Bankless - Synthetix: A New Hope with Kain Warwick

Starting point is 00:00:04 Welcome to Bankless, where we explore the frontier of internet money and internet finance. And today on Bankless, we are exploring the frontier of the multi-chain Ethereum roadmap. The roll-up-centric roadmap has always been about producing many, many new layer twos, each of their own flavor, construction, and type in pursuit of allowing diversity of chains to all exist under the same ecosystem that we call Ethereum. Synthetics and application has been leading the charge into exploring what does this mean for the application layer of Ethereum. and today on the show we're bringing in Kane Warwick, actually inside of my apartment. This is an in-person conversation. So you'll be able to pick up on the speed and lack of latency there is between me and Kane, I would say. He was in New York for Mainnet.

Starting point is 00:00:47 And so we wanted to do a show about his recent blog post that he wrote called Synthetics A New Hope about the next stage for synthetics in this multi-layer-to ecosystem and how he is thinking about some of the complexities and challenges that the Ethereum roll-up Centric Roadmap presents for the application. Like I said, since he was in town for Mainnet, I was like, Cain, just come on over and we'll do the conversation in person. So that was pretty fun. It's always nice to have in-person conversations. I don't do them as much, even though I have the setup ready to go. Anytime there is a conference in New York, however, I will try and get one done. So in this episode, you're going to watch us navigate the complexities, the challenges of Ethereum's roll-up-centric roadmap as it relates to applications that desire to

Starting point is 00:01:30 exist across multiple layer 2s, across multiple chains. Depending on the layer 2 application, the application construction itself, different challenges can arise in various levels of complexity. Kane and I walk through the three different levels of cross-chain complexity that an application can have that is determined by what that application is trying to do. For example, just mere independent instances like uniswap deployments across chains is the easiest way to navigate the multi-chain world doesn't really matter if different un-swap instances are deployed across chain. But as soon as there's unified governance, all of a sudden there is complexity because we need to start to weave these chains together.

Starting point is 00:02:10 And then there's the next phase, the synthetics phase, which is not just unified governance, but unified liquidity and unified state. Synthetics has always been at the frontier of navigating the hard problems in Ethereum. After Unipig, the Uniswap demo on Optimism's Optimistic Roll-up, the first optimistic roll-up that had a live in production demo of an application. We called it Unipig back then. Synthetics was the number two. And so they have always been pushing the frontier of what is possible in the world of crypto.

Starting point is 00:02:39 And now Kane is leading the charge into doing the same thing. Once again, with synthetics and the multi-chain ecosystem. So if you are curious about the super chain idea for optimism or just simply the shared state of layer twos, they recomposing all the fractured composability of layer twos, this conversation is for you. And it's also just a fun conversation. Kane is a great conversationalist and he's, of course, wicked smart. So let's go ahead and get right into that conversation with Kane Warwick of Synthetics.

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Starting point is 00:05:42 Experience Web3 development the way it was always meant to be. Secure, fast, cheap, and friction-free. Biglas Nation, we are here in person in my apartment here in Brooklyn with Kane Warwick, the co-founder of Infinex, semi-benevolent dictator of synthetics, house collector, and possibly, possibly the best hair in Ethereum.

Starting point is 00:06:00 Kane, welcome to my apartment. Yeah, thanks for having me. I was hanging out downstairs for a little while. I couldn't figure out what channel to get you on. Yeah, just like the problem that we're going to discuss in this episode, how do you reach me? Telegram, Discord, email, Twitter, text.

Starting point is 00:06:15 We need some kind of aggregator. Yeah, we need one single shared way of getting in contact with each other. You're in town in New York here for Mainnet. How's that been going? Yeah, it's been good. Yeah. So Mainnet and Eat, New York slash Pragma, I guess, you know, the Ethereum hackathon slash conference.

Starting point is 00:06:34 So yeah, it's been pretty good. Vibes are pretty good. Lovely, lovely. And do you go in and out of Australia or do you do a circuit before you go back home? This time I did because I went from Token 2049, landed in Sydney, and then 24 hours later, hop back on a plane to come over here. I had to pick up my kids on the way through, so I couldn't go directly from Singapore and New York, unfortunately. Oh, man, the life of juggling being a dad and going to conferences and also being an app founder, I cannot imagine.

Starting point is 00:07:03 Yeah, it's pretty hectic. But yeah, my kids are pretty good travelers now. Okay, so as I alluded to, there is a problem arising in the world of Ethereum. The roll-up-centric roadmap, as great as it is for producing natural emergent solutions across the different modules that make up a change. it also fragments composability. And this is like kind of how I alluded to with like how do you reach me with all the different apps that we use. The illusion here is that there's so many different networks.

Starting point is 00:07:31 How many networks currently is synthetics deployed on? Really two. Mainnet and optimism are the other two. Okay. Okay. Why not more? Good question. I think, you know, we obviously were the first project to deploy to optimism. We worked really closely with the team.

Starting point is 00:07:48 You know, I did try to warn people about this and say like, hey guys. why don't we coordinate around optimism rather than having, you know, 100 roll-ups, but that ship has sailed now, I think. So, you know, we are in an environment where we're seeing, you know, even L1s converted to L2s, which I think is great, right? I think people, you know, who previously thought it was a good idea to launch an L1, realizing that, you know, being sort of connected to the Ethereum ecosystem is a more viable pathway. That's amazing. So, you know, in the end of the day, I think we'll kind of accept that that's just the direction that things are going. But for us, the challenge has been cross-chain communication.

Starting point is 00:08:26 So with synthetics, because we're a liquidity protocol, we need to be able to ensure that on whichever network a user is interacting, that information about those interactions are passing through to the other networks. And that just creates cross-chain communication demands that are much higher than like bridging a token, for example, where it's sort of a one-shot thing and then the tokens on the other network and you can kind of let it do what it needs to do over there. I would imagine with the demands that synthetics has, the growing number of chains produces probably like an exponential growing amount of complexity for managing those chains.

Starting point is 00:09:02 Yeah, if you do it the right way. Yeah. So, you know, there's like, unfortunately we're not Uniswap, right? Where Uniswop can just deploy their immutable code onto a new network. There isn't even the complexity of like moving fees around, right? Fees sit on that network. they go to LPs. You know, you flick a fee switch on and all of a sudden the complexity goes up significantly,

Starting point is 00:09:22 right? Because now it's like, okay, well, where do the fees go? You need token holders on that network. You need token holders on mainnet. You need token holders anywhere. Do we burn the fees? Do we transfer them? Do we convert them?

Starting point is 00:09:33 What about if it's all an avalanche? How do you deal with that? So as soon as you start to have any contemplation of like cross-chain communication, the complexity grows significantly. So if you can just deploy your code and let it sit there and inter- only on that one network, it's much easier. Unfortunately, for synthetics, it's just not possible. Right. And so what you're starting to allude to is that there are different types of

Starting point is 00:09:54 apps out there that have different cross-chain needs. Yes. Maybe there's a few categories of this in your blog post, which is going to be the basis of this conversation. You kind of start to progress through the different kinds of apps that have different levels of demands for complexity when it comes to cross-chain. And I think synthetics would be at, like, the highest order of a cross-chain, a many multi-layer-2 world is the most complex for synthetics, and it would be for, like, Uniswap.

