Bankless - UniswapX Revealed: A Game-Changer for DeFi

Starting point is 00:00:00 When I think about decentralized finance and what we're trying to achieve, right, we can't just kind of like iterate in our like small world. Like we have to like kind of innovate and push beyond it. I'm extremely bullish AMMs at like a market structure. But I think that there are also other market structures that like could, you know, exist in the future. And then I think we also want to discover them and have them be part of the Uniswop ecosystem. Biennue a bankless.

Starting point is 00:00:22 Bankless Nation is that time of year again. ETHCC, the Ethereum Community Conference in Paris, France. All the teams, all the projects, all the protocols, save some of their biggest announcements for ETHCC, except for the ones saving it for permissionless, of course. You might remember last year, ETHC was marked by the time in which three teams all had the first ZKEVM. Yeah, that was a year ago at ECCC. And today, the day I'm recording this, Sunday, the day before ETHC begins, we already have a massive release out of Uniswap Labs, a brand new protocol called Uniswop X, a new half of uniswap that complements the rest of the Uniswap

Starting point is 00:01:01 protocol, the yin to the yang of Uniswops v1 through 4, something brand new that fills in the picture of the Uniswap project. Seriously, the best way to describe this is that it's the other half of Uniswap. It's the half of Uniswap that is meant to make Uniswap the best place for swappers to swap tokens. Today on the show, we have Hayden Adams, the day before he gives his ETHCC main stage talk, releasing Uniswop X into the wild. What is Uniswap? swap x i'm glad you asked uniswap x is a protocol for competitive order execution in defy is a protocol that exists on top of uniswops one through four as well as all the other liquidity sources in defy that ensures that the market produces the best possible order execution for anyone looking to swap tokens

Starting point is 00:01:51 using uniswap x the idea behind uniswap x is that it maximally protects swappers ahead of MEV extractors ahead of arbitragers, ahead of frontrunners, to ensure that the average Joe, who just wants to swap some tokens, gets the best possible a deal that the market will allow for. In this episode with Hayden, we go under the hood of Uniswap X, what it is, how it works, and why it's needed. So you'll learn about Uniswap X and how it uses a Dutch auction to maximize swapper returns. How this Dutch auction mechanism also ensures that MEV is maximally retained by swappers. also how uniswap x massively reduces bridge risk and almost entirely abstracts the way bridging altogether freeing up capital to not have to be stuck inside of bridges where it's vulnerable

Starting point is 00:02:38 and also how uniswap x formalizes a new kind of player in the game of making trading and defy maximally efficient as a disclosure of course uniswap is a sponsor of bankless and banklist also does hold some unitokens which you can see all the details of as well as all of our other disclosures at banklist.com slash disclosures So let's go and get talking to Hayden Adams all about this new Uniswap X protocol. But first, we're going to talk about our preferred centralized exchange for crypto in 2023, Cracken, because you've got to get your Fiat Boomer Bucks into the world of crypto somehow. So use Cracken, again, our preferred exchange in 2020.

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Starting point is 00:05:01 Hayden, what's going on, man? How you doing? Bonjour. Great to be here. First time in Paris. And first time at ECCC. But, yeah, Uniswap, we are keep cranking out the hits. Been pretty busy, hard at work. And most recently, we announced Uniswap V4, which is new version of the Uniswop Protocol. call and currently being built in public.

Starting point is 00:05:24 And it basically makes it easier for people to create customized liquidity pools. We talked about this last time, hooks. And what you start to see is there's this thing called the routing problem. And as AMMs get more flexible and basically what happens is routing gets harder over time. And routing was already actually pretty hard. So today we have hundreds of thousands of tokens. We have four versions of the protocol. We have multiple chains.

Starting point is 00:05:53 We have other liquidity sources. And then you also start to think about things like MEV and tradeoffs between slippage and latency and, you know, best execution. And it starts to get really complicated. And definitely, you know, with UNSOPV-4 and hooks, it actually gets even, you know, one step more complicated. Right. And, you know, traditionally today, we've had a, we have our current like open source, we call it the auto-router. which optimizes routing across Uniswap v3, V2. And what we've been working on today,

Starting point is 00:06:26 I guess a long buildup, is what we call Uniswop X, which is a Dutch auction-based protocol for routing and aggregating liquidity. And we think it's really powerful, and we think it will help provide it basically, one improves prices, but also has a bunch of U.S. benefits, allows for gas free trading, you know, no slippage on failed transactions.

Starting point is 00:06:49 it starts to internalize some MEV and provides a bunch of other cool features. I don't know. Maybe I don't know if I say the other big one. We'll get to every single bit here. And for the bankless listeners out there that aren't familiar, ECC is the place where you announce things. This is where announcements comes to be. And like I said, this is the Sunday before.

Starting point is 00:07:09 So we're going to be seeing a slew of announcements coming out. And we're getting the first one here with Uniswap X, which is this new thing. This is the thing that Uniswap is announcing this thing called Uniswap. X. But I want to actually set more of the stage. And you did a good job, but I want to make sure that we are talking about the problem being addressed here. Uniswap is cool because every single token gets its own exchange. It gets its own pool. Same thing with Uniswop V2, V3 made it even more complex, if you will, with this concentrated liquidity. And then when we had you on not too long ago, like four weeks ago or something about Uniswap V4, that whole thing, Uniswap V4 was even more expressivity in Uniswap pools, more complexity and the really the big takeaway, I called it Uniswops, hook-centric roadmap to go in parallel with Ethereum's roll-up-centric roadmap, where Ethereum's doing this thing, where it's pushing complexity to the edges. It's like, hey, roll-ups, you do all the execution stuff, and we will just settle. And Uniswap's kind of doing something similar with its hooks and Uniswap v4. It's, hey, there's a world of expressivity and features and different ways of constructing a pool that we want to enable Uniswap pool builders, AMMs, to be able to build. And what you're, I think you're leading up to is like, that's all the great. We have as much expressivity as we need in Uniswap pools, except we're still left with a bunch

Starting point is 00:08:31 of complexity, even though it's been pushed to the margins and Uniswap as a base is simple. The complexity still exists. There's so many pools. Now pools are different. There are different standards of pools. And so Uniswap X is a solution to harness all of that complexity, would you say? Yeah, and I'd say also, you know, when I was on last time, we talked about different ways of achieving decentralization. And, you know, there's like the most pure form of decentralization is like automation.

Starting point is 00:08:59 And you should automate what you can automate with immutable smart contracts. And then the next level of, you know, achieving decentralization. And we talked about this more in the lens of governance, but the next level is just like incentivization and then markets. And if you have like a competitive market structure where people are incentivized to do what they should do, then that's like more decentralized. centralized and something that needs to be governed, which is like the third tier. And for that, you achieve that through just like greater distribution of governance rights. And so what we're talking about here is taking, you know, the routing, like, we've already talked about this in the context of the protocol, which is highly, highly decentralized.

Starting point is 00:09:33 And what we're trying to do is, you know, do that for the routing problem, which is, you know, you could, people tend to think about like AMMs as, you know, both like routing, like, both swapping and routing as well as liquidity provision, all, you know, bundled together. Routing, swapping, and liquidity provision. Three different things. Yeah. But like, or well, you know, swapping, you know, how do you route the swaps through liquidity? But people think of it as like, okay, you have the AMM and you try to find the best price through it. But I think, you know, you can start to unbundle them a bit, right?

Starting point is 00:10:06 Because like, you know, today most interfaces have like different strategies for how they route through pools, right? And, you know, there's various aggregators and they're trying to like, you know, find every possible liquidity source. There's a uniswap UI, which today basically just like has like, you know, tries discover across uniswap pools. And you know what we're trying to do here with Uniswap X is create a competitive marketplace for routing. All right.

Starting point is 00:10:31 It's almost a way of like decentralizing, achieving more efficiency through decentralization, right? Like the more people that can participate in finding the best routes, discovering the best routes, discovering the best pools, you know, the better, discovering all the different liquidity, you know, the better prices you can get. in the long run, if you can create a competitive marketplace. And so what we're trying to do with Uniswop X is create a competitive marketplace for, you know, routing across liquidity. And that liquidity can be on-chain, it can be off-chain.

