Restaking’s Impact on the Future of Crypto | Season 8 Recap

Transcript

a year do we look back and say like well this is really helpful for just making it easy to grab some operators and have some slashing sort of you know backend logic running but like we're not seeing reaking enable net new things right does it enable net new things right uh does it provide a way for products like to differentiate but first we have to just get the you know zero to one we're still not there um and just like we saw you know a year into like let's say like the cosmos Hub and IC we'll just see like how much sort of momentum continues to carry once we've actually are in production and you know the demand side gets flushed out um takes a while so I would just say stay stay patient don't

don't jump to any like hard conclusions about this being all a meme or not yet um a grade is hasn't actually started yet hey everyone this episode has brought to you by say after several months of effort say's V2 launches live whoop let's go and introduce the first high performance parallelized BM to the world stay up to date by following say it say that's SEI Network or you can experience the speed firsthand at say. today thank you very much for being a partner to B curve say all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with nothing in the

episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back to another episode of bell curve this is a season finale wrapup of the reaking Season that Miles and I have been doing miles buddy another season in the books this was a good one another one yeah yeah a lot A lot's changed since the beginning of the Season I'd say you know General sentiment on on everything has gone down um not not just reaking just you know I think we woke up today to a nice you know 20% drop in the market um and so you know maybe the excitement on

all these like uh you know big narratives and themes including reaking has kind of dampened but that's okay um I think we we learned a lot yeah this this episode is being recorded at a funny time this is for like the 20 nerds who still care about reaking and aren't reading one of 178 threads on the you know the Yen carry trade unwinding but uh for those of us who are still in the in the trenches here uh wanted to do a just a review of some of the takeaways that Miles and I had during the season and uh for for folks who have been following along the the different themes that we were interested in going into the season is sort of the shared security history and value propositions so where has uh you know what's kind of

the history of shared security within uh crypto architecture where is it you know and sort of lessons learned from some of the earlier attempts in in polka dot and Cosmos and how that's translated into some of these newer platforms like igen lir and symbiotic and jeto Etc um then we you know we were very interested in the market structure and sort of looking at this uh the different dynamics that were popping up in between the marketplaces themselves and the supply and demand side so you know the the actors there are the actual marketplaces but then there's lrts abss and operators um we were we we called it different things at different times throughout the season but we were really interested in looking at internal and external use cases or feature Edition type use cases versus this sort of yield generation

securing external networks and I think that's where like the meat of what we're going to be talking about here there I think my at least my perspective has changed a lot I think your yours has there as well um and then finally uh you know reaking platform positioning so when we started this season this was really and you know Igan Lair obviously still is the Bell weather um you know of this entire space they've you know got kind of like an Uber type name igen is just associated with reaking but we've had symbiotic and goo since launched their marketplaces and so we're going to do like it's just interesting to see how these different players are now positioning themselves but before we get into those themes I think it's interesting to even just talk about you know you're absolutely right that when we started recording the season the

sentiment of the entire crypto space was in a very different place than it is today but I think that reaking is particularly emblematic of that just because there was so much excitement and there was so much tvl that was flowing into igen lay and you were getting all these you know grandiose threads about what it was going to do not only for ethereum but you know igler and all this yield that it was going to generate and now I think maybe the bloom coming off the rose is a little bit strong but I think people are much more aware of some of the issues around reaking as a use case and they're maybe questioning how big this this Market ultimately is so miles if you had to kind of sum up I mean how do you how would you define that kind of shift in in sentiment yeah

I think um it makes sense because I think it was a supply Side Story right for um for a long yeah as it starts Side Story yeah yeah so um okay the supply side you know and then there's lots of sort of like excitement rationalizing why this is a great Supply Side Story why you should be you know depositing your eth into these reaking platforms of depositing lots of assets the reaking platforms and then you know over time it starts um slowly and surely you know the focus shifts to the demand side right um and that is where I think you know a lot of

sentiment has or like a lot of like the I don't know the criticism has come is starting to like actually think about okay how big is the demand side is it can it ever I guess you know grow to the point where it can support the amount of Capital that is entered on the supply side and then more like existential sort of questions start coming up like well you know never heard any like customer come and say like or like a portco come and say you know we can't gain customers because we don't have enough Economic Security right um that's the general sort of like um skeptic I guess that's probably the main main message right on

the on the skeptic side and yeah I do think that that's a very fair question to ask um but I would say that you know there's different shades of like how to look at this question it's you know okay sure that has not really been an impediment to like chain link gaining adoption right but would some of these networks have paid less of their overall Supply right if they were bootstrapped via reaking um would some of these networks have you know greater levels of accountability on the operator side if were part of like a standardized system that everybody kind of really understood well um and then you know because it's so easy to go pick up you know operators

and stake and um set up an offchain Network do we think that there's going to be net more right of these networks that will exist in the future than there otherwise would be had reaking never or uh you know these programmable staking platforms we'll call them now because it's not always just reaking right um if if they never existed um and I think that overall it's just still really early like reaking has died and like come back to life a few times over the course of the season and we still don't really have a single ABS in Full full production meaning like payments going through uh slashing you know is turned on and so just tell everybody like you

know take a take a deep breath um there's still you know we're still in like I don't even know if we're in the first day you know top of the first so let's just see how it plays out over the next two or three years yeah I think maybe to skip to one of these themes that you and I were really interested going into this season is kind of this internal versus external use cases and I think the way that people at least certainly I was thinking of use cases for reaking going into the season is this idea of re hypothecating you know staked eth and then using that to secure these external maybe it's middleware type services or other l1s or sequencers or whatever it was and then there was this other bucket of internal use cases