Starting point is 00:10:21 Uniswap is deployed on, like 13 different chains, and that's just a property of the nature of what Uniswap is. Like you alluded to, there's this one thing called the Fee Switch that if we turn that on, all of a sudden, Uniswap goes from like, well, it's pretty simple to deploy Uniswap across chain to like, okay, now we are elevating in complexity. Could you kind of walk us through the phases of complexity that an app, the properties of an app might be, like what properties are simple to deploy across any chain? like the roll-up-centric roadmap of Ethereum, 10,000 roll-ups.

Starting point is 00:10:49 That doesn't matter for some apps. What kind of categories of apps are those? And then what things make things more complex? Yeah, so I think on the spectrum, you know, the simplest thing is a uniswop-style deployment. It's a mutable code. So you don't need to govern it. You don't need to upgrade it. You just deploy the code and it sits there.

Starting point is 00:11:06 There's no need for fees or anything like that to go outside of the protocol. So there's sort of, you know, endogenous to the protocol. LPs, you know, put liquidity in, then LPs earn the fees. That's it. And so each instance is really distinct. As soon as you start adding things like governance, right, if there's any upgradeability, then it's a question of where does the governance come from? Is it governance just on that network or is a governance that is anywhere?

Starting point is 00:11:31 Because, you know, most of the time the governance comes from token holders and token holders are spread across all these different roll-ups. So it's like, well, how do we coordinate the governance, you know, do we want someone who is holding AVE on main net to be governing the deployment on Arbitrum. Right. Does that even make sense, right? Like, are they the same kind of stakeholder, right? Or is it only the AVE token holders who are kind of staked in the security module or

Starting point is 00:11:59 whatever on Arbitrum should govern the Arbitrum deployment? Right. And then there's another, you know, area of complexity, which is fee sharing. So, okay, if there's fees that are being earned on one network, who do they go to? Do they go to all token holders? Do they go to just token holders on that network? How do we distribute them? Are they paid out as a dividend?

Starting point is 00:12:18 Do we do buybacks and burns, et cetera? And there's solutions to all of these things, but they all add complexity. And the governance side of things, I think, adds the most complexity, right? Then there's some other stuff like bridging. Do you want all your tokens on all of these different networks to be fungible?

Starting point is 00:12:37 So, you know, I gave an example a long time ago, even before this was a real thing of Maker, right? So if you have dye on one network that is mainly backed by USDC, let's say, right? And then you have a different instance of Maker that's deployed on, let's say, Arbitrum, right? And maybe the majority of the issuance of dies backed by Arb, the Arb token. Now, that's crazy and that's not the case, right? But like in a future state, maybe that might be the case, right? And so you look at those two things and you say, okay, you know, we've got one network where it's all backed by USC, another network where it's backed by like treasuries, and then a third network where it's backed by, you know, in a liquid

Starting point is 00:13:18 shit coin, right? You know, let's use SNX, right? It's the example, rather than ARB, right? I don't want to trigger, you know, Arb Maxis, right? So, you know, we've got a synthetics app chain where you've got dye that's being backed by SNX, right? And, you know, it's a liquid or whatever. Is that die that's being issued against those, you know, collateralized positions, fungible? Do you want it to be fungible? You know, does it even make sense? Is it, you know, on some fundamental level, is it fungible? Right.

Starting point is 00:13:45 And if it is, how do you then enforce that fungibility, right? So you need bridges, you need cross-chain communication. You need to know if the dye is moved onto a different network and it needs to be liquidated. How does that liquidation happen? And so all of that stuff just adds complexity. Is this both, if I'm understanding this correctly, is this both like a kind of a more higher-level philosophical question? of is the die fungible from like the social layer? Do we perceive these things to be equivalent?

Starting point is 00:14:15 And then the other problem is like, okay, maybe even if we do get to that point where yes, everyone agrees that these things, the risks of one implementation of die on one chain, we do agree that that should be equivalent with the risks of a different dye implementation on a different chain. If we can cross that barrier,

Starting point is 00:14:31 there's still the technical barrier of getting it to be fungible at the technical level, like the contract address and equivalency. So like there's two, problems here. I think there's kind of three. There is the social problem, which is, you know, if I'm using die, what is the perception of a user of die? Do they expect fungibility? Like, what is my expectation as a user of die? Then there's like the financial layer of, okay, if my expectation is they're fungible, are they really financially fungible assets, right? Like, you know, if one's backed

Starting point is 00:14:59 by nonsense and the other one's backed by ETH, is that even the same, right? And how do we reconcile that? Is there a way that we can set up the financial incentives such that, you know, one has a really low LTV and one has a high LTV and the liquidation means that actually they're both as safe, they've just got different parameterization? And then assuming we get to that point, then the next thing is like, how do we even do that? Right. What's the mechanism? What's the technical mechanism by which we implement that? Really just to drive this one point home, the way that the way that you describe this in your article is like Alice has trust preferences that maybe Alice is very conservative. And so she only wants to use, you know, a very low LTV inside of synthetics on main

Starting point is 00:15:41 net with very good, strong collateral because these are her trust preferences. Maybe a more adventurous Bob is out on some OP stack fork that just got deployed. And if there's a synthetics instance on that network that for some reason allows for, you know, shit coin collateral to back SUSD, that's great if these instances are firewalls, it's kind of like how Uniswap deployment would be, then, like, Alice's preferences don't get commingled with Bob's preferences. You know, conservative Alice is safe from D-Gen Bob. And so long as there is actually, like, separation of instances. Why I think the articulation of synthetics is such an ambitious project about shared

Starting point is 00:16:21 composability is that the unified version of synthetics would mean that Alice's preferences and Bob's preferences are actually commingled, and those conflict. And so that's where we get into, like, okay, so is S-U-S-D on, you know, OP stack, shit op stack fork with shit op with shit collateral, sorry for the language, just like, you know, all the risk, all the risk on one. Maximize risk. Maximize risk and then maximize conservatism. Do it, how do we even square these things?

Starting point is 00:16:50 Yeah. And is there, you know, this is the financial layer, right? Like, is there a way that you can parameterize this to allow both of these people to, you know, interact with one another and feel comfortable? Right. or if not, is there a way for you to sort of quarterize the risk and segment and silo the risk so that the user gets fungibility,

Starting point is 00:17:11 but on the LP side, the LPs are protected from one another. And you don't have this like cascading failure or whatever. And so, you know, these are hard problems, right? But then it begs the question of even if you can get to that point, the technical implementation, there is no way to implement this. And this is where synthetics unfortunately has a bad habit of being like on the bleeding edge like the vision is very bad habit yeah very bad habit like you know it's it's like this kind of uh very aspirational vision of like what if we could do this

Starting point is 00:17:43 you know what if this is the future state and the reality is that the tech is just not there yet right maybe this is solved with like you know at some point uh like an op code you know like level of solution, right, where like we actually realize that cross-chain communication is necessary. And, you know, we have this reliance on like Ethereum as a, you know, a state layer, you know, where we're, you know, storing state there. And somehow we have a way of communicating that back out or something. You know, maybe there's like a more or more long-term solution. In the interim, we've got, you know, a bunch of solutions which are fairly novel. And none of them are really yet in a position to be able to actually do this. And, you know, like anything, we do it. And then we go, oh,

Starting point is 00:18:27 wow, this doesn't scale. Right. Right. Like, or here's a solution that like handles the problem today, right? Ethereum main net, you know, back in 2018, totally fine. Enough bandwidth, right? Like just barely. Enough bandwidth.