Starting point is 00:10:58 But, yeah, that's essentially what we're trying to do here. Creating a competitive marketplace for routing. So with this explosion, like Uniswop, even, you know, its earliest days in V1, was an explosion of pools. The cool thing about Uniswap is you can list any token. And that only got furthered with Uniswap V2, V3, and V4. Now we have pools all over the place. And so the routing problem, maybe to define the routing problem, is that with all of these pools and all these different sources of liquidity,

Starting point is 00:11:24 getting the best price for your trade is a computational problem because there's so many pools out there. And so I think what you're trying to do with Uniswap X, a marketplace for competitive order routing, is you're just giving that up to the market and saying, hey, market, instead of this one, instead of the Uniswap router being the thing that manages all of that complexity, you're just giving it up to the marketplace

Starting point is 00:11:46 and allowing routers to come in and service that role to make sure that traders and swappers get the best liquidity, get the best offer. Yes, and I think the thing I'd add to that is that because we're doing this on a blockchain, it starts to touch on a bunch of other problems in complexity. We have, like, you know,

Starting point is 00:12:03 like you could do this in Tradfai, or like, you could, if you thought, think about purely in Tradfai terms and it's like just like optimizing, you know, routes, but we also deal with things like gas, and then we deal with things like the fact that validators exist and they get to choose the order of transactions within a given block.

Starting point is 00:12:19 And that starts to take us into what people call. I only found out recently that it was rebranded from minor extractable value to maximal extractable value. But then it takes you into like MEV territory, you know, gas optimizations and latency. And there's all these other things as well. Another thing is that like there's also, you know, another area of like price improvement is, you know, you know, batching, people talk about batching all the time. Like if people are trading in the same direction at the same time,

Starting point is 00:12:46 if you just like route it through a uniswap pool in the back, the uniswap pool, right, then like that's less optimal than like netting it all together. So by creating like a kind of a competitive marketplace for it, where people are competing in an auction, it basically forces people to, you know, find the most sophisticated strategies that, you know, offer the most price improvement. And so sometimes it might mean like, you know, executing multiple transactions at the same time.

Starting point is 00:13:11 And in that way, like, you know, you're saving some gas costs and you're also maybe internalizing some of the price improvement for swappers. But yeah, I mean, look, the real goal is to like, you know, deliver value to users at the end of the day. And so, and then the other thing I'll mention is that, like, again, because we're on blockchain,

Starting point is 00:13:28 there's a bunch of like UX implications of, you know, like just like gas, right? So with U-Swop-X orders are off-chain signatures that are then, you know, so rather than like signing transactions that are sent directly to the chain, usually assign off-chain signatures that express their intent, as is a word of the moment in crypto. And that is sort of an auction, a price decaying auction.

Starting point is 00:13:54 And then people are competing, as soon as the price hits a point where people are willing to fill it, the fillers, a new class participant, are submitting it to the chain. And those fillers look similar to the block builders of today. And likely will be a lot of overlap, or similar to the trading firms and arbitrageers. And because orders just start off as off-chain signatures, you also get benefits. Like if your transaction is going to fail, it never gets submitted.

Starting point is 00:14:22 And also just like being able to abstract away gas for users. So if I want to swap USDC for die, I don't want to think about ETH as an input. Today when you swap U.S.E for a die, your ETH balance goes down a little bit. Here, you know, with Unswap X, you just sign a message. Someone else pays the ETH, and that's reflected in the price that you get. So there's a bunch of other benefits as well. but yeah, there is the first thing you said as well. Yeah, yeah.

Starting point is 00:14:44 So there's a lot of things under the hood there that I want to unpack, like the gas, the M-A-V, all of that kind of stuff. But really just to start at the very, very top, how is this different, just to make sure that we're setting the table appropriately, how is this different from, like, a decks aggregator or some of the other liquidity optimizer services

Starting point is 00:15:02 that are out there? Like, if we take a peek under the hood, how should people think about this in its new form? Yeah, I say that, like, you know, for most decks aggregators and photos where there is prior work And there's other, like, teams that are attempting to do things that, like, are categorically similar. But, like, in terms of, like, the traditional model for a dex aggregator, you know, what people are doing is just, like, you have, like, a single team that is, like, integrating liquidity sources one by one. Right.

Starting point is 00:15:26 And, you know, in doing that, like, you're hoping to get as much liquidity coverage as possible. That was, like, the kind of traditional dex aggregator. It's definitely, like, you know, various experiments, you know, like, like, Caswop infusion and stuff that, like, get into close your territory to what we're doing with Unstop X. But here, rather than trying to manually find all the liquidity sources, here we're basically saying anyone can do that, and they're competing against each other. And so it's a marketplace. It's a little bit more meta than a Dex aggregator.

Starting point is 00:15:53 So a Dex aggregator. That was a name on the, there was a Unisot meta, was one name we considered. But naming things with hard. And I think meta kind of, I think meta kind of ruined. Meta is now taken. That box has been checked, sadly. So, okay, so a Dex aggregator provides a singular solution to getting the best liquidity. and that is their solution.

Starting point is 00:16:13 And what you're saying is in order to improve that product, the teams behind every Dex aggregator needs to serially, manually, one by one, integrate with liquidity pools and in order to improve their product. And what you're saying is Uniswap X is not that. It is actually a place for all of those solutions to compete in the marketplace. Yeah.

Starting point is 00:16:31 And maybe at this point, complexity around Uniswap is so large that knowing the correct way of producing the best outcome is perhaps impossible, which is why you need to leave it up. to the free market. Yeah, that's definitely it. And there's also like other liquidity sources that can start to be integrated there as

Starting point is 00:16:47 well. I'd also add that like signed off-chain order based auctions are like a really powerful primitive. Let's dive down into that. So like the current, if I go to Uniswap, I sign a transaction, I broadcast it to Ethereum in 12 to 24 seconds. It gets included in the blockchain. That is the current Uniswap user experience that people are used to. With Uniswap X, we have this new thing.

Starting point is 00:17:08 Can you unpack that a little bit? Yeah, I think that something that's funny is that actually, as a every order, like, you already have an auction happening every transaction, right? Because there's like an auction for block space. But people are, like, competing to like, you know, there's like, I'd say that, like, one thing that's interesting is that if you imagine there's like a price curve and then there's a gas price curve. And today, like, whether or not your order gets included is based purely on the gas price

Starting point is 00:17:29 curve, not the asset price curve. And so, like, this combines everything. Like, you just have the price curve. Like, the nice thing is it kind of, like, combines, like, the gas and the price into a single thing, which is part of it. But yeah, like, users sign off-chain orders. They're broadcast, and they can be broadcast in a variety of ways. Signing off-chain orders as opposed to signing a transaction.

Starting point is 00:17:50 People have talked about these for a long time, like meta-transactions or sponsored transactions. It's like a similar category of things, but we're like bundling, you know, the gas auction of getting included in a block with the price auction of trying to optimize your price at the same time. And so that, you know, there's like a nice efficiency thing there where it's something. Sometimes, for example, in the past, and it definitely things improved a lot with 1159, EIP 1159, but sometimes in the past, for example, like, you know, the gap, like, your transaction would wait until, like, the gas dropped a significant amount to get included, but in that time, the token that you were selling also dropped. And so it would have been better for you to pay more gas sooner, but your transaction has no

Starting point is 00:18:27 awareness of, like, there's no, like, and that's where when people talk about, like, M-E-V awareness, like, if the, you know, if the fee that you're paying has no awareness of the, of the transaction that you're doing, then you're, like, really not optimizing. And so, part of this is around that. There's also just, like, a gas. Like, there's, like, a UX benefit. Like, people don't like thinking about gas.

Starting point is 00:18:47 You know, when I'm trading, you know, USC for dye, I just don't want to think about E. Right. And it's confusing. And that's something that confuses users a lot. I think something that maybe makes Uniswap a little bit unique in, not totally unique, but, like, somewhat unique in, like, how we are able to develop

Starting point is 00:19:03 and design things is we just have a lot of users and we hear a lot from them. and some of how we approach solving problems, we're like, okay, like, what is holding us back today? Like, why, what are our users struggling with right now? And that part of what, like, led to us creating a wallet is our users were struggling with wallet UX. And, you know, it's part of what led to some of our design decisions

Starting point is 00:19:21 here is it's like, you know, it's just like, how do we continue to, you know, push things forward. I want to drill down on this off-chain order thing just a little bit more because I think it's a great microcosm for the solutions being, put forth by Unswap X as a whole to begin with. So in Uniswap in its current form, like I said, I sign a transaction, I broadcast that transaction. The gas fee that I pay is hardcoded into that transaction and that is independent from the trade that I'm making. And so these are two different

Starting point is 00:19:53 variables that are not talking to each other and can produce suboptimal results because maybe like you said, the token moves against me in the time that I tried to save $2 of gas. I lost $15 off my trade. Exactly. With assigning an off-chain order, which is signing a transaction, but not broadcasting it and just leaving it for somebody, a filler, a taker to take and fulfill that, they are allowed to combine the computation between optimizing for gas fees and optimizing for the actual swap.

