Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Stani Kulechov: Aave – 3.0

Episode Date: May 18, 2022

Aave is an open-source moneymarket protocol. An Ethereum native, it's deployed on Avalanche and Polygon, with more than $1 billion deposited on each. V3 is now live on seven different blockchains, including Fantom, Arbitrum, Optimism and Harmony. Aave, which has a decentralized governance system, collects about $50 million in revenue per year to its treasury through its various activities, which makes it self-sustainable. Two years after his last visit to the show and after the recent Aave 3.0 release, we had Stani Kulechov, founder of Aave, back on to chat about governance within the DeFi space, his new project Lens Protocol, and the road ahead for not only his projects, but also the ecosystem as a whole.Topics covered in this episode:In view of the situation this week with Terra and UST, we hear Stani's take on stable coins and stable coin mechanisms and how this has evolved over timeNew collateral - how a collapse of an asset can affect lending marketsGovernance within Aave and DeFi protocols in generalHow interoperability looks for a lending protocolStani's new project LensProtocol - the composable and decentralized social graphWhy have other decentralized social networks not managed to take off?Stani's recent ban from Twitter #freestaniThe roadmap for both Aave and Lens over the next 2 yearsWhat is coming next for the ecosystem?Episode links: AaveLens ProtocolAave on TwitterLens on TwitterStani on TwitterSponsors: Steakwallet: Steakwallet is your new favorite multi-chain, mobile wallet. Tired of having a different wallet for every chain? Get Steakwallet today and get the power of Web 3 across all chains right at your fingertips: https://steakwallet.fi/ - CowSwap: CowSwap is a Meta-Dex Aggregator built by Gnosis. It taps into all on-chain liquidity - including other dex aggregators such as Paraswap, 1inch and Matcha - offering the best prices on all trades. It provides some UX perks (no gas costs for failed transactions!) and protects traders against MEV. - https://epicenter.rocks/cowswapTally Ho: Tally Ho is a new wallet for Web3 and DeFi that sees the wallet as a public good. Think of it like a community-owned alternative to MetaMask. - https://epicenter.rocks/tallycashThis episode is hosted by Friederike Ernst. Show notes and listening options: epicenter.tv/444

This is Epicenter, Episode 442 with guest Stani Kulischoff. Welcome to Epicenter, the show which talks about the technologies, projects and people driving decentralization and the blockchain revolution. I'm Friedricha Ernst. And today I'm speaking with Stani, who is the founder of Aver. Aver is one of the big lending markets on Ethereum and now also other chains. But before we talk with Stani about Aver, let me tell you about our sponsors this week. Our first one is Stake Wallet. Stake wallet is a new favorite multi-chain mobile wallet that puts the power of Web 3 at your fingertips. In just a few taps, you can stake and manage your assets on over 22 built-in protocols, including all major EVMs, L2s and non-EVMs like Cosmo, Solana, near Arbitrum, and more. Just recently, they've integrated three-tap, Liquid Matik, and Solana staking, as well as liquid Avax, and launched

support for NFTs on Polygon and Avalanche. With more integrations being added every few weeks, jump into the Discord to let them know what you'd like to see on their roadmap. Don't forget to check out the Explore section in the app for your daily fix of the hottest depths, years, and news across chains. Download SteakWallet today on iOS or Android at stakewad.fi, and stake is spelled like the meat. We're also brought to you by Cow Swap. So Dexas are great, but they're vulnerable.

to problems like MEV, failed transactions and high gas costs. Cow Swap tackles these issues head-on and offers a new kind of trading experience. Built by Nosis, Cow Swap is a Metadex aggregator. That's right, it's a Dex Aggregator Aggregator. It fights MEV by matching overlapping orders directly. If no coincidences of wants are found, that is where the cow comes from, trades are settled on a variety of underlying on-chain AMMs, depending on which pool offers the best price.

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Our last sponsor is Teleho. Teleho is redefining the wallet as a public good. You can think of it as a community-owned alternative to MetaMask. So with Teleho, you can enter the Metaverse with a Web3 wallet that's fully community-owned and operated, and it's the first wallet that is also a Dow. Teleho's commitment to community ownership and public goods stretches beyond the wallet. beyond the wallet. In January, they became the first sponsor of EtherJS, an open-source JavaScript

library helping developers connect to Ethereum. And they recently announced a pledge to commit 2.5% of their total token supply to a Gitcoin aqueduct. Head over to Teleho.com. To try the Teleho Community Edition and play around with its features before its upcoming version 1 and download. So, Stani, it's super good to have you back on. You've actually been on before during ECC at the very beginning of the COVID epidemic. So that was just over two years ago. Yeah, that was, I can't believe how much time has passed since then. Was it two or three years ago even?

