Bankless - EthCC #5 | "The Cosmos (ATOM) Thesis" - Sunny Aggarwal

Starting point is 00:00:02 Welcome Bank of This Nation back to the ECC experience episodes. On this episode, we're bringing in Sunny Agarwal from the Cosmos ecosystem, also a fellow podcaster. And Sunny is giving his vision for the Cosmos ecosystem. He did a fantastic talk at ECC about Cosmos if you want to dive down more. Sunny is as bullish on Cosmos as I am on Ethereum, which means to say that he is quite bullish. But his vision for Cosmos is a little bit antagonistic to Ethereum. And you can get a little bit of sense for that in his talk at ECC. But I am very interested in the cosmos ecosystem as it stands, and we are currently in talks with Sunny and one more in the cosmos ecosystem for a full Monday podcast on bankless.

Starting point is 00:00:41 As soon as we get that schedule, that will be coming out. So we can do a full service to the cosmos thesis, which of all crypto thesis that's out there, I think that one does actually hold weight, which is rare to find in the crypto world. Sunny has been around for a very long time. He's been very committed to this vision. And so I just pick his brain on the cosmos thesis and how ECC always has this cosmos, presence from him and Simon and a few others out of the crypto space. So I hope you enjoy this in-person episode with Sunny Augerwald. Each one of these ECC episodes we are doing separately for optimum consumption. We usually do our full pre-recorded ads for these podcasts, but instead,

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Starting point is 00:03:09 All right, Sunny, hey, we're in ETC at Paris. You've been to a few of these before. Are you excited? Yeah, I think this is my fourth one. I think ETC is always my favorite conference of the year. Yeah, four out of five. Wow, that's almost all of them. Why? I missed the COVID one. I missed the COVID one. That's a good one to this. My parents were like telling me that like, hey, don't, you know, you shouldn't go. This is COVID thing. I'm like, no, no. It's all in, like, Italy. Nothing has happened in Paris. And then, like, they, like, convinced me to skip it and then, like, half the people got it. So I'm like, okay, that was good. What about ECC? Do you like so much? I don't know. It just feels like way more community-oriented and stuff. Like, you know,

Starting point is 00:03:45 DevCon is cool and stuff. But it feels a little bit institutional. If the EF is an institution, I don't know. But, like, this just feels like the energy here is just very different. I also really like the old venue. I don't know if you were at the early ones, but they had this huge courtyard. And, like, there was always, for some reason, right around ETC, there was always, like, governance drama that used to happen the first two times. And, like, you know, there's always just, like, it felt like we were in this, like, big courtyard, you know, like, the, the, the, the, uh, the agora.

Starting point is 00:04:16 And we're all just, like, talking and arguing about governance. It always felt really cool to me. So I've noticed definitely a trend of, like, just more and more Cosmos stuff going around in both, like, people's minds, but also in development. And Cosmos, obviously, like, kind of in my mind, the Ethereum's, like, other half been told that, like, and I'm trying to learn a little bit more about this myself, is that, like, the long-term conclusion of Ethereum and Cosmos is, like, super, super similar. So maybe for the bankless listeners that, I mean, they mostly hear about Ethereum stuff, can you kind of give them, like, that high-level rundown on Cosmos and, like, overall, where the Cosmos ecosystem is currently? Yeah, sure. So Cosmos sort of is this idea that the future is application-specific blockchain.

Starting point is 00:04:57 and that a single chain is not going to, you know, be it. And like, I think every sort of blockchain ecosystem is coming around to that, right? Like, you know, Ethereum has also shifted more towards this more roll-up-centric view on Avalanche. You have subnets. Maybe Solana is maybe the only stickler right now who still thinks that a single chain could work. But I think one of the views is that, like, what makes it a little bit different still than, like, maybe the roll-up view is today, at least for now, all the roll-ups are very much, like, generalized EVMs, and you just have the sort of same internal ecosystems that they're still relatively isolated.

Starting point is 00:05:34 Like, optimism and arbitrauma, like, yes, they share security from the same system, but, like, they're not, I wouldn't really consider them the same ecosystem. Like, the ability to interact between them is not, arguably is less seamless than, like, you know, maybe between other L1s, just because of some of the latencies on the bridges. What the view of cosmos is that, like, hey, instead of having these, like, generalized VMs and have like, you know, sushi swap go redeploy on every single spot. It's like, no, we're going to build one chain. It's osmosis, which is what I build. It's a Dex app chain. And so it's like, you know, we're not deploying osmosis on every chain. We build one app chain

Starting point is 00:06:13 that connects to everything else. But then we concentrate our liquidity in one place. We concentrate our UX flows in one place. And then use these like bridges, IBC, which is this like very trustless bridging system that's based off of light client proofs whenever possible and then whenever or not then we use more traditional bridges as well but that and then when you have your own app chain you kind of get a lot more flexibility to do things you couldn't when you're building on you know i call it building on someone else's chain right like you're kind of stuck with the design constraints that they laid out for you and basically we're seeing this big shift right now where a lot of applications are choosing to move into like their own app chain.