Starting point is 00:20:22 Yeah. And so they take that complexity and do that computation to produce the best outcome. And because it was left off-chain, it was assigned an off-chain order, some sort of off-chain service provider, some filler, who's managing this order routing and all the other complexity, they're able to manage the complexity between the gas and the swap to produce a better outcome for a user. And that's just like one piece of many pieces of combined complexity that allows for a better swapping experience. For sure, something I'll add is that like, that might be like, oh, there's an off-chance server. Like, like, what does that mean for

Starting point is 00:20:55 decentralization? But just, I think it's like worth noting that like today, the way it works is it's not like, it's not actually, there's no like magic like user signs that goes straight the chain right there's like we have like mempools we have block builders we have like infura we have all these things in between and what we're trying to do is say like let's optimize what in between to like you know optimize for the best outcomes for users because today like you know mv you know block builders aren't optimizing to give users the most money they're optimizing to take the most money for themselves and and often and actually you know funny enough a lot of that money is going to eat holders through efficient m eavee auctions but so actually eath holders are making a lot of that profit but we you know

Starting point is 00:21:32 ultimately want to give a lot of that value back to swappers. I know we like Eath, but yeah. We also like UX and value, value retention by end users, yeah. I also mentioned that like, you know, I mentioned like off-chain orders, like signed off-chain orders as like a general permanent. Like, I think something that's like really unpowerful with Unswap X is it actually opens up each world for like cross-chain swapping as well.

Starting point is 00:21:53 So, you know, today, what we're launching a, or today is, it depends on when this gets... Hopefully on Monday. Yeah, Monday. Monday, the 17th. United States time. July 17th, something like that. The, you know, there's going to be like an opt-in beta.

Starting point is 00:22:10 People can sign up to, or people can like opt-in in the UI to start having some small percentage of their orders route to this. We're starting small. We're, you know, it's only for certain pairs, for certain trade sizes, et cetera. And it's going to, you know, so that we can continue to like give time for more fillers to come into the ecosystem and continue optimizing how we parameterize the system. But, you know, starting to it. Today we'll have a version that's just on main net on Ethereum.

Starting point is 00:22:35 But in the long run, we can really make this cross-chain, and you can sign orders that are, you know, this method of signed off-chain orders is like a really powerful and expressive and allows for, you know, really good user experience and efficient cross-chain swapping as well. And so, you know, not today, but maybe like hopefully later in this year, we'll see like cross-chain trading, and that will also be really cool. I want to try and define the landscape of what you,

Starting point is 00:23:01 uniswap is now because we have on chain on Ethereum and the layer two's we have uniswops one through four which are amms and then now we also have uniswap x which is an order routing protocol it's another protocol and so this is a new protocol this is not an a mm this is actually something completely new compared to all the uniswops one through four this is not a uniswap five this is something completely different this is a parallel and complementary parallel and complementary like The pieces fit really, really well together. But I really want to kind of carve out what the definition is of Uniswap X. I'm going to do my best, and you can correct me because I'm only get so far.

Starting point is 00:23:40 Uniswap X is a protocol, an open-ended protocol, for service providers, fillers, trade, executors to come in fulfill the best trade according to the parameters of a swapper. So a swapper comes to Uniswop X, and they say, hey, I want to do something. and uniswap X puts that into a package that fillers can all compete on. And so it's like a protocol. What do protocols do? They bundle things and easy to manage packages of information so that other service providers, fillers,

Starting point is 00:24:13 liquidity providers, whatever in the Ethereum ecosystem can all come and compete on that vector of providing that one swapper the best swap possible. And this is, again, complementary with uniswops one through four, but is so completely different protocols. call, correct? Yeah, I mean, look, yeah, you could start to think of like AMMs as ways of creating

Starting point is 00:24:33 liquidity, you know, building on top of liquidity as a building block, right? There's like, you know, on-chain integrations, and it's just a really cool, expressive, an efficient on-chain way of providing liquidity. But I'd say that like naive routing solutions through AMMs in the long term are not going to make it, like you kind of need your routing solutions to be aware of things like MEV, aware of, you know, kind of more expressive in user intents. And so you can think of this as like, we already have a routing layer.

Starting point is 00:25:01 We already have this thing we call the auto router. We also have this thing we call client-side routing. So we have a vert, like in our web app today, you can actually toggle between two types of routing. I don't know if you know that, but like there's a client side, which basically turns off the API entirely and just speaks directly to the chain. That's like maximally like provable.

Starting point is 00:25:17 And then we have like, but like to make it like better for users, you kind of need to have, you know, smarter routing. And so we have this like smart order router, you know, auto-router thing we call. And that is like a little bit faster and discovers more routes. But there's an API behind it, but it's open source. And so the goal, and I would think of this as like a protocol that lives in that domain,

Starting point is 00:25:38 not as a protocol that lives in the like AMM. So like we already have this like, like the routing side of the system already exist. And we're, we're just kind of like, you know, updating it with a new protocol. And I'll also mention that like the UnspopX does have like there's like on-change smart contracts that settle orders. They're immutable, actually open source, GPL. GPL open source, and then there's, you know, wait, you just have, and then you have, like, front ends that broadcast orders, fillers that have to, like, discover those broadcasted orders.

Starting point is 00:26:09 And, yeah, and then the fillers basically can submit them directly to the smart contracts. So I think what Uniswap X is really doing is they're enabling a new type of player in the Uniswap arena. So we have swappers already. Most people listen to this are swappers. Some people listening to this might be liquidity providers. and they are providing liquidity into the AMM. So we have the AMMs, which are UNISWP's 1 through 4. We have the liquidity providers.

Starting point is 00:26:34 We have the swappers, the traders who trade on Uniswap. But now Uniswap X is enabling this new type of player called a filler. Yeah, I think it's worth noting that they're not new. We're just have a routing system that is aware of them. Right. You're formalizing them. We're formalizing them in a way that can put constraints on them. Because right now what they do is, you know,

Starting point is 00:26:55 you can think of them as today as like the people that do, like, you know, the most advanced trading strategies, the people that do a lot of the arbitrage, the block builders, the MEV extractors, right? And what we're trying to do is, like, put constraints on them and they take value that would go to them and give them back to the swappers. So the players exist. We're just formalizing them, and we're, you know, having them compete with each other in a way that tries to drive as much value back to swappers as possible. So swappers, the people who trade on you to swap just to trade tokens, meme tokens, USDC, Ether, are now going to be pointed towards Uniswap X.

Starting point is 00:27:31 So to trade on Uniswap now in the future, and now with Uniswap X, means to be trading through Uniswap X, correct? Well, you know, first, like, there is, like, the routing system we're going to build is, like, you know, direct your order wherever it thinks it will get you the best price. And so, you know, especially at launch with the beta, like a lot of orders will just drought, you know,

Starting point is 00:27:50 through our existing routing system. I'd say that, like, over time, probably more volume will go through Uniswap X, but I think that over time also most Uniswap X volume will go through Uniswap the AMM protocol. Right, so Uniswap X, people will trade on Uniswap, they can use Uniswap X, and then Uniswap X, for as in its nascent time, will just say, oh, you know what's most efficient, the Uniswop Order Router.

Starting point is 00:28:10 But as it develops and grows and matures, it might find better pricing and better, better just sources over time. Yeah, but for what is where, like, that sort of already we're already in that world, which is, you know, like, today, like, if you don't get, at best prices going to Unisop, then people will go somewhere else. And so there's always other liquidity.

Starting point is 00:28:30 I think that the goal of the Uniswap, the AMM, is to have the best liquidity in the most assets possible. And I think that Uniswipvv4 is a really, really powerful way of achieving that. And I'd say that, you know, it's so funny. One thing that's really interesting is when I was developing Uniswop v1, way back in the day, there was like the framing, the mental framework was like, do AMMs have a place in this world?

