Sergej Kunz: 1inch – The DEX Aggregator #386

Transcript

[Music] this is brian crane welcome to the episode hey federico how are you i'm good how are you good to be here yeah so today we are going to speak with sega about one inch so one inch is sort of decentralized exchange aggregation application d5 application that's gotten a lot of traction so we're really excited to to dive into that maybe sega just to start off

do you mind introducing yourself and tell us a little bit about how you got involved in the blockchain space yeah thanks uh hi everyone uh it's a pleasure to to be here so to my person uh my name is sergey i'm coming from germany uh originally born in in russia and siberia moved with my parents uh 1999 to germany i'm here like for 20 years my professional background is software engineering architecture in almost all fields front and back and devops and i'm a co-founder of one inch network together with anton bokov

sega can you tell us how you came across blockchain for the first time and when you realized that this was going to be a bigger topic that you would spend a lot of time on yeah the first touch point with the blockchain was 2012 i guess i was working the aggregation startup it was about aggregating product informations among a lot of online shops stores and one of my colleagues mentioned that oh there's a blockchain and you can actually earn with your um like macbook by mining uh tokens coins and i did some research really really small research i did some mining with litecoin

and uh later in uh end of 2016 uh i found my wallet with ltc and thought oh okay maybe something worth and i uh sold it like it was like 10 bucks and then i started to discover uh what is ethereum uh what is uh what is the blockchain um what are small contracts and so on and so on uh early in 2012 i i didn't recognize that this is the future yeah of finances of tomorrow or maybe already today and i didn't discover anything and uh from 2012 to 2016

and in 2016 2017 i started to mine ethereum i just bought some graphic cards uh it was like it was funny to to to build mining rigs funds and youtube videos and yeah these are my first steps in in the blockchain world and how did you meet anton your co-founder uh yeah um i was introduced to anton by a common friend who moved to germany from russia he's actually a good friend of anton he moved with his wife here to stuttgart and his wife was talking with my wife and we met together and uh i i talked a lot

about cryptocurrencies and uh this uh this guy said uh i'm not interested in cryptocurrency but i have a friend who is talking to me in the same way you do all the time and almost the same things so maybe i will introduce you to him so he introduced me it was early 2018. he didn't speak a lot with him just small chat uh and telegram and uh anton started to to join my live streams on youtube uh i created the uh youtube channel crypto manic uh it was in russian language uh i was uh talking about mining about cryptocurrency

and i started in september august uh 2018 to do security audits of smart contracts i opened just a project which was looking like a pyramid with snowball system i started to discover oh what is behind that okay i found a smart contract it was compiled it was not published as open source there was no code i started to decompile that in the live stream and try to understand okay he could be maybe a black or something something like that i had no experience in smart contracts i of course i i did a look to the specification so as a software engineer you are you have from my point of view you have to uh

be able to develop in any language because you know like if you have enough experience you can write and rust and go um of course you need small onboarding but um it normally works and i don't uh give me some hints and i i put him into the live stream and since uh that day we recorded uh more than 100 security audits in live streams uh each security audit took like three hours uh we had a really great community a lot of people sometimes 1000 people were watching us on live stream we were like in the top positions

positions of youtube russian youtube that is just our story here with anton and uh yeah in december 2018 uh anton wanted to go to hackathon i didn't participate in hackathons before he asked me to join and i did it and in the first hackathon ath singapore uh was really successful we won three prizes without having doing a lot they had almost no effort to build a small application and got three sponsor prices one from makerdaw from kyber network and from set protocol and then we understood okay we will do it every month

maybe twice a month and we did it we participated on more than 15 uh hackathons we won uh in uh stuttgart the smart mobility price from daimler by hacking over to two nights and one day without almost sleep without leaving the rooms there in the university where it happened and yeah we won a lot of main prizes with anton and one of the second tones we came to to what we have right now so this is super interesting like as a semi-professional um hackathon participant um so i assume you build a lot of different prototypes and mvps

as you know in the participation during those uh those hackathons um what made you think oh wow this dex aggregator this is it this is what we have to build for real so back in february 2019 when anton was here in germany participate another hackathon after the hackathon we have some this we had some discussions we came to an agreement uh together that we we will build something something what would change something yeah in the world we had some couple of ideas so and and these ideas uh we implemented on the

hackathons and first we have we had like kind of uh an airdrop tool for real world where you can print cards with qr code and merkle proof on that to um to to withdraw tokens which you got on the conference for example we had some other other small hacks and uh in eth new york uh we uh we thought okay um why not to implement and kind of the app where you as user actually it was an idea for mountain to to see all the taxes and to see all the uh

prices rates and to swap on one of the single sources and based on my my small experience before a hackathon where i was working on arbitrage bots and played around with some some approaches and discovered all the kind of cool hacks from from the arbitrage traders for example gas token we can can also come to it later i i suggested anton on the egh new york cacao to introduce kind of algorithm um which can split the swap amount from your source token among different exchanges based on the rate