where you know internal from the perspective of ethereum and saying hey maybe we can actually you know use this as a primitive to allow e operator set to opt into providing all of these other services that aren't dictated by EIP right are mandated by the protocol and we're were kind of looking at okay well are there other me boost type use cases that might end up being really significant and that's why re taking and pre-ms have really intersected uh in terms of conversation and narrative and why there's some overlap there in terms of interest but now I I think that was maybe the wrong way of of framing things because again you know looking at that from you know the external use case there's just a very supply side oriented argument because the implicit question

is how can I generate more yield on my eth but I think if you look at it more from a demand side approach when you're launching a network there are all of these things that need to work on the back end and there's one there's the sourcing of the op operator set and scoring them and doing all that type of stuff but then you know even beyond that there's like where does my token belong within my uh within my network and what are critical points of centralization right if I'm building something that is like kind of very base layer close to the metal infrastructure that I could leverage my own token or some combination of eth or salana or another token to actually decentralize those those core parts and I think you know to their credit if you go back and listen to the episode that we did with Misha

symbiotic this is the message that they are really pushing and so I think that's really the only type of of reaking that exists this idea of external versus internal it was really a supply side argument oriented from the perspective of eth but it's really just kind of back end and and I think that's also why Igan Lair is pivoting to this language around Cloud you know viewing themselves as like a cloud computing type thing because it just implies like hey when you're launching a network there are all these backend things that need to happen and I think that's what reaking platforms are gonna sort of turn into does that yeah resonate yeah I think that's I think that's totally fair um I would say there's actually three categories of of reaking use cases if I had to go back and um you know kind of

like correct ourselves one is just standing up new networks offchain new networks right come into a platform grab a couple operators um design some sort of Quorum you know and Quorum rules right um and you're off and running that's a lot faster than you know it used to take to spin up and offchain network the second one is I would say like decentralizing things that you know parts of a protocol that's already an an existing protocol um so we T we talked to the goo guys that's a great example of you know um they have let's say like the auctioneer role right in their M system um that takes some you know

centralized like um human interaction right they have to like actually you know hit distribute um let's could our like product be improved if we decentralize this this particular role like if the answer is yes then great okay now here's a super easy way to do that again you go in grab some operators design a little Quorum right and now you have decentralized that part of your um your protocol and then the third is I think you know this feature Edition thing I still think that's that's different um it's basically the Proto The Operators of a protocol um giving them the ability to

create and opt into new protocol rules right that aren't like enshrined as part of like the the main protocol so it's saying if I'm a proposer I can create this rule saying you know here I go I can sell like my future you know proposer rights and I'm opting in to being held accountable to do that right um I see that as different than the other sort of like internal use case which is just decentralizing like existing parts uh or parts of existing protocols um and we may never see honestly the feature Edition use case like it takes it's it's very like it would you know there's a lot of um there's a lot of adoption that needs to

happen a lot of opt-in for any of these things to be useful at like the uh you know the proposer level we may never actually get there um I think it's pretty path dependent um and if we did try to get there too early like we've also heard how this could actually you know potentially be an even worse outcome right um like kind of once you have figured out a way to sell future proposer rights it's really hard to like I would say put the genie back in the bottle and maybe that has a really bad outcome um we talked about this with Lucas about like PBS right like once once that was you know introduced there was no going back um yeah and so we you know you obviously have to be like super cautious about the the feature Edition side of things um

and that is part of the reason why it may never happen as well it's like probably very political um but there's I think the the the former two right just standing up new offchain networks and decentral decentralizing parts of your existing protocol um that's I think you know we'll see a lot of that hey everyone this episode is brought to you by SE say believes that the m is here to stay but they also believe that the evm and its current iteration lacks performance and scalability for developers say's recent V2 upgrade has introduced the first high performance parallelized evm which coupled Lightning Fast block times and finality of just 390 millisecond that is sub 400 millisecond block time very very cool this V2 upgrade unlocks a new design

space with 100x the dut even' the fastest evm L2 so if you're a developer who spent most of your time building in the evm you can do you can now build on faster block times much quicker finality you get a lot of the uh benefits of the environment that you're used to so if you're a developer definitely go check them out and thank you very much say for sponsoring this episode where did you wind up thinking about what are your current thoughts about just pre-confirmation in general and there's been a lot of because within that feature addition right allowing proposers on a network like ethereum to opt into providing these new Services the there is a question of why does it have to be the ethereum proposer set itself right why can't it just be a quorum of other uh you know service providers and I think the reason why

pre-ms are particularly interesting is because they have this valuable basically economic right they've got the block Monopoly right yeah and um and so that's why they can do that's why it I'm sympathetic to the idea that really what makes sense um is pre-confirmation on the other hand pre-c confirmations are one they have these undesirable um first of all it's it's very complex um it feels again don't mean to be hater there are lots of great pre you know startups that are building out there but it feels a little bit like a science project and I think there's there's definitely a perspective here which is people are excited about pre- comps for the for the value acrel to eth perspective as opposed to being something that the market actually wants or users or applications actually want