Starting point is 00:18:38 Back in the days of one great gas. Exactly. And then like 20 minutes later, it's March 2020. And you're like, oh, wow, this does not work at all. Yeah. Like it just is not possible for this to function, right? And so even if we have cross-chain communication and we've got these kind of rudimentary solutions or whatever, do they scale to something, you know, that is,

Starting point is 00:18:57 across 100 chains. Like at the moment, no, can they get there? It's a technical problem to solve. Right. And just to, again, really just hammer on the definition of the problem statement. The many app ecosystem, if you have uniswap without governance, just raw instances of uniswap deployed everywhere, that's like problem level one, not too much of a problem. Problem two is when, okay, we have central uniswap governance and decentralized uniswap deployments.

Starting point is 00:19:24 How does that co-how do we cohere? How does this one app go here into this one unified system when we're across, when Uniswap itself is across many different states? That's like, you know, not a crazy problem, but still a hard problem. It's still like some things to suss out. And then the final problem is like what Synthetics wants to do, which is shared liquidity. Shared liquidity across states. And liquidity is finite. If you have many chains, we're starting to fracture liquidity.

Starting point is 00:19:49 And so the golden solution here is that when you add liquidity to one network, one implementation, you are also increasing the liquidity. on a different network. And that's like the hardest level problem. It can flow through. Yeah. Right. It's the hardest level problem that we've thought of today. So far.

Starting point is 00:20:04 And this is, you know, like, like it would not surprise me at all if synthetics or other protocols eventually come up with even harder problems that are, you know, harder problems that have to do with cross-chain communication. There's some, you know, demand or some functionality that requires something. But at the moment, that's kind of the, you know, the most challenging thing is like to treat these distinct networks as one network requires a level. of cross-chain communication that we just can't quite support yet. Right. Yeah. And of course, just to throw a bone to the Solana camp out there, this is why they are like layer

Starting point is 00:20:35 one, one chain maximumists. Like they get to be the composable chain because they only want to have one monolithic chain. So they're listening to this and be like, yeah, that's why Solana. Of course. Yeah. Don't like, don't fragment your liquidity, right? Of course. Right. And, you know, there's something to be said for that, right? But, you know, there's definitely a counter argument of like, okay, fine. But at some point, you know, the L1 model ethic thing breaks, right? And then... They just kick the can down the road.

Starting point is 00:21:01 Yeah, they'll get there too. Great, like you've got 10x more growth, right? But eventually you're going to be like, oh, this doesn't really work. Okay. Without asking about the technical details, what's the vibe check on this problem becoming solved in the fullness of time? It's a really good question. And, you know, there's some ways to route around it, right?

Starting point is 00:21:25 And we've... at the moment got these conflicting drives within the synthetics community, right? One drive is maintain SNX as the primary collateral in the protocol, right? Maintain the value prop of the SNX token as effectively as possible, right? Like do not devalue the token in any way, right? And then the kind of counter to that is, okay, what if we don't need to fragment the liquidity as much by going and finding a more liquid, more prevalent collateral, like ETH, right? And the assumption is that like there's going to be a lot more ETH collateral available

Starting point is 00:22:10 and ETH liquidity available on all of these networks than you could ever really have, you know, in S&X, right? You know, the market caps are, I think, you know, at the moment, a couple of orders of magnitude different, right? So there's a lot more liquidity out there. So use a more liquid thing. and then use SNX for something different, right? And these are just conflicting goals, you know, because if we use ETH, then it becomes much easier. Right. Then you're actually back to more like the uniswap style thing, right?

Starting point is 00:22:37 Uniswap plus fee switch. Right, right? Where it's like you've got these distinct things. You use collateral on that network. You don't need to spread your collateral out. You don't need to, you know, communicate between them. You can maintain fungibility because they are fundamentally all the same instance. So you can bridge tokens back and forth and, you know, they're fungible because they're all backed by ETH, right?

Starting point is 00:22:55 They all earn fees and the fees are paid in the stable coin. And then you just figure out a way to distribute those fees across the different networks. And there's a whole bunch of solutions. You know, I've been very against buybacks and burns as being inefficient, right, in the past. Like if you're doing a buyback and burn, that it means all token holders, whether they're participating in the network or not, get a benefit. And so it's inefficient from a, you know, incentive perspective. But in a cross-chain environment, it actually flips and becomes more efficient. Because by doing a buyback and burn, the benefits accrue to everyone equally.

Starting point is 00:23:29 Right. And, you know, again, there's some potential issues with that where maybe everyone just wants to camp out on main net, the safest place, even if the highest fee yield is over here, right? And so you're not creating the right incentives. But if you have sufficient fees on the network where you want the activity to happen that goes to LPs and then some other protocol level fee that flows back to everyone, no matter where they are, then I think you can strike a balance. Yeah.

Starting point is 00:23:55 In that model, you're kind of letting the free market, you're really leaning into the free market to solve a lot of problems, which I generally agree with and like as a design principle, the free market's powerful, let it do its work. Yeah. Right. Yeah. Okay. And so this is the one thing I will give credit towards synthetics with is it's seemingly

Starting point is 00:24:16 like egolessness about being willing to experiment across all different, like being very pragmatic about like do we want to enshrine s and x first and foremost well let's consider the scenarios in which the answer is yes and no and let's pick the best of both worlds and so in your blog post you talk about three different paths three different options some make more sense than others to solve some of this fragmented liquidity um solutions and one of them like you said it's like well we can bootstrap with ether instead of bootstrapping with s and x that's i think the first the first path of three? You want to take us further into the second one?

Starting point is 00:24:51 Yes, I think it's worth calling out, though, that synthetics, we are very pragmatic, but we're also extremely dogmatic, right? And it's a weird mix, right? So there's, like, certain dogma within the community where it's like, you can't touch that, right? So for a long time, it was like you cannot siphon off fees away from the SNX token, right? It doesn't matter how good of an idea you think this is, right? And, you know, I'll give you a silly example, right?

Starting point is 00:25:14 If we thought that, like, you know, putting 2% of the total fees towards, like, funding bankless, right? Was going to be a really beneficial thing. Right. And everyone agrees that this is a beneficial thing. It would be amazing. Like bankless is a super amazing public good that we want to fund or whatever. I'm liking this. Yeah.

Starting point is 00:25:31 Okay. Zero chance. That will ever happen, right? You know, back in the day because we just said the instant you, it was almost like the union swap fee switch. The instant you divert fee. Like, we had a fee switch that was on and welded shut. Right. you couldn't actually turn it off, right?

Starting point is 00:25:46 It's the opposite of Uniswap, right? It's like we basically, you know, jammed it to like full fee switch on. All of the fees ever generated go to the token holders. Zero goes to LPs because the token holders are the same. And then we're like, let's make sure that no one can ever touch this thing. And, you know, we broke the switch off and welded it shot, right? Well, this is just a good lesson in incredible neutrality. A similar EIP was put forth.

Starting point is 00:26:08 Shout out, Kevin O'Walkie. EIP, I can't remember what it was, but it wanted to siphon off Ethereum block reward. for public goods or something. We were going to take this, what was ideally this credibly neutral protocol, Ethereum, and we wanted to fund public goods with it. Who doesn't want to fund public goods? It's a great idea.

Starting point is 00:26:26 But the community was super divided over this and over just like the corruption that that might instill. Like it starts off as a good idea. But what if bankless starts making content about XRP and how apps are dumb? Like that is not something that can be imagined in the short term, but then it might happen in the long term. Agreed.

Starting point is 00:26:48 Small little like divergence. Yeah, but like this is, you know, this is the same problem, right? Like that you really are trying to avoid trusting anyone, right? Like, you know, if there's no proper incentive mechanism to ensure that the alignment's there, then, you know, it becomes very risky, right? And so, you know, the same, by the same token, right, as soon as we're like, oh, but what if we just, it's just a little, just a little tiny bit of these, just give them, like, come on, we need this thing, right?