so when you swap huge amount on uni swap you have really bad rate if you swap a little bit you have really great rate but if you swap on multiple sources in the same time you get you get really great rate gas costs were like really small in the time and um we had the gas token has also helped for that i don't uh lift the discussion and on the hackathon for like two three hours and come back with the algorithm which we were able to split and find the best distribution among qd sources and we showed that for example liam holmes from from a th global he said this is the next big thing i was also talking with vitalik butler

in there and um about the idea before we started uh vitalik said okay it sounds great someone else tried to do the same like total i guess he said but we didn't know about them and um i was also maybe it's funny part about logo i was sitting and looking for a logo normally we just bought a logo on on themeforest for example on hackathons if you have just an idea and in the same time i have seen hayden adams living like walking around my table i catch him i explained him the idea and he said it sounds great and i thought okay why

not unicorn but like more angry because like our team was um the name of our team was cryptomaniacs based on our youtube channel uh so we were the crypto maniacs and we created uh an angry mad maniac unicorn logo on the hacker or i choose one actually i found one it was really perfectly that what we what we were looking for right now our logo is a little bit different it's like android you angry unicorn it's a good good good proposal from our designer um so there's a lot to unpack here so basically um let's talk about what exactly the offering is um for one inch let me maybe rephrase it in my own

words and you can tell me whether i'm i'm hitting the nail on the head so basically um when i trade on a dex um there's two ways that um i pay fees in effect so one is slippage meaning the price that i'm being shown is the incremental price for the very first bit that i exchange and then the price moves so basically that's the slippage so basically if there's not a lot of liquidity then the slippage is typically high and then the second thing that i pay is gas the fee to the to the network itself so can you explain the dynamics of how much i pay in gas and how much i pay in slippage and how you take that into consideration

for routing me through different decentralized exchanges that you're integrated with so um yeah every every kind of liquidity source i don't speak about taxes anymore because uh a lot of uh those liquidity source are just automated market makers and just like which source sources uh some of them don't have any front ends uh because they don't need any uh like there are also private market makers which are working also on in with smart contracts and set kind of ranges yeah if you take uni-swap for example uh use of design

in a version one and two it has uh weak points so let's say it's not efficient enough there are a couple of things like it's not efficient in the terms of um for for liquidity providers in providing liquidity and earning on the trades you have so you you will meet impermanent loss um then you have the of course the fees for the transaction itself it depends of course of the environment where it runs for example on ethereum or gas gas costs are right now very high and it jumps sometimes to the moon where you have to to pay for one single swap like one thousand dollar it's uh it's insane and then um of course you have um the price impact uh or price slippage

you call it um based on the liquidity you have in in your liquidity pool like just if you take your unit swap uh the mathematical formula is simple yeah x multiplicated with y's is equal uh constant and if you uh put more tokens it gets get cheaper if you get tokens from the from the pool it it going to be more expensive because because there's less of those tokens and um how one inch solve a couple of these problems there are several protocols in the one each network one maybe basically from from the beginning

what is one inch one inch uh in in the first steps was actually an aggregation protocol and nowadays it's a is a set of decentralized protocols and uh it's kind of network uh distributed network of decentralized protocols and we count the aggregation protocol and we we count the liquidity protocol for high efficient mm i can also explain a little bit later about that so and the aggregation protocol saves you time and and and money and also the transaction costs in um kind of uh in in the case you have to swap like one million of dollars or maybe 100 000 of dollars of if to die or to use dc um you don't

really know where the best price is because you know like uni swap don't have the whole liquidity the balancer don't have the the whole liquidity the sushi swap don't have the whole liquidity but one ish it has yeah so uh they're like uh around 49 50 liquidity stores already integrated in in in the pathfinder uh implementation uh which is uh run by our team it's just an api aggregate informational service and it provides the the best access to the whole liquidity of defy in multiple networks so basically what you do is off chain you compute how trading on each of the

integrated liquidity providers would change the price and hence what the effective price would be and then find me a linear combination of these is that it this is a more complex complex than what you described but this is just how we started here we are calculated based on on a month uh the best distribution among liquidity sources by getting into account of the uh uh price slippage which happens uh based on the amount you swap on each liquidity source and we also introduced by uh the taking into account of gas cost as well a little bit later after the start of the protocol back in 2019 do you mind sharing so you mentioned

also liquidity protocol what's the liquidity protocol is that you guys creating your own amm and and sort of adding a service on that level so our team is uh mission dream uh on fast moving team uh and we don't like to copy someone and so on like sushi did with uniswap we had some discussions in the team last year in summer 2020 and we we came to to to the idea how can we solve additional problem defense space so the first problem which we sold with one inch aggregation protocol back in may 2019 on the hackathon we combined all small liquidity pools

