reason so what what what I have done is like I've taken the CEO role of the found of the foundation the

board and all that like you know now I'm uh the main person the board and then we can like I can take with Mark like whatever decisions we need to take we can take extremely fast move extremely fast break things some things will succeed some things will fail it's fine but we work in the startup mode again that's the main crux of it what do you think so there's two business models that have emerged with chains um one is the uh you guys I'd say optimism arbitum which is like providing infrastructure for other people to go build their own chains um Or maybe that's an overly simplified version, but um you know optimism has the OP stack, you guys have a layer. These are these all kind of look directionally similar. Then there's like hey just come put everything on our

one chain. Salana maybe base like it seems like hyperl going in this model maybe kind of. Um what do you think about the two models and do you think one is Yeah. I mean obviously you guys have chosen how to do a layer. I mean we haven't even talked about Katana so maybe that's a different strategy a little bit but um yeah what do you think about these two models? Yeah, I mean Mark I can start and then maybe you can add like you know we like from the very beginning like you know like if you go and read the white paper of matic network which polygon used to be called before from 2017 or 18 that time also I had talked about multiple chains because you know I could clearly see that one chain no matter how much scaling you can bring in one chain it

still cannot take the transaction especially you are not talking about the it's not like visa network you can say Like somebody might say that Visa has 50,000 transactions. Like literally half of the world is using Visa for the transaction but Visa is only payment transactions. You're not doing complex smart contract logic on that right like you're not putting code on that like it's a one like you know balance up balance down right and even then you can't say that the world's like you know the whole world's payments are happening on visa it's a still a small percentage of this of the larger so we don't from the very beginning I my belief has been that there can never be a case never be a one single computer which will take entire world's computation in one single place that's not possible so there are going to be different different this

thing however I do agree with one thesis which I think which I give credit to Anatoli also like he saw it initially is that liquidity hotbed you know thesis that you know of course there will be computation many places but there will be probably one or two liquidity hot beds five liquidity hotbeds where there will be a lot of liquidity situated and all that and that might happen but that also means eventually in our thesis everything becomes an app chain if that thing become liquidity hotbed even then it's kind of a kind of like one some one or two kind of apps like probably uh you know you can see this thesis like for example I'm folding with unis swap chain right unis swap has like the decks there and their thesis is like between the

super chain ecosystem they will be the liquidity hotbed like you wherever you are doing anywhere the market is here right so if let's say in Solana's design also if that succeeds I see the end version is not as an ecosystem where people are doing so many things I see it as one or two large let's say exchanges or few exchanges being there and people using those exchanges for liquidity and all that but applications will largely move away like you can already see like some of the like I don't want to name but like some of the biggest applications in Solana ecosystem has already declared that they want to launch their own chains and all that and the Ethereum has been saying talking about this thesis from day zero and and so as we so yeah and tying this back to

like polygon where I think it's like really relevant is effectively like okay our Like when we think about this like purely from like a very like yeah like traditional sense like you you think we have like this this like mission of like building the trustless internet and we want people to do whatever they want with their their assets like whenever they want and when you like think about what that means um it's not like this like I view building a single chain as like a very small kind of like mission um I view it as like you could create a lot of economic value on that chain for a period of time And uh if you evolve with the market, you could continue to drive value in that chain.

And that's great. And this is why we love having a chain like Polygon POS that can drive like massive value through payments and and RWAS. But by the way, it's not going to be the only payments and RWS chain in the world whether it becomes the most successful one or or not. But when we think about it like a lot bigger, um what what is the thing that like really actually gobbles up a lot of web 3? Um, it's the place where all of these big chains need to go to actually be able to interact. Um, Polygon POS is not going to be able is not going to live on its own when it's great for payments and RBA. Salana, if it wants to be like the the onchain exchange of like web 3, it's going to need to allow users to do other things

and it's not going to do it on on that chain. It's not going to be able to like handle it. Um and so you ultimately like need this place this thing uh that that allows all of these to connect and actually like interact. Um and that is the thing that to to us is like much much bigger um much more valuable as well. Um, and so I always think of Polygon as kind of like being this nice thing where like yes, we've got like this chain that can capture like a lot of value, but there's this like much bigger picture, higher potential thing that pretty much anything else in web 3 via the A layer um that actually connects all of it together. Yeah. And I also want to add I also want to add like you know Mark said this this really good

thing and because many times we internally thought that okay should we go like you must have seen the polygon's giga gas road map right so polygon poss like you know in next 10 days we are going to go to above,000 TPS and I think by September October by almost end of September you would see Polygon POS at 5,000 TPS right as good as like any other chain that you can see probably like you know approaching similar ranges as as Solana. also you can say in the in the in the performance and we could have done that like you know we can also crank it up like you know and you know based on this all these giga gas research that is happening and all that take it to 100,000 over time that's the plan but like what Mark said is very important like you know if you if you

told me that you know we are building just one chain and then we just want to bring you know a lot of like applications there and all that and there the token does well in the short run because the long run we are saying it cannot be everything in the long run our thesis everything is is a is is is a app chain, right? Like my thesis to this is and which like unis swap you know you can see in the unis swap thesis is that if you had smooth enough crosschain you know connectivity and compatibility like I mean the composability also why would any app exist on a shared chain like I would always any app as a defi app I would always create my own dedicated chain serve my customers with highest quality uh standards and whenever I need any

composability like you know using this any kind of interconnectivity layer I can connect with anything else right so that's the and that that mission is actually like you know it's been eight years for me like you you and me were discussing right like it's been a long time three months is like one year so it's almost like 30 years right like here so you know like one of our team members is elder than me and he said like how many years have been for you I said like it's been eight years son and he's elder than me because the eight years is like 20 30 years right so so what I was saying is that This mission actually is something that makes me feel like wake up every morning even now after 8 years of all this you know crypto crap and still you know work 10

