Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Mounir Benchemled: ParaSwap – Solving Liquidity for DeFi

Episode Date: September 8, 2021

ParaSwap is a DEX aggregator that aims to provide the best prices over multiple DEXes on the Ethereum blockchain. Users are able to scan dozens of exchanges for the best possible crypto price points, and get the most for their swaps.We were joined by ParaSwap Founder, Mounir Benchemled, to chat about his role in the French DeFi community, DEX aggregators in general, and what makes ParaSwap an important slice of the DeFi ecosystem.Topics covered in this episode:Mounir's background and how he got into cryptoWhy did he start a DEX aggregator?The French DeFi ecosystem and communityAn overview of DEX aggregators - the advantages and challengesThe role of the ParaSwap routerThe prospect of a ParaSwap tokenA DEX aggregator from a legal perspectiveHow ParaSwap makes moneyMounir's views on Layer 1 and Layer 2sThe future of DeFi tradingEpisode links:ParaSwapParaSwap on MediumParaSwap on TwitterMounir on TwitterSponsors:Gnosis Safe: Gnosis Safe is a smart wallet for securely managing digital assets and allows you to define customized access permissions. - https://epicenter.rocks/gnosissafeThis episode is hosted by Sebastien Couture & Friederike Ernst. Show notes and listening options: epicenter.tv/408

Hi, welcome to Epicenter, the podcast where we interview crypto founders, builders, and thought leaders. I'm Zabess St. Quiririr Ernst. Today, we're speaking with Munir Ben Chemled. He's the founder of Paraswap. They're a Dex aggregator, and they aggregate more than 20 decentralized exchanges and AMMs. Before we talk to Munir, though, we'd like to tell you about our sponsors for today's episode. NOSISafe is a smart wallet for a securely managing digital asset. And what makes NOSASafe different is that it allows you to define customized actions.

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as a portal to defy, financial tooling, organizational management, and beyond. Visit nosis-saf.io to learn more and to get started with your own safe. Welcome to the N.5Presenter podcast. The podcast were interviewer-crupter founders, builders, and thought leaders. I'm Sebastian Guizio and I'm here with Fidelica Ernst. Today, we're speaking with Munir Ben-Semled, who is the founder of Pereswap. Paraswap is an AMM-Dex aggregator and also a sponsor of this podcast. So, Munir, thanks for joining us today.

Thank you, Sylvare. Thank you, for Rika, for having me. It's a pleasure of being here. So before you found a Paris Swap, you worked at a couple of startups in France, and I was surprised to find out that you worked for the Paris Metro System, and you worked also, I think, for SNCF, which is the French Railway, and you worked at, like, several other startups as well. And I found that it was kind of interesting as a background

for someone who came into Defi around 2017-2018. You also co-founded Defi France, which is like a sort of association here in France. that has grown to several hundred members and has produced really great content, I think, educating people about Defi and they do like meetups and things like that. And it has been, I feel like kind of instrumental to a lot of the projects that we're now seeing come out of France. So, you know, tell us a bit about your journey and, you know, what brought you to, you know, co-found Defi France and then eventually found Pereswap. Yeah, actually, I have most, I would say, of my time of my,

career I worked into the transportation industry. That's what you saw with the French railway station, a railway company and metro. I worked also at a competitor of Uber. It was also here in Paris. And I meanwhile, me working at those companies, I've been connected to the crypto ecosystem. I started with Bitcoin in 2012 the first time, and especially in 2013, when I started really I would say embracing the philosophy behind the Bitcoin and crypto. And until 2017, this is where I went straight into crypto and was doing almost exclusively crypto content. Actually, I left my job just to build something on crypto.

At the time, I didn't have any idea on what to do exactly. I just was sure. I was just sure that it's in crypto, where I want to build something or maybe join a company. It took me sometime until 2019. This is where I started Paraswap and the rest is history. What made you decide to start a Dex aggregator? Because, I mean, even at the time, there were already Dex aggregators around, right? So in 2019, there was only one.

At the time, maybe two, actually. And the idea came before. Those two appear. I was a user of ItelData. And during the ICU craze, actually, that's the one. was the best place where we can find liquidity for those ICO tokens. And the initial idea was to build a better version of EtherDal. Because it was good.

I mean, it was serving its purpose, but the user experience was not great. It was too slow, too expensive, especially with gas at the time. And the idea was to build a DECS that is just better than Ital Delta. And that was late 2018. And there was some histories with ETL Delta at the time, So, at the same time, there was Unuswap, Kiber, and Bank Corp, that started having some traction relative to that period. I mean, that period was making $1 million a day was something huge. And so I said, let's not maybe build a dex because there may be very interesting products.