into a single one and provide the best highest uh accessible liquidity on the market by using algorithms and in summer 2020 we came to the idea how to cut the earnings from arbitrage traders and let the liquidity providers earn much more and in the same step we recognized that we solved additional problem the front running attack problem which happens all the time on uniswap sushi swap balance and other protocols which are not protected i have seen a twitter post last week someone really analyzed it and found a guy

who do all the time front running sandwich front running attacks how it works is if you swap on uni swap like vitalik did vitalik had ethereum and he needed uh usdc to uh i guess he sent the money to charity company or something like that so vitalik swapped like uh 100 000 dollars in if to use dc and in the front end of uni swap there's a default settings of i guess one percentages of maximal price impact so when you swap new swap you agree for a rate which is below um the the the return amount what

you see in the in the interface by one percentage so we have the similar settings uh on our front end you can also set zero on our front and you can set 0.1 based on the architecture and and and of the taxes and the ethereum machine you you need to do that because someone can be faster than you and change the rate little bit and you can maybe get less than expected so that's why you need this uh like one percentages price impact and when the vitalik swapped with one percentages yeah the front runner recognized his transaction and what what can happen if the vitalik would get

still the same potentially yeah what what he has uh seen in the front end the front runner can still swap before him and swap after him and take the one up to one percentages the pro of the price impact and it's a lot of money really a lot of money and we were able to mitigate it via introduce virtual balances uh vitalik was working was talking about that already back in 2017 uh in one of his uh blog posts or discussions i guess it was discussion and actually we solved the problem with the earnings of the liquidity providers we improved the efficiency the of the of the automated market maker

in the same step we by introducing vertical balances via uh just uh eliminated uh front running on on the one inch liquidity protocol can you describe how this works in detail uh yes i can um i already said we call it first moonie swap like this was just fun and we launched it like we had one week of work uh in the code and one one half weeks of security audit from uh some some auditors and then we released it just um and how this works it's uh it's like that does to that you have virtual balances and if you have a swap

with uh ten percentages price slippage for example vitalik swap one hundred thousand uh uh dollar in if to use dc and their price impact um the rate is is worse by 10 percentages yeah then uh these 10 percentages are gone going uh going to be sold by the automated market maker by the protocol in the reverse direction for a bad rate and the rate improves in time this is uh similar um actually to today explain the same to coindesk uh korea uh in an interview this is like a spread if you look

on the spread on the centralized exchanges so uni swap is uh like uh really tight uh uh spread between um both sides and in our case the spread is growing if you have this uh price slippage and it's um reducing the size in time so that means it's like an actual auction which happens in the reverse direction and by that we create a competition between arbitrage traders and every arbitrator would uh try to to make a trade in the reverse direction when it's getting to be profitable for the for the arbitrage

arbitrator it can be also five bucks yeah for example if by one swap in one direction the pool got like ten thousand dollars of this slippage yeah in unisop the arbitrator would take the most of the money like 90 percentage maybe more and the on our side we try to sell it in time for for reversal rate for the for arbitrage trader so and that means liquidity will earn a lot on that so but does that mean that the profit that otherwise the arbitrage trader would have made goes to the liquidity provider but the user is equally bad off

it has nothing to do with the user so liquid provider earned the money which is cut from arbitrage traders the user have the same situation as on uni swap in in this direction they just swap make the spread bigger yeah and the spread decrease over time in the reverse direction so instead of actually giving your money to an arbitrage trader as a user you're giving your money to the liquidity provider yes i think i can kind of see the benefit of this no because if you give it to the liquidity provider also you make it more profitable to provide liquidity and then if the liquidity increases that should again

help to decrease slippage and actually help the end user that's a fair point this is this is the case also on huge pumping dumps our protocol performs very well since we improved that approach what i explained before by introducing a dynamic fee based on the price slippage so just think their their liquidity pool it doesn't know about the market price it see that someone would like to swap for example with huge price slippage or it's it'd get normal swap like with small price leverage so in the case of price big price sleep price slippage this is potentially the case that the market price

moved in one of the directions and if if it's there a huge price slippage then the pool can charge a lot of money because anyway the arbitrage trader would try to balance the pull and would make any way the swap but for worser rate than on unisop or other other where else and based on our analytics and also if you look at our analytics charts of the liquidity protocol under the dollar analytics you will see huge jump of earnings for liquidity uh providers on the huge last dump what happened like months ago that's useful to learn about and very interesting is is

what's the status of this mooney swap today is that integrated in one inch so it already said it was like a joke start we tried to jog a little bit uh direction hayden adams and and unisoft team because we created something more efficient than they uh actually we respect them fully uh they did really great job and uh we didn't copies anything but they wrote something we we copied from from uni swap uh on twitter publicly it was really uncle uncle but uh but we uh we just released it because we were able to do that we solved an again a problem and we rebranded it uh on the start of the one inch token