but um you know where did you kind of wind up thinking about pre-confirmation as a category how exciting is it you know yeah I think there's um so when you think of pre comps I think L2 pre-ms are the first thing that come to mind right yeah but I think there's also you know if you go kind of deeper into the weeds you can imagine this world of like generalized pre-ms um including you know daps on L1 right or users of daps on L1 buying the rights to something um like let's say you know maybe a pre-com for um Can facilitate like an app like a right

making sure that a liquid selling off like top making sure that their liquidations are top a block and like selling the right to to execute that right um maybe it's Unis swap you know exerting its leverage to say like okay we're going to sell off you know the first TR Unis swap transaction of the next block and uh this is like mcam um is I think the name of the the the me system that was proposed where you can basically sell sell off the first transaction of the next block then but if you don't place that at the top of the next block the rest of Unis swap transactions do not go through something like that to me actually is a little bit more compelling from a demand Side Story just because I don't necessarily hear

like the existing rollup ecosystems jumping up and down for pre comps or you know would be rollup devs saying like Okay now that we have pre-ms I can build my base roll up um so I'm a little bit more skeptical of like that side of pre-ms but I do think there could be something interesting here where you know it allows I'd say like the apps that um make up the majority of valuable activity on L1 and could you could use pre-ms to like recapture some of the value that would otherwise just go to the proposers um that's always made sense to me but again I think you know it's very early and haven't heard from the daps themselves right um and until we hear them saying okay we're building

this for ourselves because this sounds great right um I'll probably be a little skeptical there's the other thing that's happening in tandem to this is there's a lot more excitement around multiple concurrent proposers um than there used to be and this is I think an idea that originated in salana with Anatoli but now Max Resnik has been pushing on ethereum my sense is that there's more buying than there used to be and it's so very early days we haven't I don't think seen any concrete specs uh come out of either camp but the reason I think it's interesting for this conversation is it represents kind of two different design philosophies here where I think this impacts how people are going to think

about PBS because PBS basically says all right there used to be just a proposer here who had actually build the block themselves and there was the right to propose a block which is valuable and then all there's all the work that you need to do to actually build that block and I think there was the correct realization that some specialization of tasks or labor make sense here so now more and more tasks are just getting outsourced to these block Builders right and the idea is that the network is still decentralized because the proposers are still you know there's low hardware and bandwidth requirements for them may we just outsourced to a special Builder and now we're we're kind of chucking more and more critical tasks for the network towards Builders and and relays and then there's another solution to that which is okay what you actually

could do is just break up that Monopoly that sort of financial right you and I have talked about this it's almost like the right to a medallion right for a taxi and you could just take that away and actually make the proposers compete um by having multiple different entities proposing to the same block at the same time and so then you don't really need this really strict division of labor which has become a little bit centralizing on the Builder and relay side of things and instead you have you're making proposers compete uh with each other for inclusion So in theory it's more censorship resistant I think the I think honestly the salonic camp is interested in this for a little bit of a different reason it's less about censorship resistance and more about just building you know they're really interested in getting around that 200

millisecond you know time that it takes an ad to travel around the world but yeah I think that you know if we were revisiting this entire season in in a year or so I think the depending on where mCP ends up going I think that'll be significant to proms as an idea as well yeah I agree um because it's I feel like it definitely is going in the other direction versus like I would say um a lot of the feature Edition you know use cases of re that we were talking about with proposers is giving you know the proposer who has the Monopoly even more power right right giving like uh you know providing a way to be even more

expressive about about the blocks that they're proposing and frankly other giving I would say like more voices a say in getting you know their transactions into the block um if it's not just you know a Searcher it's looking at L1 you know AR of opportunities are like sex decks are it's now like l2s trying to like you know pay for priority blob space it's um you know actual like individual daps paying for placement within the block um that could be very interesting and as as usual like it it already is happening in in uh in Cosmos and so you can look at like osmosis right now where it has

mempool Lanes right um and so it's using reaking um basically to have proposers run an oracle side car place that at the top of the block and then they run a top of block auction um where anybody can you know bid to have that right and then you have standard transactions and then you know the proposers are also running on a different piece of software to back run I would say like you know like all the amm transactions and imbalances and pools so it's very very low stakes compared to ethereum obviously it's a single dap chain um but it could be interesting to start looking at like you know what are sort of the the ramifications of that um on a smaller scale how does it just the

implementation work does it actually benefit the app right um so yeah very different setting but I'd say like that's the first like use usage of this in the wild yeah per usual Cosmos is just way ahead of their time right that's some things some things will work some things won't right but they're gonna try it anyways so which is why you know it's a fun fun ecosystem to be in apart from the dysfunction occasionally all right so speaking of Cosmos one of the other I think interesting lines of thought that came up during this season is and this this is a little bit related to this this this fun question of whether or not Economic Security is a meme and actually

we were we're done with the season but I think we're lining up a pretty awesome bonus up for everyone uh that we were hoping to get as part of the regular season but we we'll just tease it here it'll be worth tuning in for but the I think this this idea of like some of the issues that I think are being more widely understood about vanilla proof of stake and there's kind of the spectrum of vanilla proof of stake delegated proof of stake and then just straight up POA proof of Authority or proof of governance that type of thing and I think people are starting to question you know maybe especially for chains either you know closer to the beginning of their life or that have a very different end State than the sort of global distributed compute um system like ethereum maybe actually these POA