hours 12 hours a day right and and that's the most important thing that's why we are chasing this dream to create not one chain two chain but create this trustless internet like a layer if you see like and I would love to do like sometimes a deep dive and not a lot of people understand like ag layer but if ag layer succeeds it actually ends up becoming not like one one 111 network it ends up becoming like a trust uh trustless internet like almost like you know people have abused this name the TCP IP of this but if you see this in terms of security it actually is the could could become the TCP IP of the value internet that's what is the bet yeah I do want to go there in a second um what is the role of Ethereum in all of this sand deepep so Ethereum in our

mind is Ethereum is the like after bitcoin is the most decentralized chain And that is used for the final settlement guarantees right so a layer actually collates the uh you know the zk proof from from everywhere creates the final settlement proof and posts on ethereum and because ethereum is decentralized enough people don't have to trust on the ag layer which is providing this fast interoperability between the chains and all that they are actually trusting the final settlement on ethereum so that's the role of ethereum yeah so a couple months ago um before ETH really started to do their transition and like this new pivot and new guys in place and stuff like that. I think the there were some I mean there

were some folks that probably you and I both talked to who are really frustrated with the state of Ethereum and you know people would say to me and I'm sure if they're saying it to me they're saying it to you too which is you know if ETH keeps going this way I'm going to leave the L1 right I'm going to do things myself did did you guys ever think about that? I mean you can you can imagine that you know like there was a time that every other day this conversation would come up all our investors will ping and then they'll say just because see in terms of the money value it can deliver to you it's just like you know we just need one announcement that guys we are an L1 now right and then suddenly like the valuation and the pricing is completely different right considering

we are one of the most adopted chains like you know we would actually you know most of the L1's right now they will fail if if you actually compared the real user statistics and everything compared to Polygon POS right but their valuations would be like two three five I don't even want to know some of them are completely dead L1's and they are like you know valued like four five times higher than uh than Paul so obviously most of the investors stakeholders there is huge pressure there was huge pressure but I think like you know I mean like people actually like you know this is like I I should say this like so a lot of people actually because MATIC as a token did its like 100x bull run and whatever and all that. They think of

me as some sort of like crypto businessman, right? Like my branding is crypto businessman, right? But I am actually like a engineer. I originally wrote the code also there and I have a thesis. I have a vision but I want to achieve right. It's not like I I'm just like people are just thinking why Sep is just not declaring because they are assuming that I should be doing this anytime like now L1 pump like the token goes up and all that right like but I don't do that like you know I am actually building for something real and I definitely like a layer in its current version is not an L1 it's basically something that use Ethereum as the as the settlement like as it decentralizes all that like everything like in future you know we don't know but but Ethereum the a layer relies on the settlement

powers of Ethereum and we can't just call it like you know we we can't go and say that no this is an L1 and we'll see when it happens L1 and all that right so that that we won't do I won't do specifically also yeah and Jenna this also ties into the discussion we were having earlier on like at least that I started around like this idea of a product and like Ethereum is a great product for settlement period and so we should keep using it for that purpose um it's it's actually that simple and it and it shows that like build a great product and people use it and people look at Ethereum also and they're like, "Hey, it's not a great product because of like XYZ." I like strongly disagree with it. Like we we actually have a need for Ethereum that frankly others don't

satisfy and that is like very useful for us. And so as Sep said like when it comes to the AG lay layer like we post final proofs over there and like honestly like if there wasn't Ethereum I don't know who we would be able to trust um from a trustlessness perspective to actually be able to do that. Yeah. It's only Bitcoin. It's only like someday like Ethereum's real real competitive competition is if someday Bitcoin says that we are adding the ZK proving capability into this then there is like serious competition serious problem to uh you know Ethereum. right now like for the settlement which we think Ethereum is built for and I think like you know this is what other L1 especially Solana has been able to do the best is that they were able to drag Ethereum

ecosystem into a fight which is a execution fight which Ethereum is not made for at all even if let's say like they are 13 TPS even if you scale 100x you still go 1300 TPS you're still like 1/4 of where like let's say 1/3 1/4 of where Solana apps sui many of these other protocols would be there right why fight that fight like that was not supposed to be Ethereum's fight. Ethereum should have been a settlement layer and all that. But I think there are a lot of like in the community like the just number go up kind of people because they want to see the fees and revenue and D5 volume everything on Ethereum so that like you know they can price it better or or something and they like I think you compare that with let's say and this is my my disappointment

like I was actually discussing with the uh you know some Ethereum Foundation people also recently that this is my biggest frustration like price and all that like I know like I have I'm seeing the price I've seen the bad price in 2020 for years like you know when polygon's price was at 2 cents right like you know I I don't care about that we keep building if we build a good product good users will come things will things will happen but I was telling them my biggest uh you know frustration was that getting dragged into this you know execution war and leaving your strategy because see what happened on Bitcoin in 2017 18 when this you know BT uh what was that Bitcoin uh what was the other name of the the bit the the

Bitcoin bigger blocks. Bitcoin Cash. Yeah. Bitcoin Cash because they said like Bitcoin is actually for payments like Yeah. Yeah. Yeah. And then you know the the the core people of Ethereum community they put their foot down. They said no no no we are store of value. We are digital gold and that's it. We are not doing anything else. This is what we'll do for let other people build other things. We will do this and oify it. Keep it simple. And I think that's what like you know Ethereum this is my disappointment like I thought that this thought process and you know wisdom will come from Ethereum community that no we will not do this like in fact instead of like getting you know scared by the regular revenue you know this thing coming to this coming back no no we are

built for settlement we will only do this we will make sure that you know there will be you can run Ethereum nodes on Raspberry Pi and laptops and all that and there are so many nodes with sovereign resistance permissionless because it is the best place for settlement which also means it is the best place for creating the sturdy value. It is the best place to keep 10 billion dollars, hundred billion dollars. Like if I had like hundred billion dollars or 10 billion dollars, would I keep it on any other chain, I don't think except Bitcoin and Ethereum anything suffices, right? Like where you would want to safely keep and store your money. So that's where like you know disappointment uh from our side like from my side because I I still like I am I'm still a pretty big Ethereum maxi in that sense.