uh governance system we represented it to one inch liquidity protocol we introduced the new thing the price impact fee and we introduced instant governance this is really a new thing unique in the market uh in the default space one year in defense space is 10 years in the traditional finances and you have to go fast otherwise if you halt you catch fire you have to go fast and long proposals makes no sense to set to to change for example an amount of fees which should be charged in in the pool um and yeah just instant governance improves that so everyone who's take one each token can uh vote for specific settings and uh

the value is the awaited average of uh of everyone based on their amount of their staked amount of tokens but the the money swap is now a part of one inch exchange is that correct one each network one inch network okay so i can still provide liquidity on moony swap no um if you go to um so we are we are right now in a rebranding process the domain will change uh one inch dot exchange cover actually the whole one-inch network uh it has the aggregation protocol it has the instant governance uh the stocking the token staking thing the governance for the liquidity

protocols and we have under dao liquidity pools we have the liquidity protocol integrated there it's not very well designed yet we will move it maybe to the top of the navigation so everyone can see that there's also liquidity pull liquidity protocol there and if you click to the liquidity pools you will see the bunch of liquidity pools already um a couple of projects did uh bootstrapping uh on only one inch liquidity protocol uh for example kind of initial liquidity providing i guess vasp did it and it went very well the the protocol performed very well in the first first day the protocol collected 1 millions of dollars by 10 millions of

liquidity that's pretty good can can we maybe zoom out a little bit and take a look at the bigger decks and amm space there's a lot of protocols out there that do a very similar job for the user how do you think the average user decides where to go what are the stickiness elements we are looking only on your statistics and we as team we don't understand why people are still swapping on unisop since uniso already said don't have the whole liquidity in the market can't provide the best rate yeah and there's also on the bonus marching for

for example pancake swap there's a lot of people who are swapping on banking swap directly by yeah getting the best rate from my point of view uh taxes are kind of out since uh we from our team introduced an aggregate aggregator for uh for liquidity sources and the future could be for the uh teams who just write work on liquidity protocols they will have just liquidity protocol not the ui and not the kind of entry point for the users i use swap is the app is cool it's simple but you don't never know that you get the best rate yeah uh

gates like entry points for for for all the people can be only uh aggregators a good example is here google think in the beginning of internet yeah it was a pain to to find a resource and now nowadays you you just use google or maybe some some other search engines i see the rationale but if you look at the numbers so basically i i looked at the numbers before this recording and currently 90 percent of dex volume goes um to trading venues directly in and not through aggregators so aggregators only cover ten percent one inch gets the biggest cut of that

but if you look at the number of unique traders that's even worse so basically unit swap gets for the last seven days uni swap had 187 000 unique traders and one in chat nine thousand um so if there's that big a difference in um the result for the user why don't they vote with their feet yeah this i already said uh we don't understand why the people still sitting in on uniso because maybe they never heard about the other projects if you look on our numbers and other projects then it looks it looks similar like for example here one issue in bonus march and

four thousand two hundred sixty uh people in the last 24 hours on the ethereum 1572 people on uh in 24 hours uh curve 225 it's small amount but most of the traffic is coming from from aggregators also uni swap volume what you mentioned include our volume as well we dip sometimes three four times in a pool of uni swap that means we produce three four times more volume for unisop compared to what we get from the user for example if you use a swap one million of dollar and we tap in the path multiple times in multi

in different pools of unisoft we can produce three millions of dollars of volume for uni-swap it's very very important to understand and if when we are talking about volume on uh direct volume for for use we should maybe remove the volume from aggregators and then speak about apples and not about oranges yeah i mean i mean comparing apples with apples not apples with oranges if you look also to to balancer 70 millions of dollars volume and in the last 24 hours and 1400 users it's similar to us you know and um i guess this uh kind of uh

the the real numbers of normal users who are who know about different products and those people who are using uni swap they maybe never heard about other products like aggregators but the market is uh will will will move to to be very efficient and this is only the way and this is the way to use just an aggregator so one thing i'm curious about you know if if the things go there and i think it makes perfect sense right that if you have different liquidity sources then having some sort of aggregation thing uh you know provides a better product for the end user but if things are heading there you know where will

there be the sort of the defensibility in the mode do you think there's gonna be around more around these aggregation protocols or will there still be big incentives to go and create something like uh you know liquidity protocol like uniswap and try to to get a lot of volume there or like how will the kind of market structure change of course communities were important unisop has really great community big community uh theirs started really early got support from vitalik buterian and other big people but they they can't keep all the people on on on site because this