Let's gather the liquidity of all those dexes into a single place so that the end users will have access to a higher liquidity. So that was the initial idea, I mean, the second iteration, sorry. And during that time, I saw two products that were launched. One of them is called Total. I think it still exists. And that was the first aggregator. Then they came one inch. And for me, it was great because, I mean, I thought I had this idea first,

but other people had it and implemented it. So which means it's a kind of a market validation for the idea I had and launched. So I decided, in fact, to maybe iterate and do something different. by launching a pure retail app, like something that will democratize Defi and access to Dexas that anyone can use. And that was launched in June 2019. It got a lot of excitement from many people and a lot of good feedback. But actually, nobody was literally using it. It was a very naive approach in 2019 launching a Defi app for retail that anyone can use, which led me to iterate and build something for the Defi community, which looks a lot like what is.

Parasop today. Cool. Before we dive into Paraswap, I mean, I want to talk a little bit about the French crypto ecosystem. We're both in France and very much involved in it in various ways. And you know, you found it, you co-founded Defi France. You know, I mentioned earlier. It's sort of a nonprofit that has, you know, organizes meetups and produces educational content around Defi. And I think like a lot of people outside France probably get, you know, probably

have interacted with the French ecosystem, like, through ETCC. But, you know, how, how big is the French DFI ecosystem? And, like, how do you feel like DFI France has contributed to, you know, the proliferation? Like, there's been just so many, like, really interesting projects coming of France in the last recent months. How important you think DFI France was to bootstrapping, like, the DFI community that we have now? So, Dify France started in Q4, like, around September 2019. it started by just a coincidence. There was this big DFI group in Telegram and somebody asked a question about

is someone from France here? Or is someone speaking French here? Somebody replied and somebody else replied. We were like five talking and then we said, let's create a group. We created the group called the DFI France and this is where the DFI friends started. We had like 30 people and very active, very highly engaged

and continued growing. And then we organized the first meetup in Paris. And we were highly surprised because we were expecting normally in METAS. People have like 50, 60, 70% no shows. We have an excess. We have around 100 and something total with 50% in livestream and 80 people inside. And that was 2019. We're like people who were barely talking about Defi.

So this is really when Defi Friends started. And the engagement was until now, there's no loss in like equality. very, very highly engaging in the subject are really interesting. So I think many of the projects you see today, I won't say they came out of DefiFrance because DefiFrance is not really an entity, but I would say they were inspired by the project

and the content that was present in DefiFrance. Now it's been almost the two years. And I don't know if you see some of the projects right now that were launched like Morpho, like Paladin, like Jelify, So these guys were very, I would say, active participants in Defi France. So, yeah, it's hard to say they came from there, but I would highly give credits to the community of Defi France

to inspire these guys to launch this project. It's really cool to see all this. I feel like DefiFrance was a big inspiration to these people. And I give it a lot of credit for, you know, propulsing the ecosystem here in front. friends. So before we dive into Pereswap, maybe just a quick reminder for those perhaps who are, you know, tuning in for the first time here. You know, give us a sort of an overview of like what is a Dex aggregator and what's its purpose? So aggregators are like airline companies.

That's the easiest example I give. It's like an Expedia or a kayak.com where it gathers its supply in here in defy, what we call liquidity from different sources. actually hundreds, maybe thousands of sources if we count the pools of each tax, and tries to deliver a price that is better than the market. That's the value proposition of tax aggregators is trying to beat the market price. And that's either for end users or maybe for protocol users or API users in a nutshell. So currently around 20% or so of trading volume goes through tax aggregators. the other 80% go through trading destinations directly. Why do you think that is?

I would say the market is still maybe not aware, 100% of aggregators. Also, one funny thing is that among the other volume that recounts, like the other 80% contains also the volume coming from aggregators. So normally, the volume for aggregators maybe is more, more than that, because they're often double counting, like a trade that was, if a trade will go to Paraswap, maybe it will touch Uniswap once or twice or three times, and Uniswap will get this volume counted three times, and Paraswap will get it counted once or another aggregators. So I would say there is part of publicity that is not enough,

and that's also the same thing in airline companies. Many people still go directly to Orion Air, Air France, Air America, and so on. But also there is this double counting that's happening, So let's say it's one, kind of both. And there are also many projects. They will go directly to Uniswap because it's one of the best, sorry, the biggest exchanges. So they will go straight and integrate Uniswap just because it's known enough

that they will go only there and miss out on the liquidity of URGs. So if you look at the fees that users are slapped with, I would kind of count them in three different buckets, right? So basically there's gas, then there is slippage, and then there is extracted MEV, right? I mean, would you agree, Monnier? Well, MEV, I mean, it's common for all dexes or anything that is on-chain trading that has maybe no native protection. We can maybe discuss more into that. I mean, the fees, yes, they are paid anyway.