It was two years ago. Two years ago, yeah. That's basically, so two years ago, that means in DFI, 20 years. At least 20 years. One year in real life is 20 years in DFI. So many things happen so quickly all the time. So 20 years ago.

And this is particularly true today. So today we're recording this May 12th, 2022. So we are about two days into the collapse of the Stable Coin Project Terra. So it's collapsed from a $40 billion market cap by 99%. And as we speak, the chain was halted a few hours ago. And this is very much not my usual MO. I don't really talk about recent events, especially not in the beginning of the episode. But I think this is one of these ecosystem moments.

It's kind of like Mount Gawks and the Dow. it's kind of it it it I'm pretty sure this is going to um haunt us for a while so um let's let's talk about this now so if if you think about lending markets um like arven compound um especially a while ago they kind of they used to be stable coin king makers right so i mean why am i saying that so basically if you look at the stable coin demand, a large fraction of that was fostered through rewards dispersed to liquidity providers in the form of the native governance tokens. And basically which pools got rewarded was a protocol decision. And traditionally, the stable coin, saber coin pools were highly rewarded, driving demand

for the corresponding stable coins. So super long lead up to my first question. What's your take on stable coins and stable coin mechanisms? And how has it evolved over the years? That's a very good starter right there. I definitely think, yeah, what happened with the UST and Terra, I definitely think that the mechanism there was pretty much kind of like an algorithmic design. And I think there was a lot of reliance on,

market forces and the community and wider kind of like a crypto community and trust that the functionality and mechanism of that stable point basically is something that works and holds the peg. So what actually holds the peg isn't actually the mechanisms. It's the our perception of those mechanisms. The UST stable coin that Thera community had, there was some interesting elements. First of all, you had this kind of like a burning minting mechanism between Luna and the U.S.D, but at the same time, they started to collateralize partially the stable coin and build trust.

So it's a perception. It's the same thing, for example, with USDA from the editor where we have a stable point that everyone has been trusting for years. And they have issues previously in terms of transparency and whatever, but still it's been trading at the $1 range and because of the perception. So that's the thing, like how and what kind of mechanism you trust. but also like I've been in D5 now six years when we didn't have the even term D5 wasn't really actually coined yet. So it was very early we had one decentralized exchange, ETER Delta, and Avest very first protocol, Eidland was probably second or third, like financial, decent financial nature in nature application. then we start to see more the ecosystem to grow.

But even in our first version, we didn't have any stable coins, just to give some history for the audiences, that the main stable coin header was on Omni chain, which isn't even Bitcoin. So centralized exchanges were supporting UST and they were integrating with the Omni chain. And later, then we started to have stable points in the Ethereum network and across,

other new networks that were picking abstraction. But to give an example, in the very beginning, you could actually borrow, for example, Eter that was pegged to USD value. So you could come to Avae deposit different kinds of tokens and then borrow, let's say, 100 USD board of Ethereum, and then come later back and return 100 USD board of Ethereum. And this was, tricky because your debt will be USD nominated, but it means that if you want to use that value, you need to convert it to real USD quite soon because of the volatility, so of Ethereum. So stable coins that are, you know, that you have an asset that you know that it's, you know, peg to one USD, let's say one die, one USD, it really simplifies the usability on blockchain.

actually have value that you can just hold store and it doesn't fluctuate much. And that creates you a lot of usability and you can build a lot of applications on top. And down the line, after first stable points were created, the next thing would happen was the interest rate market. So essentially the other protocol is an example where you supply cryptographic assets and, for example, mainly stable points and you earn yield. And because the liquid, has been very narrow in decentralized finance over the years, especially in the beginning, you could easily receive 4 to 5 to 6% yield without any kind of like a liquidity mining in native protocol tokens. That's very attractive value proposition for every single person who is looking