Starting point is 00:06:56 So, you know, the one I caught a lot of headlines was DYDX. They wanted a lot of customizable around like how they do their, because what they're doing is they're running an order book in the MMP pool and only submitting settled trades on chain. That's like a really cool architectural design, but they needed to have their own custom chain to do that kind of thing. Another big one is just that like, you know, Anatoly had a good tweet a couple of weeks ago. he's like the only value of L1 tokens is the MEP that they can capture. And it's like, well, okay, as an application developer,

Starting point is 00:07:29 why am I giving the value that my protocol is creating and giving it into someone else's token when instead that MEV capture or that fee capture can be going to as protocol of revenue for our gap? So that's kind of a couple of the reasons we see the shift towards app chains. So the image that I have in my head is like we have these generalized, layer twos, which are large and flat, right? You can come, like, settle on them and, like, set up shop. But then on the application-specific chains, you have these, like, large verticals that are highly optimized for their one thing. And so there's a spectrum here of, like, how flat and generalized you want to be versus, like, how vertical and specific you want to be. Yeah. Do you think that,

Starting point is 00:08:09 like, the long-term conclusion of this multi-chain world is that we find some balance in the middle of these two things, or maybe we find more chains that are on the polar ends and less in the middle? Do you have an attitude towards that? Yeah, I think generalized VMs, are still going to be useful for like the more tail end use cases. So, you know, if I want to launch, I don't know, an NFT for something, right? I'm not going to go spin up a whole chain just to launch my NFT, right? Maybe I'll go, maybe what will happen is you'll have like chains that are specialized for like NFT issuins.

Starting point is 00:08:38 There's one in Cosmos called Stargay so they can do cool stuff where like, you know, the validators are required to be running IPFS like endpoints, but so that and like pinning data and stuff. So like you can still have chains that are optimized for that use case. But like, yeah, so there'll be this like tail end of things that will like be on generalized VMs. It just doesn't make sense to like launch your own chain. But then I think like things like, you know, core protocols, like, you know, we're talking about dexes, lending protocols, stable coins. Like these things really would benefit from having their own chain. I think we're going to start to see like the, you know, the app chains are going to win out just purely because of like UX reasons and stuff over the generalized ones.

Starting point is 00:09:19 So in the Ethereum ecosystem, we generally have a pretty, like, good concept on, like, our roadmap and where we are in the roadmap. And, like, Vitalik had that, like, verge, blurge, merge, blah, blah, blah, blah, all the urges, which I did not correctly label out in time. But, so, like, for people that are super familiar with the Ethereum roadmap, does it make sense to ask, like, what does the Cosmos roadmap look like and where are we in that timeline? Yeah, so I would say, like, cosmos itself does not have a singular roadmap. Like, I guess one thing that's very different in Cosmos. is like we don't have a single dev team. Right. You say Cosmos is more of an idea.

Starting point is 00:09:53 Cosmos is an idea and a set of open source tools that like help make that achieving that idea easier. So the three main tools, I would say, are tendermint core, which is like the consensus protocol. Cosmosis SDK, which is like a toolkit that makes it easy to build your own app chains. And then IBC is just the communication protocol. But these are just like code. There's no central blockchain. in the Cosmos system. So there's no dev team behind the Cosmos.

Starting point is 00:10:24 It's like, you know, our team, for example, is one of the dev teams because, I mean, we're one of the biggest users of the stack. So we spend a lot of time contributing to that. But then there's like, I don't know, I would say there's like probably like somewhere between, you know, how you counted, somewhere between five to 10 like core dev teams,

Starting point is 00:10:40 like contributing to the stack. So it's kind of more similar to how you see like the ETH two row, the client development teams. That's kind of more similar. But I guess the difference is in ETH, in ETH too, it's more every team is working on a, for the most part, it seems it's more like each team owns an entire client implementation from like top to bottom. While in Cosmos, it's more like, you know, we're all contributing to one code base. And because of that, it's hard to kind of like say here's the roadmap as much as it is like, well, here's a huge pool of things that we need to do.

Starting point is 00:11:10 And then like each team kind of like picks and chooses what they need to do based off of their requirements. And so, like, you know, the developments that we need to see from the CosmosS SDK might be different than what a different project needs from the Consus SDK. And so we're all sort of just, you know, contributing to this large repo together based off of our own needs. Yeah. I think a difference between Cosmosin Ethereum is like, first you have like the beacon chain as like the central coordinator chain of all of Ethereum and also ultimately all the shards and all the layer twos. And then you also kind of have like the central coordination of like the EF. while they don't coordinate things themselves, they basically pay for that coordination by pushing an outbound. And Cosmos seems to be like build the code, make it easy for this thing to construct itself,

Starting point is 00:11:54 but it still feels like very bottom up construction. So with that sort of like strategy, how do you like accelerate that? Because we all want to grow these things as fast as possible, like take over the world and replace the financial system. Is there like an acceleration strategy for Cosmos? Yeah. So, I mean, I think the, our approach has always just been like an application first, approach. So like, you know, I guess our roadmap would be like more focused on like how do we, I guess, okay, the main thing that we've been focused on is on the application layer composability. So one thing I like to tell people is that like, look, everyone is starting to think about cross-chain communication now. But in Cosmos like ecosystem, we haven't been thinking

