Bankless - Is Lighter Ethereum's L2 Perp DEX? | Founder Vlad Novakovski

Episode Date: October 16, 2025

A $19B liquidation wave hit crypto 10 days after Lighter’s public mainnet—so we asked founder/CEO Vladimir Novakovski why they built a ZK L2 Perp DEX on Ethereum, how the escape hatch actually protects users, and what really happened under extreme stress. We dig into ADL vs. LLP, trader-first design, and why verifiability (not vibes) should govern order matching and liquidations. Vlad shares throughput targets, why Lighter chose custom ZK circuits over a generalized ZKVM, and what’s next: Spot, universal cross-margin, and a ZKVM sidecar for a broader platform play. We close with lessons from the cascade, realistic tradeoffs of being an L2, and how L2Beat “stage upgrades” fit into the roadmap. --- 📣IMMUNEFI | CRYPTO SECURITY OS https://bankless.cc/Immunefi --- BANKLESS SPONSOR TOOLS: 🪙FRAXNET | MINT, REDEEM, EARN https://bankless.cc/fraxnet 🦄UNISWAP | SWAP ON UNICHAIN https://bankless.cc/unichain 🛞MANTLE | MODULAR L2 NETWORK https://bankless.cc/Mantle 🌳KGEN | REQUEST A DEMO https://bankless.cc/KGEN-podcast 💠BIT DIGITAL ($BTBT) | ETH TREASURY https://bankless.cc/bit-digital We’re being compensated by Bit Digital (NASDAQ BTBT) for this segment promoting their company and BTBT. The compensation is paid in cash as a one time payment. You can find additional information about Bit Digital and BTBT on their Investor page at https://bit-digital.com/investors --- TIMESTAMPS 0:00 Intro 3:04 Guest Intro & ZK L2 “Why” 4:58 L2 Security & Verifiability 11:35 Verifiable Matching & Liquidations 14:02 Mainnet Launch & Liquidation Stress Test 18:16 Outage: Timeline & Make-Good 18:58 Scorecard: Lighter vs Hyperliquid vs Binance 22:20 ADL 101: Why Automated Deleveraging Exists 32:32 “Customer-First” Design Stance 38:32 Takeaways: Transparency, Proofs, Details 41:48 Causes Considered & Vlad’s Market Lens 49:31 Why a Perp DEX: Product & Fit 57:42 L1 vs L2: Tradeoffs, Sovereignty, Incentives 1:06:45 Roadmap: Spot, ZKVM Sidecar, Cross-Margin, New Markets 1:11:21 Points, Token Timing & Transparency 1:15:31 Closing Thoughts --- RESOURCES Vladimir Novakovski https://x.com/vnovakovski Lighter https://x.com/lighter_xyz --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

Welcome to bank lists where today we explore the frontier of Perp Dexas. We're here to help you become more bankless. You got Ryan and David on the podcast today. There's been a huge breakout this cycle. One of the themes has been decentralized perps exchanges led primarily by a application and a blockchain called Hyperliquid. But now some competition has entered the ring. And one in particular is moving up the charts in terms of open interest for perps and volume. It's caught our eye. It's called lighter. It's now the second largest purpose exchange. They're only two weeks in to Mainnet, so it's quite a feat.

It's getting a lot of traction. The difference here is that lighter is built on Ethereum. So the question is, is this Ethereum's hyperliquid? In this conversation, I think you'll find this is not just a battle of purpose exchanges, is certainly that. But it's also a battle for Ethereum's vision

of the world, which is L2's backed by Ethereum-grade security versus maybe some other visions of the world, a multi-chain vision of the world where every single app has its own new fresh layer one. A few things we discuss in this episode, the benefits of an L2. Can L2s really scale? Also, the massive flash crash on October 11th and what were the causes? Vlad also gives letter grades to all of the major perps exchanges in terms of how they operated. We also discussed the lighter roadmap and their upcoming token, including how to earn the airdrop, and

the future of lighter and their plans to become a platform chain. I really enjoy talking to Vlad and just getting his perspective as like why build a layer two perp-dex. And we didn't really specifically ask Vlad this question, but I don't think he's doing it because he believes in Ethereum or it like wants to do the layer two model. He's doing it because between ZK and between a layer two, he can build what he thinks is the fastest, more performant perp-dex. And so it's not a question of ideology.

It's a question of just can he build the most technically performant chain? And so that I thought was pretty refreshing. Before we get into that conversation with Vlad, a moment to talk about some of our friends and sponsors over at Immunify. Security has been one of crypto's biggest issues. Hacks and exploits have cost this base, not only billions of dollars, but billions of dollars worth of PR. So stop getting hacked.

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there's a link in the showouts to learn more. Let's go ahead and get right into the conversation with Vlad from Leiter. Bankless Nation, we are here with Vlad Novakoski, the founder and CEO of Lighter. A newly launched ZKL2 Purp Dex on Ethereum, a ZKL2 perp decks. That's fun to say, which recently crossed $1 billion of TVL deposited all in USC. Vlad, welcome to Bankless. Thanks, David. Thanks, Ryan. Good to be here. I want to read out a tweet to get us started here because I enjoyed this tweet.

Ryan enjoyed this tweet. This is a tweet from you. You said being a layer one is a bug, not a feature. A layer one is just an Ethereum layer two without any of the security and verifiability parts. So, Vlad, why did you build lighter as a ZK layer two? Yeah. Well, I think that one, obviously,

it was a little bit tongue-in-cheek, but, you know, there are some very good L-1s as well, like Bitcoin is an obvious example. But I guess my point was that, right, when we were making this architectural choice, like, you know, the hard part was inheriting the security layer of Ethereum while still having really good performance.

And it's like if you don't do that, then the way you can achieve security and verifiability is, you know, it's a much harder problem to kind of rebuild all of the functionality that Ethereum already has. So it's like if the, because a lot of people would say things like, oh, well, like after we built later,

you know, it's one thing in the beginning, maybe we could have made a different choice and we were very happy with the choice we made. right but like after we done all the hard work and made it work as an l2 some people were saying oh well later have will be in l1 and it's like yeah we have to do just remove all the hard work we did and call it an l1 like it's like like having like having the good performance and the verifiability and the security that that was always our goal and we think we are you know well on our way to achieving it with with the structure we have can you get into that flat so we'll

talk about performance maybe later, but the things that you get as an Ethereum layer too, the security piece, the verifiability piece, what do you get by virtue of being an Ethereum layer two? Right, right. So the security piece is ensured through something called an escape hatch that we have. And, you know, if you look at our white paper, it explains that in kind of technical detail, but also if you go to L2B, you know, that's where one of the L2s that has that. But basically what the escape hatch means is that if the L2 messes up or does stuff that

is outside of the rules or if it gets hacked or you know kind of, let's say our own team somehow gets corrupted or whatever happens if that happens then, you know, within a certain time frame, if it's not fixed,

customers can get their assets back through Ethereum. And so that's kind of a very strong way both to disincentivize bad actors, but also to ensure, you know, security. And so then, you know, which clearly you don't have, if you're building your own L1, if that L1 is facing a problem, like, that's it.