at their checking account or a savings account that doesn't offer them almost like dust. that's just kind of like a back story. And I think like when it comes to different stablecoin solutions and and mechanisms, there are different kinds of, right? So there is the very first model that USDT and USDC had where you have the one-on-one globalization. So effectively you have a promise where you have an equal amount of funds either in back account as cash or in some other instrument that are highly liquid and low risk. Then we have the next model where we have over globalization. So let's say that you deposit a certain amount of cryptography value, let's say, Ethereum and then you mint a stable coin against that collateral, but less of the amount that you

actually deposit. So you have over-colonization and if the value of that collateral declines and below the value that the stable coin has been issued and for that user, there's liquidation. So there's a mechanism to uphold the colonization value within the whole protocol. it technically shouldn't go below that and looking at how the liquidations works. So it's not very capital efficient when you have a stable point where you have a localization. So this has sparked a lot of discussions like how to make a stable point where you introduce the globalization and you basically have some sort of algorithm that is backing or using market forces or using something else

than collateralizing fully the position. And this is what many of these so-called algorithmic stable points have been trying to kind of like a solve. And I think it's a very valuable and interesting performance as well because if you think about it, US dollar, it doesn't have. So it does have this technical redeemability, but it isn't backed by any kind of like direct value. It's backed on directly by the US economy.

and of course the ability of the U.S. economy to collect taxes, running infrastructure, and all this bunch of economical features. So essentially, if this can happen in real life, how you can make it work in same or similar manner in decent as finance and reduce that polarization requirement, which allows you to scale because you're not relying on those different kind of assets. And this is how we've seen various experimentations. The thing is that crypto is volatile and everyone who most

of the participants were in the space, they are risk takers, they make quick decisions. So it's just very hard to do in a very small scale. And I think that's where, for example, the UST terrorist stable coin had become issues. I mean, if for time being, if the market has been bullish over a long period of time and continue to grow, maybe we will not have seen this issue yet. But it's still very fascinating to see as an experimentation, but also what is difficult here is that many folks that actually believed in that stable coin, they really believe in the fact that it keeps the peg and they're. we're confident on that as a user, even though the time from the inception is very short.

So it just shows also the fact that one thing I want to say is that in these interests finance and in open ecosystem, like the battery, anyone can come and just build new things and innovate and look at the code basis and improve them to redeploy. that's the beauty of scaling and accelerating innovation and solving problems and making impact. But also it means that there are sort of people that are looking what you're doing. And if it's interesting, it gets attention, they will come and interact with that smart contract or a stable point or whatever the application is. And if it's not actually well designed or the market isn't ready for that kind of idea, then the problem starts. I kind of want to push back a little bit here.

So this narrative that the US dollar is not backed by anything, I think this is a narrative that we hear often on crypto Twitter and in this ecosystem generally. And I think it's a narrative that is at the very least omitting a large part of the truth. So if you look at the entire dollar ecosystem, the fact of the matter is that the vast majority of dollars are actually backed by something. Basically, so basically dollars are created. So basically someone goes to the bank and says, I need a loan to buy a house. Bonds, for example. Yeah.

Yeah. So basically, and I mean, this is how almost all of the dollars are created as in as part of, loans and mortgages. And I mean, and then they, they are collateralized, not by things that are super easily liquidated. So things like houses, for instance, or cars or, I mean, or even just personal reputation if I, if I get a credit card loan. But it is, it is actually backed by some real value. So I am not, I am not sure whether a purely algorithmic stable coin, can ever work. You touch a very good point because that's how essentially most of the money is created

when someone is taking a bank loan and at that point the bank is in credit, credit 40ness and basically creates that value. So essentially when you get a funding to buy a house, for example, at that point the funds are traded and the person is paying interest on that. And it's actually quite interesting because it means that's every single dollar that is or a pound or a euro that is actually out there. Someone is paying interest on that. So they kind of like, I think the backing is an interesting concept because you can it can be very concrete or you can think of about it in very widely. So in this case, when you buy, for example, a house, you can think about it.

Are you actually, is the house actually backing the loan and the currency, or is it backed by your credit 40s or is it backed by the fact that it has demand? So if you are not able to repay your loan, there's someone who is willing to buy it and repay to your loan. One of these tie into each other, right? So basically with the majority of people with day jobs, if they go to the bank and say, can I get a loan for $800,000, for instance, and the bank asks, what do you need it for? And the person says, oh, I want to buy a house here.