Starting point is 00:27:13 And people were like, as soon as you do that, the flood gates open. Right. And you don't know. And, you know, there's, it is a bit of a slippery slope argument, but like it is definitely like a qualitative change, right? You're not just going from like, oh, let's, you know, send another 1% of fees to this thing, which we're already doing. You're actually saying 0% of fees go anywhere but token holders.

Starting point is 00:27:33 And now it's 2%. What's to stop it from going to 4%. What's to stop it from being wasted? Right. The problem is that, you know, we're now at a point where we have actually, started diverting fees, we finally said, we have to pay integrators. We don't have our own front end. There's no synthetics front end, right? There are three, four different integrators and we need to pay them, right? And how you pay integrators to come and do this is a hard problem to solve, right?

Starting point is 00:28:00 There's a whole bunch of different conflicting, you know, uh, kind of motivations from, from different parties, right? And this is how interesting it is, right? So there was a bit of a debate, And I'm on one hand building a new front end, right? So I'm doing an integration, right? So, you know, like you could make an argument that for me, I'd love if half the fees went to integrators, right? Like it's very self-serving argument, right? Like, let's make it 80% actually.

Starting point is 00:28:28 You know, the protocol should get some fees, right? But like, if 80% go get- But really, it's the front end. The front ends are doing the work, right? So like, let's pay the front ends, right? And we need them. They're critical to the ecosystem, right? So there's an argument to like to try to maximize that.

Starting point is 00:28:40 for my own personal benefit. And I said, no. Like, I don't want to be advocating for high fees. I don't think that we should be looking at the cost of running a front end today and setting the fee split based on that, right? We should set the fee split as conservative as possible. And if it's not working, then we can increase it, right? And some of the front ends of like, you know, come back and said, well, that's not fair, right? Because your front end is being bootstrapped by you. And you've got enough money to pay for it. So you don't need money. You'd actually run a loss, right? And so by that argument, the most self-serving thing for me to say, no fees for any integrators.

Starting point is 00:29:16 Let's make it zero percent. Let's go back to the old days of all the money goes to S&X holders because I get those fees. I can fund user acquisition. Exactly. Yeah. Then I can choke off all of these other guys. And I was like, wow, I hadn't even thought about that. And so now it's a situation where like it doesn't matter what I advocate for it.

Starting point is 00:29:32 Like it's bad in both cases. So I kind of have to recuse myself and let it play out in the community. But, you know, it's, again, just kind of speaks. It's a challenging problem working out. How do you split up fees? Where do the incentives go? What are you trying to optimize for? All of this stuff? It's really hard. And that's just talking about one network. Right. Like we haven't even gone to a multi-chain network where now you have the arbitram network and the optimism network fighting saying, well, hang on, we're generating more fees. Why don't we get more? Right. Why is it equally distributed? Why, you know, like we've got more users, got more activity.

Starting point is 00:30:07 Let's just keep the fees over here in arbitram land. And then optimism people saying, And we've had a little bit of this between main net and optimism where people are like, this isn't fair. We want more fees for optimism or more fees for main net or less fees here or whatever. So these are all very challenging governance problems. Okay. So as we're going down the rabbit hole, the idea made is of like trying to discover how synthetics has this like unified a vision for itself.

Starting point is 00:30:30 Where are we? We talked about the three phases of difficulty. We started to define the differences in composability of governance. What's next in this conversation? So, you know, the liquidity conversation is, can you get people across the line to let go of their dogma, right? Really, right? Like, that's the question. And so we were very dogmatic for a long time about no fees to anyone other than S&X holders and no external collateral, right?

Starting point is 00:30:56 We, you know, we've had some rappers and some other things like little experiments, but like fundamentally the S&X token is the collateral that backs SUSD, right? And so it's like, okay, how do we test this out in a way? that maybe is not a one-way door and doesn't kind of open the floodgates and risk the position of the S&X token and how do we negotiate that amongst the community and be pragmatic about it, to your point, right? How do we balance the dogmatic? If we open this door, we flip this switch, we might not be able to unflip it, right? With we have a genuine problem that needs a solution and we don't have a clear solution and so we need to experiment. And that has been, you know, honestly the challenge of synthetics from the beginning, right?

Starting point is 00:31:41 It's balancing those two, you know, kind of competing drives. One of the tools in the tool belt for solving this cross-chain liquidity issue is just cross-chain bridges. I think chain link CCIP comes into play here. Yes. How does that help solve the cross-chain problem? Can you talk about its involvement here? Yeah, so it helps, right, in the sense that you can start to pass messages about the state of the different instances.

Starting point is 00:32:08 back to the main instance, right? So very good for like, you know, managing governance, managing deployments. Okay. Right. So you can have a unified governance framework that exists on optimism, let's say, right? That can pass messages to the other networks,

Starting point is 00:32:23 to change parameters, to make new deployments, to do a whole bunch of things, right? And so that's super valuable. What it probably can't do at the moment or what it's not yet ready to do and chain link have some other solutions out there that are coming online that we'll be able to do this is to manage like a shared cross-chain liquidity profile, right?

Starting point is 00:32:44 Which is the golden standard. That's the ultimate aim that we want to get to, yeah. Right. Yeah. Okay. So maybe one metaphor that's helpful for people to understand this. Synthetics a long time ago has chosen optimism. You guys have been working with the optimism team since Unipig, right?

Starting point is 00:32:59 I think like after you shop, it was Synthetics. That was the second app that was using the OP tech stack. And so this is synthetics brain. This is the home base where parameters get changed and then hopefully it spans out from there. And so if the optimism version of synthetics is the canon, the home of the brain, then you use chain link CCIP to send messages down the neurons to other instances of synthetics. Right, wherever it's deployed. And that's passing governance messages. Yes.

Starting point is 00:33:33 passing protocol updates and changes. Pulling fees back. And pulling fees back, right. And then kind of how we talked about earlier, you're allowing some of the margins, the edges of the free market to balance pools, balance liquidity and kind of do this kind of immersion stuff where there is no one single shared state,

Starting point is 00:33:51 but things do get balanced relatively quickly according to the free market hypothesis. Yeah. So, you know, if you've got ETH sitting on arbitram or optimism, there's a bunch more demand on arbitram, you know, there's just a strong incentive to move over there and capture the fees because there are some fees that are only going to LPs. So, ETH stakers in this case, right?

Starting point is 00:34:11 So people, you know, if you're staking ETH on optimism and there's less activity there, you're going to get paid less. So you're going to move over to arbitral. Right. Absence some very strong ideological reasoning, right. You know, same thing with Avalanche or whatever, right? So, you know, you kind of pick where you're willing to deploy liquidity and you're going to get fees there. But then there's going to be a cut of the total fees that flow back to some.

Starting point is 00:34:33 place, right? And that's some place then becomes an interesting question, right? Because, okay, we've been on optimism for a long time. We had to move to optimism because we needed scaling. We couldn't deploy our perps solution on main net. It's just not possible, right? The latency is too high. A whole bunch of reasons, right? Cost is too high, et cetera. So we had to do that. But now we've got the OPE stack and the super chain. And it's like, is it weird to have all of the governance on synthetics happening in this arbitrary chain, right? Because let's say, you know, in two years time, there's five or ten chains where synthetics is deployed.