Excuse me, what was the third? The gas, you mean? The gas overhead. Yeah. That's true. So what we do, and I think now it's becoming a standard in tax aggregators is that prices will always take gas into consideration. Like, for instance, you are getting $1,000. Maybe you will be getting less than $1,000.

Maybe you would be getting $995, $995 as our destination token because the $1,000 will come with a higher gas. So those gas weight is taking into consideration and calculating those aggregation algorithms in order to argue that something else is we did and also other dexas aggregators have done is rebuilding those native routers of Texas. Like Uniswap, they have a router. It was rebuilt by us, by others in order to consume less gas. So ours consume 5% less gas than Unisab V2. And we are also working on the V5 on our smart contracts that will mean. minimize the overhead to a, I would say, a few 10, 10, 20, 40K, still still on overhead, but much less given the advantage we get to use in an aggregate.

And what do you think is the typical trade size from which it is worthwhile using a Dex aggregator instead of just a trading destination like Uniswap? Because basically, if you have gas overhead by going through several, different smart contracts, then if you're only trading for, say, a thousand euros or something, it might not be worthwhile, right? I would say depends also on the gas conditions and depends on the blockchain. We're talking about Ethereum. In general, we tell users better to use dexes in general, not only aggregators, starting

from around $1,000. But also that depends a lot on the gas price markets. As I said, uniswaping, all the forks are cheaper now in aggregators than on the dexes themselves. So, yeah, it depends, I would say mostly on the market in using usage of dexes and not only on aggregators. Do we have a sense of how much people are saving on average by using dex aggregators? You know, like, you know, if you have the trade $500 and you had the choice between the decks going straight to the decks or the dex aggregator, you know, how much could people expect to, to say like to optimize like their their trade there one of the gains that they can expect so depends on there are two categories there is the long tail and high cap tokens uh so the high cap in general it's

a couple of say point five percent or less than point five percent for small amounts for a high amount like more than one billion dollars it can range over one one two percent depends on on liquidity. For low cap or the long tail, it depends. Most of the long tail are in a single decks. So for a $500, I would say 90% of the cases, it will be on a single decks on a unioswap, for instance. And our selling, a unique selling variable position is go use as instead of unoswap because our our dax is cheaper than in terms of gas. So I would say, yes, I would classify them in two categories. If it's a low cap, maybe $500 to $1,000, we'll, will still make sense, but in this case, we're looking into gas, gas, and in high cap or maybe high,

high volume or like high, high amounts, this is where we're going to be looking at the percentage on how much an aggregator is better than native. It's always good to compare many users. What they are doing is they are opening virtually multiple tabs in their Google Chrome or whatever they're using and comparing those. That's why we have a table, like instead of people doing that, we can show them the prices in a single table so that they can compare themselves and see which one is best. Interesting.

So one of the things that I think people are used to seeing on a Dex aggregator is like the router, but I'm not like particularly familiar about how that works, like what the router actually does. So can you explain like what is the router and like, what? what role it plays in the trade? So router is, well, there are two things. There is the algorithm part, so like the data aside, that will run the algorithm and gives the user a price and that is as good as the best price of the market or better than the markets.

And there's the second part that is the execution, which is the smart contract or the set of smart contracts that will execute this trade. So if you look at the first part, which is the routing side or like the algorithm side, So there's a lot of engineering and algorithms that are involved, like a cocktail of algorithms that are involved in order to maximize the price and minimize the fees, which are the gas here. And that uses, I would say, we can get into the details, but as you said, a set of algorithms. And also we try to have a real-time connection to the liquidity. And that's what liquidity, which means we are connected to the full notes and try to source prices as fast as possible in order to stay connected to the markets.

And the execution side is smart contracts that will execute on multiple dexes and make sure the prices that are returned matches the expectation of the users. Otherwise, it will revert. So it's an atomic trade. It will either 100% execute or fully revert, and the users will get back their funds. And that's a guarantee that the EVM is giving to the user. So what are the challenges of running a tax aggregators? I would say there are many because there's a lot of engineering complexity on the back end side. But the biggest challenge is staying synchronized with the liquidity of the blockchain.

Because there's a lot of data. If you look at our traffic, we are doing hundreds of calls per second. If you look at our backend system, we are making thousands or tens of thousands sometimes of calls per second. It's very high traffic. It looks a little bit like it wasn't like that, but right now it looks more and more like traditional finance. I mean, a lot of computations or all the time, a lot of engineering strategies in order to deliver high consistency. And that's not an option to deliver inconsistent prices. So I would say this is the first in major parts.