This episode is brought to you by Scale, the next evolution in layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, Scale allows for limitless scalability, and has already saved its $50 million users over 11 billion in gas fees. scale's high throughput, zero transaction costs, and powerful web 3 infrastructure make it the ideal platform for gaming, AI, and other high throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X at scale network. That's scale spelled with a K.

Thanks to Scale for making today's episode possible. As always, investments in blockchain technology involve risk, terms, and conditions apply. I I want to start to try to tie in Katana into this whole story. So, um in your post, you said uh we will dep So, you guys are deprecating Polygon ZKVM. Razer focus um is going to be on polygon poss. Where does um where does Katana fit into the story? I don't know if this is a question for deep or Mark but yeah see first of all like katana is one of many incubations and closely built products in the ecosystem that we built right katana this is your point number four you said the ag layer breakout program

is going to continue spinning off projects that will result in increased focus for polygon poss layer big air drops to pole stakers and etc etc absolutely absolutely so you see that you know the the core focus of polygon foundation and polygon labs is to focus on Polygon's core product which is POS and ag layer. Now for ag layer poss is very clear payments and RW and we are pushing ahead on this right like already you know I don't know like a lot of people are watching those stats there are like some people have started talking on Twitter also by you know in terms of the number of transactions we already surpassed Tron like number of transactions payment transactions but you know in terms of the values value settled Tron settles around 680 billion

per month and we are at 140 billion or something right so of course like still 140 worth of Tron but like you know if you see like you know how market values Tron at 25 26B that is also like you know completely something that is underpriced in the market and all that like so of course like not financial advice and all that I'm just saying as a you know founder my uh side of like this thing how I see the irrationality in the market but polygon PS payments and RWA a layer is a multi-chain ecosystem right it's you know in the past we call used to call it internet of blockchains ecosystem right and providing the final settlement on Ethereum, crosschain, interoperability, whatever. And a layer does not succeed without some key initial partners or initial chains in

the Ag layer ecosystem. You see that there is an OKX chain. There is Polygon POS is connecting into a lay layer and then there will be like this chains like Katana, Maiden all of these chains will connect into the Aglair and they will provide the initial network effects initial liquidity into the AG layer and uh Katana for example was one of the you know is one of the incubations. Miden is like a non non EVM incubation which we spun out and Miden you know recently did a very stellar fund raise and all that. Uh similarly there are multiple others. Some of them we have announced, some of them we have not talked like billions for example is also on one other project like you might have heard ID they are like now you know uh they are the ID like proof of humanity plus ID protocol

right and they are already getting a lot of traction because a lot of projects are using them as the airdrop you might have heard about so these all are like our you know incubated projects you know some of them built inside spun out some of them built outside and all that and kadana is one of them and I was explaining previously that since agar is this multi-chain ecosystem imagine you were on game chain and you built you earned thousand game tokens which equals to $100 in USD you want to swap it you want a place where there is like larger liquidity and all that with that USDT probably you want to buy ETH you want to put in an ear product and all that so you need a liquidity deep liquidity place hotbed in that and we believe that Katana has the ability to do that

because of the mechanics uh Katana has and I think Mark is the best person to explain some of those mechanics because of this his D5 background also So, but that's the that's the background of Kadana. Sundep, we'll let you get back to your uh your walking desk right now. Mark, do you want to um I don't see you walking. Sundep, we got to get you. Yeah, because I I stopped like you know, while I was talking, I realized that I was not able to focus so I just stop. I can't I can't multitask. I I can't do that. Um but I I realized for the first time that, you know, especially in the podcast like calls I can take but then podcast. Um, Mark, tell us the tell us the So, I'll I'll get into more specific questions in a sec with Katana, but tell

us the backtory of Katana. Like, how did this thing come to life? Like, was this like several people? Was this your idea, Sandep's idea? Like, how did you guys have a bunch of partners? Like, tell tell me the story of this thing coming to life. Yeah. So, this actually um started for the exact reason that Sundep said, right, which is like we we were looking at the AG layer and we actually wanted a protocol that would a chain that would actually have like really deep liquidity on it. We went out to the market, right? And we looked across the market at every chain. It doesn't doesn't matter what chain it was. Just name the biggest chains you can name in the space. POS, Arbitum, Salana. We said, "Okay, which one could we just find a way to do a deal and bring them to the and what we actually realized was

that none of them were actually good enough for the goals that we had for this purpose. And specifically the reason for this is because none of them actually have very deep liquidity. A lot of them have very high TVL. Not a lot of them actually have very deep liquidity. Um, when you go look at like the the pools that get traded the most, you're talking about things that have like 20 or $30 million of liquidity, which is just like it's basically nothing. Mark, can you can you talk about that difference for a second? Uh, TVL versus liquidity. I'm sure this is familiar with with for some folks, but maybe not for others. Yeah, sure. So, like general idea is you look at a chain and you're like, "Hey, you have you look at this raw number. There's $6 billion of TVL."