they are not like um the the only one single point of entry for the freddie g5 and then don't keep the whole liquidity already said community is very important and the community can stick to your project and uh maybe after after uh airdrop what unisop did a lot of people love to to use uni swap because they just got for free a macbook we did similar approach as of the uh the foundation distributed one inch token uh for free a lot of them actually really a lot to make the token uh more decentralized uh uh in the first in the first release i guess if you calculate it to s dollars

it was like 1 200 bucks and now this is like i don't know two three thousand dollars at the current price but we are from team we are we are thinking about one inch one inch is equal one inch not more not less and we don't see any financial value behind that we see on the value of for our network which can be governed by but uh by the token and can be used also as connected token in the liquidity protocol so the one end token what what are exactly the governance capabilities that it has so um we started with the first uh step uh and that was to introduce this instant governance so you can take

one each token and you can set you can vote for the settings of the default settings of the liquidity protocol you can vote for example to charge additional governance reward what happened also to also get earnings from the liquidity protocol um when the user swap and the liquidity protocol charge fee for this swap similar to uniswap it is splitted and part goes to liquidity provider and park it goes to uh to go to those people who take one inch token and do votes for governance also um there's a way for liquidity providers who provide onliquity in liquidity protocol

they can vote also with own share of liquidity in the same liquidity pool so it makes no sense to govern a specific liquidity protocol where the people have no skin in the game also in the aggregation protocol the people can vote for for um we call it um spreadstar plus or positive slippage uh i i like this uh first naming um they can vote to uh share uh the earnings with with the referrals where do you see the one-inch token going

in terms of governance um so i assume you as one in the company will minimize your own role yes we are core contributors so we invented that here with anton and worked a lot a long very long time for free and the idea is to to build a fully decentralized network of decentralized kind of distributed network of decentralized protocols and uh the governance uh process is very important in that case so right now we have already said the first step did we did the first step with the instant governance since uh

you need to move fast you cannot wait two three weeks to change a setting in in a liquidity protocol it needs to be a kind of instant yeah who has the skin in the game they have more voting rights and so on and so on the second step would be to introduce a full governance uh advanced governance similar to compound uni swap we uh we we didn't have enough time to to finalize it here and it would kind of make a lot of things really complicated and but it's still required since the dao should uh decide which modules modules should be added or

removed from from the governance system so right now it's like module modular based we have to one module is the liquidity protocol and the second model is uh the aggregation protocol uh in uh in couple of weeks uh the new protocol will popping up we'll we'll join the system two more independent teams right now working on uh additional product and protocols for the one-inch network there will be also additional announcements regarding that so here comes uh here um one is foundation in a role uh to uh make everything possible uh to make the

one each network fully decentralized and uh for example providing grants for people uh who participate in their in the protocol like external teams and right now the one inch foundation uh can decide on adding or removing uh those modules like government governance models or liquidity or other protocols to the network or remove that it can't break anything so it's not there are no admin keys where someone can steal their mind or something like that this is like written in the stone it's it's not possible to to actually change anything if if we have a new update for liquidity protocol we create just a new version and let the people migrate this is the way how it should work uh

default admin keys we have seen a lot of hacks based on the admin keys of fulcrum busy acts were hacked because they just deployed with own admin key a new implementation of the protocol and got hacked so i and anton we actually discovered the first vulnerability in the bzx back in 2000 2020 and uh yeah we reported that of course but after that two weeks later it happened someone stole the money and uh this is a bad approach and we try to to improve that and in a fully decentralized uh it should be a as simple as possible and for sure the dao should have the possibility to to add a new smart contract to join it

to let it join the network and also maybe execute something in a blockchain for example we think to maybe it makes sense to introduce a treasury so maybe the first vote in the advanced governance will be introduced a treasury where all the rewards which are right now collected this is like right now around almost seven five to seven hundred thousand dollars every week what what is collected uh from the protocols uh and distribute among these takers this can be maybe collected in a doubt treasury and based on the votes something can can be done with that maybe it can be sent to a in a new team which would be uh would

build something new or something else can can be done with that and this should be done by the dao the front end is right now um uh run is run by um by the foundation since this this this no profit model behind that so foundation is non-profit organization and it has only the talks to distribute it among the people to make the token as decentralized as possible it's it's impossible to run a kind of domain by the dao because dao is not a physical organization yeah if you need to pay for for a domain a real domain you you you need an entity behind that and for that case we have right now the foundation and

i don't think that it would change the dark would hold an ens domain right and then basically if you if you use ether.link you can even access it from you know regular pro browser yeah sure the dao can can change the the ens for sure so for this again we need advanced governance system and then we can execute from the dow uh commands here on the blockchain but there are some weak points like it can take like three weeks four weeks to to to change something so you need to quorum you you need do you have an entry entry barrier you need a lot of tokens a lot of money to to create a proposal of course there are delegations there