Starting point is 00:28:54 The frame wasn't like, you know, was like, I'm going to build the best A-M that's going to take over all the liquid. It was like, like, this is like a new way to do like liquidity creation. And like, I wonder if it will like work and like have a place in the world. And I think we saw that it does and it's like a really efficient cool way of creating liquidity and unlock some really powerful new things. Like the ability for anyone to create, you know, liquidity at like sort of any, like, it sort of, you know, anyone can create liquidity. Not anyone can create liquidity as efficiently or effectively as Citadel, but anyone can do it at some level. And that's why a lot of the earliest, you know, pools that were big on Uniswap were, like, these, like, longer tail pools that were struggling to get exchange listings, et cetera. And, you know, like, MKR and Die were, like, very big in the early days because they were, like, it was, like, the only place to trade them.

Starting point is 00:29:38 And so, like, AMMs are, like, have these, like, new unlocks. They're like, oh, like, anyone can provide liquidity. It also has, like, on-chain integrations, which are, like, money Legos, like, a really big unlock. I think that, like, when I think about decentralized finance and, like, what we're trying to achieve, right? like we can't just kind of like iterate in our like small world like we have to like kind of innovate and push beyond it and I'd say that like I think that like AMMs are like can be like you know I'm extremely bullish AMMs as like a market structure but I think that there are also other market structures that like could you know exist in the future and I think we also want to

Starting point is 00:30:12 discover them and have them be part of the uniswap ecosystem and and have them be like complementary and so like you could think of this as like oh some you know some volume might go you know elsewhere but like that one might go elsewhere anyway because if you if Uniswap isn't offering the best prices. And so I'd say that like, you know, other liquidity sources are going to exist whether or not we, we, you know, are aware of them and look for them. And so, you know, also worth mentioning that like today, you know, Uniswap has like a pretty, like, it's the funny thing is that we've actually seen this play out in aggregators. Like Uniswap still is like the largest liquidity source for every aggregator that's out there, even though they all have like private market makers, other liquidity sources. And I think that like the sort of network effects that can build up around V4 will also be like really helpful. So what you're saying with all of that is that Uniswap X is not a Uniswop maximalist protocol.

Starting point is 00:31:03 Well, it has the word Uniswap. I'd say that like it's it is a it's not a Uniswap. I'd say that like I don't want to go that far. Like I'm pretty AMM maxy in many ways. But I'd say that like it's like expressive and starts to push the Uniswop ecosystem to go beyond strictly AIMs. But I'd say that like it still is like also the best way to route across AMMs, which is I think really important. Like you could like, like for anything that is like lost to other liquidity sources,

Starting point is 00:31:30 there's like also gains, I think in like routing efficiency. And also really importantly when you start to think around like, you know, when we jump back to like that hooks problem, like one of the biggest questions that we got after then the sort of announcement of our vision for UNISOP4 was like, okay, I'm a team, I create a hook. And how do I make sure that people like, you know, front end? And one of the nice things about Uniswap is if I create a pool, I know that routing is going to be discovered in routing engine. If I create a new hook that has some new, let's say it has like T-WAM in it.

Starting point is 00:31:59 T-WAM, if you're routing through a T-Wam pool, you need to be aware of the T-Wam component because that affects the price you get. And you can't just look at the liquidity. Or if I create some other custom hook, like, how do I know that my, you know, maybe people are afraid that it will like, you know, it's not safe and they have to audit it and they take some time to audit and they don't care about me. And so, like, how does my liquidity get discovered? And this is like this solution to that, right? It's like if someone creates a new custom pool, a new custom hook, you know, rather than needing like Unisop Labs team to audit their hook and integrate it into our front end, you know, which is like, you know, a not the idea, like it's not the ideal process, right?

Starting point is 00:32:37 And like let's say maybe we're going to be in a world where there's a million hooks. Right. Or a million, like right now we already have hundreds of thousands of pools. We're going to be in a world that has like millions, probably eventually hundreds of millions of pools. And you can't have a single kind of team just does routing. And so you can think of this as like, now all you need is to find one liquidity, one filler who's willing

Starting point is 00:33:00 to integrate your hook. And then that hook is represented in the liquidity that you find in front ends, like your Unswap front end. So when you go, so someone can like not only create their liquidity pool on Unswap, they can like, you know, find one of any filler in the world or create, that's willing to like, you know, include that hook. And then, you know, from day, you know, immediately that liquidity is represented in the Unoswop Ui.

Starting point is 00:33:21 And so I think that, like, you could think of it as like, like, adversarial, but I kind of think of it as like almost like strictly required to like make it work in the long run. And so, yeah, you know, pretty, pretty excited. Metamask has something new. Introducing Metamask portfolio. Metamask portfolio is the best way to view your crypto portfolio from a holistic level. See everything across all the chains all at once. In your portfolio, Metamask. report the aggregate value of all the assets in your Metamask wallets and even the other

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Starting point is 00:36:22 There's been no way where one single player could manage all of this complexity with all these different pools versus the competition of just like how just like, oh, this is too complex, just make the market deal with it. I want to run through how uniswap X actually works. I mean, we've talked a lot about the contours of it, but maybe we can run through the life cycle of a transaction and how Unoswap X actually ensures that that transaction gets the best actual output of whatever it's trying to do possible. So, maybe you can run us through Uniswap X under the hood. Yeah, so, I mean, I guess we can start with like the Uniswop front end. For swappers and the Unswap front end, it actually looks and feels very, very similar. Okay. You know.

Starting point is 00:37:05 No new skills are required here? No new skills. Hopefully fewer skills in the long run. But, you know, when you go to, you know, you choose the tokens you want to trade, you like, kind of like, you know, you click like swap. The big, the first difference is actually that you'll see that there's no gas for your swap. There is still, I'll caveat that, like, there is still, like, one initial approve per token of, like, the permit contract. We created these permit contracts that you've probably seen that'll, like, basically allow any signature to do signature. Any token that you approve on this contract can now do signature-based approvals forever for you.

Starting point is 00:37:38 So that's like what permit is, and this is building on top of that. So you do have to do an approved transaction every once in a while for new tokens that you haven't traded, and that does cost gassed. And there's no way to avoid that unless the token itself includes gassless signatures, or you're using a smart contract wallet. But for tokens that do have, you know, signature-based approvals eventually, but anyway, like once we have our token approvals, which is our, you know, from that point on, right, you make a swap, and instead of paying gas, and then instead of, you know, signing,

Starting point is 00:38:08 a transaction. If you're using Metamask, it looks a little different. You can swap wall than a regular transaction. It just says, you know, you're trying to sign a, you're just like signing a signature. So you sign a signature, and then at that moment, it feels very similar. You know, it then goes to a pending transaction state for the user. One noticeable difference is that when you sign a transaction, you can immediately go to EtherScan and start like waiting for it. Here it's just an off-chain signature. So the order hasn't been executed. We don't know what the transaction hash will be yet. At this point, it's not. It's not. It's not. It's not. It's Not even in the mem pool.

Starting point is 00:38:40 Yeah. It's in the pre-mem pool. Yeah. At this point, the order is broadcast to like a network of fillers from the front end. And there's like a kind of like a, yeah. There's an API for that. And then it's similar to like our auto riders. There's an API.

Starting point is 00:38:56 And the order is broadcast to a network of fillers. And I'm going to start with the base case and then mention that there's like an optimal, there's an additional like ability to parameterize through RFQ. But just like the base case of the of a good order. If you sign an option order, it's broadcast. Your order is basically like a decaying price auction. So like at the moment you sign it, you're like willing to accept 100, you know, like one price. And then like the price goes down a little bit over time.

Starting point is 00:39:20 And what that does. Yeah. And so you start at like, you know, maybe it starts it up a little bit above the price you expect and the decays over time. And what that does is, you know, the moment that it's worth it for someone to fill, they will. And so that's like what creates a competition. Right. And that's what in theory produces the best possible outcome because. Yes.

Starting point is 00:39:36 So long as somebody is some rational. actor saying, hey, that's profitable, I'll do that. You'll get the first profitable actor that'll do that. Yeah, the person who's willing to take the lowest margin or has like the best strategy. And they're competing against other people, and they want to make sure they get it so they try to give the best price. Now, and then, you know, then at that moment, the filler, not you,

Starting point is 00:39:56 submits the transaction, meaning they're paying the gas. And then what that does is it pulls your tokens out of your wallet. You know, you've approved it. And there's a smart contract that you fill through. And it enforces that they can only take the tokens out of your wallet if they send you the required amount of tokens based on the moment at which it executes, right? Because it's like a timestamp component.