What people think of is they're like, "Oh, this is the place that I go and I can get lots of liquidity. I could trade really easily." But what happens is that most of the time that TVL is just assets on a chain, but they're not actually used in a DeFi protocol. Uh you could almost look at this as like um DeFi Lama provides like the actual like TDL that actually exists in the DeFi ecosystem. Um, and that is not at all the same as the amount of assets that are actually sitting in that in that ecosystem. And so the thing when you get is you you're you're a trader and you want to go trade that all that amount is irrelevant, which by the way is like over 50% in most chains. It's like it it doesn't do

anything because it's not in a D5 protocol. On top of that, when you actually look at liquidity within those chains, what you actually realize is that they're not actually all sitting in one protocol either. they're also sitting in like 10, 20, 30 different dexes or lending protocols. And then what you realize is that when you want to go trade and you go look at the pool within one of those protocols that has the most assets that you can trade against and start realizing that there's not actually that many assets to trade against. I the value of those assets is not that much because it's spread out across everywhere or it's not even in a deeper moment. So that's what I'm referring to when I'm talking about this like deeper liquidity is really like a pool that can actually truly be traded

against. So when we were looking at that in the ecosystem just across the board, we're just like nothing is built for this this purpose. Um and so we started thinking about like how can you actually get this done? We actually had the project called the sync that was actually being worked on about a year ago by by an external team and it was intended to be a project that could be kind of built for this purpose. Um what we realized actually is that there was a lot of improvements that could be made to this project. Um and that could really really focus on solving this issue properly in a way that only like a new chain could solve and an existing chain could not solve it. And so we started kind of like looking at that and then what we realized is we're like you

know what if we're building a chain for liquidity you know what we should probably have is a partner who can help enhance that liquidity in the best way possible. And so that's why this is a chain that's actually not just made by Polygon, but also incubated by GSR. Um they're a liquidity provider, marketmaking firm with I don't know 10 years in probably 15 years in the industry, almost no 13 years in the industry. Um and very experienced in this way. And so the thought was if we could build kind of two teams, one that could bring like an ecosystem and one bring the liquidity, um then we'd be in like a really really good spot. And so really that's like the the source of of Katana is really this idea of like hey bringing this to the ag layer with like the the comprehensive team that you need

solving an actual need. Now one of the things along the way that we realized is not only do we need deep liquidity on the ag layer but actually we need a chain that is actually just optimal for users period. So like great that we need deep liquidity. So we went and did a bunch of user service. We're like, what do you actually want to do in DeFi? Like what do you like what are the top three things that you actually care about? And uniformly, like almost across the board, number one is I want high yields. Not surprising, it's DeFi. Um, but also, by the way, that's just finance. Go ask a go ask retail. What do I want? Like using Robin Hood, what do I want? I just want to earn a lot of money, right? So that's always number one. Uh, number two

is I want deep liquidity. This also is not surprising. Go to anyone in finance and say, what do I what do I want? and they're gonna say, "I want liquidity." Uh, and then number three is security. And so security to us is always like baseline. It's like the first thing that we we always think about is like you're gonna build stuff that's actually secure. But those first two things are things that like chains do not solve for at all um across the board. And that is really the idea behind Katana, which ends up being what we need for the agenders than currently exists for DeFi purposes.

Mark, you guys made some interesting design decisions. I will say um for example, one is you guys are opinionated on the apps that you guys have um you know chosen to like you have one lending protocol, one spot deck, one per deck. I I think I'm getting this right. Um tell tell me about like how you guys came up with some of these design design decisions and how yeah how how you came to those conclusions. Yeah, so it comes down to this point that I was saying earlier. Let's take any general purpose chain that exists today. Um what do you have? You have a um implementation of morpho on it. You got an implementation of a on it. You might have Oiler on it as well. And then by the way, name like five more like longer tail lending

protocols. Do the same thing on the deck side, right? You're like I've got uh Uniswap, Sushi, uh Quick Swap, Aerodrome, like and and most chains literally have like 30 DAXes if not more. Um, what happens is that you get a hund00 million of liquidity that sits in, let's say, Morpho. You get $100 million of liquidity that sits in a you got $100 million of liquidity that sits in oiler. That's $300 million of liquidity. But the thing is, you can only tap into $100 million for any sizable trade without with and and like having the issues with related to like slippage and just pricing in general or or specifically on on this side like borrowing, lending rates. Um, if you

were to take all of that liquidity, all 300 million, and just put it into one protocol, you now have much deeper liquidity, you can do much more sizable um, lending, borrowing without actually affecting rates on the debt side, you're not going to affect slippage in the same way. Now, you have to assume that if you don't bring those three protocols and you only bring one of them, you're not going to get $300 million liquidity. Um, you're going to lose some. So, what are you going to get? You're probably going to get $150, $200 million liquidity. So then you ask yourself, are you better off with concentrated liquidity of 150200 million or $300 million where the deepest liquidity that you have is $100 million. And the answer is like pretty easy. Just like if people want deep liquidity because that's what users tell

us that they want, let's build the thing that actually brings that deep liquidity. And then the same thing is true with respect to assets. Very interesting. This is the one that's like a little less obvious. I think the protocols obviously when I walk people through it, they're always like, "Oh, yeah, duh." Um, on the asset side, it's a little less obvious, but if you think about it, you've got um so many versions of like wrapped BTC, WBTC, CBVTC, TBTC. I could keep going down the line of like lists of like wrapped Bitcoin. Um, those are virtually the same assets. Um, at times there's some like differences in how they're secured, but like frankly not actually meaningful once you dig into it. And most people are willing to hold any of those assets. It's not

uniformly true, but it's very often true. And if you have $100 million of WBTC, $100 million of CBTC, 100 million of TBTC, that is significantly worse than just having $300 million of WBTC or even $200 million of WBTC. Um, now what happens though is there are different people who want different things. Some BTC holders are like, I want something really, really secure. Um, so I I want something that's like secured on Bitcoin. Um, versus somebody who says, "Hey, I'm I'm more of like an Ethereum person and I'm okay with like multi-IGs holding my assets." And so maybe what you end up meeting is actually two versions of these BTC assets that meet different needs. The point is there's a subcategory of people that want like