And obviously, like any DFI protocol, security is always the main concern on trying to deliver smart contract that are secure because, I mean, people, if they execute the trade on our smart contract, we have literally no control. So these things have to be highly secure, highly audited, and the engineering practices have to be done very well. So let's talk about governance a little bit. Before doing this interview, I posted on Twitter that we were going to be speaking with you and asked what we should ask as a question. question and a vast majority of people were interested in knowing if Paraswap would have a token soon. And other Dex aggregators have issued a token, either in a form of an AirDrop or like some of the distribution methods. And these tokens are typically for governance. So tell us a little bit about why a Dex aggregator would have a token. And if this is something that you guys are considering,

since there seems to be so much enthusiasm about a potential PeriSwap token. Yeah, the famous one token. So I would say yes, the short answer is yes. But the outstivations are not necessarily the same as you may have seen in other aggregators. Some aggregators were a pivot from a non-performing project to an aggregator. Some others have also AMMs, and the main use case was the AMM. And then other use cases show up, which are also interesting. for us and our vision is building a defy project or defy protocol

it means decentralization so building I would say a centralized UI centralized backend is just a mean to an end and not the end itself maybe that's what my feeling I have for some other project that's it's very important to keep a say a intellectual property on some of the things that have been built, but for us, the future, everything has to be decentralized and we should be able to literally raise our hands and this thing continue to work. Parasop as a tech should continue to work. Maybe Parasop.io, which is a domain name that uses legacy, I mean, tech systems, maybe is will be centralized. I mean, we have no choice right now, but the tech itself, the smart

contracts, the backend and all the tech should be decentralized. And to do that in a secure way and also an incentivizing way, that needs some incentive mechanisms. So that's why a token will make sense. When this will happen, we don't have a date yet. If it will happen only when we get there, I don't have an answer right now, but we are working into only very creative models

in order to make this thing, I would say, useful. And for me, a token is not also an end, it's also a mean to an end, because it's a tool that helps on maximizing decentralization or solving some product problems right now that we have identified and I will have some information maybe in the next few weeks or next few months, you can say when exactly, but we're working on some very interesting.

I don't know if the Twitter mobs will be satisfied with that answer. Well, actually, so when you were talking about this, it kind of brought up some other things that I'm interested in picking your brain on. So you mentioned that the defy, the back end, you know, would need to be decentralized, and that's kind of the goal. And that the front ends, you know, there could be a website or something like that. And, you know, recently there was a bit of uproar when Uniswap, you know, delisted some tokens and, you know, people started kind of like raising their hands up

and saying, like, yeah, we need to like decentralize all front ends, et cetera. And what are your thoughts on this? Like, do you think that it's, like, really important for also, like, all the front ends to be decentralized or should there be companies kind of bringing those? And what are some of the best technologies that are available today for this to happen? Or what things are you, even if they're not mature, like which technologies are you most excited about in terms of like being able to also decentralize, you know, front end stuff? So I think it's hard to decentralize front end today while keeping a high quality of service

because we can use services like ENS and so on. but there is no the tooling that we have in Web 2.0, for content delivery networks and caching in all those systems, still are lacking. There are some bridges, like one is used by Cloudflare, that can bring Web 2.0 toolings into IPFS, but still also not all browsers have support for IPFS domains. Still, we would be going through Web2.O.

Again, so the point is we are always coming back to a point, web 2.0 and we are still having to open an account and put a credit card and pay a cloud flair or an equivalent. So it's hard to be a pure or a purest decentralized right now today, but there are some features who are like some products who are building. I forget the names, but some interesting ones. And that's one part, like the delivery parts. There is another part is building the software itself. When we build a software with the team, we have a GitHub that is centralized. We have the whole process. of building. We are a small team, so we have, I don't know, depending on the

team, like you have a Scaramaster, product manager, and so on. We do that to keep things efficient. By decentralizing, it's very hard to have good consensus. And that's also, again, talking about purism in decentralization. But we can, I think, I always think that we can have pragmatism in decentralization and that's what made many projects successful while being sufficiently decentralized. So how we do it ourselves, I'm not sure yet. So right now it's much more productive to keep things the old way until we reach a critical mass in terms of usage, in terms of maybe decentralizing what we can be decentralized today and can be efficiently decentralized, like our smart

contract system, power supply pooling, all those things. And once we reach that maybe at that time, the tooling or the infrastructure for decentralizing the front end will be mature enough to decentralize the front of it. Running a tax can be, how do I put this delicately, regulatoryly fraud. Is it also difficult to run a tax aggregator from a legal point of view? Or do you guys just take the stance that basically the only service you guys are are providing is telling people, you know, where they can trade and you're not actually

facilitating the trading yourself? Yeah, I see personally, I mean, I'm not legal. I mean, legal is not my expertise. I can say only my opinion. I think it's a pure software because the liquidity is not on parasylop, is not on the aggregator. The liquidity is on the underlying decks. The tokens are not listed in paraslop are listed on the underlying dexes. So in my opinion, if there are any regulatory, I would say, challenges will happen first on dexas and not on aggregators.