Starting point is 00:35:13 And let's say we do get to a point where it's all ethical lateral. There's eth collateral and all these different L2 chains, right? And maybe optimism is number eight in terms of volume, right? It feels a bit weird for the number eight chain, you know, maybe base is number one, right? It's like, well, hang on a second. Why are we sending all our fees back there? That seems weird.

Starting point is 00:35:31 And so this towards the end of the article, is where I sort of propose this idea of having a credibly neutral place for governance and fee share and all of that stuff to happen. And, you know, it might be an OPEs stack chain, but it'll be like a synthetics app chain where stakers live there, governance lives there, fee sharing and, you know, other kinds of liquidity around S&X and, you know, various things live there. And then all the other chains have a deployed instance of perps and spot and whatever. This starts to feel like a little bit what Rune was going after with his MakerDAO app chain

Starting point is 00:36:06 that is what he was calling the back end management of the Dow. Yes. And one specific chain that's custom built for MakerDAO. Yes. And then just instances of MakerDA splattered across the cross-rollable ecosystem. It sounds a little bit harmonious with that. It's similar, except minus the crazy LLM Salonica scaling. Neural tokenomics thing.

Starting point is 00:36:23 Still haven't got my head around that yet. We didn't do our cage fight in Singapore, unfortunately. We didn't have a chance to. Maybe a permissionless next year We can put a sumo suit on or something And battle it out or have a boxing match Yeah, yeah, it's the permissionless game Which is just a meme I'm trying to intercept

Starting point is 00:36:38 Okay, so that would be the synthetics app chain Not that there is one instance of synthetics That is the large central instance Like, that's a DYDX model Where DYDX is like F chain F all the chains Just the DYDX chain We're gonna go to the best place

Starting point is 00:36:54 And we're gonna, you know, we're gonna deploy You know, on the best ghost chain that we can find. Right. Why not do the D-Y-D-X model of building your own like Cosmos IBC or your own one single central like even role app on Ethereum and say, hey, no no arbitral deployment, no optimism deployment, just as one place where you come to us. Like why not do that? It's a good question. And this is I think one of the unsolved or unanswered questions, right? And, you know, I had a debate that was moderated by Dan from Paradigm with Antonio. I think it's a couple years ago now, maybe almost three years ago, right?

Starting point is 00:37:29 And I was like, this is crazy. Like, you're crazy. Composability is the thing, right? If you go and build your own siloed chain at that point on Starkware, right? Then the only people who can interact with it are people that bridge there. Like, that's crazy. We want to be on a composable chain. That's the benefit of defy.

Starting point is 00:37:46 And turns out I was wrong. At least in the short term, right? In the short term, I was wrong because what they got out of having their own chain where they controlled everything is they were able to concentrate all the liquidity there. they were able to get a much better user experience. They were able to scale faster sooner, right? And they got a significant lead over the other dexes. And so there is an argument for an exchange to live on a very specific place, right,

Starting point is 00:38:12 and to concentrate all the liquidity there. The problem that I see with that is this liquidity fragmentation and user fragmentation that we have today. The thesis is that there are distinct users on Arbitrum, on Avalanche, on Salon, on Mainnet, on optimism, you know, et cetera, et cetera. We can keep going. Yeah, we can be here all day, right? And those people are not going anywhere else.

Starting point is 00:38:39 Right, right? Maybe there's people that are like on Mainnet and arbitram or main net and optimism. But if you're on only optimism or only arbitram, there are users you cannot access, right? And so that thesis is still kind of unproven. And this is where the base experiment of, okay, let's deploy an instance of synthetics, let people deposit eath. Let's see if any activity happens there. If there's no activity there, that is a really important piece of information. Now, why do it on base versus arbitrum? My reasoning is that arbitram is more valuable, right? Base is very new and, you know, it's a low-stakes

Starting point is 00:39:14 experiment. If you do it on an arbitram and you get it wrong and, you know, you launch this ETH thing and people don't want to use ETH or liquidity is bad, you kind of get one shot at it. We waited a long time to go to Arbitrum, and I want us to get it right when we go there. And so let's do it on base. Let's see if it works. If it kind of works, then, okay, let's do it on arbitrament. Arbiturama's production base is an experiment. 100%.

Starting point is 00:39:35 Exactly. Yeah. And so, you know, again, it's like if there are distinct users on these chains, then you need to be on every chain. Right. If you believe, as DYDX does, that it doesn't matter what chain people prefer, they will come to your chain if you are the best solution, then that's another approach. And that has been the approach that DYDX has taken and it's gone very well for them so far.

Starting point is 00:39:56 There is a third option, though, and this is the Infinex option, which is abstract away the chains completely. Right. Right. Use an execution environment, but you don't even need to talk to users about it, but go, like, multiple steps further than DYDX, where you're abstracting away the fact that there is even a chain. You're just giving people an application, a trading application. And you're giving them what they're used to using on centralized exchanges,

Starting point is 00:40:23 username's passwords, you know, no bridging. USDT, USDC is collateral, you know, not signing transactions, a database like performant environment where it feels like you're inside the app and every time you move or touch something, something happens, right? It's not this kind of slow, clunky, high latency thing. And if that works, then you can be on whichever execution environment you want because all of your users are just going to be signing into front end with a username or password and not caring. You can switch execution environments out arbitrarily and they'll never notice. execution environments as blockchains.

Starting point is 00:40:57 OOP stack is an execution. Obitraming. Exactly. Yeah. So like if InFinex is working, let's say, right? There's obviously there's the demand side and the supply side. Okay. So at the moment, the supply side of liquidity is coming from optimism, right?

Starting point is 00:41:11 And the demand side is coming from people on optimism. You build Infinex and you abstract that away. The demand side's coming from centralized exchanges. It's coming from Binance and ByBid and OECS and all of those guys, right? And so now you've solved the demand side by building something that is, feature parity with centralized exchanges, right? Maybe on the supply side, the liquidity is not actually there. Maybe there's not enough liquidity on optimism and maybe there would be more liquidity on arbitram. You can actually switch out those execution environments and just move or

Starting point is 00:41:39 combine them, but you're abstracting it away. The user does not care or even know that sometimes their orders routed to arbitram, sometimes it's routed to optimism, sometimes it's routed to Salana. It's irrelevant to them. They just want to know that they get, you know, fast execution and deep liquidity. That's it. Portfolio is your one-stop shop to manage your crypto assets and to tap into Defi all in one place. And the most important part of that experience, buying crypto, obviously. MetaMask portfolio's buy feature enables you to purchase crypto easily without going through centralized exchanges.

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Starting point is 00:44:36 And just allowing simplicity to go into the actual end users who's supplying the orders. It reminds me a little bit of like the whole Uniswap X intent model where people are just come to Uniswap X or Kalswap and say, hey, I have this desire. I have this intent. And then the free market like bids for that. And so they would come, like the model I'm seeing with Infinex is that people are just coming in, signing in, depositing their collateral and say, hey, I want to do these things. And then more sophisticated back-end providers do the best to optimize their route between Arbitrum, whatever deployment of synthetics, arbitram optimism, wherever base. And then they just serve the best price possible to the user and they take the cut.