but it's still difficult to create something if you look back what happened with uni i don't have i didn't see a lot of proposals there and a lot of pro some of the proposals were declined for example to distribute additionally uni swap tokens to those people who used proxy contracts through dharma to arch and through one inch and it was just declined this is still an experiment from my point of view what kind of infrastructure are you going to use for the one inch dow do you know because it sounds like you've given the attention and the bandwidth and the latency problem a lot of suit i guess compound did a really great job uni swap take the implementation from

compound uh if we from our site from team we think about also compound we will discuss it in the governance forum so in our governance forum you can propose something and can be discussed and if someone uh would like to implement that they can that yeah for example an independent team can implement something a new protocol and they can ask the foundation to to join the one-inch network and maybe to get a grant it's also possible so view from our site from core contribution site we can do analysis we can do kind of code review and look that everything is good and ensure that there is uh they are audits and very well already it's kind of from open zeppelin for example and so on so we can act as a consulting

uh part can we talk about the regulatory angle for a little bit so um taxes generally operate in a regulatory fraud space how do you deal with this as a dax aggregator because i i assume you face much of the same problems that taxes face so i personally i'm i'm just a core contributor i've write code here i talk with a lot of people make interviews and i don't run the system so i introduced it yeah with anton we we can kind of pull it from the beginning and we keep to contribute on that um right now we have the foundation which is non-profit organization

which run the front end which is uh partially governed by uh by the dao we try to keep this discussions and improvement proposals in the forum also on github and i personally have no not nothing to do with the frontend part so and i as software engineer and architect i write my code and delivered us as open source and the pathfinder because that's the other thing right that's the other centralized thing yeah this is just a centralized thing similar to other uh teams as well xerox for example they run also on on on api actually the one the

aggregation protocol is built in that way that uh also xerox api results can be used to uh to to do the uh transactions uh uh over um aggregation protocols since it ensures that it's verifies that uh who provide the data it's not lying and also that the return amount that the user get what what they expected so in in our case we run an aggregate informational service which don't touch the money we just provide aggregated data which is used by several parties mirror musk use it coinbase wallet use it uh my my user wallet use it the one inch front end run which is served by by the foundation

use it so just the way is this a plan in the future that this would be decentralized is that something that makes sense or is that something that should be continued to be run as a sort of you know api service so this is this is already kind of decentralized every team can run on api and uh let it add to to the front end of one inch aggregation front end there's no plan for us to publish this open source since we had already experienced the beginning dex ig scott uh just have stolen our source code of the first implementation of the smart contracts

i provided the proofs on twitter and uh they just said okay you you are no one you have no name and we just take your code and we say it's ours and this is this is through how i say here and this is this is really bad approach we had no name back in 2019 we were no one just two russian guys were working the nights having normal jobs in parallel uh wrote a cool thing which was directly used uh by by kind of uh i was i would say like the the market leader and or like people who had kind of um higher level uh in the community

so and um we got a lot of shitstorm because like i published this tweet with the proof here's a function this is one two one two hours and this is russian english in the name and this is exactly what we published here's a proof on the blockchain here's a proof in the blockchain that you use it after that just add our names to the source code that sergey kuhns and anton bukov wrote this part of code just do it and they said no you are lying you are no one i didn't do anything based on the appeal right and so on i thought we we don't have to try time to waste on that and uh yeah that's uh yeah on that topic i know one thing we

haven't really touched on we've talked about unit swap but you know uni swap v3 is out and actually one interesting thing there is that they do have this license that uh basically i think prohibits others from using it commercially for two years and and i guess this is a kind of you know tricky area right where we have on the one hand sort of ip right so the hand over hand like you know blockchain decentralized systems that are explicitly meant to be able to function despite that what are your thoughts on that i can just say this is a centralized piece of so if you if you look uh this is really bad approach to

introduce this business license since uh the the uni swap team act as a distance like of let's say core contributor to a decentralized protocol uh they renamed the twitter um from uniswap to unison labs they have now the labs and the labs the ip rights and the code from one side i can fully understand so we we followed the the thing similar part with the pathfinder but uh we we argued that everyone can use yeah add create new api and and and offer it to use in the front end of course we don't publish our source codes uh we have our ip right this is kind of secret because we

we uh used a lot of uh resources uh to to improve this algorithm we were working with uh russian university mgu to improve that algorithm as well and uh on the unit's website we see oh they say we are dow oh we have our team tokens but we will not vote okay and now they develop such a software and from my point of view we should have a proposal in the dao to add this protocol to uniswap dao to the front end which is run by the team the team run the front end yeah how i can see they own the domain and they can change the ipfs endpoint so

they change the ipfs hash on cloudflare by them by themselves so don't own the front end there's no foundation independent foundation which controls that so and from my point of view it looks like a centralized piece of software with uh with a fake governance which uh aims to to be uh kind of decentralized there are a lot of investors who can vote in in this governance and in our case um we have done this advanced governance uh it will come but it will come only for unlocked tokens so that means the first unlock will happen some some some day in december uh the people who have these tokens in the hand they can vote