I mean, it kind of lights out. Whereas here, obviously we don't want that scenario to happen, but A, it's like strong and disincentivized, and B, if it did happen, customers can still get their assets back. So, like, just so it's clear, what happens? if a, maybe we'll not say finance, but say something like a hyperliquid. Let's say hyperliquid goes offline

or becomes, God forbid, corrupt, or gets censored by some government, which could happen. What happens in that case versus what happens in the lighter L2 case? Right, right. And I mean, I think we certainly, you know, we're, our team is, you know, we've always been friendly with, you know, Jeff and his team. So we certainly

considered them good actors, but I guess in the scenario where something like that happened, they would probably do their best to compensate users, but it wouldn't be through smart contracts though, right? It would be something like kind of outside of that, right? So if that were to happen or with any like other L1, right, like if there was corrupt or hacked or just like, I don't know if they had an outage, never recovered, like you wouldn't be able to get your funds back through smart contracts. Like hopefully those projects and then we think hyperliquid is, you know, they're certainly good actors. I mean, they would try their best

to compensate users in some other way, but it wouldn't be done programmatically. Whereas with our architecture, you can actually, like, the escape hatch, like all those assets, you can't, no one can move money in a route between the L2 and Ethereum until the L2 can prove that what it's doing

is correct and fair. And if it can't prove that, then within a certain amount of time, you know, users can just get their assets out programmatically through the escape hatch. Of course, this all, presumes Ethereum stays up, but it has. It has a fantastic track record of that,

has a fantastic track record of security as well. Just the other piece here, verifiability. So I feel like we've talked a little bit about security, but there's a different concept here where you say, verifiability of being in Ethereum L2 is important there. What does that mean? If I think about exchanges and what do customers need as far as guarantees, like kind of the hierarchy of needs there, right?

I think like at the top, maybe at the top is like, you know, your money isn't stolen, right? Which certainly we've seen that, you know, FTX and other cases that can happen. And certainly would not happen with, I think, you know, decentralized exchanges. Obviously, you know, module the point about the L1 or the L2 being secure, but certainly the design of the exchange to make sure that funds are safe. I mean, you know, self-custody, right? So that's the first thing. The second thing you want is that the trades you think happened are the trades that happened. So it's like kind of, you know, that there's, because that's not true for centralized exchanges, right?

Like, centralized exchanges, if you, like, if you think you bought and they exchanged things you sold, like, it's like kind of, you know, your word versus their, you know, there's not really a way to prove which is correct, right? Now, that one, the reason I point that out is just to give credit to other projects like DYDXV3, like they had that, right? They proved that using kind of StarCware technology. what no one had done in the theorem ecosystem is the third hierarchy of needs which is like when you send an order it gets matched correctly.

If you're an active trader that's actually very important. It sounds like it's like academic but it's actually very important because if that's not the case, especially during a high volatility environment like the last few days, like if you're sending an order to buy at

4,200 and somebody else is buying at 4,300, 300 or somebody else sends in order to buy it 4,100, what if that 4,100 actually gets matched before, you know, somebody who's willing to pay 4,200? You know, you can do a lot of things. If the matching is off-chain and not verifiable, like a lot of wealth can be transferred unfairly if that happens, right? So it's very important for the matching to respect, like, time price priority and kind of all the rules that our circuits have.

But also not only matching liquidations have to be very. identifiable, right? Because again, liquidations, it's like, well, who's to say, you know, if the price falls from 4,200 to $4,000 and get liquidated, well, but maybe somebody else had the same exact position that you didn't get liquidated. Like, all of those things also have to happen fairly. So anyway, both of those things are insured by the ZK circuits, but again, the L2 is only as good as the L1, it's on top of, right? Like, you can verify all that stuff, but then if, like, let's say those proofs just stay on our L2, well, then, like, the whole thing can, like it was as we talked about like the whole thing can just go rogue. Then like, yeah, like you can complain all you want about those proofs being wrong. But like there's not much you can do. Whereas here, the only way that assets can move and forth, can move back and forward between the lighter L2 and Ethereum is if Ethereum knows that the proofs are right.

And that's that's kind of the key part here about the verifiability. Will you say, Vlad, about fair order matching or execution? Are these like theoretical concerns or are there exactly? examples in Perp Dex history, in the Perp Dex landscape, of actually corrupted or unfair or untransparent order matching that has created just a bad environment for traders. Right. Well, certainly with Mev, that stuff happens all the time. I mean, I guess it depends on whether you look at, you know, the order book model or the AMM model. I mean, I think with, with mev, it actually happens kind of out on the open. It's not even a secret. Stuff like that happens.

I think with other order books, yeah, it's a good question. I don't know if they're very, been any like demonstrable because the thing is that you wouldn't know it right like if something like this happened the only way you would know about it is if someone involved in that scheme you know if there was like a whistleblower or something like like if it is off chain and there's no proof there's no verifiability and there is well I think we know that sometimes like other projects in the past have had like special deals with market makers we know that but how far those deals went and how much did they hurt retail. I don't know if there's like evidence of that that's been out and open, but that doesn't mean it doesn't happen, right? Because if it, like, we know, we know, we know,

it's a theoretical factor. Yeah. I mean, we know, well, it probably does happen, right? It's just like, again, if you don't, if it's not, you know, if it's not provable, you can't really, like, if it happens, there's no way you would even know about it, right? The only way someone would know that that happened in the past if there was, if someone involved in that scheme kind of spoke out. Right. Right. But we know that customers complain a lot about like why, you know, with other, with kind of, right, like even on centralized exchanges, like, why did I get filled here? But this other trader didn't, you know, like anecdotally, you know, it kind of comes up a lot. But, and we know in Tradfi, for example, like the flash crash of 2010, like a lot of, like,

there's a lot of really weird price action. And to this day, like, I think Congress did an investigation like five years later and they still couldn't figure out what happened. So this stuff is like very important. And if you don't have it, then like the whole point of, again, this hierarchy of need, it's like, you know, money not being lost. The trays you think happened are the trades that happened. And then everything that you did is very fiable. That's kind of why you want to use blockchain for this in the first place.

Right. If you don't care about those things, then, you know, like you can just trade and stratify. There's a bunch more technical architecture conversations that we want to get into, like the ZK stuff, more about the capacity. more about the capacity, the throughput of being a layer two. But we'd be remiss if we didn't also talk about the recent market volatility. Just for context, for listeners who are less familiar with Lider, Lider launched a public main net on October 1st. And later, the PIRPTex, has been around for months.

People have been trading on the beta version of Lider for months. But the public main net happened on October 1st. 10 days into mainnet, one of the largest and most chaotic liquidation events across crypto occurred with $19 billion of liquidations happening inside just a few hours. Now, Vlad, when you build a perp decks, I think you know that this day comes eventually. I don't think you're ready for it to come 10 days into the public main net. So a pretty fast trial by trial by fire there. Put us into your shoes during that time.

When did it turn into an all-hands-on-deck moment? Like how much of a crisis was it? Kind of walk us through what it was like to be Vlad in that moment. You know, I just like one thing to point out, and we this, we, we, we, we wrote a post-mortem about, you know, there was an outage that happened, right? But the outage actually happened five hours after the high volatility period, right? So actually during all, during the specific, you know, timeline you're talking about where markets got really crazy for about four to five hours. Actually, the system handled that correctly, right? There was, there was no problem there.