Starting point is 00:40:13 And that's about it, right? You sign an order, a filler, you know, the first filler that's going to fill it, takes it and submits it on chain and pays the gas and that does the transaction. I think that's something that, you know, starts to happen here is as you think about like, like, latency. So back in the day, pre-1159, Unisoft transactions used to take like a few minutes sometimes. People were like, the gas markets weren't very good or very efficient. Right.

Starting point is 00:40:37 Today it's a little bit faster, about 75% of Unswap trades execute in the first block after they sign it, and about 90% in the second block, by the end of the second block. And so I think that there's definitely a need for the auctions to happen very quickly. And so there's an optional component for the system. You know, like optional at a smart contract level, right, UIs can do whatever, but that allows you a layer an RFQ on top of it, which basically means you use you. you use an RFQ system, request for quote, they're called, where you ask a bunch of people, what is the best price you'll give me?

Starting point is 00:41:12 And you use that to inform what the actual market prices, rather than guessing when you're parameterizing the auction. To incentivize people to give you their best quotes, you do have to give them something sort of in return. And so the way that that looks in the smart contracts is if you use the optional RFQ parameterization, then you can, then basically, there's a slight priority given to the RFQ winner for the first, you know, maybe few blocks.

Starting point is 00:41:40 So what it looks like is like, I sign my order. I get, if I'm doing a transaction with an RFQ, I ask, you know, the best quote, I sign an order that says, this person can fill at their quote. Anyone can fill. If they have real price improvement, they can fill and they can come in before them. But there's like some margin of price improvement

Starting point is 00:41:59 that they have to offer. So you can't offer like one way higher. It's like you have to offer like, you know, maybe 0.5% higher, something like that. So there's still a point of price improvement. public auction component where someone can come in with price improvement and out-compete the RFQ winner, which is important. But there is like a, for a few blocks, a slight priority given to RFQ winner, which allows you to basically get, you know, very efficient,

Starting point is 00:42:20 very fast price discovery. And, you know, in that way, you know, maybe most transactions that fill through the RFQ can execute maybe in like, you know, one to two blocks as opposed to if you weren't using the RFQ, maybe it would take like, you know, five to ten blocks or something like that. Yeah. With this model, this decreasing price auction, which is a Dutch auction, which is existed for the 1700s, which is why we know it's really good, primitive. Do you know where it comes from?

Starting point is 00:42:47 The Dutch? Yes, but do you know, it's from tulip auction? Yeah. Whenever I think it Dutch, I'm like, was it the tulips? Yeah, it was the tulips. It was the tulips. Yeah, it was flower auction. We'll put a pin in that one.

Starting point is 00:42:59 First tulips, now dogs. you have the option of extending the time or slowing down the decreasing price for a very long time. Like, you know, you could go up to 10 blocks or you could go up to 10 days for whoever wants to do that for whatever reason. What would be the advantage for extending that period of time? Like, why would someone do that? Yeah, I'd say that, you know, you can... So one thing is if you don't want to, like, depend on this RFQ system or if the RFQ system is not, like, optimal for whatever reason for your trade. Some people might just be comfortable to make, like, part of it is like, you know, there's sort of an assumption in what I'm saying that users need their transaction to execute in the same one or two blocks.

Starting point is 00:43:37 And I think a lot of users that's really important. And it's like a reason that, like, that's like, like, you know, when we build things at Unspop, we have, like, we have to consider what our users care about. And so, you know, having this, like, RFQ component allows it for users who want their trade to execute in, like, the next block. It allows that. But if users are, like, comfortable waiting, like, a minute or two, you might have, there's definitely that, you know, there's a lot. of debates you could get into about whether or not it's like there's price improvement. It probably depends on like the size of the order. All right, if you're making like a large order giving some people time to like source liquidity,

Starting point is 00:44:08 you can optimize the price. So waiting a little bit longer, giving more time for it to propagate, more people to discover it, et cetera. There is risk that the price moves, like that the price moves against you during that time and not, like, you know, this sort of like, you are, like, if you have an order that executes more slowly, there is risk that you are taking on like price risk that like maybe the, like, the trade will like go down, you know, the price will go down, not up. for the token you're selling.

Starting point is 00:44:31 And so it's not, like, strictly better, but it is, it does let you, like, remove the RFQ system, and it also, you know, I'd say that, like, you know, waiting one to two minutes, like, you're not really expecting

Starting point is 00:44:42 too much price movement, and it might actually, like, optimize price a little bit. But it's, I don't want to, like, it's, like, such a kind of interesting design in trade-off space that it's like, I'd also mention that,

Starting point is 00:44:54 you know, one reason that might, that might actually be is that, like, batching within the system. Like, if you have orders that execute slowly, maybe someone else makes an order in another direction within that time, and then it's more efficient to net against them.

Starting point is 00:45:05 Something that, like, maybe I'll, people ever know is like the story, not everyone, but most people know the story of, like, Carl and, you know, my first friend in the space, and he gets me into AMMs. I don't know if, you know, my second, the second person I met, the first three people in order that I met in the space were Carl, then Phil Dian, then Dan Robinson. That's a pretty good lineup. Good lineup.

Starting point is 00:45:23 So the second person I met in this space was Phil, and, you know, the founder, you know, co-founder of FlashBots and, like, MEV, inventor of the term MEV, I believe. Discoverer of MEV. Yeah. Yeah. Yeah. He released like the Flashboy's 2.0 paper. And so we've been talking about this like design space since like well before.

Starting point is 00:45:43 And like, you know, the first like, you know, the first kind of version of Unisphot right is like, oh, I mean like yeah, like this leaks MEV. I mean, we didn't have the word MEV yet. But he's, you know, and he sent me a paper by this guy Eric Buttish called like free, it was something like frequent batch auction. something trading arms race you know frequent back like basically gets into like the whole like Flash Boys 2.0 and like basically like postulates that like if time is continuous like if you treat time as like a continuous thing then like these like HFT games are like inevitable right that like there's always people they're like front running is like inevitable if like time happens in order and like the only and

Starting point is 00:46:25 that like to like create fairer systems that don't favor like you know like like a like an arms race, you kind of have to like break time up into discrete intervals and do batching within those intervals. And so they're sort of like, you know, can, and definitely like there were like have been earlier attempts at it in Ethereum, but I think there's like often like UX issues around it. So I think what we're partially trying to do is like experiment with and explore this like this tradeoff space of like how do we like create fairer outcomes that don't have this like this like maximize power in like the most sophisticated traders in the world purely. and I think part of that is like starting to like enable things to be executed in batch

Starting point is 00:47:02 and starting to be like more aware of things like MEV. And so I don't even remember a question you asked at this point. I'm kind of just ranting. We were going through how did the just the life cycle of a token and then also just the time for why someone would extend out a long period of blocks. Yeah. All that is to say like users have their preferences for like how their order. If someone really cares about executing their order immediately, they probably are going to get a slightly less optimized to trade because they have to kind of rely on like you can't very efficiently discover the option.

Starting point is 00:47:36 Auctions allow you to like efficiently discover the right price. But the slower, like if the auction is too fast, it's not very efficient. It's hard. You have to like know how to parameterize your auction. And you don't know how to. And so like the fast you needed to converge, like the less in some ways there's like less time for optimization. And so like having like, yeah, slower orders over time, like, might just let you, like, get more optimal prices where you feel better about, like, they're not being someone who's, like, extracting some value from your transaction. If you don't care and you just want your order to happen right now, you know, like, then, like, you're always going to, then like things like, you know, we can do much, much better than today.

Starting point is 00:48:15 But, like, there's going to be some tradeoff space of, like, if you want the instant fastest transaction, you might have to pay a little bit more in the long. run than people who have slower transactions. What about MEV? How is MEV as a mechanism, like, stop, how as UNICEF X stop the leakage of MEV? Yeah, I'd say that like not, you know, I don't want to use phrases like stop the leakage of MEV because there's like such a like, there's even like different ways

Starting point is 00:48:43 of like thinking about it. Some people say like, oh, MEV exists no matter what. It's just like you've internalized it or some people or it's like gone to a different party. It existed. You just, you know, if you generally think about it as like, you know, Someone wants to make a trade, you know, like that creates some value somewhere. And like, you know, like there's a lot of forms of MEV, right?