And basically, it's value is a million. And basically I have $200,000 as a down payment. then the bank's answer is going to look very different as if that person walked into the bank and says, can I loan $800,000? And the bank asks, what do you want to do with it? And the person says, oh, I don't know yet, but I'm definitely creditworthy because I have a job, right? So, I mean, I think, I mean, yeah, obviously it ties in with the fact that the house has a market value. and generally real estate is more, I mean, not super stable, but I mean, it's, it's a stabler than many other assets.

So, yeah, I think these things are not mutually exclusive, right? And I think they're not mutually exclusive, but also it's kind of like, it's also like, if you go down deeper, you can even think of like, am I actually, is it actually backed by, by the house, by my credit 40s? or by my personal equity in that sense. So when you look at the algorithmic stable points, essentially when, where you can mint a lot of kind of like a native equity token or assets and backed by that,

like are you actually using the protocol as a collateral? So I definitely agree like it's not completely mutually exclusive. And that's why kind of like a credit and, and colorization is very hard topic. In crypto, it's very, like, we have a very kind of like a heterogenic approach in the sense that, you know, if it's not traded during exchanges, you know, like how can you use as a glattal, you know, same for example, NFTs. Like if you have NFTs, like how we can use them as a collateral because they don't have the market

price, but they have value. there's sort of kind of like a difficulty when it comes to collateralization and backing. Exactly. So but here the problem is not collateralization as such. It's the price oracle, right? So basically getting a price feed. And this is also one of the attack vectors for lending markets,

kind of manipulating the price orchard. But we'll get to that later. So basically, let's kind of, let's loop back to stable coin. So basically, if you think about different stablecoin design, So as you said, there's the ones where the stable coin is actually backed by some sort of fiat value. So basically a good example would be USDC or USDT if everything is as BitFinex says. And then there are stable coins that are backed by on-chain values such as dye and rye. and then there are algorithmic stable coins that are either not backed at all,

kind of like UST, or fractionally backed like fracks, for instance, right? And for a long time, the Achilles here of lending markets in terms of, from a security perspective, was that you needed to make sure that every single asset that you accept, every single kind of collateral by itself is 100% trustworthy and not manipulable. So this has changed with the most recent version of Aver. But maybe let's talk about what an attack or doesn't even need to be a, attack what the vulnerability would have looked like. Say, for instance, you would have had a centralized stable coin emitter go haywire and just print an endless supply of whatever stable coin they issued

that was accepted as a collateral on Ava. So basically the question is, for a long time, the main Achilles seal of lending markets such as Ava was that, that, that, you know, that collateral, different types of collateral were and shielded against one another. So basically, if one of the collaterals kind of had a catastrophic failure and the value would go to zero, that would impact the entire lending market. Yeah, exactly. So essentially, that's how we were building protocols that you have, the pooled collateral composition, meaning that normally, for example, that when you come to the to the AVE protocol as a user, you can supply cryptographic assets.

So typically you might have a portfolio of assets. So you might have a bit of EADs, you might have a bit of AVE, you might have a bit of, let's say, uni, and then you supply them. And then what happens is that you can draw stable coins or any other asset that you want to. And in that case, if one of those assets for some reason, goes down, it affects the whole kind of like a lending market. But with the version three of the other protocol, what we wanted to do is that we, first of all, we first of all, in version three, we focused quite a lot on two topics.

One was the security and risk mitigation. And the second topic pretty much was the topic of capital efficiency. So in terms of like risk mitigation, one of the main features that we added, of course, we added also like supply caps, borough caps. So essentially each and every single asset can be capped. So you can list assets more quicker, but then with a smaller supply gap. But the interesting feature is the so-called isolation mode where we silo a collateral away from the other collaterals.

So what it means is that you can come into the other protocol and supply one particular asset that is listed as isolation mode with a lower cap on top of that if needed. And usually there is a cap. Then you can borrow stable points against that particular asset. So the idea of what we are trying to solve here is that because the space is moving very quickly. but there's many asset listing requests from the community members. And it's very important that we take always as a community, the risk aspect quite involved. And this allows to scale and list more assets more quicker

without introducing this unlimited or unknown risk into the other protocol. So essentially it helps to scale the protocol, but also mitigate risk in that sense. And I definitely agree like this kind of like an infinite mint has its own issue, but also in terms of stable points, centralized stable points like USDT and USDC, you will always pretty much have the issue of you are not necessarily knowing what is the, how the underlying assets are collateralized and to what extent. But maybe the future is where you might have a stable coin that is trusted enough