And in fact, I think LLP also maintain liquidity. A lot of traders who would have been wiped out on other platforms didn't get wiped out. So actually the system worked fine during that time. Then after that, kind of the database gave out. And it's a little, it's more really like kind of like a bit of it like the issue. I think was kind of bad timing in the sense that we launched public, you know, we went from private beta to public main net.

like we upgraded some things to prepare for the higher, you know, kind of higher throughput, new and more customers. And part of that was kind of upgrading the database. We were planning to that on Sunday morning on the 12th, just as like a schedule maintenance, right, and like upgrade the database.

And, you know, we picked Sunday morning as the time that would bring the least disruption to the users, to the traders. And so the plan was to like do that database upgrade, you know, take the system down for 10,

15 minutes. But we, you know, the fact that, you know, that there was this huge volatility, like Friday night, obviously was not playing like a known. Had we known that, we would have just done the upgrade like Thursday morning. I mean, they wouldn't have been happy. Because the reality is that users, you know, they don't like it if there's a two minute outage. Like, so it's like, kind of like the perfect being the enemy of the good. Okay, let's like time this upgrade exactly when there's the least activity. And then like a day and a half before that, we had the most active trading day of the last 10 years. And so, and again, it actually,

database didn't die during that spike, but like five hours after that, it finally gave out. And we had to like, and upgrading it when it's unhealthy is different than upgrading it when it is healthy. So that actually why it took like four hours to do that, four hours to fix the current thing.

And then we still, we upgraded on Sunday as we planned to do. So now we're kind of the system has the infrastructure that it needs to have to kind of survive another event like this. and with some buffer as well. But yeah, I mean, hopefully that gives you a little bit of the timeline because it's not, you know, it's like a couple of things happened. Like us getting a lot more users happened a week before

and then we were already planning to upgrade the database and then this like volatility happened a few hours before it finally gave out. So I think I just want to make sure clear about the timeline because people I think have conflated some of the stuff. How long was that outage flat? It was four hours. Four hours. Okay.

And this was somewhat after. So I'm curious. It was like hour five through hour nine after the, it's like the high volatility was like the first five hours, right? And then it actually survived then finally gave out. And so like that's why we were going to compensate, you know, people affected during that four hour block. But those, you know, it'll be pretty manageable, right?

Like if it had happened during the previous five hours, there would have been a much more complicated. get a process to compensate. Right, right. Okay. So Lighter did have an outage, but it was five hours after, and you've talked about why. So, yeah, I feel like all eyes and crypto were on these perp-dexes, and in perpetual's exchanges, centralized or not. So sort of the three that got the limelight, one was finance, of course. There's a lot of mayhem going on there, just finance the exchange, and then also, you know, the perk side of things. The other was hyper-liquid, of course, which did stay up the entire time,

but had this auto-de-leverging type of event that some traders kind of raised an eyebrow at. And the third, actually, given your volume and given the significance of size was lighter. And so I want you to give kind of a letter grade to these exchanges or these perks, like how did they perform during the time when they're most supposed to perform,

which is incredibly high volatility position. So maybe start with your own letter grade for lighter. What would you give yourself? And then we'll go to Binance and Hyperliquid. I'm probably not the right person to roll up those grades into a single score. You know, the customers can do the, you know, it's up to kind of do their own homework on that. But I can at least provide some input here, I think,

whereas like if you look at the categories of reliability, liquidity, and communication, maybe if you look at break it up that way, I would say speaking about us, like, clearly the reliability, we did have an outage. It didn't happen during the worst period, but it happened. So I would say in reliability, it's like, again, just talking about October 10th, right?

Not the entire, you know, I would say on the reliability part, it would something like, like between a C and a D. Or let's just say D to be, you know, F would have been if the outage happened during the worst period. I will say like, you know, D plus C minus, something like that, right? I think on the liquidity part,

we actually did great. I would say like, you know, B plus. The only thing that went wrong with the liquidity is that some of the market makers kind of left and was really entirely up to LLP to provide liquidity. And so, no, the market makers. And LLP is sort of the insurance policy. That's the pool of last resort in the lighter system.

Yeah, so LLP is the public pool that is kind of the, you know, the market maker that's run by the protocol. Anyone in the community can buy into it. And it takes, yeah, it's like, it's always there. It makes markets. It does process liquidations as well. If liquidations happen, it kind of takes over positions.

And by the way, LLP does have ADL as well. It's just that the ADL policies are less aggressive. So it's not like ADLs didn't happen for any market at any time. It's just that we tried to provide as much as liquidity as possible before getting to that point. And the L for people who aren't familiar with. with these perps terms. That's automated de-leverging. That did not happen on your platform.

That did happen on hyper-liquid. Well, I wouldn't say it didn't happen on our... It happened on our... Like, ADL isn't just something like it either... It's not like black or white. It's like... Okay. In some smaller markets,

and in particular blocks of time, it did happen, but small, right? Like, it affected maybe customers to the tune of, you know, tens of thousands of dollars versus, like, on some of those other platforms, the ADLs affected customers to the tune of tens of millions of dollars. Can you define that more?

Why is ADL in place in these purpose exchanges? Like, why is it there at all? Yeah, why is it there? What does it do? And how did it kick in a crisis? I mean, at some point, right? Like, let's say that you and I are trading in market and like I'm long 50X and you're short 50X

and like, you know, let's say the market is trading at 100 and some catastrophic thing happens and the market goes all the way to zero. Like before anyone has a chance to do anything. well, like, what would happen in Trotify, right, is like, you would actually, like, you know, like maybe you could potentially go after the person, like claw back other assets. But in Defi, you can't, like, all I have is the deposit I made in the wallet, right?

You can't, like, get other funds from you or from you. So like, like, let's say that something like that happens. Well, basically, like, kind of the total amount of like money in the system is not less than what would, right? Like your P&L now, let's say if that happened in this case, Like, like, I put in $20, you put in $20, but now your P&L is $200. Well, like, I only have that $20 to give. So, like, you're not going to make the $200 you think you're making.

Like, so now I'm not going to make money either, of course. But, like, I'll be wiped out with like, the whole system has to deal leverage until, like, the money, the total amount of money in the system is, like, equal to the total amount that that would be owed to all the different parts. And then, yeah, the insurance fund can contribute to that. but it doesn't have like that. The insurance fund is not big enough to make everyone whole relative to what they're supposed to have. But the point to avoid that, though, you can kind of like do partial liquidations along the way

or you can just provide more liquidity so others can trade kind of in and out. So the ADL is like the last resort thing that happens. But the reason it's needed is because of this example, right? Like ultimately, if the moves are strong enough and there's just not enough of a backstop, like you have to because the total amount of money, you can't like call a bank or like write a letter to a lawyer

and get other money into the system like in defy. Right, like the amount that's been deposited to the exchange is the total amount of assets that's there and that's not going to, you know, like you have to make do with that. And so that's why the ADL is necessary. Right. Inherent to any leverage platform with margin, right? And generally speaking, longs and shorts moderately balance out.