have different needs. All you need to do is meet their needs, not have every version of these assets. And once you do that, you can deepen the liquidity in what is virtually the same asset rather than fragmenting liquidity across all of them. That results in less TDL. It results in significantly more actual value for users on the chain. More value is better user experience or more yield. Yes, better user experience. So, we can also get to the yield part if you want, but definitely better user experience for anyone who's looking to do anything that could create any kind of slippage or like move borrower uh lending rates in a meaningful way. Yeah. How did you come up with the partners? Um like uh I think I think I'll get this some of them

right like Morpho, Sushi, I think Lumbard, um I think you guys partnered with Agora on the stable coin. Like how did you actually make these decisions? Is it whoever gave you the best rates on things? Is it what founders you like the most? I'd actually love to hear just like a behind the scenes of these. Yeah. Yeah. Um, so there's multiple approaches. Um, on on some of them it was a pure RFP. We sent it out to the top teams and we said, "Hey, um, what are you what are you willing to bring to the chain?" And very importantly, um, the decision-m on who we initially approached had a lot to do with like the security that they could bring in the asset or in the protocol. And the simple reason is like this is a like core aspect of the chain. If this fails, it's

actually problematic, right? Like if you think about like where's the risk on Katana. It's on like the failure of a protocol. So what you want to do is you want to build pro like choose protocols that are like very very secure, solid audit history, solid actually like history in production. Um and those are really the teams that you want to work with. That's number one. Number two is uh I I I really people like to say like chains are everyone's chain or whatever it is. I I I think of katana as like the users chain. Basically like users get everything thrown at them in katana. Like every bit of value that can be taken from a chain from its partners gets thrown at the users um through yields which we can talk about. So when we look at this a lot of this had to do

with like okay what are assets that users want to hold? What are protocols that users want to use? I don't want to choose an asset that protocols like don't want to that that users don't want to hold. I don't want to choose a protocol that don't want to be used. Um, and then second is what are you willing to bring to the users on Katana from an incentives perspective or other value. Uh, I'll give as an example. Sushi has a percentage of its revenue that actually goes to chain owned liquidity. Effectively what this means is a percentage of the sushi revenue actually goes to creating liquidity in um in on sushi themselves in various tokens so that when there is a bare market of some

sort and many people have decided to pull out their liquidity um in sushi what you have is liquidity that literally stays in there and that never gets withdrawn. Oh, so you've got you've got like the sequencer fees and protocol fees and application fees basically all uh funneling into one fund essentially which is like your own that's the that's what you guys call the uh uh chain owned liquidity and then this becomes now you guys own the capital you don't become reliant on other people's capital you own the capital that supports DeFi on the chain so in yeah in in up markets you don't have to worry about that in down markets and now instead of having capital leave the chain you have this embedded liquidity uh which can be maybe the difference

between a chain doing well in volatile times versus not doing well. Is that like is that a decent I I often think of Katana as being like I I think it's easy for any chain to do well in a bull market frankly like it's it's it's not that hard especially the DeFi oriented chain. The hard part is what happens when times get tough. Um and that's ultimately the the key thing you're trying to be solved is there's two things that make this really interesting on Katano. First is the chain liquidity, right? Again, people pull up the liquidity, but you've got a baseline layer of liquidity that you can still trade against. The second one is when we look at these different sources of yield. Um, some of them are actually offchain yield. So something like a USD.

A USD is a stable coin where Katana Foundation actually receives the revenue and redistributes that out to to users. Um, that is offchain yield. So when you are in a bare market and DeFi yields drop significantly, what will actually happen is that that yield on the AUSD is actually going to be much more desirable than the onchain yield. And that is something that allows like disproportionate earnings for users in a bare market that you don't actually get in a a like frankly just anywhere else because they're not built for it.

I wanted to take a moment to tell you about Focal by Falcon X, the AI powered insights engine built for institutional crypto. With Focal, you can create charts and generate answers to questions in seconds, used by over 80 funds with more than 10 billion in assets under management. You'll feel like you have a team of analysts at your fingertips. Ask focal questions like, "What's causing the uptick in liquidations? How much Bitcoin did Michael Sailor buy last year? And what is crypto's correlation to traditional markets? Focal pulls data from trusted sources like Coin Gecko, Token Terminal, and the tie with enterprisegrade privacy and security.

Learn more at ask focal.com or check the link in the show notes. Thanks to Focal for making today's episode possible. Ever wish you could access cash without selling your Bitcoin? Leen, the global leader in Bitcoinbacked lending, makes that possible. Since 2018, they've issued over $9 billion in loans, and not a single Satoshi of client funds has ever been lost. Here's what makes a Letin loan different. With custodied loans, collateral is not lent out to generate interest. No credit checks, funds in less than 12 hours, and no monthly payments. Repay whenever you want with zero penalties. And they don't just talk security, they prove it.

Leedin offers proof of reserves reports verified by a top accounting firm every six months. Lein is 100% focused on doing one thing better than anyone else, giving Bitcoin holders a secure, transparent way to unlock liquidity without selling. Click the link in the show notes to find out more. As always, investments in blockchain technology involve risk terms and conditions apply. What does this do to the actual yield on for users on the chain? Yeah. So, so, okay, so yield's really important on this chain for two reasons. We talked about like all of these assets and all of these um protocols, sorry. The question becomes like how do you

actually get Sushi and Moro and the Lombards and the Ether FIS? Like, how do you get them to actually be like the assets here that people adopt and how do you not fragment that liquidity? And it all comes down to like incentives. Just incentivize those assets. Incentivize those protocols. Do not incentivize anything else. This comes down to this point of being opinionated that you you made at the beginning, right? And if you do that, if you imagine another DEX coming to Katana, the disadvantage that they're going to be at is absolutely massive such that they will get no adoption compared to sushi. And the reason is because of the yield that's funneled there. I think of it as like there's like five sources of