uh constructions are are the way to go um at least in the beginning or even potentially as an end State and in that instance do we really need like how useful is this concept of Economic Security right and is this really just this is kind of the toally point is the security the actual boxes and sort of this combination of the reputation and future cash flows of The Operators and so I don't know I thought that was a pretty interesting topic that came up this season and maybe the more that you move towards POA the less useful this concept of Economic Security sort of is I me sure where' you shake yeah I think um I think tog girl did a good job of describing like the layers of security

um it starts with you know the the the outer shell right is I would say I think he said it was Economic Security um I would maybe make that a little broader like there's a layer here where it's just some security Around The Operators um and that could be Economic Security right like in the form of stake that is um delegated to The Operators to keep them accountable it could just be reputation right um it could be a combination of reputation and economic security um and then there's the you know middle layer which is the protocol security so like the rules of the protocol keeping people like actually you know accountable and then there's

the social layer which is you know kind of like the the ultimate fallback if anything really goes wrong you can always kind of rely on the social layer and the question was well how actually meaningful is that outer layer of Economic Security or is that outer layer you know more reputation based right um and I think it kind of it's kind of a copout answer but it's like it depends um because you know if you do feel like you would your protocol would benefit from having a permissionless operator set right um which most l1's that is uh kind of like table Stakes right then uh Economic Security is important because

you don't know who these operators are um you have no way of you know tracking them down or keeping keeping them accountable in offchain you know ways like like suing them or you know pursuing legal action right um but then there are other more narrow use cases or and frankly like many use cases in the early stage right that that kind of benefit from having higher levels of control and opinionation and gating that operator set then there's the question of okay if it's gated you know who these people are what is the incremental value of you know throwing some stake at them versus the you know incremental cost that you're going to pay for that stake um and so I think it's all very fair

like criticism especially when the the sets are gated um but we'll see I I again like I I re we really do not know if economic stake you know keeps these operators more accountable than just calling it like proof of Authority or proof of governance um but I do think maybe over the course of the season because of the skepticism around like Economic Security you know being a meme maybe it's now socially more accept acceptable to launch as like POA or proof of proof of gov um I just think we'll see a lot more experimentation with people you know now kind of being like guys it's a meme we're starting off as POA right um which is probably good

too right and then we'll have more sort of like information in front of us like okay did the POA you know do we see any sort of like catastrophic you know issues with with the projects that took the POA route compared to those that did like a gated operator set with some stake um you know we'll see yeah and I think there's a I think this is a pretty interesting question to just think about and ruminate on because this you know talked about this even in the context of 51% attacks and stuff like that because there's there's all of this so just Economic Security is not a complete meme right I I don't even think toly really believes that at at this point um just because there are

these obvious attacks that you could perform but I do think there's kind of an interesting question about how much should protocols just count on the legal systems in jurisdictions that they operate and so like I think a 51% attack would just be straight up illegal and a lot of the attacks that Economic Security you know guards against they're pretty much just illegal and so and if you're gating your set like you have like the ability to review and evaluate operators and so right what the what are the chances that you like you know evaluate an operator say yeah this guy looks good and then they perform a 51% attack like you probably could have

sused that out if you have like that level of control over the operator set pretty low I think yeah hence why it's not as useful for POA but in in you know some sort of permissionless system like a proof of stake type system yeah I I think even there there is this um there is a let's say you say let's say like I I'm I'm comfortable relying on global you know legal and Regulatory systems I think the more Global you are or you assume that your base of operators is the less you can probably do that but then even even in instances where you know maybe you're not spread around a bunch of jurisdictions and the legal systems where your operators are

domiciled out of is actually pretty good it's still pretty timely right like it's still it still takes time and so you know we talked to um Ludwig who's building you know a a this sort of it was actually what you referenc in sort of based applications they're building this just kind of more out of protocol right angstrom which is a way to auction off that the optionality of trading against LPS um in at the top of the block the the reason why they're interested in reaking is because any of these the sort of Quorum of auctioneers that they're recruiting could theoretically run off if the if the lever that gets extracted on one trade becomes too big and okay you could rely on the legal system to have your back there but it's really expensive

maybe it takes a lot of time and you just don't want to deal with that as a protocol and frankly it's just much easier to procure some cheap Economic Security so I I think there's and I think maybe we have to watch some black swans play out there and in the same way that mount gaw imploding was ended up being kind of super bullish for dex's and it's also probably not a one of the one of the few shining bright light metrics that's happening right now in crypto is the percentage of descent like deck Trading volume as a percentage of of sex is going up you know I don't think it's crazy to assume that that had something to do with a failure of FTX and so you know I think there probably will over over a period of time maybe we just have

to watch you know some very high-profile Overton window shifting failures of the legal system to enforce some of these rights for people to say you know what maybe it's worth it to procure some procure some economic security here especially if you can do it in a capital efficient way which I think Igan Lair and symbiotic Ando these Platforms in April you know so yeah I AG that just a tradeoff yeah I'd say like um the if it's permissionless you definitely need it like the operator said yeah if it's permissionless anybody can become an operator anybody can you know basic like you can there's liability basically with people you don't know who are running the system that makes a lot of sense and

then the other end of the spectrum um I think Sunny was the one who pointed this out it's when you're relying on a single operator right to do a task um rather than some sort of decentralized Quorum with checks and balances I think like a market maker you know filling a user's um you know instant bridging like ask right and then having the funds held in escrow and released to them um that's when it makes sense to have a lot to have some sort of Economic Security backing the protocol as well um and even better if the value that is being you know put up as collateral can be redistributed to any user that ends up being harmed right by that operator um