And if price doesn't move that much in any direction, that's just okay. We're operating in the happy case. But if price moves violently and there's any discrepancy between a long and a short, then all of a sudden that gap can become more money than was ever deposited into the platform in the first place. And so you need to make sure that that doesn't leave some people host

and others people not host. And so an ADL is like an equitable mechanism, equality mechanism. Yes. And all of these platforms have, some version of it, I think, you know, like, I think some of the discussions online have been, like, for people who've never seen it before,

it's more like, wait, how does it, like, this thing doesn't... Yeah, they're learning about perps for the first time. Yeah, but like, I think... Not us, though. Not me. Yeah, yeah, not you guys, right? But, like, I think some of the discussion... Like, because there's been, like,

I think this turned into a lot of... There's been a lot of, like, bad blood online as a result. And, like, I think the differences between the different exchanges on this are like pretty nuanced right like if you look at even our you know like if you go to our documentation and you read how the adl works it's like you know it's pretty there's a lot of math in there right like the differences between that and you know hyperliquid or finance adl is like pretty nuanced now those nuances do matter and we can talk about that but yeah

but but the nuance it's not like some have adl and some don't like it's not yeah but let's talk Let's get back to the letter grade. So reliability, we got your letter grade for lighter. How about liquidity then? How did you do? Yeah, so liquidity, I would say, right, like, kind of like B plus, right? B plus, okay. And the only reason I say not A is because, like, LLP, I think, did great with liquidity

provision. Like, I think the other market makers, and I don't, you know, certainly don't want to throw them under the bus or anything, but like, I think, you know, they kind of all left, right? And I think they left, not just us, but, like, other exchanges. They were very busy, freaking out at the time. Yeah. How about comms? How'd you do on that?

I would say we've done, you know, again, not to, you know, be self-serving. I mean, I would say like A-minus, you know, I think we updated our users pretty quickly and, you know, our customer support team was in touch right away. We had a form for folks affected, like we immediately announced compensation,

that compensation will be given. We did a post-mortem on the technical outage and now we're also going to do a write-up on what happened with LLP, which even though it did what was supposed to do, like a lot of people didn't know that it, that's what it was supposed to do, right? So I think it's definitely worth a comms piece on that as well. But I would say, again, bias, but I would say like a minus on the comms part. Okay.

Same for hyperliquid. How'd they do? Reliability, liquidity comms. Right. I mean, I think on reliability, I would say like, yeah, like maybe like B plus in the sense that like you don't know outage, but there's definitely performance degradation and different, you know, like, I think the certainly the high throughput and high volume was felt by the end user

but overall pretty good I would say like yes something like a B plus but on liquidity was the problem right like a lot of people got liquidated who weren't expecting to and you know I would say that one you know it's like you know

like maybe at a D there that was because you think the their ADL you know mechanism was too aggressive you said yes I mean we're not experts in how their EDL works but just from talking to customers who trade on both, that's, that's the, you know, that's, that's what we've heard. And also, if you just look at the numbers, right, like the 40 million that HLP made, like that 40 million

didn't come out of thin air, right? Like that, a lot of, you know, people lost a lot of money. Now, some were just on the wrong side and should, would have lost money anywhere, but like, I think the, you know, again, I think others, I'm sure will parse the on-chain data and kind of figure this out in more detail, but just anecdotally from talking to folks, like the liquidity really dried up quickly and they had a hard time getting in and out of positions. And it's the traders really that are losing here. It's kind of that user clops. Well, the traders, yes, as opposed to who, I guess? I guess, you know, LPs or something or the platform.

Yeah, yeah. I mean, the LPs are, I mean, it's a zero sum, right? It's like, I mean, ultimately the traders have to, it has to be a good experience for the trader, right? I mean, all this other stuff, like having liquidity pools and. having, you know, like having points and airdrafts and all this. I mean, that's all good and well, right? But like, it has to be a good trading experience for the trader. Like, if that's not there, then, like, all this other stuff is just smoke and mirrors. Introducing FRAXUSD, the genius aligned digital dollar from FRAX. It's secure, stable, and fully backed by institutional grade real world assets. Custodied by BlackRock, Superstate, and fidelity. It's always redeemable one-to-one, transparently audited, and built for payments, defy and banking. of all worlds. At the core is Fraxnet, an on-chain fintech platform built to align with emerging

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That's X.com slash mantle underscore official. There's a conversation going on that when I said Ryan and I are not, we're generally less informed about the perp tax landscape than the average trader, for example. So we're kind of like learning about these things in real time. There's a conversation going around on Twitter about the opinionated nature of the ADL system because every single per like per platform has to have an opinion on who gets, you know, demargined or de-leveraged first. There's a queue of sorts.

And I don't know to what degree that this is real, other than this one tweet thread analysis, which seems pretty good, but it was talking about how hyper-liquid LPs made money where a lighter LPs lost money, like lost a little bit of money. And what the interpretation of that means is that, well,

lighter preferred traders over their LPs and Hyper-L-L-L-Pered their LPs over their traders, meaning because of the opinion nature of the respective platforms ADL system, ADL design, lighter just allowed traders to retain more capital than their LPs

and Hyperliquid was the inverse of that. To what degree do you think that that is an accurate statement? Is that reflected in what you just said where you said like, you know, you have to build a platform for traders first. Talk about the nature here. Yeah, so it's like if you think about it, like let's say you're running a casino, right,

like your Caesars and, you know, people come and play blackjack, maybe somebody goes on a great run. Now they're up a lot. Like, now does the casino have other, you know, maybe they're, you know, like, I don't know, maybe you have a credit line from, you know, Black Rock or something, right?

Or Goldman Sachs or like, maybe, you know, they have shareholders. And they have all these other constituencies too. And, yeah, like, you want to treat everyone fairly and, you know, certainly the goal isn't to, like, screw over all these other constituencies. But at the end of the day, like, the customer has to come first, right?

like if you're running a casino somebody comes in and they hit blackjack and like it's like the whole point of that is like you get three to two when you hit blackjack right and the casino's like I wait wait actually we're not going to give you three to two we'll just give you we'll just give you your money back like that that's not that really violates the kind of trust with the customer right I think so I think you kind of want to avoid that at all costs it's better like it whereas if you know the casino has to like take out a loan at a higher rate for whatever, you know, with their creditors, whatever. That's like, it's better to do that than have to then, like, violate the kind of the

understanding with the customer. So that's kind of how we think about, right? Like, the customer has to come first. And then, yeah, you treat all the other constituents fairly as well. Like, LLP holders, like, you know, they had 15 up days in a row before the down day. And LOP as a whole is up, you know, 220% year to date. So, like, obviously we're not, you know, it's not like there was an intentional choice to like this stuff all works programmatically.

Going back to the point about verifiability, right? This stuff all, it's all encoded in the ZK circuits. It all works programmatically. And we made some design choices in the beginning that work this way that kind of favor the trader and those they're all in the code. And so like, you know, it's not like we pushed a button and said, you know, let's like, let's make this straightoff in real time. This all kind of worked the way it was supposed to work. But the reason we feel good about the tradeoff is, yeah, like you have to put the customer first. Let's finish up that report card real quick. So comms for hyperliquid.

I mean, I think in general, hyperliquid is very good at comms. I think in this case, I would say that, you know, not the best though, because I mean, I wrote something around like going back to the casino analogies, like they were kind of saying, well, you know, we're sad people are going after us. But I mean, I think a lot of the questions that were raised were fair questions. And it's like, you know, they did very well both in terms of fees and the HLP. So it's almost like, you know, there's this thing like no crying in the casino there. It's almost like no crying in the casino owners box. Like they, I don't know what there's to be sad about for them, right?