yield that exists on kata. Um and you've got kind of three sources that we'll call like real yield and then we'll call like two sources that you call like token yield which is like the typical yield that you get right the typical yield that you get is like a token called cat right where there's going to be a uh significant air drop to pole holders so uh well really pole stakers specifically so u it's interesting in that sense for kind of like that incubation but then on top of that so so that's all going to flow through and by the way when that flows through the users it flows through those core protocols and those core assets. So, you're only incentivizing those. On top of that, the core protocols, um, they all bring incentives. So, morpho incentives, sushi incentives, those all flow through those core protocols. So,

again, you're incentivizing just those protocols and then certain assets that you pick. But then on the real yield side is where it really gets interesting because every chain has that, right? Every new DeFi chain comes in, they pump you with a ton of incentives. the incentives eventually disappear um or they do really well and those incentives last like a little bit longer than they would but eventually those incentives a are volatile and people can't really price them well but b end up actually not existing for forever. So Katana has like three other yield mechanisms. The first one is a protocol actually built by by Polygon that is used called Vault Bridge. So this is a a protocol that's actually available to like actually multiple chains. There's actually a lot of chains that will be adopting vault bridge in general. You will see this soon. It's it's become one of the more

popular products of Polygons where you just haven't seen the launches come out yet. Um, and Katana uses it and effectively what it is is that all USDC, all USDT, all ETH and all BTC that is deposited into the chain is actually deposited into Morpho Vault on Ethereum. Those assets get lent out. They earn a certain amount of yield. So users are taking more risk here. Now, why is this appropriate? Simple. It's a DeFicentric chain. If you want to earn more yield in DeFi, you do it on this chain. And you're just automatically making these decisions, right? You don't you don't like a user doesn't opt in to put it on Morpho. It just automatically goes into Morpho, right? Automatically. Users are told that's where your deposits are going. They they know that it's for they earn that. That yield gets earned. That yield does not go straight to users.

Passive users are terrible for DeFi. They cost you security on the chain. They add no value. That actually goes to Katana Foundation. Katana Foundation then chooses how to use this. So all of that yield goes straight back into those core applications and into those core assets incentivizing them. We now have I think $150 million of deposits on Katana that is generating uh probably $7.5 million or so a year already. um you push that up to three, four, $500 million, you're talking about tens of millions of dollars going straight into these core applications and all flowing through to the applications built on top of sushi morpho and the the other core

applications. Um and then the users ultimately getting that benefit. Second one is a USD. Some people are not going to like this bridge mechanism. They're going to say this is a risk that I'm not willing to take. Who's going to do that? Mostly institutions. The thing is this chain is actually one that should be desirable both for retail and for institutions. Retail is going to get more yield. Institutions are going to get deeper liquidity. So we want to offer them an option. So we've been working with Agora uh which has a USD. It's a stable coin that shares yield shares yield with uh Katana Foundation. So institutions can receive uh a native stable coin on Katana, take no bridge risk, use it in Katana, and then that yield goes right back into these core applications and core assets including Agora as as an

asset. So again, that's more yield just flowing straight through. And then lastly, this is a sequence chain with a with a single sequencer. And so ETH is earned. And so when that ETH is earned, initially that's all going to go to creating chain owned liquidity, deepen that liquidity, take a very long-term view. Once that liquidity is deep enough in the core assets that you want, you start taking that and passing that right through the core applications to the to the users as well. And so now what's happening is users are actually not only just earning token yield, they're now earning USDC yield, USDT yield, ETH yield, BTC yield, and AUSD yield. And that is actually like real stable yield in like a very sizable way. Huh. It's funny this there are these like themes,

you know, time and time again, you see these things in crypto that didn't work and then you you slightly tweak the model and it comes back and it works. It's like, you know, everyone knows like Olympus Dow obviously and like they had protocol liquidity and blew up and stuff like that, but like I don't know, this kind of it's like Olympus DAO meets like what FA was trying to do and then there's some element of like the curve wars and like what balancer had tried to do with like uh combining voting and emission and uh but you I don't know it's um maybe I turned that into a question like what yeah what have you guys learned from like studying the the the failures of the past? Um okay so this is an interesting so first of all it's funny people compare this to a lot

of things it's bar chain it's blast and the thing is yeah it has a lot of elements from things right there's there's elements of bar chain there's elements of blast there's elements of um Olympus DAO ultimately like I I think people focus on the mechanics behind katana too much and they don't think actually focus on like the bigger strategic difference the core assets and the core protocols that is actually the differentiator the the mechanisms are just how you actually make that come to reality. Um that is really it. That being said uh Olympus DAO is in so many telegram channels and Slack messages uh looking at them. Actually funny thing is

Olympus Dow is failed. Olympus Dow has one of the biggest treasuries in all of crypto. Um, and that is the whole idea with like the chain liquidity is like that's technically like a treasury but not really, right? Like it's going to be it's going to be like owned by by the protocol, but like the amount of value that can actually acrue there is very significant the way that you've seen in in all this D. Um, we've learned from BLAST, one of the big mistakes from BLAST is you deposit into BLAST and you receive an asset on the other side. You hold that asset and you earn yield.

Well, what that does is it means that now the chain has a security cost associated with it. Somebody's got an asset there that is being secured and no value is being added to the chain whatsoever. That adds a lot to TVL. It's very easy to attract TVL in that way. Katana like very much rejects that idea. It you do not earn any of the value until you actually use protocols. This is the concept of like productive TVL. We want TVL that is actually used rather than TVL that just sits there. You don't want users just getting 5% a year and just sitting there. I mean, there's lots of ways that they can do that, right?