running off of the capital and so I think that's the the next point is saying like Okay um when you have like single points of failure and let's say you know that Capital like no honest user will ever be harmed because there's always enough Capital that can be you know redistributed that to me seems like a great you know endstate outcome um and pretty hard to argue with from the standpoint of hey this makes the product better like and I think that's been one of the criticisms as well it's like does this actually make the products better would the products be fine with the current systems or with no security and I think it's you know if one if you're you know taking on some amount of risk

as a user and one product says hey you're basically insured so like if anything goes wrong we're going to you're going to get your money back and the other and the other product says well we're kind of banking on their reputations it's like well I'll probably go with the one that I can get my money back if you know those reputations aren't strong enough or like that reputational system isn't strong enough and something goes wrong so yeah ex that now I think hard to argue it miles that's a really good point because one push back that I think is really appropriate for this line of thinking which is just you know what ultimately at the end of the day these operators operators are very well-run businesses and they have reputation and future cash

flows at stake so they're going to act in this perfectly rational way I would just point out that that line of thinking especially when it comes to financial services gets you in trouble this is the Allen Greenspan thing Banks would never know they're they're smart entities run by competent people who are Financial experts and they would never blow themselves up until they all blow themselves up in the end and need to get bailed out so and and there's just frankly there's just so many instances of corporate fraud and Mal feance over the years that I just don't think that that's a particularly strong argument in the long run if we're trying to build a really antifragile robust system here and so I think this idea of insurance maybe reaking and insurance moving a little bit closer is a very interesting one one one new mechanism that I wish

that we talked about a little bit more is this idea of Stak Shure which is coming out of the igen layer team super super interesting idea can you just give us a a quick high level overview of Staker yeah Staker um I think the the TLD Dr on Staker is that you've got this enormous pool of capital right that's been deposited into igen layer um there's got it you know some amount of that capital is going to be you're basically going to be able to like self-insure any sort of action that you're taking on chain um and you can do that you know as an end user you could do that on behalf of your end users as a protocol and so what this basically says is okay not you know this is not just normal stake like this is not going to

get in a slashing event this is not going to just get slashed and burned right um maybe I have a large number of you know total stake that's securing my protocol this is the cost to attack right but a much smaller amount of like actual like redistributable Capital um and a big part of Stak share is like uh actually looking at how much security you need um as an L1 and like what is what how much like capital is actually at risk that the protocol rules themselves cannot protect um or the protocol rules themselves and the social layer cannot protect so it's like a

subset of a subset of capital that basically is you know if reverted right um people would lose money elsewhere so this is like why coinbase you know Waits a week before letting you actually withdraw USD from like a US DC transfer right because there's a week where you know a lot of whatever is on chain could be reverted or um by a proposer and then coinbase has already sent you the USD right and it's in your bank account there's no way to recover that for them and so what this is saying is you know there's some subset of subset of capital that you know if there was a chain reorg uh somebody else and you've like

prematurely right settled the other end of that offchain trade um you're kind of like there's nothing you can do right and so what if you you actually like allow end users to measure and and by the way and there's no way to like measure throughout on like a global level you know how much of capital is at risk at any given time because it's so individual right um but would if you could like you could start from a Bottoms Up sort of method with the end user being able to actually measure you know how much capital is at risk at any given week and ensure yourself from from it so what I imagine is like you know if you've got like20 billion dollar of tvl in igen layer in two years let's say it's just

flat there's probably most of that is going to be you know uh like have some sort of be it's most of that is going to be subject to some sort of slashing and and like a small subset of the total slash value is also going to be able to be you know redistributed and so I just think it's where sakure gets like um interesting is you know how will the market price Capital that you know could be redistributed in case of a slashing event versus Capital that would just be slashed and burned um and I do think they will price it a little bit a little bit differently um just because I think you're taking on

a little bit more risk if you're saying okay somebody could actually hypothetically benefit from causing a slashing event right if they figured out how to be the claimant on the other side and attack your protocol umh and insurance historically like onchain insurance has not been a a totally great story um you know think it's been tough yeah exactly so anyways that's the tldr that's what excites me about um about reaking longer term and just having spoken to you know ABS Builders um you know like Lucas from ethos like Ludwig um that we had I think that's what they are seeing as like the long you know really sticky long-term value prop of

reaking um because it could make their product better over another product that doesn't have this sort of insurance right I agree I agree and you know there's some part of me as well which is it feels intuitively again going back to the cloud analogy here I do think that there's some element of what reaking is is very backend heavy if that makes sense in the same way that cloud is as well and you know if you were asking well hey you know what does uh having Azure on the back end mean for salesforce's product it's like not that much but actually that doesn't mean that it's not particularly useful and in the case of reaking I think or or shared security or whatever I do think that you do have these interesting uh use cases

that actually will impact the product experience which is the insurance stuff that you're mentioning and that Second Use case of reaking which is yeah decentralizing some core some critical parts of infrastructure yeah yeah just going back to that cloud analogy I think the other part that that lwig um called out that I think is important especially to respond to the Skeptics is him saying like hey this is like something I need it's not core of my business it's not core of my product like yeah I know I get that it's not like my customers are demanding I have this but we need it and I don't want to build this out you know I don't want to dedicate tons of resources that could otherwise go to the core you know application right to build out this some this thing I kind of need but it's not non it's it's very non-core