or not not those people who who are locked i understand that that move hadn't has fear that aggregators will take over they have fear that like sushi will copy everything and they try to protect them and this is really bad approach from our point of view they should run with mit smart contracts so like we did it with our mm we don't protect them we just published because we solved something and they can get more success by by doing it more like open source uh actually we can we can our team can rewrite the whole code to make it more efficient it's not efficient enough from our point of view

and we can publish this open source the same approach but written in our own words i would say and more efficient then what they have from that nothing yeah from our point of view if they would just publish this open source then they can get maybe from us contributions we have if we found some parts where we can actually contribute but we will not contribute because this is the wrong license in in defy space but you also have some parts that are not open source right i mean you said that earlier yeah sure our pathfinder is not open source the implementation of some uh gas efficient implementations on uh on on a very

virtual machine is not open source which uh depends to their algorithm of profiner but the uh the protocol itself the the the main layer is open source on the mit license everyone can use it everyone can use our special implementation which would which we released with the v3 of the aggregation protocol uh which uh saved 10 percentages of gas costs by using a unisop-like pools actually i offered uni swap to use the source code or or our smart contract to offer cheaper cheaper transactions but they they didn't react on that yeah some parts are not necessarily to to publish because

no one would get benefits except uh the competitors in the competitors in that way that uh they just copy it like dexagee did and use it for all profits and uh earn money with that speaking of profits so there was a controversy earlier this year late last year when one inch um pocketed the amount that prices slipped in the positive direction so basically whenever there was positive uh slippage on on the one inch protocol um that went to one inch instead of just giving the user a better price right so how did that play out and why did you implement it this way

actually it was like a bug and we found out it's uh actually really late uh it it happens only on really huge huge volumes so and one day we use the uh kind of uh the wallet which were was uh set as kind of emergency receiver if something goes wrong to like put have a protection layer behind that just got additional money from from trades which happened in the case that the user committed for specific rate and the rate changed in in a process when the transaction was already sent to

the mempool and the price improved a little bit on a huge volume it can happen that some something drops on the wallet this uh kind of um earning unexpected earnings we call it um spread surplus uh is going to is distributed among uh right now among governance participants people who participate in the governance and vote for to receive these amounts of this kind of leftovers they they get it uh every week so what was it like this from the get-go did uh the governance participants get this surplus fees yeah they get they get it yeah they get it

the vs team we don't get anything and uh so we we got our gene in this investment from from uh two rounds esteem to develop on the protocol and um there is uh also support from the foundation they uh provide grants for people who join the network uh for example in the community space uh there are people who are explaining people how it works or try to solve some issues they get grants from the foundation and uh we can work very very well long time with that money what we have plus we got team tokens and right now team tokens are locked uh

my personal tokens as well and uh in the next four years like almost three and a half years we will get those tokens and will be committed uh for sure so maybe maybe let's step back a little bit um so one of the most important issues on ethereum layer one currently is gas costs and scaling what's your view on that are you looking at layer twos i mean you you certainly do since you know recently you also set up one inch exchange on binance smart chain so what are what are your thoughts on um other maybe more scalable chains or layer twos and where do you think will move

as the ethereum space what we have seen is a huge jump of the gas cost in ethereum and for us it was logical step to expand the oneness network uh to deploy everything that we have in ethereum to your bonus smart chain to offer the people a possibility to reduce the gas cost for the swap since we have seen a lot of volume a lot of people training on bina smart chain great support from binance also invested in the first round slid invest in one inch but we had no requirements to do that we just reacted on the on the people who also came to us and um asked us of to expand to to buy a smart chain uh for

sure buying smart chain is not the solution for the scaling problem since they just copied if ethereum and just use the specific mode of staking kind of being bm uh the solution would be of course if union 2.0 but we need like two three years for that and then we have to rethink everything we have to rewrite everything because uh it's everything would work as incorrectly in a short blockchain and the best of this architecture we have to rewrite any applications there are some solutions right now i have seen a near protocol they have actually already staking um charitable blockchain architecture implemented in the mainnet with the

rainbow bridge which can bridge the tokens there are some approaches to make the calls synchrony kind of you have a kind of isolated state and you put smart contracts there and work inside of this state kind of of virtual machine virtual machine layer 2 uh it's a it's a great solution for but only layer 2 which allows composibility here optimism will start already may i guess we are also looking in this direction we are working closely with the team of optimism uniform committed synthetics is committed till later to optimise but there are some traders optimism is not the best solution i would say zika snarks is from from my