That's okay. Um, but like, why don't you earn 8% a year while depositing into Morpho instead? Like, go earn your your L1 yield and then earn the full L2 yield and like that's the yield you can earn. If you want to earn 5% like somewhere else, like that's that's okay. Katana is not like the the place for you. And and that's fine. Again, opinionated chain, right? Then there's like other things that you look you look at like um I think like the the mechanisms that you see in bar chain uh around like um kind of like their proof of liquidity. Uh you see some of that replicated in kind of like the mechanisms that exist in katana. I think one of the really interesting ones is like the curve wars.

This is something that we don't talk about as much because like cat is not like tradable right now. But one of the cool things about CAT is that when it is actually tradable, you'll be able to deposit it um into a um kind of uh like you'll be able to lock it and receive what we call VCAT, just a voting cat. Um and you will then be able to direct emissions into different sushi pools and receive fees from that similar to how you see that on like Aerome. Um and so that's another mechanism where we've like looked at a lot of protocols and see how it's done. So mechanisms bring together like all of these different protocols, but ultimately the key thing is to me is like this strategic

difference on like concentrating that liquidity and like driving it all to drive like higher yields and deeper liquidity that gives like users what they actually like want in DeFi. M um Mark if you ask a bunch of founders of different chains like who's your customer they would say actually founders and builders um and you know we we have chains who come to us all the time because like you know we make money from like advertising and sponsorships and stuff like that and we're like who do you want to reach they're like I want to reach new developers to build new apps on the chain. Do you don't have to worry about that uh problem at all or because you've already picked the apps or you still or you still care about the founders and the app builders as a as a potential customer down the road? Yeah,

we very much care about them, right? Because ultimately you've got this you've got this base layer, but then I want thousands of applications built on on top of them, right? They're all tapping into the same liquidity. They're all tapping into that yield. So ultimately, and and this has been like we'll when Katana launches, it will launch with quite a few apps right off the bat. And the reason it's been like relatively easy to attract both like high quality apps as well as like longtail apps is because they actually know that they're going to be able to offer their users higher yields by building on top of the core protocols than they would if they go build anywhere else. And on top of that, as they bring more size, they'll be able to do it with like more kind of like in in bigger size um than they could do

anywhere else simply because of that deeper liquidity. And the same is true for like institutions. um when when we have conversations with like fintexs um and they're like hey I want my users to be able to like earn uh on on their deposits the problem for a lot of them is the volatility of what is actually earned if you've got a pool with like $10 million of deposits then like you're you're like APR is just going like up and down like that and that's not like an experience people want you want some consistency if you actually build really deep liquidity then you can come tap into that with consistency for your users and that's something that like Fendex are like willing to to offer. So ultimately we hope to have like yeah thousands of builders come build on on top of them. Um and a lot of that also

has to do with like how we approach this. So GSR has been like uh really uh important in this part which is again this whole liquidity aspect of it. So if you want apps to come built you need apps to make more money. Okay, apps are going to make more money because people are incentivized to use the chain. But you ultimately need the users to be able to come and come like very easily. And the way this is done on Katana is like a few few things. First of all, um there is like the default experience is like a subsidized solver experience. So onboarding to Katana like literally takes like a few seconds and is free.

Um, this is actually like very very important because if you're an app builder, um, usually what you're used to is somebody needs to go to a site, bridge over there, come over there, and then blah blah blah. Um, or people try to claim that that's different for L1's, but it's no different than an L1 because you need to go to a centralized exchange, deposit your assets, move them from the centralized exchange to the L1, and then you can start using it. Um, by subsidizing solver key fees, you can have anyone who's in web 3 in general depositing from probably 60 plus chains in seconds for free and users can start using the apps in the ecosystem like immediately and that is kind of like I think a very big value ad to builders that is not like directly to builders but makes it that so much more desirable

for their users to actually like come to the chain. Yeah, maybe as we think about tying all of this together and wrapping up this conversation. Um, Sundep, I don't know if you're uh if you're done with your your walk and you've got your enough steps in here, but Sundep, maybe I'd go back to you and just think um get your take on like if this is wildly successful, right? If if if Katana works, if Polygon POS works, if the uh if the Ag layer works, like what what is the vision of the future? Um if if if all of this if you're wildly successful with all of this yeah I mean if all of this is wildly successful that means that uh you know a layer combined with all of these chains OKX's X layer

and many other chains they succeed that means that a layer will become that liquidity hotbed where if you are launching anything you would want to launch connected to the ag layer right and ag layer provides you that interoperability and all that and that's the that's the future vision Like I see like people laugh at me when I say that I predict a million chains right people are like you know we have like 500,000 and that I think that you know in 10 years give it long enough time if the trustless compute has value which I think like you know enterprises are realizing like you know crypto was never bullish not that bullish for crypto itself like you know I'm saying now what is most bullish is that now enterprise

is realizing that this is better financial infrastructure structure because your counterparties can simply you know launch or or like you know kind of connect to your trust machine and you they don't need to have like those deep integrations and as a whole the financial system is much more auditable much more you know transparent and all that. So if everybody is coming and those 1 million chains are coming into the space then agar will become that avenue where all of these chains would want to connect because aglayer is very different like you earlier said that you know directionally it's similar to super chain and this and that like super chain and some of them they are like very uh you know like super chain wants to create like a uh you know like an environment of 10 20 30 100 chains

probably which work very closely together and you know you think like and this is basically again the the the thought process is like a limited you know kind of compute requirement of the world versus unlimited comput of the world that's the only difference actually like that so the a layer is built in a way that there is unlimited computing requirement in the world right so more and more chains can connect and you know you can have like 1 million TPS on aggregated on a layer right like you know where all the chains are are working so yes to to answer your question if it's like widely successful we want to see a layer as becoming the the the that important element of this trustless internet that is being created which is a subset of the overall