right right and so there's like a cost sure there's like maybe a supply sort of savings value prop but there's also like a cost of time and resources value prop here where I think you know we're seeing like jto and symbiotic especially saying like no use your own governance turn your own governance token into a staking utility token um I think that's totally legitimate and should you know dap Builders be spending t a time to build out their own Customs everybody having their own custom sort of staking back end like no like great that's now you know something you could just grab off the shelf and again focus more of your time on on your core app

so there's a lot of funny stuff in crypto which is just people arguing whoever said this that a huge percentage of arguments in crypto is just operating on different time Horizons is is kind of how I feel about the modular versus integrated debate as well and I mean I think we've pointed it out on this show before but even if you if you listen to a lot of the proponents of something that's more integrated versus something that's more modular it's people that come from like a cloud background or or something like an apple type background where everything is integrated and you know a there just there's many different ways to skin a cat probably both approaches have a lot of Merit even over the long term but you know in historically what what has played out in this way you had like

on-prem software right that was the entire market and then it ended up getting more and more you know kind of uh the the cloud ended up eating a lot of that market share when people figured out there was common infrastructure that you could leverage and so yeah totally um you know just it's you got to remember that when people are screaming at you that this is the only way to do it and they're making religious arguments out of just like pretty technical implementation details it's just totally fun totally so yeah let's talk a little oh yeah no go for it I was just going to say I do think one of the uh maybe looking at the segmentation like so let's you and I put ourselves in the position of an actual Marketplace and we're looking out there into the

wide world of abss I think that maybe symbiotic having Misha on it seems like what their the customer segment that they're attacking is less kind of St like new startups that are just getting their start and need to bootstrap a network in day one maybe that's one customer segment and then another one is actually large existing protocols which are looking to do sort of a more sophisticated evaluation of their their backend uh so to speak and looking to decentralize core parts of the protocol and and critically there as well you we talked about kind of this idea of ABS as a narrative and are people buying a narrative or a go to market strategy and I think there's actually a large for

that second customer Group which is already large and established and maybe has a user base and a brand and an identity they don't maybe actually want that um and so maybe a good example of this would be some of the work that uh symbiotic is doing with Athena you know to uh decentralize different parts of their so so what do you think about those two different customer segments and sort of this um yeah branding makes sense I think um there a real question of like uh will the winners be based on quality or quantity um and I think the you know Ian layer kind of drawing this analogy to the cloud and microservices you know you know kind of points to a a vision of thousands of

these microservices right just like we have in web 2 with thousands and thousands of different sort of like SAS you know applications now um that are super narrow and specialized in what they do and that's one vision of the future versus and and maybe creating a you know messaging and creating a platform that's meant to facilitate that sort of future um which is having everything in one place right all the logic all the capital parked on eel1 um and making it really easy to come and spin these up you know super fast whereas symbiotic is like no we think we're going to bet on quality over quantity um we're going to go you know

we're going to build a product that we think is you know best aligned to to Target the the big sort of projects out there and saying like no take your own instance of of this system and create you know how you want it to right this is not like come into the igen platform here are the rules blah blah blah um and I think you know that ends up kind of looking like you know Unis swap where it has like lots of different deployments on different l2s that are have really nothing to do with each other right but um I think you know that's maybe more appealing to larger projects they're saying like Okay I don't have to be like part of this you know on the igen platform like subservient you know like in in brand right to again uh by like

being a consumer right um I can just kind of take this and then with J I think it's a story of dog fooding um you know and seeing like uh a lot of a lot of really obvious um use cases for reaking within your own products and then seeing how a reaking product can be extraordinarily like um have tons of synergies right like if jeto let's say uses its product to centralize some component of its me system and it says you know we're going to decentralize this component that we used to do we're going to have operators you know kind of running the system uh and you're gonna stake your GTO soul to those to secure those operators well like great now

that's a huge driver of demand for for Goos soul and a big utility you know um sort of like a sticky sort of utility for Goos Soul um and so like that that to me is really interesting because if you were to ask like the igen team let's say six months ago or a year ago like hey what do you guys think about Flash Bots as a customer right as an AVS they'd be like that's the dream abs like that is you know or something with me boost right where we are like really core to the the whole system um I think J's like well yeah that makes a lot of sense we can do that ourselves and so how much you know um kind of pops up around cheo's dog fooding of its of its platform is is is very TBD um

kind of depends on how many you know use cases Beyond like keepers and oracles there are on salana right now um but you got like you landed the whale because you are the whale in terms of the customer um and so that's one way to go about it that I think is super interesting okay there's a lot to unpack there one before we get into jto and this idea of vertical integration which I think is very interesting just one note on the the we heard this both from symbiotic and igen layer that they're trying to create an ecosystem for their abss and I think the one of the lessons we didn't really talk about this on shared Security in general past iterations is one they they almost always got the demand side of the equation wrong so they and it was almost always overestimating the demand side in

the case of polka dot they thought that people are going to pay a lot of dollar like be willing to pay a lot of money to win these PA chain auctions and lock up you know block space for a long period of time the other thing that I think has been a noted challenge is this idea of adverse selection you see this in cosmos A Lot these sort of consumer chains versus you know stack chains that don't need the security of the Hub and then you risk just graduating right it's kind of like SNL right it's a good place to launch your career not a great place to stay and so I think all of the both the marketpl places understand this Dynamic today and so they're interested in kind of creating this ecosystem and do doing different value added services and I think if you squinted a lot of crypto