Starting point is 00:45:15 This sounds like a design pattern that I think is going to be important for producing composability for all chains. It is another tool in the tool belt, if you will. Absolutely. And, you know, again, it might be that something like Infinex ends up routing to multiple different liquidity pools, right? And that there are multiple instances of synthetics where that goes. The thing that I think is interesting is my sense is that liquidity providers are a different group of people to end users, right? Or even traders, right? I think I have, you know, I kind of believe in this thesis that there are traders on arbitram that don't trade or won't trade on optimism, right? I don't think the same thing is necessarily true of liquidity providers. I think liquidity providers

Starting point is 00:45:59 are a bit more mercenary. They just want yield, right? And, you know, they'll move arbitrarily between different chains to get the best yield. And so on the supply side, I think if Infinex is routing orders to Avalanche and it's working and as a liquidity provider, it's really high yield, I think people will move there. And they'll just be like, well, I'm a liquidity provider. I'm just looking for the best yield. That's all I care about. I'm not ideological. I'm fine. Well, because if nine, liquidity providers like, I'm not touching Avalanche. Well, then it just increases the yield for the one that does. Yeah, exactly.

Starting point is 00:46:30 And if for some reason it makes sense that that is the place to route the orders, right? Then, you know, it's this forcing function where everyone kind of has to go there, right? And so, you know, on the user side, you just abstract away, you know, Binance doesn't tell you which database engine it's using, right? It doesn't tell you which cloud computing, you know, if you really love GCP and you hate at the AWS, like there's no finance option for you to choose that, right? Like you just turn up to finance,

Starting point is 00:46:58 username, password. They could switch out, you know, the, like, computing provider and you would never even know. So there's some other tools in the tool belt that I want to bring up. Optimism's idea about their super chain and homogenous block space is their strategy.

Starting point is 00:47:14 It's a little bit of hand waviness. There's a little bit of unknowns, but I will accept on faith that once we get to homogenous block space, we have some other things that we can then access and it's an inter-of-process. So maybe there's some solutions there. And then there's also this concept

Starting point is 00:47:29 of shared sequencing and shared execution, espresso systems. And then, like, you mix that with a roll-up as a service provider like Conduit, for example. So Conduit runs OP stack chains. They just opened up their support for Arbitrum. And all of a sudden, like, say, for example, Conduit or Espresso shared sequencing,

Starting point is 00:47:48 they just work together. It's that transactions on Arbitrum can be matched and balanced with transactions on optimism before settling down to the Ethereum layer one, all of a sudden we get even more composability cross-chain than what we had previously. And maybe that's too far down the line for what synthetics is putting in practice today for solving the problems today. But are these solutions on your radar and what do you think about them? They are.

Starting point is 00:48:13 They're on our radar. And, you know, there's, if I put my Infinex hat on or I put my synthetics hat on, this two kind of different approaches, right? Or thought processes, I guess, that are going on here. You know, with my Infinex hat on, I sort of say, it doesn't really matter, right? Like, it really doesn't matter about any of these things because the allegiance of a user in Web2 world is not to the execution environment or the network, right? It is to the brand of the application that they like to use, right? They feel comfortable with it or whatever. You know, if someone likes Robin Hood, they don't care if the order is, I mean, they care a little bit that it's

Starting point is 00:48:54 being routed to sit down. We care now. There's a payment for order flow issue, right? But like, fundamentally, the average Robin Hood user does not care whether it's Ken Griffin getting their orders routed to them or, you know, some other guy, right? Like, they don't really care. They just want to make sure that they don't pay anything to trade and, you know, that the execution price is reasonable-ish, right?

Starting point is 00:49:15 And even that, they don't care about that much, right? They care about the Robin Hood app. They care about the features. If you change the color of the confetti when you're going, you know, that they're going to care about. They're like, whoa, whoa, blue confetti, right? Like, don't change it from blue to white. So, you know, what users actually care about is the user experience. And it's the allegiance to the brand.

Starting point is 00:49:33 It's the allegiance to the look and feel of the app and all of that stuff, right? The execution environment or where the orders are routed or whatever is not that relevant. And so when I put my Infinex hat on, I say all of this stuff that we're, you know, you know, getting caught up in arbitram versus optimism versus, you know, whatever may get abstracted away. Right. Right. And the question is, well, why have we not gone there before? Like, why now? Right. And I think that there's a couple of reasons. One, we didn't have the infrastructure in place. Like, the infrastructure was not sort of good enough to compete with CFI, right? You know, whether it's on the lending front or, you know, OTC desks or, you know, spot trade.

Starting point is 00:50:17 Herbstrating, whatever it is, right? We've always had this competition between decentralized and centralized. And centralized has always dominated because centralized has just been better and easier and simpler and not safer, but, you know, all of those other things. And unfortunately, safeness is on the low end of the stack, right? And so, you know, if we get to a point where we have an aggregator or this like DeFi super app like Infinex, where it's just choosing to integrate the best liquidity pools and the user doesn't care, they just, care that they're getting the best experience, then all of this other stuff may disappear. Right.

Starting point is 00:50:53 Then I put my hit. But it is solving it with centralization, though. Yeah, to an extent. Minimum centralization. Yeah, to an extent, right? So, you know, how is it solving it? It's saying we're creating a brand that will kind of overlay itself over all of these different things, right?

Starting point is 00:51:12 And that brand will have users that will have some, you know, level of allegiance to the brand, right? And they will be used to the flows. They'll have an account there. All their assets will be there. And, you know, they will just want to be able to use whatever is there. Now, there is a problem with that. Like, if you take that to a logical conclusion, all of a sudden, the market power that, you know, even forget about Infinex, if any app were to have that level of market power where it is more powerful. than the underlying execution environments,

Starting point is 00:51:44 then you, you know, get into a situation where, like, what if, you know, that app decides to route orders here over there because of some weird preference? A synthetic competitor. Exactly. All of that stuff, right? You know, like, you suddenly there's conflicts. Not even a synthetic competitor, but Infinex just forks synthetics with this new token. Yes.

Starting point is 00:52:05 And it's like, hey, it's us now. We're doing this thing, right? So here's a great example, right? Let's say we get into a situation where we want to use a lending. protocol for margining, right, rather than building our own margining system, right? So Infinex says, okay, you know, Binance spent two years building their, I mean, FTX, but spent, you know, a few years building their margining system. And, you know, by all accounts, it was a good margining system. It had some fatal flaws, you know, at a deep level. But like, the margining system

Starting point is 00:52:32 was good. People liked it. Users liked it, right? You could margin with a bunch of different things. You had cross margin. It was pretty good. But they had to build it bespoke, right? What if we just use compound or abbe, right? Now, okay, let's say we have a lot of market power, right, in the sense that we can route a lot of borrow, right, into one or both of those protocols, right? And so we say, okay, well, if we want to route orders to Avey, we need to get some kind of fee cut from this, right?

Starting point is 00:52:59 The same way that you would expect in any cut, you know, right? So who's going to give us the most fees, right? And then the next step is, okay, we're still not getting enough fees. What if we just fork it? If there's enough market power there, You could get to a point, like, and I've always been so anti this like fear of forks, right? Like, oh, don't do open source because, you know, people will fork you because we've never had anything with that much market power.

Starting point is 00:53:20 But it could very well get to a point where given the state that we're in now for next cycle, if, you know, a defy aggregator of some kind has enough power. I mean, one inch kind of got there for a while. Yeah, yeah. Where like if one inch decided to route things to your private pools, like you remember there those private pools, right? You would make a lot of money. If it didn't, you wouldn't.

Starting point is 00:53:40 And so you have to imagine that like that needs to be controlled, you know, that's a very dangerous thing in terms of concentration of market power. Yeah. The, the centralized front end should not be top heavy with the power and strength of the foundation of the underlying protocol. But that's the reality in most of the world. Right. Right. The front end is the valuable thing. Right.