internet of the data internet which is the value internet and the ag layer is an important element of that um yeah and like just building on top of that you know like I think the like I always think of it as the a layer should make all of web 3 feel like one chain it's just that simple like that's the experience that we ultimately want so like everything else that like you build around the a layer is important to like kickstart network effects want to make sure it's like trustless like we we know there's going going to be hundreds of thousands of chains and then hopefully more than a million chains. Tend to agree with Sundep on this. Um but ultimately like the thing that matters is that when people are using these chains um they have an experience that lets them feel like the internet does

today which is just one internet and it should feel like one chain and they are going to want to go between chains. If you narrow and niche chains down enough, they're going to want to go from one place to the other. It's it's unavoidable and we need to do that in like a very very seamless way, which is the goal of the egg. Yeah, it's a good way to put it, Mark. There's it feels like there's one internet. Obviously, it needs to feel like crypto crypto very soon needs to get to feel like there's one one chain. Um, I like that framing. Um, Sundep as you go back into uh to like use the very overused saying at this point which is like you know it seems like you're going back into founder mode at Polygon right now. Uh like are there any misconceptions that

you think uh the industry has or people have about Polygon that you are looking to kind of reshape? Yeah, I think like you know not misconceptions I think right conceptions like you know these are not misconceptions like we in 2021 when we acquired all of these ZK teams and all that we wanted we were a very heavy you know BD heavy you know project right and we went into a very research heavy mode right so imagine like the project pivoting from one extreme to other extreme and then also you know we evaluated multiple different protocols in between like okay do this that clon 3 zkvm this that And you know like the market unfolded markets unfolded only now like now you see that ZK is largely

commoditized right like you know it's what you need is the is the ZK networks and all that so I think like you know it's not a misconception like you you also have heard I think you also told and multiple people have told that polygon is doing too much there's so much going on like my done ID this that like you know we were thinking in that direction but I think now what we have done and that's the part of the founder model is the laser focus on building few things rest all have been spun out my id this zk proving zisk recently with jordi you know which is a zkm and all that all is spun out polygon is going to focus core on core product which actually serve the serve the end users in a better way that's the that's the whole is there anything that feels very

obvious to you right now that you think other people in the industry are missing oh yes yes yes yes that's that's that's like there for example Yeah, especially like you know again like I I can I can go on about it all you know uh I internally keep saying that you know I always take draw inspiration from like what what Jeff Bezos says about AWS that you know the AWS for first seven years people didn't even realize that there is something meaningful right like they're like you know what why do you need this and all that and many many many people also feel the same way about like a they think that you know this there are some bridges third party bridges or intent providers and all that like you know what they are not realizing is that agar

is providing one single security zone like all of these bridges and all that you know kind of uh separate the security zones when the assets are traveling and at its scale you know you you will have absolutely no idea what you know what thing is going where and what is securing that and all that you actually need one single coherent security environment that we have in the form of let's say TCP IP or www https on the on the data internet which I call like data or information internet. the same will be needed in the value internet and I think that is one thing like I deeply like many people have spoken to and like all of them see it's a great idea and all that but I don't see that you know okay this could be this could be the thing I think that's

what like you know people don't see it obviously I I see it so clearly I think the correlary of this by the way is that um it kind of goes hand in hand is that every chain and sad said this multiple times but I think it's so not appre appreciated yet in the industry. Every chain will become specific to a purpose. And I often say specific to a purpose by choice or by force. Um and by force I mean by market force, right? Like what's going to happen is I I I often say like if if you want your general purpose chain to be great at DeFi, like I guarantee you I'll build you a better DeFi chain. If you want your general purpose chain to be good at payments and and I guarantee you I'll build a better chain that does just that. And I think

that is going to play out like very obviously. It's just like it's just obvious, right? So often people say like, well, what's different from a technical perspective? I mean, we just walked through Katana, like I could give you 10 things that I could not do on a general purpose chain on Katana. I could do the same thing on like the part payments and RDBA side, but there's a part that's even more important than that. I was in Hong Kong the other day. I was meeting with I was in a dinner with somebody uh somebody like uh very uh yeah like uh running a very big enterprise in in China. Not interested, frankly, in the conversation. And then I say, um, Polygon POS has actually turned its focus almost entirely to RWAS and payments. Literally turns starts asking questions, five minutes later, he's like, can we have a meeting tomorrow?

And that is that had nothing to do with anything technical or or engineering or uh anything of that sort. It had to do with I know you're focused on this. I expect you to be able to give me more support. I expect your ecosystem to be more comprehensive for this purpose. Um, that is just how every market has ever operated. things niche down with time and 100% those niches win and there's no way that is not true on a blockchain as well especially if you've got the a layer that allows you to still benefit from users and liquidity on other chains 100 yeah could not agree with that more um that feels like a good place to wrap marks on deep thank you guys um for people who have not checked it out we had actually we didn't even talk about

katon you guys have these cool boxes people should check out the boxes you can win a prize um actually Mark you want to 30 seconds on this so I don't completely botch uh what what is happening with Katana right now. Yeah. Yeah. So Katana's got got one really cool experience which is that you can actually deposit funds and receive effectively these crates. Very cool like gamified like uh it's a very gified experience. You have the chance of winning 10 million CAD a crypto pal things like that. Um you also have like another avenue for deposit.

That's that's kind of like the the let's get the gambling addicts of web 3 to use that. And then we have like the more uh let I need 50% yield people uh who because that's very normal of course uh who can go to turtle club and deposit and earn yield on BTC uh and uh yeah some stable coins. So uh check it out. It's a it's a fun experience and then you'll be right on Katana using it when it launches uh at the end of June. Epic. Congrats Mark. Sand deep rooting for you guys. Thank you for the time. Cool.

Thanks Adam. [Music]