point of view really great solution from the matters team these are our friends we also invested in such digitally invested uh in in this team to uh have the possibility to early also try and join the network and deploy everything what we have kind of expand again we have deployment on the bonus marching if you're in buying a smart chain then all the layer twos which would have the traction and later we will be ready for ephraim 2.0 and when you guys let's say deployed one inch on binance smart chain or if you're gonna go to other chains are these like uh totally separate

and you know let's say the one-inch token maybe there's another token on binance smart chain oh is there some sort of link are you you know is that one inch as a governance token reused in some way there yeah um so the foundation created the original one-inch token physically created on on ethereum back in christmas night in 2020 last year and uh what happened here in the bina smart chain so the foundation created the same token and binary smart chain minted 25 millions of tokens how i know move these tokens to the bridge of binance that means if you move tokens from ethereum

magnet to binance to binance magnet you lock on one side of the bridge ethereum tokens and unlock uh on the other side means uh there are not more tokens uh of one inch printed it's just a selectivity provider to balance bridge and also for the other um for the other change would be the same from our point of view lock on one side unlock on the other side and then it's great i wish more decentralized bridge than what we want to have right now on buenos aires chain uh but it is what this is and uh it works and regarding the governance uh what was

happened uh the the whole network was replicated in the other chain so if you stake there you would for their settings in in in in bonus marching right now and if you get rewards in the one and smart chain uh only use taking a binary smart chain uh matters and you can move the tokens through the bridge in both direction and uh you know at the moment we still have you know let's say you have this binance one inch in banana smart chain you have one inch on ethereum you know maybe there's going to be you know a zk roll upside all kinds of stuff coming uh all kinds of new chains and you know we are starting to see some

attempts at having decentralized exchanges that are like across different chains so i think like thor chain connects maybe two examples of that is that something that you can also envision for one inch that you know you're able to basically aggregate liquidity across you know many different blockchains as well as like many layer twos um we can do it already uh but we don't see us in a row to play the bridge for like um blockchain cross swaps um we ensure that we do that the protocol ensures that the

transaction is done in one single transaction so the trade is is is done in one single transaction i have seen andre cronier um publishing oh there's a better rate when you use curved together with synthetics and virtual scenes and then i swap to somewhere else but you have to wait six minutes but you can wait six minutes on a market pump or time right so and uh to ensure 100 percentage protection for those people who are using it you need to do it atomically in one single transaction um so sega where are you planning to take one inch what are your plans for the foreseeable future

so for the future um we are right now as team talking with banks switzerland banks for example and we offer an enterprise endpoints for them for the integrations and um i guess other people try to do that xerox try to do the same i guess from a point of view but what i heard as well i see i see banks and fintech companies as gates for normal people for for main kind of mainstream adoption we need partners and this can be banks one more and more banks in switzerland they are open for sticking compound

this is like if you look in the current banks bank system this is highly unefficient for those people who who has money who have money uh and would like to put the money on their bank account you have to pay a minus kind of uh apy here to to you have to pay for to to have money on the bank and this is this is uncle and some banks offer you to so to exchange in crypto yeah like usdc and you can stick on on component get your five percentages uh api this is great you don't get it anywhere here in the bank system for sure so if there's a lot of influx from the bank system

which obviously has a way larger volume than you know the entire decentralized space don't you think that interest rates are going to go down and approach the interest rates of the traditional financial system sure sure it will go down when more people will join and land the money but also in the same step more people traders will come to to borrow that money so to borrow to speculate to create leveraged positions right now you don't need any middlemans here to create leveraged position compound you have just it's quite complicated because like low level i see components like first layer and uh one of the hackathons would

like la 2020 in february in uh in adh denver we we have built a leveraged platform based on compound uh to create like up to 5x uh short or long position for ethereum and it's happening without any person in the middle or banks in the middle and more and more people will come and doing do that because they have the control uh in in our hands and they can't just jump and jump out anytime when they want and they can do it in one single transaction and this is just not possible in the banks if i buy here financial products um and how i invest in the phone i have kind of to wait a specific period

of time and i need to wait when the market is open and open and uh and so on and here's in the default space it's all the time everything is often and you can trade all the time i think these are really nice words for wrapping up so sega where do where can people find out more um about one inch so you can uh join our uh telegram follow telegram channel um chat twitter we are on twitter uh with 140 000 people already subscribed um we have discord as well we have a blog at medium also we have a great help

center and we have also support you can if you are on one inch you can on the right bottom corner you can find the support chat and you can ask anything you want yeah if you have any question cool thank you sergey and thank you for coming on yeah thank you it was a pleasure thank you for joining us on this week's episode we release new episodes every week you can find and subscribe to the show on itunes spotify youtube soundcloud or wherever you listen to podcasts and if you have a google home or alexa device you can tell it to listen to the latest episode of the epicenter podcast go to epicenter tv subscribe for a full list of places where you can watch and

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