today you can see a lot of bundle type business models and it it it feels easier to just I mean I'm sure that some of these will work and they'll they'll be great but but I will say running a bundle is very challenging um and yeah I think where there's some the the on the other side of that is that you see this this dog fooding this this creation of an application and then the underlying infrastructure itself something that looks like uh you know Amazon and AWS right where they actually spun up you know a very large e-commerce platform and then they realized in trying to in creating this this application that they could actually sell the infrastructure to that and I think there's analogy there with jto and actually igen lay

itself because you know we were talking about how actually igen lay the whole Genesis of reaking came from trying to solve the data availability problem that was going to I think sham was really preent in identifying that that was going to be an issue for rollups and you know jeto came at it from the perspective of they were you know they were kind of the Meb shop on Salon still are but they were the first ones to really try to dig in and tackle that problem and I think they very shrewdly understood the flywheel that occurs in between meev and liquid staking because you know if you if you have an ability to auction off the yields and increase increase the yields for validators and that's really good for lsds there's like a nice little flywheel that kicks in there and then when they have this like

this mass of extremely core infrastructure which is really close to the middle of just how Salon operates they're probably saying well it would be nice if we didn't have complete control over all of this right so they they they kind of started with this this actual application and then they're they're realizing that yeah they they dog food at their own their own M and it looks less like a bundle to me which I like and it's it's I mean yeah it's vertically integrated is like a bad word in crypto there's this kind of Dogma around it where people like these very thin unopinionated protocols and you know I'm less and less I'm am I convinced that that's the right way that that's the right way to go I I don't know um I I see it I really get it for something like Lio but I don't know it's

just interesting that they're the same thing yeah um and I think the the Lio sort of thin uh unopinionated like you know approach is reflected with symbiotic right I think symbiotic is is trying to be as thin as possible and and just trying to you know like I don't see them putting out tons of first-party products right or first-party avss maybe they will maybe I'm wrong but I do feel like they're kind of like okay we're going to make this thing as configurable and you know um basically what the customer wants and we're going to put it out there and we're going to try to like minimize you know the rest of the surface area whereas IG layer is more trying to drive Network effects home you know by putting

out all of these complimentary products and services so starts with a DA but I think there's a couple more in the works that aren't necessarily products like Igan da is but it's complimentary services to the abss so it's saying okay um it's kind of trying to create this this larger cohesive story of of you know the benefits coming on the platform and I don't mind that at all um I think I think it's probably you know what it's probably a good decision on their St from their side right now I think that there's kind of an interesting discussion to be had here around this idea of thinness and fatness right the original I think language that was used here this was fat fat protocol thesis from Joel monegro of of placeholder and

it's interesting that for core protocols a lot of the design philosophy has actually moved away from that and you see that in ethereum which wants to be increasingly thinner and thinner and less and less opinionated layer you see this in Lio as well and I do think for some for some uh for some applications that Mak sense like you probably want that for your money right like a really thin neutral valueless layer I think that makes a lot of sense but just just like we did on the supply side for Bitcoin we probably extrapolated that to too many different um places and I think value capture comes from fatness and this is like basically if you want to take on a really complex problem and

actually solve it there's almost always value there as opposed to saying someone else solve it because if someone else solves it they're going to have solved it and they're going to be able to extract value from that and this is the constant tension between open source software and the companies that are built on top of it and I think if you look at areas of crypto which are you know less opinionated more neut they look more like public goods and there's value that's being built on top of them and uh maybe maybe one example of this would be uni versus this is the kind of the tension that exists between Unis swap the token and Unis swap Labs equity and you can look at the fees that the lab sporer is doing they're they're printing it uh they're they're doing extremely well and I think jto is

another interesting example of this where it's a much fatter layer they're doing a lot of things but it opens up all these really interesting opportunities and so I don't know I think it's super interesting tension like I think it's one way to frame it is like the more the more you know things that rely on you almost like the more like apps activity users people that rely on you uh almost like the thinner you want to be in some sense just to decrease you know any real or perceived sort of platform risk um like Glo right is trying to be just like you know one block right like one

building block that's really close to the metal of ethereum it wants its it wants steth to compete with eth right and so it wants to create you know it wants to have a system that is as close as possible to you know kind of emulate eth itself right in terms of how hard it is to change how thin you know the sort of decision or the human touch points are and um how hardened you know the protocol gets over time um and I think with Igan laay You could argue that it's pretty close to the middle too and in a successful World there are going to be there is going to be a lot of activity that's sort of sitting on top of it right and so that's going to be a really

interesting tension of like you know I think how do you take a sort of active opinionated you know approach building complimentary Services while also trying to you know mitigate any real or perceived platform risk um um and I think that's happening right now right it's like you've got almost 50 avss building and it's like well or want to put out like the slashing spec right um well if you put out something without it kind of like it's the listening feedback from everybody building on top of you then maybe they feel rugged right if you put out something that breaks a whole bunch of designs that they have and now

they have to go back and you know redo everything um yeah and so I think these things are really important to nail early on and then to figure out just like how they evolve over time um you know does it make sense for igen layer governance let's say to be like owning Igan da the marketplace and you know first party services like two through n right or should you if the marketplace becomes such a critical dependency for so much activity on top should that really have its own sort of thin layer like try to be thin right um versus things that are built on top like similar to Unis Swap and Unis swap Labs right now um I think that stuff really