Like they, but, you know, if they want to revise their leverage policies, they can then. Or if they think what they have is fair, they can keep it going. Like, as long as it's transparent, everyone knows the rules of the game they're playing, you know, I think it's fine. So I would say comm's there like maybe like B minus or. usually their comms are in an A. Okay, okay. All right, how about Binance? Would you give them on those scores?

I don't follow Binance too closely, but just from all I know is just what I hear from, like I don't trade on Binance anymore, right? I used to before, I guess, before ProDexes were good enough to, you know, so I don't know firsthand, but just from what we hear from our customers who are also on Binance, like I think on the liquidity side, it was also not great, which is surprising, right?

But because you would think they have like tons of market makers and everything, but I think maybe like a C on liquidity side. And yeah, I think performance, some centralized exchanges had some outages as well. I actually don't know if Binance was one of them. I think so I don't want to speak out of certain. I think some centralized exchanges had outages, though. Finance maybe just had degraded performance, you know.

But I think there were some issues with like withdrawals. but I would say like not an A there, but I don't know, somewhere between a B and a C, I just don't know. But I think on the comm side, from what we've seen, again, secondhand, but like it seems like there was a lot of stuff about like the price of their token and all. Like, it's probably not the right time to talk about that. Zooming out, Vlad, what have you learned? What have you learned and what maybe has the industry learned as a result of this cascading liquidation event? like the microstructure that just builds around crypto. Anything novel to take away?

Like the details matter, right? Like small differences in the math. Like I think most people when they see these ADL formulas, like, and we, I think we're guilty of this as well, right, in the sense of, yeah, like we stated what the formulas are. And when we designed them, we favored the traders. But like, it doesn't say that in the docs necessarily, right? Like here, you know, the reason we made these tradeoffs and not those tradeoffs.

And it was more just like, here's the formula. And we prove that that's what happens. And that's, I mean, it's correct. But like, I think a lot of the stuff is like some of these really kind of technical, like super technical things, right, like are kind of, you know, in the back of a documentation, you know, with like a hundred page document of how the exchange works as opposed to really being like front and center and everyone needs to know. Because I think that's like this only comes up during like,

the crisis environment and then everyone forgets. And then next time, it's almost like the financial crisis, right? Like the credit crisis, it's like as soon as people recover, everyone forgot about what led to the crisis. So I guess the learning here is like details, like keep them in the forefront. Like, I think whether, you know, we're certainly going to review our, the way that our mechanism works. Like, you know, we were already in the process of doing that, right?

Because one of the complaints we had before was our liquidation fees are too high. Now, now people see why that makes sense because, yeah, the fees are high where like maybe during like a big market move, you pay a little bit more in liquidation fee than you might somewhere else. But during a really big move, the LLP is there to protect you. But again, being more clear about that tradeoff and like I think certainly I think there's a lot to be said about the verifiability piece too, right? like I think in a perfect world these systems should be audited. They should be verifiable.

Like I like teams like chaos labs, for example, that kind of like, that's kind of what they do. Like ideally it should be audited by like a third party like a chaos labs or other teams like like gauntlet. Right.

Like it shouldn't just be, you know, like the protocol designed something and like publish some formulas in the back of 100 page doc and that's that. You know, so I think there are those learnings like that.

I'm still trying to process everything and, you know, maybe work with other folks in the space for kind of more holistic solutions. But I think the solutions, it's about transparency. It's about like verifiability, but also about like decentralization in the sense that like, like I don't think these decisions should just be made by like, you know, an engineer working on this thing who's like running out of math and they made a decision and that's that. Even if it was the right decision, like there should be more transparency, more collaboration.

I mean, you've watched crypto markets for a while. was we've seen things like this before, maybe 2021. It was kind of a big leverage sell-off then. But this maybe seemed similar. But this was also an order of magnitude larger. Do you have any theories for what caused this? I mean, people are talking about like, oh, is this a coordinated attack? There's a few pairs that they saw some liquidity on.

Of course, this was timed with the Trump kind of tariff scare. Is it just generally, you know, crypto has just so much leverage. This type of thing is bound to happen every so often. What's your theory in the case? Well, I guess before anything that, I want to come back, this is related, but I want to come back to one of your first points, which is like, you know, this happened right after we launched

public main net, which is true. But we have been running in private beta for eight months before. And actually there were some, like in February, there was a tariff thing too, right? And then like, I think, like April 2nd, there was as well. There's some, not as big as this, but there's some pretty volatile moves.

And then there's some volatile moves on the upside, right, when like people like, you know, like Tom Lee and others started like buying Heath like there's like there's some pretty scary looking charts this year in general and for example like our system yeah like we had that outage five hours after this one but like all those other ones we we were able

we handled without issue but but so I guess I don't want to over index on this particular crash like there have been kind of lots of them this year and you know I think what caused this one, I have, you know, we're, we spend the last 72 hours kind of just getting our own house in order. Like, we haven't really been looking at like, you know, we're just looking at our own data with our own trading, making sure everything worked correctly, making sure customers who need to be made whole are going to make whole. Like, we've really been focusing on that.

So root causes, can't say too much, but I've been in the markets for a long time. Like, I think, I think the Napoleon quote does apply. Like, never mistake from Malice. that which can be explained by incompetence. Like I think a lot of times in the markets it is like that. Like it's like even like the flash crash of 2010. It was like I think the most kind of widely accepted explanationism or just kind of some like fat finger trades. And I think it could have been something like that here.

You know, was it a coordinated attack? I haven't seen any evidence of that. But again, we've been pretty busy just keeping our own house in order to do like a full, you know, a full diagnosis of that. So this is a very interesting way to get main net up and running and just get a lot of stress under the system. But I kind of just want to zoom out and learn a little bit more about you and lighter. Yep. Where did you come from?

And also, what made you decide to just build a perps decks? Like, what's your background and what was the motivation? If you zoom all the way out, like, and, you know, there's, first of all, like, we have a really talented team. And so I really, you know, kind of, I will talk about my background, but I want to make sure it's not like, I'm building all this stuff solo by any means, right? So, but just my background, I guess I'm, you know, I'm not like a crypto guy that discovered finance. I'm more like a finance guy that went into tech, discovered AI,

and then discovered crypto and then built something in, in defy. It's kind of like the arc, right? But so I started out, well, I did a lot of, you know, STEM stuff growing up. Like, I was on the US team for the I.O. And, you know, was it, did a bunch of math stuff too. in economics at Harvard. And then, yeah, so then actually was at Citadel. And like when Citadel first started looking at high frequency trading and then did

that at another firm as well. So kind of in total for eight years doing high frequency trading and TrotFi through the, so these crisis environments, as I mentioned, like crash of 2008, you know, made off, you know, flash crash of 2010. I was there when all that stuff happened. Right. And, you know, then in 2012, I kind of shift. shifted gears and came out to Silicon Valley and worked at a couple of startups, mostly in

AI and FinTech. That's also when I first read the Bitcoin paper, got really excited about that. I wasn't sure kind of what there was to do that was actionable, though, because from a trading perspective, it was very small. Like a friend and I built a bot in 2013 to try to trade Bitcoin. I was like, we calculated that even if our bot got every price move exactly right and traded at 10% of the market volume, we would only be making like $10,000 a month. like just enough to pay our, you know, like,

our living expenses is like, okay, this is, whereas like, you know, we kind of put that aside, right? And this is when Bitcoin was trading at like 30 or something, right? But anyway, so, so put aside. And then another, later on, like another friend, um, showed me more around like Ethereum and EVMs. And, you know, that was really interesting. And then the thing that really got me excited was zero knowledge proofs, though.