and they might start reducing collateralization. But then the problem is always the perception of the public. So let's say that we can easily trust USDT. in case when the market is fine. But then when the market is actually taking ahead and valuations are decreasing and there's sort of panic, that is the moment where the actual real stress test will happen. Yeah, absolutely. And basically, being able to kind of list assets with a lower,

with a lower threshold for security. This has kind of gone hand in hand with Ava governance, right? So basically, the other thing that has been upgraded majorly is the governance mechanism behind Ava. Tell us about that. Yeah, so essentially what we have in the version three of the ABA protocol, so we try to think of different kinds of ways of minimizing governance as well because governance is also it's a way of coordinating effectively in a

decentralized way and innovating and improving the protocol making important decisions and implementing them but at the same time getting all the all the decision making into the main governance is something that is very burdensome process I mean we had recently over the past couple of weeks, multiple votes, and each vote requires a decent amount of quorum. And this slows down some simple governance updates, such as risk parameter updates, which just needs like small tweaking periodically. So we added this occult risk admin feature into the lending pools, meaning that you can actually delegate that function to a external smartcom check

that might have various different kind of logic. So it might have a logic that you can tweak the risk parameters up to certain thresholds between certain kind of like a threshold. And then you could essentially create additional logic there that you can trust someone like gondelet to do those changes. and submit them even like a daily basis, would have based on some sort of machine learning algorithm, or you can add some sort of staking functionality

where staking more Rave or staked up will increase along the value ratios. The options are quite open, and there is room to build those things. So that's the kind of like a main thing in terms of like being able to tweak the risk parameters. And then, of course, we have the, we made similar kind of like a governance update in the part of listing where we created this

listing admins where similarly logic can be delegated to under a smart contract and create some sort of staking or just delegated the listing into a smaller forum or even like a bigger world. That's the idea of governance that it needs to be flexible as well. And speaking of governance, it's something that we all have been always innovating. So we, since our AVE governance launch, we innovated quite a lot, what is currently used in the defy ecosystem because it's very typical to delegate voting. The Ava governance supports actually separate vote delegation and proposition power delegation. So you can delegate proposition power to a developer

who creates a proposal and then just to protocol politician the voting power to vote on decisions. And from that, we also innovated to create cross-chain governance as well between different networks that we have. So there is sort of innovation on that side. And I think it's still where we're going to improve more. So kind of like the now

the focus point is actually in ensuring that we have governance where you can vote in low cost and something like snapshot might be an interesting solution and optimistic voting as well. Cool. There's two things that I

kind of want to loop in here. Maybe the first thing is you just mentioned protocol politician. So I mean this is kind of what we've seen increasing over the last couple of months, basically people who are active in a number of Defy protocols and act as delegates for voting. How do you see the increasing professionalization in the governance of Defy protocols?

Do you think this is a good thing, or do you think this is something where that's a symptom of governance that's not quite there yet for the user? It's very early. So for me, when I look at the ABE governance, I see a lot of delegation. So there's sort of governance power and voting power delegated to university blockchain associations. So Berkeley, Stanford, you know, all these universities, they actually, they contribute into decent as finance and VIII protocols and actively both. which is amazing because student networks and those are ways to also kind of like to delegate, to be able to decentralize an ecosystem.

And it goes back to the like early days of the internet where universities were the ones who are connecting and creating connectivity within computer networks. So for me that's been very fascinating progress. We could see more actually more active. like governance activity. But I think the issue at the moment is the fact that you need to pay very high gas fees when you vote on Ethereum, but that might change on later 2. Of course, that will be a different story.

And eventually, one another thing is that there's also this kind of idea of lending votes out. And I think that's a kind of thing that is very, concerning to me because, you know, the idea of, that you can actually borrow, let's say, a certain amount of a quorum and just vote with $2,000 is a frightening idea. Yeah, I mean, this is something that has been, I mean, basically, the idea of vote buying and dark dows, and this has been around forever. And I mean, even in the curve, worse governance. I mean, it's happening, right?

So what do you think we need to look out for in order to kind of retain a healthy governance? I think like organic voting is important so that the voting behavior, you know, corresponds of the intent of the community. So the discussions that have been in the community forums and that there's kind of like the voting, the snapshot signaling, and then the actual on-chain voting corresponds what has been discussed. So there's like, you shouldn't see like surprises last minute on-chain. But I kind of feel that with the curve wars is that some of the voting behavior that can be done without actually governance, you know, just some sort of staking and so forth. That's like one.