Starting point is 00:54:02 Right. And, you know, like this conversations happened, you know, I can't remember what the specific phrasing was. I think it was like Chris Berniske, you know, talking about, um, uh, fat protocols or something like that. Yeah, the fat protocol thesis, right? Um, you know, well, maybe that could flip it on its head, right? Whereas it's actually the fat UI thesis, right? Like the UI is, right?

Starting point is 00:54:24 Like the U.S. So Ethereum. Yep. Not like, I didn't make a statement about the app layer. And then like, who knows about the centralization. Yeah. So, you know, there's a whole bunch of things that could play out. Like, we're still so early.

Starting point is 00:54:37 And these things are still so. unsolved. And so it's really not clear what happens there. But, you know, we're already seeing things that I hadn't even contemplated in terms of like, you know, this UI layer, right? Because it had never been important in synthetics. Syntetics was always infrastructure, right? We had too many infrastructure problems to worry about the UI layer. It was an afterthought. All of a sudden, we're now thinking about this and thinking, well, hey, there's a lot of leverage here. If you can get this right, all of a sudden it's like, well, let's just for CAVE. We've got, because It's always been the demand side, right?

Starting point is 00:55:11 Like the supply side, we've been so focused on it, we haven't been able to get the demand side. If you control the demand, you have a lot of power over the supply. Especially in crypto, my God. Whoever's got demand has it all. Exactly. Yeah, yeah, yeah, yeah. Well, okay, so thinking about this idea of like a top heavy, powerful app, the kind of the solutions I was talking about, like cross-change execution via shared sequencing

Starting point is 00:55:34 is a check on that power. Yep. Like one of the goals I think we should all aspire to in cryptop. is like we want to get everyone on chain. We want a billion people on chain. Infinex, you know, sorry, Kane, doesn't actually solve that problem. Yes. It actually is intercepting that problem.

Starting point is 00:55:47 Yes. And so putting on your synthetics cap and your on-chain maxi cap, then we should be hopeful about the power of cross-chain shared execution because that is a powerful tool of making, you know, in a synthetics instance one, composable with synthetics instance two. Yeah. So I think where the disaggregation, potentially happens, right? So we might have an aggregation period where these like

Starting point is 00:56:13 UI layer solutions, you know, that are abstracting away complexity and, you know, making the user experience and onboarding experience better, right? Aggregate a lot of power, right? The disaggregation comes from us learning the lesson of this abstraction of complexity is really powerful. At the moment, it's just an idea, right? Like people might not even care. Like being able to sign in with the username and password might not be that beneficial. right we're seeing in friend tech that it's kind of beneficial right like that's a good early indicator that like this is actually useful because there's a whole bunch of other things that are horrendous about that app and yet the onboarding process and like i love it right i'm on there like i you know but like it fucking barely works right and yet you know people are onboarding it's like there's some things that are working some things that are not right so the interesting thing for me is okay you know waves of aggregation and disaggregation and so if it turns out that this idea of the onboarding process being streamlined and, you know, abstracting the signing process away and all of this stuff becomes very powerful,

Starting point is 00:57:15 it's easy for people to replicate that. Like, Infinex is still going to be open source. You can fork Infinex and go and do it a different way, right? And so, you know, like, yes, the aggregation could be problematic for a while, but if there's too much power aggregated in a two, you know, concentrated group of, you know, whatever controllers, token holders, whatever, whatever the governance process is, the market will kind of disaggregate it, right? At least in crypto because everything's open source.

Starting point is 00:57:44 And it's like, oh, that's the tactic that you need to use, right? You need to remove the signing and you need to have account recovery and you need do all this stuff. And then that'll become table stakes. And everyone will start doing it and then, you know, it'll kind of spread back out again. Okay. All right. So I feel like we've done a pretty good job like laying in the landscape of the problem

Starting point is 00:57:59 statement and talking about potential solutions, where to look for solutions. Where are you focused? Like, where are you, what kind of solution area are you focused on the most, are you most optimistic about to solving some of these problems? Or where is synthetics specifically going towards? Yeah. So I think synthetics is looking at how do we do kind of one and two, right, as we talked about. Can you define one and two again?

Starting point is 00:58:19 Yeah. So one and two would be like, how do we get on as many networks as possible and solve the governance problem? Okay. So like deploy distinct instances and let's test out if that even works, right? And if it works, then just solve number two, which is like the shared governance fee movement sort of thing, right? Importantly allowing the free market to balance doing the job of the free. The supply side liquidity, exactly. Yeah, yeah.

Starting point is 00:58:42 Like balance the liquidity by the market. Right. And then figure out a way to stitch together that, you know, fee sharing process or whatever, right? Don't worry about fungibility. Don't worry about cross-chain communication. Don't worry about unified liquidity. Let the liquidity flow where it flows and then figure out a plan for fees, right? Figure out a plan for governance and how you modify the thing.

Starting point is 00:59:02 That's the, I think, short-term synthetics plan. Okay. short-term synthetics plan do you have any sort of like semblance of time around this well i mean there's nothing really stopping us from deploying to base right right like it's really about getting consensus within the community about that um you know so i would imagine that deploying to base at this point given how close perps v3 is should probably wait for perps v3 um the same thing that infinex is doing you know infinex could deploy perps v2 but then you know the contracts change massively So we were just waiting for Perps v3.

Starting point is 00:59:36 Purps v3, the last I heard, is in audit. Whatever that means, you know, Sunthetics, right? You know, so, like, my guess is that Perps v3 will be deployed probably in, like, October or maybe November. Okay. And once that's done, then it makes sense to test out this base, you know, thesis, run the base experiment.

Starting point is 00:59:56 Cool. Well, just like neck and neck with actual, with optimism, the people that you have teamed up with such a long time, actually straightforwardly pushing the frontier into the unknown. And it's always one thing I've admired about synthetics and then what you've been doing, like taking on the hard problems head on. Are there any other parts of this conversation that I haven't unpacked yet that are worth pulling out about synthetics or composability or anything else are you guys working on?

Starting point is 01:00:20 I think, you know, we do have this other component in V3, which is permissionlessness, right? So, you know, synthetics has always been a permission liquidity protocol in the sense that governance controls what can be deployed, right? You can't deploy a novel instrument. No one can turn up and, you know, it's not an open protocol and sense that someone can deploy some new asset, right? You're talking about the new output of synths, like a new synth. Yeah, exactly.

Starting point is 01:00:46 I would like to create a synth around some particular asset. Some novel, you know, like a volatility of Bitcoin index, right? Okay. So, you know, you want to like have the BTC VIX. Okay, cool. No. Right. Great.

Starting point is 01:01:00 Go to UMA. Right. like that really like go to you and build it there right or you know whatever um and and so now with v3 we're going to be opening up um maybe maybe not this year but probably early next year uh the ability for someone to turn up and do the financial engineering without needing to do the token engineering if that makes sense right so you can turn it up and you can say hey i've got this article um you know this is the way that the price feed works and i want to pump it in and get liquidity um and i think that really kind of shifts the game in terms of like the ability to do novel financial engineering.

Starting point is 01:01:34 It doesn't solve any of these other problems we talked about, but, you know, it maybe makes them worse on some level because then you have like different instruments that exist on different chains and, you know, it's like, well, I want the VTC VIX. Oh, no, sorry, that's only on Arbiter. Because David's right now. You got to go to a different store for that one. Yeah. So, yeah, you know, it really puts a bit of pressure, right, when you have permissionlessness.

Starting point is 01:01:53 Because then it's like, you could have some protocols that decide to just deploy on synthetics V3 on a specific chain and people are like, I heard that you could trade this thing and it's like, yes, but. And so, you know, being able to abstract that away and saying, you know, okay, well, on arbitral, we've got these weird instances on base, we've got these things. And then on optimism, we've got these separate other things. And finding a way for users to be able to like grok that is, you know, going to be challenging. Right.