Starting point is 00:49:00 People have talking about like sandwiching, front running, back running, you know, reordering transactions, reorgs. I don't even remember, time banded attacks. Okay, I'll rephrase the question. I'll give an actual answer. How has UnitWap X changed the way MEV is expressed? Yeah, yeah. I think that like generally what we're trying to do is have value that today leaks out to block

Starting point is 00:49:22 builders and validators through MEV markets. Right now when someone makes a trade, like it is actually also broadcast publicly. Like right now basically, you know, someone makes a trade on Un-Swap. Like people are just like competing with each other, but they're not competing with each other to offer the best price to the Univ-Wap user.

Starting point is 00:49:39 They're competing with each other to extract the most value from the Uniswob user. That's what like current MEV markets are and that's what current like block building networks are. And what we're trying to say is like, can we change how we engage? code transactions such that that competition, that like, rather than like two sophisticated, bunch sophisticated people competing to like extract value from swappers, like, they're competing

Starting point is 00:50:02 with each with each other and as much of that value as humanly possible. Like some of it, like some value will always have to be, go to Ethereum miners or validators. Some value will always go to like block builders. But like how do we just maximize the percentage of the MEV that goes back to the swapper because they're competing with each other, right? Like if they're competing, right now they are competing with each other, but they're competing with each other to take all of the money. Now we want them to compete with each other to like have most of that value go back to

Starting point is 00:50:30 the swapper. So it just has to do with how you like encode your transactions and having like, you know, an auction is a way of doing that because if they're, you know, today like a un-swap order is like executing it like basically like a, you know, it says like I will make this trade as long as I get better than the minimum slippage, my slippage tolerance. What that means is like a validator can like front run. the order up to the slippage tolerance and take that money for free if you're mining a block. Right.

Starting point is 00:50:56 And we don't want that. And so by having like a price decay over time, as soon as it's profitable for someone to like to like include that transaction, they will. And so it, I guess one way to put it is that like today, like, depending on the size of the trade, like, it can be profitable to like front run up to your slippage tolerance. And this one, it doesn't go to the minimum price because it usually actually like your slippage tolerance. is still expressed as like the minimum price of the auction, but the order is filled well before it hits your minimum price, and it can't hit your minimum price until the end of the auction, by which time it's already been profitable.

Starting point is 00:51:32 So the first moment it's profitable, that's when it's filled. And so you don't just get like front run up to your subject tolerance, which is kind of how it works. Right. This is the beauty of the mechanism design of a Dutch auction, where just the mere system itself of making sure a somebody fills that order at the first profitable opportunity is the MEV protection. mechanism.

Starting point is 00:51:52 Yeah. I'd say that also like, you know, so that's like the mechanism of protection. I say there's like other ways that like it's improved and like things like just the fact that like if you have a bunch of transactions at once that are off chain orders, like one filler can like discover all of them and complete them all at the same time. That means that like it can be, it's about like that means it can be profitable to fill them all even earlier in their life cycle because like someone might have an order and on its own it's not profitable for the filler to include it in a block or like a block builder

Starting point is 00:52:21 but like if you have another order that's going the other direction, then maybe you can. And so like when you think about that as like the earlier up you are, like the higher up you are in your Dutch auction, like it's a decaying price. The higher up you are, the less value has been leaked. And so we're trying to like, you know, the more optimal that we can like make these stiller networks and the better we can parameterize these orders, like the less value will be leaked. Okay. Are we ready for the bridge conversation? Cross chain.

Starting point is 00:52:49 Cross chain swapping? Yes. cross-chain swapping. How do I enter this conversation? Yeah. What's the point of entry here? I can start. And basically, you know, when you have orders expressed as off-chain signatures, we initially

Starting point is 00:53:07 started this project kind of thinking about what we might want to do in the aggregation space. And I think that what we discovered in the process, like, if you express your orders as off-chain signatures, there are, like, other things you can do. And I think one thing we discovered is that you can actually do. is that you can actually do very efficient, very powerful good U.S. cross-chain swapping. And so instead of signing an order that says,

Starting point is 00:53:30 I want to swap this token for this token on Ethereum, you could sign an order that says, I want to swap this token on optimism for this token on arbitram, or swapping across chains. And the sort of beauty of it is that from a swappers' perspective, the user experience is exactly the same. and even like the like the like the the the the ux of like you know it actually can fill very quickly and the the you know these fillers that are filling orders on units that you know we've

Starting point is 00:53:57 already talked about they actually can handle like the complexity and latency uh of using bridges um and and figuring out settlement and so uh you know we basically think that like the the cross-chain version of this is is really powerful i guess one way to put it is that maybe a few of the benefits that you might see is, one, it allows for, like, native asset swaps. So, like, right now, a lot of value currently lives in, like, when people are doing, like, moving funds between chains and making trades across them, usually what you're doing is, like, you're bridging an asset, then you have a bridged representation of that asset on another chain that is, like, sitting in a passive, in, like, a liquidity pool, and

Starting point is 00:54:39 then you're swapping in that liquidity, like, you might, like, bridge eth, maybe it to be more concrete, Like you might bridge eth to Polygon and then swap your Polygon ETH to automatic tokens on Polygoner. I guess they rebranded their token. Soon, yeah. Something like that. With approval, yeah. Something like that. But, you know, in that world, you know, bridges are, like, I mean, look, we've looked at this world of Britain.

Starting point is 00:55:07 Like, we've had so many bridge hacks. Funds that passively sit in bridges are just like, you know, risk for the industry. less than, look, the more, you know, obviously, like, some bridges are much better than others. And, like, we've had, like, these L2 bridges have been, have held up pretty well so far for the most part. But what you could do with, you know, swap X, you could just say, I'm going to swap Ethan Maynett for a Mattockon Polygon and, you know, a filler, basically, you know, should I talk to the life cycle maybe? Maybe that would help. Yeah. They're like, you know, so, like, a swap in my time in order that says, like, I want to swap Ethan Maynette for Mattoon on Polygon and a filler.

Starting point is 00:55:41 And then just like the previous version, you have this decaying price auction for how much, you know, Madic you need to fill to, you know, to get that the input eth. And the order is actually completed on the input chain as well. So the filler, as soon as there's a price at which they're willing to fill, they, like, you know, they initiated a transaction that, like, claims the order. And they transfers the user's input, you know, tokens into a kind of like an escrow contract. And they put up a little bond. and now they're basically responsible for sending you those tokens on the output chain. And so the next thing that the filler does is they send you those tokens on the output chain. And now the filler, from the swappers' perspective, they have just made a cross-chain swap.

Starting point is 00:56:24 And then the filler basically has to prove that they did that to claim the user's input tokens on the input chain. And if they don't do the proof, eventually it would go back to the swapper because they never proved that they filled. Now how do you do a proof? You can use any possible bridge. So that's one of the really cool things about it is that like Unstop X cross-chain variant basically can support any possible bridge messaging

Starting point is 00:56:45 or like any cross-chain messaging protocol or even like any other use system for how you settle these cross-chain orders. It's like kind of completely agnostic to that. But you know we have some initial smart contracts which I think will probably be going open source around the same time that basically allow you to

Starting point is 00:57:03 that work for like the you know the canonical optimism arbitram in polygon bridges. But yeah, basically, like, you know, the filler has to prove through a bridge, or they could do it optimistically. Like, you know, one way to do it is, like, it's assumed the filler fills unless someone challenges it. And then it kicks off the force to do it through a bridge.

Starting point is 00:57:22 It's like a similar design space to, like, optimistic roll-ups or something. Where, like, but that shouldn't happen in most cases, like, because you have bonds to prevent that. But generally speaking, maybe I'm, you know, user signs often order that is an auction, Then filler initiates a transaction that puts their tokens onto the escrow contract, then fills in the output chain and does a proof. And that proof can be an optimistic proof, which means that it's assumed that they do it unless it's proven that they don't.