And then it's also happening in most of this kind of like a token economic. So you vote there. But like in my opinion, the most challenging part is being able to kind of like a bribe, get voting power and then using that to achieve your own kind of a goal. And then you are not like necessarily looking for a consensus what you have in the community. Because if you think about the idea of consensus and how it works, is that in Web3 communities, you usually try to achieve as wide consensus as possible. So the solutions and implementations should look like more of a compromise that everyone is kind of satisfied

because you want to make everyone happy as many people as possible happy. because there's always a risk that the community, a part of the community members, they can actually fork the protocol and create a new community and create a risk of kind of like a forking. But forking should happen as well. So it's organic behaviors, creating new communities and new ideas.

But it's still very early to say where and which direction things are going to go. I would love to see more like innovation regarding the experience of voting. and especially regarding increasing the vote participation. So kind of like many people don't care about to vote, but if it can be made very simple and elegantly and brought up to the users closely, that will help to increase the vote participation because that's what the centralization is that you can participate.

I totally get that. I feel a part of the problem is that it's so much work to keep up, right? I mean, I'm a full-time web three person. I can't keep up. It's like, it's not because I'm a slow reader. It's just because there's so much going on. So basically, you kind of, to kind of know what happens in the governance of all the protocols you kind of partake in. I mean, basically keeping up with like Maker and Uni and Ava and compound and, you know, all of these different things takes a lot of time.

And there's a lot of votes. So have you guys thought about disincentivizing not voting? So basically things like people who don't vote, they're diluted in terms of governance token. So maybe they shouldn't hold a governance token. Have you thought about kind of divorcing the idea of having this fee accrual token from the idea of having a separate governance? token because currently it's everything is kind of oh I mean governance and ownership is always kind of amalgamated into one do you think that's sustainable yeah I think uh I think this in this

incentivizing the the voting is is quite tricky because you're you know touching the the holders assets and you because like when you have a governance token you have like the governance power and then there's like certain things attached, which is voting or something else. And for me, it's kind of like a tricky idea to implement. And I would rather see kind of like innovation where we try to incentivize voting and also incentivize active participation in the governance

or in the community. But that's the same thing, right? So I mean basically giving extra tokens to people who vote and kind of slashing people who don't vote is effectively the same thing. Yeah, I think it's just like kind of like as optics, it's very hard to swallow for a kind of like a token holder in the sense that you, some people just, you know, they don't want to vote. They just want to delegate their votes to someone else. And, you know, that's fine because they want to trust protocol politicians, for example. But delegating is not the, so basically people who delegate, they're not the problem, right? It's people who don't vote at all who are the problem, right?

They're not the problem either because they, you know, there's different roles when you are part of our community. So when you're holding an asset, you're basically also betting on that project and you're part of that community and you're, you're supporting the value of the community. And then there is the voting behavior. So I think, I mean, voting always has a cost, right? So, you know, if you vote online, it costs time. It might cost you a computer or, you know, a bus ticket or a car ride somewhere to vote and some time. Whatever is the mechanism. Same on chain as well.

So like there is definitely mechanisms of like that there's already kind of like challenges there to go and vote because it's costly for you. And especially the problem is when you don't have like idea or time to go into the proposals and understand them very well, it's very difficult to vote in that case. In many cases, these proposals are very technical and very difficult to understand. But I think when it comes to actually this is incentivizing, it's just very hard topic because you want to support the community but you don't want to necessarily vote but you want to have your assets as a whole so as an conceptual idea it's challenging but what i think might

be easier is that you could incentivize the voting by uh inflation which is kind of like the same thing but optically and as a feeling uh for community members different but i'm more curious not about that but I'm curious about actually creating voting rights that aren't related to the governance token itself, because government tokens, they have value. But for example, if you are an active community member or you care about the protocol, in that case, you could get a special right to vote with a certain voting power and participate. And I think that might be more interesting because, you know, you are actually giving voting power for people who are active and they follow what's going on and that way kind of like

bring more diverse governance. I think that could be more interesting and something that optimism team has been also working towards. Yeah, I think we could talk about this topic for hours. But there's one more thing I really want to cover, and that is interoperability and different layer ones. So Ava has deployed to a number of layer ones, different from Ethereum, the original layer one for Aver.