Starting point is 00:12:32 about it. We've been building it and shipping it over the last three years. And we're like on the next step, which is cross-chain composability. So other bridges, yeah, sure, you can send tokens between them. With IBC and the framework of cross-chain composability we've been working on, you can send NFTs cross-chain. You can have an account on one chain, do actions on another chain. So you can have a Dow on one chain, do their token swaps on osmosis. We have a smart contracting system that has been developed called Cosmwasum, and it's very designed for interchain native, where a contract on one chain can make a function call to a contract on a different chain, and it's the same APIs as calling a contract on the same chain.

Starting point is 00:13:13 It seems that a lot of other ecosystems have been focusing more on like, you know, the base security, kind of like, you know, shared security, fraud proofs, all which I think are like super great. And I think that like, you know, validity proofs and stuff are the future. But it's like there hasn't been enough of a focus on the actual user level composability. How can my Dow on optimism make use of a contract on arbitram? And that's kind of what we've been focusing on Cosmosis. You know, one of our North Stars for Osmosis is like, you know, we want to make sure the

Starting point is 00:13:45 UX of the multi-chain is as seamless as the UX of a single chain. And so that's kind of by building that and using that as our focus, I think that's how we're going to get sort of the usage and adoption. So the Cosmos ecosystem and just like overall community, along with the Ethereum ecosystem and community have like been running in parallel for a really long time. There's a ton of overlap. And especially at ECC, I see just like always. when I run into the Cosmos community members the most is at ECC.

Starting point is 00:14:11 So, like, just overall, like, what would you attribute this, like, social alignment, like, this overlapping Venn diagram that's not completely overlapping, but still does overlap between, like, Ethereum more than any other alternative layer one that I would mention, like, you know, Salana, not really much overlap, avalanche, not much overlap. Cosmos, a decent amount of overlap. So, like, what would you attribute this to? Yeah, I think it's, you know, we were never, you know, everyone else marketed themselves as, oh, we're the Ethereum killer kind of thing, right?

Starting point is 00:14:36 I think that was never our approach. With Cosmos, you know, we just had a sort of different vision of the general architecture of blockchains. And we just sort of started building it in parallel and, you know, collaborating on, you know, a lot of like proof of stake stuff. You know, our team was very early on a lot of the proof of stake stuff along with the, like, EF and stuff. So we were collaborating on that kind of stuff. And then, you know, just letting, we kind of just been letting the rest of the ecosystem eventually, like, you know, pick up on that. And I think that, like I said, we're working on a lot of the application layer composability. I think a lot of the Ethereum ecosystem is working on more of like the core chain level, like integration.

Starting point is 00:15:14 I think these things are going to go together where I completely imagine that like all these rollups are eventually going to integrate like IBC, for example, and then start using the application layer composability protocols that we've been building in order to allow this crushing communication. I do think that application specific rollups are going to be like, I'm way more bullish on application specific rollups than like these generalized rollups. today. Sure. So we've been calling it a bank list, a build market, not a bear market, implying that if we want to get out of the bear market, we have to build our way out of it. So in the next like, you know, six, 12, 18 months, what are you looking forward to in the cosmos ecosystem to build our way out of the bear market? Yeah, I mean, there's a bunch of things that sort of our team is working on, especially though one of the biggest things that, you know, the original purpose of osmosis was we got really interested in like MEV kind of stuff and

Starting point is 00:16:03 MEV reduction especially. So, you know, I'm close friends with the FlashBots team and stuff, but like, you know, we were like, oh, we don't want to be auctioning off this stuff. We want to be like figuring out how to actually reduce it. And so we spent a lot of time on this design called Threshold Encryption, which basically is a way of encrypting the Mempool and only decrypting and executing transactions after a block has been finalized. So then if no one can read transactions in the Mempool, no one can front run or sandwich or anything like that. And so this was, you know, how we started out of this is, we started actually with that. And then we're like, well, this is a feature, not a product. We probably should go build a product around this.

Starting point is 00:16:42 And that's sort of like, okay, let's go build a decks. And unfortunately, the Threstle Encryption stuff got like just kicked down the road because it's like one of those features that we know takes like, you know, probably will take another like six to nine months of like development work. And then during the bull market, we just have to, you know, keep focusing on those like faster two to three month wins. and just like shipping features faster and stuff. And so now with the build market, we get a chance to be like, okay, we can focus on some of these like longer term initiatives. So for us, like threshold encryption and other privacy stuff is like one of the reasons I think app chains are cool is we're able to iterate on like privacy stuff in a way that

Starting point is 00:17:19 you can't on a generalized VM because you're stuck with the cryptographic primitives that the chains give you. Sunny, thank you so much for joining me at ECC. Awesome. Thank you. Cheers.

Bankless - EthCC #5 | "The Cosmos (ATOM) Thesis" - Sunny Aggarwal

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