Starting point is 00:57:50 And then in that way, you have very fast, good U.S. cross-chain swaps. And definitely if you go to a challenge period, then it might be like, if you challenge a swap where you need to prove it through the optimism or arbitral bridges, which are seven days, then you have a seven-day lockup period of the input assets. that only happens if a filler lies, and then they lose their bond. And so you have to like parameterize these bonds to be such that it's not incentive. It's, no, not optimal to fade. To carry this through with one of the themes I established at the beginning,

Starting point is 00:58:19 which we talked about with all Uniswap v4 and one through four, there's all these pools and all this complexity. And so this beautiful, elegant mechanism of an off-chain signed order, an off-chain order. That doesn't just solve the complexity problem of pools. it also solves the complexity problem of bridges. And bridges and pools are kind of similar in that regard. And so since we are just signing these transactions,

Starting point is 00:58:43 signing these messages of these off-chain orders that say, I have this token and I would like this other token on this other chain, all of that gets abstracted by the same service providers, the same fillers. And so they can manage the bridge complexity. They can manage the timing and the latency of that and just provide the swapper,

Starting point is 00:59:03 the thing that they want, which is the maximum number of tokens in the place that they want it. And all of that complexity is just, again, once again, the whole theme of this seems to be left up to the free market, left up to the fillers. Yeah, and there's like smart contracts on the, like, the input chain that, like, enforce that the swapper actually gets what they wanted, right? Because you do have to choose, like, what is your source of truth for whether or not the order was filled? And that's specified in the order as it's being broadcast.

Starting point is 00:59:26 And so, like, it's likely that, like, will you, you know, in our UI, once we have this, live in our UI, like, you'll probably use, like, mostly canonical bridges. So, like, you know, for swaths between optimism and main net, maybe we'll use the optimism bridge. And, you know, you can use the optimistic pattern to make it so that, like, you know, you don't actually have to have seven-day, you know, delays. And I'll also mention, like, one thing that's kind of cool is that it's not just for, like, you can think of it as, like, also, like, for, like, fast L2 exits, you can use this. Right? Some people who are, you know, some people might, will be willing to, like, pay you. if you have, you know, Ethan Maynett and want Ethan optimism,

Starting point is 00:59:59 someone who's on optimism who wants to exit might be willing to pay you a little bit to do that, right? And so you can use this for fast exits as well. I'd say that like definitely the like reduced amount of, one thing that's like a little bit different is from like most existing kind of like bridging protocols is most bridging protocols have passive exposure to bridge risk.

Starting point is 01:00:20 Passive exposure to bridge risk. What is that? So like if basically like liquid providers in them are like like like like you hear about like bridge hacks like basically like yeah we do yeah yeah like you hear about bridge hacks all the time there was I think there was a billion dollar one like last week or something oh last week I thought so maybe not I've been gone for 10 days this is the first thing I've done in crypto in the last 10 days well I have some catching up to do well

Starting point is 01:00:43 we don't I don't know if we know how much I think it was like minimum I don't know it was like anyway I don't need to get into specific but but yeah like you know bridge it's because people are like have like they're holding you know So you deposit a token on one chain and it has a rep... And then at that point, the bridge is kind of like almost like a multi-sig holding all those tokens, and they have representations of those tokens on other chains. And the sort of like risk... And for as long as those tokens live on the other chain in any form, and if you want to have

Starting point is 01:01:13 like liquidity for people to make trades, then like liquidity providers need to hold those bridged representations of tokens on the other chains. And so, like, Ethan and other chain is always going to be worse than Ethan Maynett. And, you know, there's this maybe one exception, like, USDC on any chain is probably, like, equally the same. Which is kind of interesting, and that's why it's interesting that they have a bridge. And by the way, we did do an experiment that made it so that we could use the, like, the circle U.S.S.C. bridge as a settlement system for the cross-chain variant of Uniswapax. But that's sort of an aside. But, you know, yeah, it again speaks to, like, you can, like, basically have, like, I think we're going to eventually have a world where, like, most assets live on the chain in which they were originated or originated or originated or, like,

Starting point is 01:01:54 whatever chain that they're most secure or is like most canonical for that asset, there might be some assets that are like on multiple chains, like things that are common stores of value and like, you know, currencies. So like, you know, top stable coins and maybe eth and a few others. But like, but generally speaking, like allowing, you know, if you're a liquidity provider, just letting you kind of like hold most of your, like, like, let's say that like, you know, I want to fill and like I could have like some native tokens on each chain. And like if I want to fill an order, like let's say I do a cross chain swap.

Starting point is 01:02:24 from some random native asset to optimism from main net. Like even if you don't have, like, like, there might be AMMs on optimism that are between like, you know, the optimism native tokens and other optimism native tokens. And on main net between main net native tokens. And so like the filler, they can basically just like, maybe they have like, they're holding OP tokens on optimism.

Starting point is 01:02:43 They buy some other optimism native token, fill your order on, and fill your order on optimism. And then they like never have, and then like they just like receive ETH on Maynet. And they never at any moment in time, had to have, like, fun, like, they never had to hold, like, ether-wrapped on optimism, or it just, like, reduces the amount of, like, the size of these bridge honeypots and lets people just, like, swap between native assets.

Starting point is 01:03:04 Well, it seems to really minimize the use of bridges in the first place. Like, rather than have bridges being bridges for assets, bridges are, in this model, are simply just used to pass the final message, data, not assets, of approval that the bridge was actually the trade, the swap was actually executed appropriately. And so it's one small use of a bridge to pass a small packet of data rather than hosting long-term liquidity

Starting point is 01:03:33 inside of these bridges. And you don't even need that data packet unless the filler is lying. If the filler actually fills your order, you don't even need to pass that data. Is it fair to call it minimum viable bridging? Yeah, we're basically trying to minimize the amount of assets only live in bridges.

Starting point is 01:03:51 Users are only exposed to bridge. risk while transactions are in flight. Once like, you know, like the swapper has their, like, once the swapper has the output tokens and the filler has the input tokens, there's like no more bridge risk for either party, unless those tokens are, happen to be like wrapped, bridged assets, but they don't need to be. So yeah, we're like minimizing the, the extent to which people need bridges. We're also kind of like abstracting them away a little bit. Like this system can kind of support any possible bridge. You could think of it as a bridge aggregator. It's important to like note that like the the you know when I the bridge used for settlement is like

Starting point is 01:04:24 different from like like like fillers can use any bridge they want to like move liquidity around you know they could use centralized exchanges they could use bridges whatever but then like each trade does have a specific bridge or or what you know what we use the we use the term settlement oracle right which is which is can be any bridge it could also technically be any other system you could technically use like a multi-sig or a governance system or a single party if you wanted, if you wanted to, you could also trust the filler. If you were like, I trust the filler and then like you could trust them to be,

Starting point is 01:04:56 and they could be the, and then you say, say, say, like, technically you could do whatever you want. Right. You just need some system to say that, yes, that trade, that swap was fulfilled. And this protocol is like completely agnostic to that system. It, like, can support any possible system. We have, like, you know, initial smart contract designs that like work with, like, you know, as I mentioned, like the main app to, you know, like the canonical L2 bridge,

Starting point is 01:05:19 for optimism, arbitral and polygon. We have a design that works with like the circle bridge. But it can really work with all the other, every bridge you hear about in the space. Like, theoretically, you could have, like, an adapter that could use that bridge. And then bridges are competing on, like, offering security and latency for, like, passing messages

Starting point is 01:05:35 and not, like, you know, having, like, billions of dollars of liquidity stored in them passively, which is, like, real, you know, which is, like, a security risk. And we've seen how that plays out. I just, again, the theme of this whole thing is seems to be harnessing complexity. And Uniswob X, the naming also, I think, is intuitive

Starting point is 01:05:54 because we have Uniswops 1 through 4, right, which are AMMs. And again, Uniswap X is not an AMM. It is a order router, an order optimizer. And so we have all of this expressive liquidity protocols that we call AMMs, Uniswops 1 through 4. And then we have this other expressive order fulfillment service called Uniswop X.

Starting point is 01:06:15 It really kind of seems to be like a yin and a yang, like two sides of the same coin, where if you smash these things together, now you have Uniswap. That is Uniswap. Right. Right. Yeah, I'd say that this is definitely like a moment.

Starting point is 01:06:26 And it's not the first moment, but it is a moment where like, Uniswap as an ecosystem can like step slightly beyond what it's done and, you know, and kind of continue pushing into new territory. But like, yeah, definitely like. New Frontiers, please. New Frontiers.

Starting point is 01:06:38 Yeah. I say that like definitely the, you know, the end goal, right, is we want to create like decentralized markets. And we want, you know, today, right, people use decentralized markets because they are decentralized, but they don't, but there's like a tradeoff, right? Like the user experience is still a little bit worse. Like they're still like, it's still not as efficient.