And so 2017, 2018, like reading a lot of that literature, thinking about what that means for scaling. But we, so when my co-founder, Scott and I started a company, though, we considered a bunch of crypto ideas, but in the end, went with an AI idea, which we built called Lunch Club AI, which was like an AI that essentially like connects people. So it's like, hey, you know, Vlad, you're into defy and, you know, markets, you know, David, you're also into that stuff.

You guys should talk, right? That's kind of how Lunch Club AI works. It actually still exists. A dating app for friends? Yes, based on kind of professional interests overall. and kind of mutually, you know, a lot of data went into it. So, you know, we built that and did really well during the pandemic. It's one of these startup ideas that, like, because some ideas are just like obvious,

it's not going to work and others work right away. But this one, like, it worked pretty well, but then plateaued after the pandemic. And so then we came back around and much of our team, me, our engineers, like, a bunch of folks were like doing crypto stuff on the side anyway, whether it's trading or reading ZK research or, you know, doing, you know, going to things. Ethereum hackathons, this and that, and like, okay, like, let's really build something here. And anyway, going back to why lighter, well, we looked at, to me, like, okay, like, there are all these digital assets, and I used to trade, right? And it's like, where would we trade them?

Well, it's kind of weird. Like, why is 99% of the volume of digital assets traded on exchanges that don't actually use the blockchain to trade digital assets? It's like, that doesn't really make a lot of sense because many, not all, but many of these assets, their whole point is to build blockchains for. for stuff like finance. But then when they're traded, they actually use those rails. You just use centralized stuff, which is less transparent than Tradfi.

And so we kind of had that high-level idea. And then back then, when we looked at it like the closest thing that existed to what we thought should exist was D-YDXV-3, as I think I mentioned earlier, and they got a lot of things right, but the actual matching and the liquidations we're still off-chain and not verified.

So that's where, okay, like, we think we can solve that problem. And we worked on it for 18 months, launched the TestNet last September and, you know, launched the private beta January 19th of this year. And then now we're in public mainnet. So why a perp decks, though? Because you could have built, I mean, Uniswap is a Dex. Uniswap does the job of kind of what you are talking about. Why do you care about a perp desk?

I mean, it's not efficient. I think that the AMM structure was needed at the time before Ethereum L2 has existed and before ZK was really ready for prime time. Like if you were, if you just want to trade like directly on the Ethereum on on L1, like yeah, the only where you could do it is through an AMM structure. That's true. But AMMs have other problems, right? Like MEV, there is just slow, right?

Like if you're earning 10 seconds to trade, like that's not a good consumer experience. So, I mean, and candidly, right, that's why a lot of the volume was centralized, right? Like, it's not that all these people are like, oh, like, I'm really excited about Bitcoin and Ethereum and Solana, but I want to trade all that stuff in a centralized way. Like, that's not, it's more just because you couldn't trade it in an efficient way using its own tech yet. So, like, I think, because the cynical view is like, oh, people just want to gamble on this stuff. But I mean, you know, people can gamble a lot of things. You can gamble on go to the casino. You can bet on courses, right?

You can bet on sports. You can whatever. I mean, people who trade digital assets, I think by and large do believe in decentralization. So it's like, like, why aren't they using platforms that use decentralization? I think they were just not efficient enough to work for most forms of trading. Right. So, yeah. So anyway, so now why, why like perps specifically and not like, why didn't we build like a spot version?

We actually did build one along the way. and the problem was that the ZK part of our stack wasn't ready yet for one thing. And secondly, we just saw like spot is really good if it lives side by side with perps. But spot on its own, like, you know, like active, you know, if what you're building is the value prop is really great platform for active traders. The active traders trade perps. That's just the reality. Like, you know, because of it's just more efficient, right? like when you use leverage.

If you have a view on the market and your short-term trader is just much more efficient to do so with leverage than not. And so like spot markets also have a lot of uses more for just like doing swaps, like kind of one-off things like, oh, I want to move some assets from this book to that book, whatever, right? But if you're an active trader, like there's not a lot of active traders. We say, hey, like I'm a day trader and I trade in a unit swap, right? But it's not really a thing.

Like we've interviewed thousands of traders. that that unicorn doesn't exist. It's like people who are active traders, they're trading perps. And so now, of course, once you have that, because you have to start with something that is, like, I think customers want the most, and then you add other parts to it.

So we're adding spot in a couple weeks, in fact, and then we're going to add universal cross-margin, and we're going to add the ZKVM sidecar. And that's kind of the roadmap. I mean, it does seem like you're right. Like trading in general is a crypto's killer use case, but then Perps specifically a highly efficient form of trading. So on L2B, actually, lighter is number six in terms of total value lock,

the sixth largest L2 already, which is pretty impressive, you know, 10 to 15 days into main net. Also, the number one, you know, layer two app chain, let's call it, because you're focused just on Perps itself. I do have a question here. So there's been a lot of discussion around, say, why hyperlip. liquid did an L1 rather than an L2, or even why tempo from stripe or arc from circle or plasma from, you know, kind of invested by Tether, why they're doing their own layer ones. And a lot of the answer comes down to like a technical type of answer. I'm not sure if this is

the real read between the lines answer or if this is correct, but a lot of them say, well, Ethereum is just like not performant enough. In particular, L2s are not performant enough. So I want to ask you the performance question. So it sounds like you spend a lot of time trying to, you know, make sure that lighter had the performance necessary for high volume perps trading. So where are you on that? What is the, you know, TPS throughput of lighter today? What are you expected to be?

How scalable really is your architecture or there are some limits to it in tradeoffs? Well, let me talk about lighter first. And then I can talk about some of the other projects you mentioned and kind of the bigger picture of the industry, right? with lighter, right, like our goal was always to have, to build, you know, the best decentralized trading experience, you know, in that that you can have, which means low latency, low cost, verifiable matching, very fileable liquidations, and security, right? And the security part we talked about, right, the escape hatch kind of being on top of

Ethereum. The really nice thing about being Ethereum also, and you know, Vitalik talks about this all the time, right? It's like the more secure the L1, the more performance can the L2 be, right? Because the, you know, when you're trading, like, the L2 can be, first of all, the L2 doesn't need consensus. Since we use ZK proofs for verifiability, like anyone can generate the proof. And it doesn't matter if the proof was, like, because the proof has to be correct and the rules for its validity are enshrined in the, like, you know, these, ZK SNARC circuits that are public. And so, like, you know, if the proof, like,

if our sequencer generates the proof and it's wrong, then that's not accepted by Ethereum or someone else can generate a proof too. So there's no need to wait. So basically what I'm saying is like even if there was a decentralized sequence or like whoever generates the proof first goes, like there's no need to wait for consensus. But the, I guess more to the point, though,

the performance, essentially like the L2 can be as performance as hardware it can get. There's no limits to the performance of the L2. The only limits are just economic, right? Like, because you have to pay, you know, someone has to pay to run those machines. And both the machines to, there's like, you know, it's like, you know, think about like a race car that goes around the track

and then there's like a big car that follows it to clean up. But like, and you kind of have to pay for the, so the race car is just actually doing the matching and like responding to request within milliseconds and all that. And then there's like another like bigger car that like generates proofs that what the race car did is correct. So you need to pay for the performance of both of those. So now, the latency part,

I think even right now later has the best latency in the market. Like if you try it out, like, especially if you're, you know, it is a centralized sequencer, but that sequencer is co-located close to where our customers are. And like, it's pretty fast. It's like you can feel, you know, it's sub-hundred millisecond latency.