matters so I agree I think it's a difficult tension even something like farcaster with you know it's trying to bootstrap a network of different clients and they dog foodedible it's tough and Li's Lio is the most interesting example of this to me because it's the one that I've always really liked I think a lot of you know when you look out into this world of of dows you know the governance structure of the protocol is actively working against the product whereas Li is probably the one where the product and the governance setup is most aligned I would say and I I don't know how

ethereum's ultimately going to end up you know solving this whole debate around issuance and you know what the distribution of stake should be um I've always been a fan of Lio I I like them and I think their design is really elegant and I think they're you know they're experimenting with governance they've got um dual governance uh which is I think rolling out this year and it makes sense for them to have a really flat structure the other thing is they you know they have the use cases kind of money um that that's what they're sort of competing for and I think that's where this flat governance structure makes a lot of sense but in other areas like you just look out into the world and okay what has re you know what is like really

neutral and it's things like you know Swift and Swift's a great product everyone uses it it's totally neutral but all the values built on top of systems that leverage Swift right you know so right I don't know um it'll be an interesting it it'll be interesting I agree I agree yeah I think um well and none of these things have even really like launched governance or anything like that but I do I do agree that like all projects should kind of done what Lio has done and work backwards from okay like what is the product we're selling what sort of operating structure and org structure and decision-making processes like actually make sense for

this product um and with Lido's case it's you know trying to compete with eth so you just minimize sort of the any sort of like governance Bas governance related risk as much as possible if you're building a consumer app you probably want to move fast and iterate on product without like having lots of issues with you know having to go through governance right um so we'll see how that plays out across the reaking you know landscape but um yeah I think I think I think we're that's more or less right yeah all right so and maybe in closing in closing here miles what do you think we could be looking forward to in the reaking ecosystem like if we were to be hosting this podcast a year or two

from now what could we expect obviously these platforms will be live on me like goo symbiotic um and igen L here are going to be live and hopefully there's going to be more abss that we can actually talk about in production that are leveraging these marketplaces you know we haven't really talked that much about I think a big miss this season was we really talked to any operators um frankly that would have been a really interesting perspective to have in the season um and maybe there'll be more robust you a more robust ecosystem of sort of lrts and teams that are managing risk across these things but what are what are you looking forward to in the next year or so frankly like just seeing the real thing in practice in production

live fully featured and then seeing each platform get to that stage where everything is actually you know in in production and then seeing I think just we can start to sort of Benchmark on the economic side um which would be super helpful like if we see that on average you know hopefully like these payment terms in economics are all super transparent but like how does it compare to a to a cosmos chain like histor you know the numbers that we're seeing how do they compare historically to Cosmos chains um you know what do the operator sets end up actually looking like how sophisticated do we get with sort of Quorum designs and slashing conditions

all of this stuff um um or in a year do we look back and say like well this is really helpful for just making it easy to grab some operators and have some slashing sort of you know backend logic running but like we're not seeing reaking you know enable net new things right does it enable net new things right uh does it provide a way for products like to differentiate right this is something like with the insurance piece that we were talking about um but first we have to just get the you know zero to one we're still not there um and you know I think that just like we saw you know a year into like let's say like the cosmos Hub and IC

we'll just see like how much sort of momentum you know continues to carry once we've actually are in production and you know the demand side gets flushed out um takes a while so I would just say stay stay patient don't don't jump to any like hard conclusions about this being all a meme or not yet um agreed hasn't actually started yet yeah I would say that we I agree we just have to see this stuff in production we started this podcast off by saying that sentiment has shifted a lot and this always happens in crypto this there's these crazy sentiment shifts and just in the same way that you probably should have been a little bit cautious and skeptical when people were proclaiming reaking was the second coming of Jesus H Christ you should

probably be a little bit skeptical that it's all a meme and that it's overvalued and useless and probably neither one of those things are true and so there are really great teams that are working on this um also just the long history of shared security iterations you know should tell you that this this is something that networks need and so I'm interested in actually just seeing you know what ends up coming to fruition as we close here I just wanted to to give a a quick um update for longtime listeners of velur we are actually going to be taking a a break from Seasons here I posted something on this about Twitter um maybe just doing more ad hoc episodes and got a lot of positive responses there so yeah you know not that we'll probably have Seasons or maybe Min

Seasons or just return um you know when inspiration strikes in the future but for now I'm just going to be going and lining up a couple of episodes and to actually just tease the episode that we that we mentioned before as a kind of a bonus extension onto the season we're gonna have toly and Sham on here talking about Economic Security and whether or not it's a meme so build on some some of what we covered today um also going to be doing an episode with an and Max Resnik on multiple concurrent proposers um we're going to have Mark zeler on here talking about agenomics and this Resurgence in D5 1.0 and then um Frankie uh from Paradigm and uh uh Eugene Chan of Ellipsis talking about their new sandwich resistant amm so got a lot of bangers uh lined up and Miles you and I

will we'll get some great um recordings in there and uh and uh maybe tease some personal announcements of yours in the com months yeah so that'll be a lot of fun I'm looking forward to it me too me too it was a really fun season now uh yeah maybe I'll you'll see me again on one of these like flavor of the week sort of uh one-off podcast because yeah we love doing those the something like that there you go you got a jingle yeah I don't know but yeah it was a lot of fun buddy um and yeah we'll be back for the special bonus app I'm excited all right this is going to be a blast dude I I will uh see you cheers see you all right guys one more shout out here to

this episode's title sponsor say there are a ton of reasons to build on say if you're itching to get started building or using the ecosystem head over to say. that's se. get started be sure to let them know that we sent you thank you sir