It's also the case in traditional finance where middlewares, like they call them in also like how we'd like to see ourselves as a middleware, are not subject to the same regulations. And sometimes I'm not to no regulations at all compared to the venues where the trading happens. Because the problem is in centralized finance, there are many middlewares. I mean, if each one of them will be regulated, it's just not going to be possible. So that's why the regulation happened on the both ends, on the front end and on the back end. and on the backend site, which is the training venue and the end user interface or the broker in the case of Defi. Maybe Frontenance will have some challenges in the future, but again, I mean, I have no legal

expertise. I can't really say what's going to happen. Sure. How does Paraswap currently make money? So right now, by defaults, the Paraswap is free. It doesn't have any fees or any extra fees. There are two models, two business models that were deployed in. production right now. One of them is what you call performance fees, and that's a very

minimal. I mean, I even have a hard time going on it a fee because it's less than a one basis point. It's just a break-even fee to just finance, I would say, whatever infrastructure is behind the API. And that's 50%. We share the, I would say, the app site with the end users in case they receive more than expected. And the second one is with partners. So anyone will integrate our API. If they choose to, they cannot choose to. If they want to monetize, we share fees with partners. So it's 15% for whatever the fees they set. They can put them to 1, 2, 3% whatever they want, even to 0%. We are totally agnostic and we take a share for both fees. So when you say integration partners, like, who do you have in mind here?

Argent, ledger, metamask, and all of those who choose to monetize. But we have a lot who haven't monetized at all, like by Cowswap, as one of them, that choose to not extract value because value also can be extracted in many ways. And each product have their own method or like their own

approach of extractive fees. So I wanted to come back to something that I noticed that I didn't ask, but when we were talking earlier about the about fees, you announced earlier this year that you had released this Redux token

which claims that it can reduce gas fees by up to 50%. How does that work? Well, it used to work because now with the London hard work, it's no longer usable because there was a change in the EVM and the gas tokens, ours, I mean, our previous Redox and others are no longer possible. And basically the concept was if you remove storage from the blockchain, you get refunds in order to incentivize people,

to remove storage. And the idea was interesting, but many people started abusing between quotes like us, at some way, to create an artificial storage, like smart contracts. And when the gas was cheap, and removing the storage with the gas was high, it was like an arbitrage in order to reduce gas fees. It was very useful when gas was very expensive. But yeah, right now it's no longer possible. Thank you, Vitalik.

That's what's happened. Yeah, that certainly. I mean, in the grand scheme of things, it was probably good that this move happened because people were abusing it and basically the way that it wasn't used in the way that it was envisaged to be used. So yeah. So maybe let's talk about the defy ecosystem as it, you know, as a larger arena. What we currently see is trading sizes. being economically limited on layer one, right? So basically back in the day, you could, you know,

send $10 worth of something and, you know, it cost like 10 cents. It was fine. And now that trades have become much more expensive. The economic viability has kind of gone down for these smaller trades. So basically they get pushed to layer two. What are your thoughts on the dynamics between layer one and layer two? and with regards to trading.

How do you see this interplay in an equilibrium state in, say, a year or two? Yeah, maybe a year can be a little bit easy to predict. More than that, it's very hard. I mean, even one year is a bit challenging. So right now we saw the big success of sidechains, not layer two, but maybe what they have in common with layer twos is high throughput and low fees. And they attracted a significant amount of retail, which were starting to be coming to start to lose at some point, say,

in DFI from, say, DFI summer, till the launch of BSC pretty much. It was kind of exclusively DFI DGYNG play using taxes and aggregators and other DFI platform. So I would say we have a clear sign that layer two are and will continue including retail. And right now it's hard to say if we look at that layer two as proper layer twos, like Zika Rola apps, optimistic Rolaps and not the side chains and how this would play out. We will see, but I think it will be also one of the biggest engines of driving retail. I'm hesitating a bit because what I saw and what drove a lot of interest is all those incentives we were seeing in those side chains.

So I think that for layer 2s to succeed in to attract users, there has to be some kind of incentive, like some kind of highly attractive products for these people to come and leave the side chains and go for layer 2s. We want them to do so, in my opinion, because it's much more secure and they rely on the security on Ethereum. But in order to do so, there has to be this incentive because the security incentive is not enough for retail, because simply there is lack of understanding of those properties. Yeah, interesting. Can you maybe explain how you differentiate layer two and side chains? So what to you is the core?