Like, it's noticeable. TPS, again, is a matter of hardware and it's a matter of costs. like, you know, I think the, like, could later run at a million TPS right now. Yeah, like we could if we were okay spending 10x on infra that we do right now. Now we don't want to do because like right now there's not a customer demand for that. If there was, then the cost structure should be adjusted. Like we've thought about like if someone wants to do really high, like the kind of high frequency does never happen on chain before.

Right. If someone wants to do like ultra high frequency, right, like million TPS. then they should pay for that TPS directly. And we haven't, that's not, you know, right now we have the free tier and the premium tier. There's no, like, pay for your own TPS, ultra-HFT tier yet, but that's something we're thinking about, right?

So what is the current kind of TPS? Well, the current TPS, yeah, I mean, it's like around, you know, 5,000 or so is, like, normal. Like, during these, like, these crazy environments, it spiked, I mean, and I think, and for some blocks it was, like, in the hundreds of thousands, You know, it's...

Okay. So if you're getting to 5,000 already and you can scale to a million, I think for a lot of bankless listeners, they're asking, okay, like, why are other layer two's different? Because while there's no sort of theoretical limit to the scalability of something like base or arbitram, there's a practical limitation to it. And they're, you know, Jesse from base is working on to get to gigagast levels of, you know, block base throughput.

Does that imply something different about your architecture versus some of the other more more general purpose L2s. Our circuits are, like we did not build a ZKVM, right? We built custom circuits to run an exchange. And that's why later we'll also have a ZKVM sidecar for less, for applications whose performance needs are a bit less. They can kind of be run in a smart contract that translates into circuits and then share a sequencer, to your point about the L2B,

like we are in app chain right now. But I guess what you're getting at, though, I mean, our design is, I think, very good optimization-wise, but the other part is the economics, right? Like, maybe some of those other L-2s, you know, if they're used for stuff like payments, like they don't have, you know, Citadel or Jump or Jane Street who want to use them for high-frequency training,

who would pay for that TPS, right? So, like, I think that's part of it too. So it's not just like, I mean, we are very proud of our engineering, but I think also like this trading, use case just has, there's just more economics to be put, to be brought to bear for it in the first place. Okay. So then this gets to the second piece of my question, which is like, well, how come all of

these other platforms are opting for layer ones and citing performance reasons for that? Do you buy it or is there another motivator here? You know, those guys, they should talk to teams like succinct labs, right? And build a performant L2 on top of Ethereum, you know, I, I don't know exactly what made into it. Like maybe, like, I don't know, like, maybe they made a technical choice two years ago that's not relevant today or something. Like, I'm guessing the stuff that's come out recently, it wasn't built yesterday, right? Like, I'm guessing they were building it over time.

And a year or two ago, like, the building blocks on Ethereum weren't as advanced. And maybe they didn't want to, like, I don't know if you're putting myself on their shoes, you start building in 2023. And all you have to go by is that, you know, the talix vision, but the stuff hasn't been built out yet. and you're thinking, okay, it may take two years, but what if it takes five? Do I want to risk my business on that? Or do I just want to build an L1? I don't know.

That's probably the thinking that went into it, but I don't know. Another explanation I've had, which is just like, it's not a technical explanation, but I'm wondering, so Lighter does not have a token right now. Maybe it will at some point in the future. There does seem to be something

that I've called before the L1 premium, which is for whatever reason, if your token is an L1 token versus an L2, in these current market conditions, there's some sort of premium associated with that L1 token. Maybe it's just the simple logic of,

well, if it's an L1, then we can take Ethereum's market cap, which is like $400,500 billion, we could be a small sliver of that market cap versus taking an L2 market cap. So it's possible that the explanation could be, it's higher ROI. You have the option,

and you have the L1 premium if you do an L1 rather than an L2, and that could be some of the explanatory. reason why. I don't know if that's Cope or if like there's something I'm missing here. That's not really based like I'm a first

principles thinker right as I think you guys are too like to me that's not really based on any like that like that narrative probably is is a thing but it may be I don't know like maybe some famous VC set at one time and everyone was like oh yeah like it's like I don't think that's based on anything

right if you think about how other things work like who like you know I don't know if Ethereum is like HTTP like, whatever, like, you know, or like Cisco, you know, there's a value in their other applications on top of that, like Google and Facebook. Like, they've accrued a lot of value too. It's not like, you know, Facebook built their own version of HTTP. You know, I just don't think that really, like, I think you have to look at each application

from first principles, like who are the customers who, you know, what are the risks, like, where does value accrue longs from and stuff like that? I guess, just like a VC meme. From a first principles perspective, so you've talked to, about all the benefits of being layer two, verifiability, security, you have to maintain a consensus layer. You don't have to inflate your token

in order to pay for validators, all of these things, I imagine, factor into it. Are there any downsides, though? Do you lose any sovereignty being an L2? Is it maybe harder from a technical perspective? Are there liquid? Yeah. I certainly don't want to be little,

kind of the technical efforts of other teams. So, you know, but like maybe some of the projects you mentioned, the reason they didn't follow the kind of path we did is like they just didn't have the in-house expertise to do it. And that's why I mentioned teams like Sysync Labs and others like Axiom that are helping developers kind of do, do like build efficient L2s on Ethereum using ZK. But like, but like, but the sovereignty thing, yeah, I mean, I think that's, that's probably, I mean, of all the arguments I've heard there's probably something to that, right? Like being relying on Ethereum. I mean, I think if one of the risks is like,

what if Ethereum itself becomes corrupt? Like that is A. risk and if that's the risk you're solving for, you know, that could be a reason to make a different decision, right? I mean, I think that is, that is real. I mean, but I think, yeah, like keeping the technical stack easier and more under your control is a reason too, right? Like, we're definitely, like, are we somewhat at the mercy of the, of like, like, if Ethereum, stuff happening on Ethereum was like two years behind, would we be where we are today? Like, probably not, right? So, So there are things like that. But we're very aligned with the Ethereum community.

And, you know, like, I think that's certainly a bet we've taken and we feel good about it. When you say harder, it's interesting, right? Because it's harder to do an L2 from an engineering perspective. There might be lots of reasons why. Also seems very hard to, like, bootstrap your own validator set and work on, like, decentralizing that and making that kind of the consensus layer.

Like, that's a whole other moving part that L2s don't actually have to contend with. I mean, is it though, like, I mean, I think their frameworks to do with, like, Cosmos, like, it's not, like, they're not also, like, I don't know. That's been done many more times, you're saying? Like, it's been, it's not like no one's, you know, like what we've done has never been done before. I guess the closest was D-YDXV-3, but even they did it in partnership with Starkware not alone. Hmm. I get it.