Starting point is 01:06:57 There's still not as much liquidity. It's still, you know, like, you kind of like, people use it like despite the flaw. But we think that like in the long run, like, decentralized markets can actually be like more powerful and stronger and like a better user experience and, you know, more efficient market structures. right like you know we speak to like like even like when you think about like a market based approach to something versus like a single company that's trying to like you know optimize for you know for you right like moving into these models we just think that like you

Starting point is 01:07:27 know and using also like all these like new tricks that we've learned in blockchains and with crypto you know new novel cryptography and eventually we'll have like you know better ZK tech and like that's going to be a part of the story like this is like a first step that's that's a really important thing I want to get across like building like we want to build like the ultimate kind of like, you know, decentralized kind of order flow, you know, network. And there's like a broader industry around us that are also, is also working on these problems. We want to do it like collaboratively, right? Like teams like, you know, like flashbots, etc.

Starting point is 01:07:56 Like there's like all these other teams that are also working towards like how do we like decentralized order flow. And this is like part of that story. But I think it's a really big moment for the industry because Uniswop is because, in part because like of how dominant Uniswap is from a like, you know, in terms of like volume in users, like something like probably like 30 plus percentage of all gas on Ethereum is Uniswap trades. And it's a, and I guarantee it's a higher number percentage of MEV because, you know,

Starting point is 01:08:26 un-swap trades generate more MEP than transfers. And so it might, you know, and so like having, you know, I think that like us kind of stuff into space and like is like really important for kind of helping push the industry forward. And also like having users and like being able to like learn from them and kind of optimize and improve, you know, for real people that are really transacting,

Starting point is 01:08:49 is, like, really useful and important. And, you know, again, we're, like, really excited to do it collaboratively, and, like, and, you know, if these other kind of, like, models also end up working out, like, things like Swavs, like, could, like, you know, be directly tied into things like, you know, USWOPX. Like, they're not, like, also automatically competitive.

Starting point is 01:09:08 We're all kind of, like, decentralized order flow generally. So what's the rollout? plan for Uniswap X? How does it get started today, Monday the 17th? Yes, Monday the 17th. It's actually Sunday, but for us, but for you guys, we're hearing this on Monday. What's the rollout plan? How does this actually launch? Yeah, so today what we have is the, you know, single chain main net variant is in like an early

Starting point is 01:09:34 kind of opt-in beta stage, meaning that when you make it transact, you know, when you go to the Unswap web app, you can go into settings and you can turn it on. You can also just like make transactions and if there's a transaction that, you know, the interface thinks you will get a better price if you use UniswopX or if not a better price. It's like, it's like, or I think again, it's like this is like the first, like it's sort of like an early beta. And so it's like, yeah, you know, it will suggest it to you and you can turn it on. Even once you've turned it on, it doesn't mean 100% of trades will route through it. It's actually going to be like a probably like a smaller percentage of trades, only like certain tokens, only certain, you know, trade sizes, only certain pairs,

Starting point is 01:10:12 is only certain, you know, like, it's, this is again, like, the earliest beta rollout. We want to really, like, test the system before we, you know, rolled out to more user, to, like, a full user base and for, like, you know, all orders. And so, you know, so, you know, today what we have is a working system for the main net version and the ability to opt in and have some percentage of your trades execute through it. When you do, you will see that your order is now no longer cost gas. There's some minor U.X tweaks that show, like, there's, like, no gas being paid. It will be a signature instead of a transaction.

Starting point is 01:10:42 When the transaction is pending, you can't go to easy scan because the transaction hash hasn't been created because it's just an off-chain signature. So there's like a few things. It's kind of like a slow rollout. We really like, you know, this is like a big moment and a big change in a complex protocol. We want to like optimize parameterization. We want to give time for, you know, a competitive marketplace only exists once people join it. And so we have like some, you know, a little bit of work to onboard some initial kind of fillers to help like test the system. But like we really want to give time for more people to onboard. and interact before it becomes the full thing.

Starting point is 01:11:16 And so this is like an early version. And now, in terms of the cross-chain variant, unclear, we have smart contracts right now, like stuff like parameterization, how long it will take fillers to start to integrate cross-chain. They're still probably going to have to wrap their head around the single chain variant, and that will take some time,

Starting point is 01:11:32 as well as the front-end considerations of cross-chain trading. There's some other changes that probably need to be made to let you swap between different chains, like in terms of how we handle network connection. and other things. So we're starting to work on improvements in our web app today that make it more multi-chain native. If you look at our wallet, our wallet is very, like, handles multi-chain very cleanly, and

Starting point is 01:11:51 our web app is not quite there. And so, like, as we're like optimizing the single chain variant, we're going to start optimizing our web app to be better for multi-chain generally. And then, you know, hopefully, like, later this year, we have, you know, the cross-chain variant in our web app as well, and people will be able to make, you know, trades. But yeah. What service providers or... other people infrastructure is needed in order to actually get this thing up and rolling.

Starting point is 01:12:18 Like, who do you need to hear from? Who do you need to get onboarded? Yeah, I'd say that, like, you know, a lot of it already is like, like, you know, swappers just need to use the web app as normal. Liquidity varieties just need to create liquidity and swap protocol as normal. I'd say that, like, what's new is there are definitely fillers. And there's sort of, you know, initially like, there's initially just like an API that broadcasts, you know, orders. And so integrating that and being able to, like,

Starting point is 01:12:42 fill orders, you know, there's already like, there's all these like people that do block building that can start tapping into that. So we need fillers to start discovering orders. Also, you know, for the RFQ variant, definitely there's a need of like people who provide quotes up front. That's about it. I'd say that like probably like wallets having like good U.X around signature based orders will help. They all have signatures and like other sites have done like signature based orders before. But the more like the wallets can be aware of like the UX implications of this, the better. I'd say that like people can start like, you know, looking at the cross-chrain smart contracts and thinking about how to build adapters for other bridges if they wanted,

Starting point is 01:13:25 if does want to get involved in that. Generally like infrastructure around, you know, alternative, like, a cool thing is that like when a user signs in order, they're incentivized to, like, broadcast that order as broadly as possible. They want as many fillers to discover that as possible. Similarly, if you're a filler, you want to discover as many orders as possible. And so having redundancy at the broadcasting layer, like today we have MEM pools and whatever for Ethereum

Starting point is 01:13:53 transactions, like having alternate like APIs for hosting signed orders, stuff like that could be helpful or interesting. I think over time they'll be like it won't just be like one API for hosting these signed orders, right? And that's not the goal. So things that help help. how further the decentralization and I guess is also desired. But yeah, I don't know. That's a bunch of stuff. That's a lot of surrounding infrastructure. Again, a lot of moving parts, a lot of complexity,

Starting point is 01:14:22 but also protocols that harness complexity is kind of a core theme of not just the Uniswap in the last year or so, but really crypto at large, I would say. Hayden, it's been a crazy year for Uniswap in You got the mobile wallet, uniswap v4, now uniswap X. Is there, I mean, we're only halfway through the year. Are you going to be on again before the end of the year? I think I'll be on, I'm expecting two to three more times. In 2023? Probably.

Starting point is 01:14:48 Oh my God. What else is coming? You know, we got some things lined up. I can show you privately after this podcast. All right. Well, apparently, Bankless Nation, you can hold your breath because Hayden Adams will be back for more Uniswap releases. the absolute juggernaut in 2023. Hayden, thank you for being such a strong bear market builder

Starting point is 01:15:09 and really pushing the space forward. Thank you. Thanks for having me on and always love coming on bankless. And yeah, we're trying to decentralize finance. Yes, we are. Yes, we are. And we're doing it a little bit jet lagged at the very start of ECCC. Both Hayden and I landed coming from the East Coast just a number of hours ago. So that's aping into ECC with a podcast. Hayden, thank you so much for joining me on Bankless today. Thanks for having me on. Cheers. Bankless Nation, you know the deal. Crypto is risky. Defy is risky. Unispop X is a brand new protocol. It's probably also risky too just because all things are. You can lose what you put in. We are headed west, however. It's not for everyone, but we are glad you are with us on the bankless

Starting point is 01:15:46 journey. Thanks a lot.

Bankless - UniswapX Revealed: A Game-Changer for DeFi

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