Is to you a layer two, something that shares the economic guarantees of Ethereum layer one? Or how do you, how are they connected? Yeah, for me, layer two relies on the existence of Ethereum. It cannot exist without Ethereum. A side chain is just an L1 that has either compatibility with Ethereum, like Polygon, for instance. The smart control of the trans here would run there, but it has its own security assumptions, and it's completely independent. It's like Solana, for instance, it's a layer one. It says that it's not a site chain because it's not compatible with Ethereum in terms of EVM.

and so. Okay. And do you think that the likes of polygon and say X-Dye can, that you would correct rise as side chains, do you think they can somehow attract the security guarantees that Ethereum layer 1 currently afford? I mean, it doesn't have to be the exact same security guarantees, right? basically they just have to be commensurate with the use case. Yeah, I think it doesn't have to be, of course,

and it can be also as good as Ethereum if it's done in a different way. I mean, why not? I think that's something we started to see, like Polygon with the merge with Hermes, maybe they are building something more solid than what exists right now. I mean, they have to start somewhere.

They don't need to have full bullet points. security from day one. They made that they choose to get the traction and now they are maybe building new models that are more solid than what exists before. Also the same thing with Ethereum. Each year it's more and more solid. So I think Polygon will get there at some points. What do you think is currently missing in the Ethereum DFI ecosystem? It's currently missing. But I think it's broad, the DFI ecosystem. system, there are many many things going on. But for me, maybe we come back to the same subject.

I think layer twos are missing because now Ethereum is still a Degen place and retail are going to side chains. So I think layer two will bring back Ethereum to its initial, I would say, philosophy of being inclusive and bringing out a, yeah, maybe it sounds cliche like financial freedom to, to everyone. How do you see the evolution of trading happening? So basically, if you look at the history of Dex's on Ethereum, we used to have the order book Dexes, right?

And then basically they were overtaken by AIMs, which in a way was unlikely because the user experience is worse, but basically the feasibility is better. So how do you see that play out in the long run? Will we see more and more sophisticated AMMs like UNISWOPVV-V-3 or will there be a return of operator-lis order book dexes? I think we will continue. I mean, in this direction of innovation, it doesn't have to be either or.

And UNICEFVV-V-3 is the proof. It's a merge between other book models and AMMs. So it has the best of both worlds, the convenience of using an AMMM, and also the sophistication of using an order book. Maybe right now, the new challenges with MEV, for instance, push the ecosystem for new innovations like this new, I don't know, like Tuap, but with an M, things like AMMs, but are executing trades in batches in order.

But I think that's also what CalSwap is doing with diagnosis, in order to reduce MEV and maximizes the price that the user is going, going to get. So I think those are new trends. It's always the case. Nothing is new. Like AMMs existed maybe since 2016 or early 2017 with Bankrupt. But only in 2019 that people started talking about it. Maybe also with batch executions. It was it was pioneered by businesses. And only right now people became, became cool and trendy. But there is also a necessity because at the time, there was no MEV and there were, we didn't have those challenges. And right now, since we started to see them, people notice the benefits of using such systems.

So I think, yeah, innovation is building one, is building on top of the others. And hard to say what's going to show up in the future. But I think other books and AMMs and product built on top of those will continue to innovate. I'd like to just come back to the discussion you were having earlier about L1s and L2s. Do you think that L2s are just destined to capture much of the liquidity that exists, in L1. I mean, if fees there are so much cheaper and transactions happen much quicker, do you think it's just natural for most of the, most of like pools and transaction volume, which is move into L2s?

That's what we hope would happen. But the issue with that is we are creating new problem. There is new kinds of fragmentation. We used to have it in N1s. It was solved partially by aggregators as well, by gathering this fragmentation. But right now we have a new kind of fragmentation where we cannot apply the same security, I would say, native security guarantees provided by the same L1. So hard to say if liquidity is going to be concentrated, if on a single L2 or mostly on an L2,

or maybe cross multiple altrues. But that again created also new opportunities for innovations by creating solid bridges that are highly secure and highly decentralized. Still, I think we are not there yet, but we see some very positive early signs that some of those bridges are going to make this possible, make this composability that we lost, the possible and efficient. Do you think it will be possible to, like this is something I was thinking about earlier. I don't know if this is possible. and maybe you guys have an answer. Let's say someone has like a, you know, a bunch of liquidity positions on one ether address

and like they're, you know, in, you know, they're in Avey and maybe they have like a CDP or something. Will it be possible to do sort of a one-click migrate, you know, perhaps using flash loans so that you could just basically move all of your positions onto an L2 without having to like liquidate those positions, et cetera? You mean across L2? No, from like L1 to L2.

So like, let's say you want to take. advantage of, you know, something like Polygon, but you were already, like, invested in an L1 smart contract. Could you just simply move those positions, like do sort of like a migrate contract that would migrate all your positions onto L2 so that you can benefit from like lower fees and faster transactions? Yeah. So there are two parts of that. There's the part that is proper to L1, like avoiding liquidations and so on.