I mean, none of the stuff is easy, right, by any means, like, but in terms of the degrees of how hard it is, like, I think, like, what we've done is kind of right at the top. Introducing KGen, aka Verify, the world's largest verified distribution protocol or VDP. If you're trying to grow a real protocol or app, you need real users doing real actions. If it's not Verify, it's just noise. At the core of Verify is Poggy, KGen's identity and reputation framework. It helps you reach humans, not bots, and proves what your users actually did, so your budget goes to the right people. With Verify, you can run verified user acquisition with confidence,

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Learn more about Bit Digital and try their MNAV calculator at bit-digital.com. That's bit-hyphen digital.com. Bankless is being compensated by Bit Digital for this ad. You can find out more information by clicking the link in the show notes. Maybe we can place ourselves in Lighter's roadmap. So Maynett launched 14 days ago, biggest liquidation event ever in crypto 10 days later. But that wasn't part of your roadmap. That was an external force. What happens next? What are you guys

working on next in terms of your roadmap? What's the grand plan? And where are we? Right. Right. Yeah, I think I quickly talked through this earlier answer, but let me expand on that a bit, Right. So, you know, spot is we were a planning spot by kind of end of this month. You know, the recent events might have set us back two or three days, but still like end of October, maybe first week of November, still scheduled for spot. After that, you know, if you think about kind of core infrastructure, then there's like things like the ZKVM sidecar. There is the idea of universal cross margin, right, where any asset on... Just real quick, Vlad.

the side car? Are you referring to basically, besides just being a perps app chain, having more general purpose block space and more of kind of a platform type play? Yes. Yeah, yeah. So you could write,

because like right now, let's say someone like an AVE wanted to, like, first of all, we already can integrate with the stuff that happens on the L1 on the Ethereum already, but let's say someone like an Avey one or whoever wants to write an application that runs directly in the L2,

like they would have to be writing ZK circuits right now, right? Or, you know, that's, but with stuff with a ZKavam site car, they can actually just take their existing smart contracts. They can run in the sidecar, but that shares the sequencer with the perps exchange. So then you can kind of

like, you know, like those assets would, can be used as collateral or use for liquidations. So that's the ZKVM sidecar thing. And then there's a universal cross margin, which is pretty cool. Like imagine that, like all these people who hold Heath, like imagine you can use your

ETH as collateral. when you trade. Now, of course, think about what just happened, like liquidations, like you'd have to be pretty conservative. Like maybe the leverage you take on. If you do that isn't 50X,

maybe it's 10x, you know, but like, but it's still better to have some version of that than not, especially, you know, instead of having to like force people to use USDA as collateral.

And then, yeah, beyond that, just on the markets. So I write like different types of markets, pre-launch markets, you know, real world assets, you know,

options. Like, all of that is like, like, stuff for the next few quarters. So you're looking to become kind of a, just a financial super app, super platform where any financial instrument can be turned into a ZK circuit and added to the platform? That's correct. Yeah. Wow. Has it always been that ambitious? Yeah. I mean, it's always been, like I said, markets, you know, we, when we started, it's like, why are all these digital assets traded in ways that don't actually use the underlying tech. And let's build, let's build, you know, a way to trade digital assets that fully leverages kind of decentralization, verifiability, security. And well, and the scope of what digital assets

means has grown a lot while we were building also, right? Like, for example, real world assets weren't really on a roadmap in the beginning, but now with kind of new, you know, new administration, new policies, now they are, right? Or things like, you know, like prediction markets maybe as well. or things like options. So all of that, a lot of that is driven more by customer demand though, right? Like we're not just like building stuff in the lab and like seeing what sticks like.

We actually, we're pretty transparent about it. Like we ask polls, like, okay, what should we build next? And the one that came up was like pre-launch markets. So we built pre-launch markets. So the perp-dex landscape has this huge hyper-liquid colored glasses around the whole concept, largely because of just the absolute success of the launch of the hyperliquid token.

No investors, no VCs, a very generous share given to the community, and then the token just ripped afterwards, did it 10x. And now I don't think you can be like a perplex in the space and not really have that fact, that series of events, kind of just in the back of your head.

Lighter has a points program, presumably points turns into a later lighter token. Any details? How do I get points? When will the token drop? Any sort of details about this aspect of a letter? That's an easy one because we're going to be publishing. So as season two starts, we're going to be publishing the formula for how points are generated this week.

Why has it been a secret so far? Well, so season one, the formula used in season one was a secret. The formula for season two will be much more transparent. Why the secret? because, you know, like, we didn't have systems in place to, at that point, to prevent bad actors from gaming the system, right? So also, I think there's something interesting when it's like new people experiment. Like, if they don't know what it is and they try different forms of trading, you kind of get like a better stress test for your product. People are poking around in the noks and crannies of the protocol.

Right, exactly, exactly. But now, now we know, you know, we have like 250,000 traders, right? so we know what kind of stuff they're going to do. Like, it's unlikely that a trader will come at this point and discover a whole new way to use, you know, to use lighter. So, like, I think we can be a lot more transparent now. And the transparent, like, why, like, the argument for the transparency is that especially, like, institutions, you know, market makers and HFT shops,

like, they have quant teams, like, run strategies. Like, for them, it's very helpful when they can actually say, okay, like, my, one are in the strategy and then, like, you know, this is how many points I'm going to get for the strategy and, like, that adjusts their models, right? And that's good because they can, for example, provide more liquidity if they know they're going to get points. Again, like maybe if they had known that, they would have stayed in more on the 10th

and we would have had even more liquidity than just LLP. But your question about like, yeah, we're thinking about kind of year end as kind of to wrap up season two. And, you know, I think you can expect kind of something to happen. around that time, but we'll kind of make announcements as we get closer. And I think, yeah, I think your other point was about, like, you know, the market, you know, market comps to other projects, right? Yeah, I mean, again, it's like, to me, this is all about blocking and tackling.

Like, you have to treat the customer, right? You have to have reasonable policies, right? To be transparent about communication. Like, this whole thing about like VCs, well, we have some very helpful partners on the capital side. but for example, you know, founders fund is their, like their whole ethos is that they are there to help when you need. Otherwise, they get out of the way. And so it's like the founder kind of has, you know, the founding team, you know, makes kind of the core decisions. Right.

And for us, we, of course, get input from our customers. We make those core decisions. So it really depends, like, I don't know, maybe people have been burned with some particular VC back projects before. So this whole narrative appears, but it's like, from our perspective, it's no different than, you know, if someone on a team won the lottery, you know, won the Powerball and had a billion dollars to inject into the project, it would be no different than the VC partners we have.

Actually, it's even better because they can help when we need them. Vlad, you guys premiered on L2B, which is sort of a stakeholder that looks at the property rights assurances of all the L2s out there. And you got four out of five pie slots green. It's pretty impressive debut. Still a stage zero. What's the plan to get to stage one, stage two?

Is that a priority for you? Yeah, yeah. I mean, that's kind of for the team that's working on the core infrastructure, the cryptography side. Like, yeah, L2B is, you know, one of their core metrics, one of their core KPI.

So I think we should be all green pretty soon, but I guess you'll see it when it happens. Very good. Vlad, thank you so much for joining us today. This has been fantastic. We appreciate it. Yeah, appreciate it. Yeah, appreciate the questions.

For everybody out there, none of this has been financial advice, of course. Perps are risky, so is the rest of crypto. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.