Starting point is 01:02:20 So that's another level of complexity that we need to deal with, unfortunately. Oh, man. Complexity. Always making jobs. Yeah, right. Right. What about just even outside the stentetics ecosystem, broader crypto, Ethereum, 2023 regulation. Is there anything else floating around in your head? Yeah. I mean, look, regulations and regulators, I think, are pretty fucked at this point. Like, there's no other way to put it. Take the L's, you know, like, it's at a point of sort of adversarial attacks on crypto that I really didn't think that we would get to. Like, I wanted to believe that.

Starting point is 01:02:56 and maybe this is a bit naive, right? But like, I wanted to believe that the regulators genuinely were operating in good faith. And I actually think we've crossed a line where they're no longer operating in good faith. It's actually a pitched battle and they're just trying to win. And you're talking beyond Gensler. Oh, yeah, like the CFTC is now, you know, like it's way beyond that, right? And it's, you know, even into Congress and, you know, different things come out on any given day about the agendas that various people have.

Starting point is 01:03:23 And crypto has become, unfortunately, a partisan issue. as well, right? So you've got partisanship, you've got point scoring, you've got, you know, adversarial regulators. Like the U.S. is not in a great place. And I love America. You know, I've spent half my life here. But, you know, it's not amazing. That said, like, if there's one industry that you don't want to become adversarial with, it's crypto. It's the industry that's built inside of an adversarial environment. We've been doing this for much longer than you guys and we will absolutely not lose that battle, right? So, you know, I think, again, there was an assumption for a long time that it was misguided, but in good faith,

Starting point is 01:04:02 acting. And now it's become more obvious that it's actually not misguided. It's not in good faith. It's a very clear attack on what we're trying to build, which is sad because, you know, my genuine view is that crypto is a new enabling technology like the internet that will make the world a better place. And of course, it can be used for bad things and it can be used for good things, but like on a fundamental level, it is a new technology that will enable new, innovative solutions to existing problems that will make the world a better place. It's just unequivocal in my mind, right? So, okay, so are you saying that like maybe in the era of 2021, we were harmonious-ish with the regulators playing by the rules, good faith regulation, and then swap to 2022, 2023,

Starting point is 01:04:45 all of a sudden it's no longer good faith. It's like now it's a game of chess, now people playing dirty and you're saying that that environment is actually favoring to crypto because for sure yeah like you know i think we're kind of sci-opsed into like being like oh i think you know we just need to educate them right right so you spend a bunch of time educating people that did not want to be educated actually knew what they were doing and we're doing it in a very deliberate fashion and we were just wasting our time trying to educate them right um you know it's the kind of now you know then like then they fight you sort of thing right we're in the then they fight you first they psyops you and now they're

Starting point is 01:05:20 We forgot the sci-ops. Yeah, we forgot the sci-ops part of that, right? But, you know, like, I think we were kind of sci-ops, right? Like, we were like, no, no, no. Like, you know, like, I really believe in the American system, right? Like, I genuinely believe that the American system is a market-driven, very powerful mechanism for improving the world and has been for a really long time. And so, you know, like, I was kind of si-ups to myself and being like, you know,

Starting point is 01:05:46 people are not anti-innovation in America, right? Like, you know, like you've got some people that are maybe conservative, right? And who are like, oh, let's, you know, de-risk this. Let's not do something rash. Let's slow it down. But, you know, the idea that someone is just against innovation in principle, that's a weird, it's a bit foreign. Never been seen in America. Yeah, it's kind of strange, right?

Starting point is 01:06:08 And so, you know, the idea that you have regulators and, you know, people running these regulatory bodies that are just absolutely trying to stifle innovation, that's a dark place to be in, right? But at the same time, the nice thing about crypto in my mind is that if you would design a system, right, the fact that we've been, you know, able to do regulatory arbitrage to, you know, such a powerful extent, if you would design a system that is resistant to this exact type of thing, it would be crypto. Right. Right. So we have the tools right. Right. And we know how to use them. We are the tools.

Starting point is 01:06:40 We are the tools. Like the tools to resist this kind of overreach are, it's crypto, right? And so, unfortunately, you know, they picked the wrong fight. Right. That's the reality, right? They picked the wrong fight. We didn't know we're in a fight. Now we do.

Starting point is 01:06:54 Right. And it's like, okay, well, unfortunately, this is going to go pretty badly for you now. And so, you know, that's just the situation that we're in. And, you know, I wish that it weren't. And, you know, again, it's become a partisan issue. And maybe that shifts and, you know, the battle lines, you know, kind of shift. But at the moment, my approach is that we need to actually, you know, be adversarial in it. Clearly adversarial.

Starting point is 01:07:17 Bullish. Yeah. Bullish. Yeah. Well, the idea just that crypto, who is full of just like relentless innovators, builders who are scrappy, like absolutely chewing glass as an industry going up against like status regulators who are just like, I know where I'm picking my, my chest. Like you wouldn't want to take on, you know, like the valley, right?

Starting point is 01:07:39 Like, you know, you wouldn't want to say like if you're going to, if you're going to say, okay, I'm going to go pick a group of people like startup founders, right? you know, in Silicon Valley, like those are the people I'm going to go after. That's a dumb thing to do. They're insane. Like you're talking about you're taking on insane people. Then crypto founders, it's like an order magnitude beyond that, right? Like you, yeah, you might as well take on a zombie horde.

Starting point is 01:08:00 It's going to go just about as well for you. So, yeah, that's my kind of take at the moment. And, you know, as I said, it's a bit unfortunate that we're here. But it's nice at least to know that this is the situation we're in, right? And really have a clear-eyed view about, okay, if this is going to be the next five years of how we play this out, then let's play it out. Well, Kane, this has been great.

Starting point is 01:08:19 Is there any message to any of the bankless listeners, the builders out there pointing towards synthetics or infanics or any part of that ecosystem or even as broadly, any message you have for them? Just broadly, I think, keep building, right? You know, the bare market, noise floor has dropped. It's really much easy to get attention for novel, valuable solutions,

Starting point is 01:08:37 you know, and innovative designs of systems. Like, this is the time to build those things. This is the time to get momentum. And, you know, I'm already seeing a ton of interesting stuff. Like, every day, you know, you just, the vibe in terms of building is amazing at the moment. It's, which is kind of a bottom signal, unfortunately, right? Like, the peak of when you feel like, wow, we're really getting stuff done and making progress is like, unfortunately, that's the peak of the bottom and then it's going to get crazy again because the momentum, you know, starts to flip and then the

Starting point is 01:09:08 noise is there and, you know, you get all kinds of craziness. But it is what it is. I think we've got solid six to 12 months of building in front of us. And, you know, just keep building and keep grinding. Well, Kane, your commitment to grinding is admirable. You've been grinding since last, the prior bear market, through the bull market, and once again, through the bear. So I'm very glad to have you on the same team as I am, the crypto team, of course.

Starting point is 01:09:31 So thank you for coming over to my apartment and doing this podcast with me. It's been fantastic. Yeah, thank you. Thanks for having me. Banko station, you guys know the deal. Crypto is risky. the cross-chain composability world. It's a fog of war, yet we are going into that frontier,

Starting point is 01:09:43 nonetheless. We are glad you are with us on the bankless journey. Thanks a lot.

Bankless - Synthetix: A New Hope with Kain Warwick

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