That's a problem that we know how to solve with the tools like flash loans and so on. The challenging part is moving liquidity to the other side and making all this process atomic. So that's what we lose in maybe in L1, we lose the synchronous atomicity. Like we are 100% sure that this fully has to succeed or fully reverts. But the thing here is that this is, I would say, synchronous atomicity that is lost. I mean, there's no way to have it. So there are ways, but they are not 100% centralized. decentralized there are some trade-offs and that's a mean anyways it's about engineering it's all

about making trade-offs and making the right trade-offs and building on top of what has been what has been done so there are solutions like connects that will allow you to programmatically do this by executing smart contract on one side moving the funds to the other side and executing the contract on the other side again so you will say you have die on avi and you borrowed usd-d-t it's going to back your loan and take out the die, move the die to, say, Arbitrum, for instance, and then you're going to deposit the die again, deposit the Di in Arbitram and borrow the USBT. All of this is the same smart contract at the end. If you look at it, it's just the instructions we are giving to the smart contracts, but the

question here is who is doing this work? I mean, somebody has to push a button and has to do it, and you can, as a user, initiate the first transaction, but then moving the funds to from L1 to Arbitrum, well, In Kinex, they are using market makers who the system is still not custodial, but they are responsible for this operation. So there is an execution trust. You are trusting that they will execute your transaction in time and they will put your funds on the other side in time.

So that's, I would say, the only trade-up that exists in other projects. They try to build different models like instead of using market makers, they will use oracles and validators of the oracles like ChainLink. We don't know which who is right because none of this is highly battle tested, but the idea seems quite interesting. Super interesting. So one of the other hot topics of the moment is MEV, right? So basically, and if you look at DEX aggregators like Paraswap, they offer MEV protection against some sorts of MEV, right? So basically against backrunning, for instance.

but not quite as well on front running and sandwiching. Do you have plans to kind of protect your users against these kinds of attacks? Yeah, well, there are multiple things that can be done here. Well, first of all, on the front end site, where users don't need to broadcast the transaction to the miners, like to what you call the dark forest, they can send it to a specific network, It's like flashpots, like blocks route, and so on.

So that's better. Well, there is Kalswap also that's doing dispatch processing, which is very helpful. But then also there are native products that are MEV resistant, like Piresnap Pool, which is a network of professional market makers. It's like an on-chain OTC trading, and the codes are fixed as OTC. I mean, I'm selling X and I'm expecting Y, and that's why it's fixed, as long as it's executed on time. So that's natively what we're doing,

but that's only one of the dexes, among others. If 100% of the trade is executed on Parasalk Pool, there is literally no possibility to have any slippage or any kind of front-running attack, but the users can do it themselves and can help them by integrating these kinds of features on the UI side, like flashbots, like Limitolders,

which are swapsed, another route. kind of those. So as we wrap up here, I wanted to maybe take a step back a little bit and, you know, look at the Defi ecosystem from a broader perspective. What are your thoughts on the institutionalization of Defi? Do you think it'll happen? And perhaps more importantly, do you think it'll happen on Ethereum or perhaps some other platform?

Well, it's definitely already happening, as we saw with Ave and Ave Pro. and whether it's Ethereum or not, I think so, because institutions are interested. Normally, what I can see in two things. First is in the liquidity, and there is in Defi, in the returns that Defi can provide to them. And the second thing on the technology, and both are built on Ethereum. So if it's not on Ethereum, it will be on a fork of Ethereum. So it depends on the motivations of the institutions. If it's just about technology, so it may be on a private fork of Ethereum, which is,

still, I mean, credit to Ethereum. If it's about the liquidity, so it should happen on main net, and if it's not on main net, on a layer two. So I would say very, very likely that this will be on Ethereum. We see some innovation also on Solana, on Polka dots,

but Ethereum has the critical mass. I mean, has the lion's share of this. And I would see institutions starting with Ethereum the own Ethereum ecosystem, rather than going for other options. Do you think that, that efficient and secure bridges could potentially lead institutions to, at least, I mean, perhaps Ethereum is the platform where most of this happens, but what role do bridges play in making

it such that other platforms can also capture some of the activity? Well, also, I would always put that relative to the motivations. So if it's, and also on the amounts that are at stake, so I would say it's very hard to know right now. It's still in the beginning. And Ave, maybe it's a good project to watch and see the outcome on how this will play. But institutions are security for institutions, something very important because what is at stake is very high. So I don't know. I mean, hard to know.

For me, it will be either Ethereum or a private blockchain because it's given these institutions an insurance that things will be safer. So, yeah, I don't know how it would be exactly, but I see hardly them using something besides Ethereum or private projects. Do you think institutional money is going to change what Defi currently is? Yeah, I mean, about I can't really say. day, but what we can make a parallel with the CBDCs that are trying to run on blockchains and some of them are considering public blockchains.

What I heard at least in France, they are considering all blockchains. I mean, they are not going for a single one. They are testing each and every major, major blockchain in order to figure out which one would work best. But this is the, I mean, I would say the biggest players like states and governments. in any ways this will be highly centralized. So it's not going to be defy. Maybe we don't even know that if defy users will even have access to this money,

that normally is reserved for banks in big institutions. So, yeah, I mean, I still, I mean, it's not my expertise. I can say exactly. But if defy will change how the perception of money for people, that I can definitely say yes. Are you afraid of the regulatory landscape and where it's currently headed in Europe? Not afraid at all because we had some discussions with many regulators in many countries. The common denominator with all of them is that they are all pro-innovation and they like to talk to builders and they would like to see more builders. The only thing is how DFI fits into the current regulatory frameworks, which I think it doesn't.

So the challenge is how will the future regulations look like that will try to regulate DFI. And now what I like is that regulators understand very well how DFI. At least two ones we talk to, maybe we haven't seen the whole picture. But once we talk to and we've seen multiple countries, they like innovation. but they are still, I would say, those institutions are very complex and have a different agenda than builders. I mean, they have protection, human protection, rules, anti-money laundering, and so on. So how will this look like? I don't think it will be as bad as people think, but I definitely think it will be very highly challenging.

Yeah, I mean, this is a topic that I'm personally very invested in and interested about working at that. everything. And I feel that at one point it will actually come to a head because the agendas are so different. And I really think that at the moment, the builders and the regulators are not putting really all their cards on the table. Like the builders are trying to convince regulators that what they're doing is like, you know, innovative and everything. But what I think institutions, you know, fail to fully grasp is that crypto and defy is a power play. I mean, it's fundamentally there to disrupt central concentrations of power. And whether that becomes apparent to regulators before they regulate crypto or it kind of like comes up after,

you know, one side of this fight is going to get, you know, we'll, you know, we'll be disappointed. And I have a feeling that the regulators with the power that they do have will probably end up having the upper hand. and you know we might end up with like a future of defy that looks a lot more like Spotify Netflix than BitTorrent you know which which has its advantages and you know like still allows like innovation to foster and everything but like a sort of wild west world where you know the future of finance and like world you know global economies are governed by you know shattery super coders I think is unlikely and if you have anything to add to to that or any reactions to that at all?

Yeah, I cannot agree with you in that sense. I mean, the world will always have some older in one way or the other. And maybe human beings expect to have this predictability than not having any kind of visibility on who has control of what. So maybe it's not going to look like this, but defy again, it's very small. And the use cases are very limited today. And the disrupting and changing completely the financial system is not. on the table here.

It's more what is on the table right now for builders is just making things better, just making exchange of value better, just making exchange of digital value better. That is the order of today right now. And I think no matter what's happened, as you said, we will have the Netflix and Amazon Primes and so on for sure. But whether we will have very sophisticated bitterents

that will be more and more established, I think that we will have it as well because the blockchains right now, and especially Ethereum and maybe Bitcoin as well, are hard to, I mean, cannot be stopped. And what's built on top of those cannot be stopped. So maybe other people who didn't have access to finance before

will always have this kind of access. And that I think is irreversible. So what projects are you most interested about it today? Like what really kind of gets you excited in the defy space right now? Like what's at the kind of at the cuspur at the forefront of innovation? Well, maybe we discussed it, layer two, but also bridges with layer twos. Those are things, so I'm looking at it. Not looking too much in NFTs, I don't know how, but maybe two focus and what we're doing.

We actually had some... Probably a good idea. Yeah. I had some cool ideas about NFTs, but since we're not highly involved, we didn't have the time to really focus on them. But always ideas in the aggregation side. I mean, that's what we do. So that's what we've been thinking about. But I think the biggest things that are happening today, in my opinion,

the most interesting things that are happening is those connections between blockchains and between layer two's that I think is very challenging in an intellectual point of view and also in a kind of user demand point of view. Yeah, I agree. I think like creating the bridges here is one of the most important things. Like you want to have, I think we want a future where assets and liquidity can just move pretty flawlessly, you know, pretty seamlessly between platforms and like even, you know, between like layer one. So, you know, like having assets being able to move from Ethereum to Solana or

cosmos and I think is a vision of blockchain that I've always kind of been excited about. And I'm hoping that it really goes in that direction that we do have like true interoperability between everything. So yeah, that's also something I'm very, very interested in seeing happening and playing out. Yeah, Munir, thanks so much for joining us today for coming on the podcast and telling us about Paraswop and your vision for Defi. And yeah, looking forward to seeing the continued growth of Paraswap. Well, thank you for having me. It was a pleasure to be in here. It was a pleasure to have you on.

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