How has the community decided which chains deploy on and how do you think about interoperability across different, chains for Ava. I mean, typically kind of splitting liquidity is usually not a great idea. So tell us how you go about this. So it's quite simple, to be honest. So there is a proposal. Someone proposes in the Ava governance forum that, you know, there is this on a network and it has a you know and there's sort of traction and might be even part of that community that proposal. Then the other governance has a snapshot vote whether to deploy there and usually there might be some committee member that is deploying the contracts, which is relatively straightforward

thing to do, technically protecting all people and with some smart contract experience, of course. And essentially, usually the idea is that when you look at the other community, it's very inclusive community. So it listed assets that weren't listed in other running protocols in very early, but very conservative risk parameters deployed as a first protocol, like big protocol into Polygon and into Avalanche. and kind of like it's been always kind of like an inclusive community in that sense. And I think like every single community is also a reach into new audience. And I think that's the kind of like a key momentum because Ethereum also is quite heavy on transaction costs. So if you are joining the WebS3 community, you might be joining elsewhere through Polygon or Avalanche or optimism or arbitration. with the layer two is. So that's like given, so there is communities in different networks and

the challenge is actually moving funds between those networks. And that's where the trickiest part comes because when you move funds, you are using a so-called bridge. And that means where you actually move into a kind of like a scenario where it's very difficult to secure a, that bridging functionality and that's where i think the the current aculus heel is but what we can do instead of uh focusing on bridging assets between one network to another one layer one to another layer one uh focus on building functionality uh for the layer twos because the layer twos are inheriting the security of uh layer one and that's where that's where in my opinion the the the future is because you can transact in relatively low transaction costs on layer two,

but then you are submitting the state of the layer two periodically into Ethereum, for example, and you get the security that you need. So I think that's where we're going towards. Yeah, yeah, that makes a lot of sense. So in terms of Aver, I think I've covered most of my questions, But because Ava apparently was not enough, you launched a new protocol named Lens. Tell us about Lens what it does. Lens protocol is essentially a decentralized social graph.

And what it means is that you can create an own chain profile and basically follow other profiles. And both the own chain profile is tokenized as an FD and the follow relationships are tokenized as NFD. as well. So, for example, if I have a your follower FD, so I followed you and I'm, I can be the token ID one, so I'm your biggest fan at that point. When you have, let's say, 1,000 followers and you publish content on the Lens Protocol. What happens is that that content is dynamically represented in the follow NFTs, meaning if I'm looking at your follow NFD in my wallet or OpenC, I always see your latest content. So essentially, we created this way of dynamically distribute content between you and your audience

and then have that social relationship. And then, of course, if I like your content and I can actually mint a mutable copy of that content, So I can mint an NFTs any other that is immutable. And essentially, what we're trying to solve here is that, for example, if you create a account in Twitter, you have 100,000 followers, you know, if those followers are locked into that platform. So pretty much the platform controls, you know, how your audience will interact with you, the features that they're going to be adding,

how much those features or algorithms will help you. So you are at the mercy of that platform, whatever that platform is. So let's recall the idea is that instead of your profile being just a number in a database of a social media platform, it's actually on chain, meaning that you have the control of your profile and your audience, your followers, the distribution of the content. And essentially, anyone can come and build a social media application on top of the lens protocol. And this means that every single user that comes to those different applications are

growth hacking the same social graph. And the applications can decide how they curate the content, the data, moderate, and so for it. But essentially, you have the key infrastructure yourself. Super interesting. So if you think about other decentralized networks that have been around, so Steam, BitCloud, diesel, whatever it's called now, MasterDon, and so on, none of these have gathered any serious traction. So what did they get wrong? I think there's a lot of things there. I mean, essentially, like, there's been social media networks before Twitter, before Facebook, and even like there's social media networks, even that started early and got a lot of traction

and pretty much died later, like Myspace, for example, if you go today to MySpace and try the application, barely works and the company that bought it latest they informed that you know they because of a server migration they lost all the user data before 2015 if i remember correctly so this is just showcases like first of all why you need to own your profile and and the connectivity with your followers but the reason in my opinion with the models like steemit's uh and And a BitCloud is that they focus on the kind of like value part. So for example, that you have a profile, you have value, you know, you have, let's say that you have a post

and there's token economics that if you like the post, you basically have some sort of monetization. And I think what we are doing with Lens Protocol is it hasn't any relation to that. It's completely different things. So where we are actually focusing on the ownership aspect. So we think that if you own your key, you own your crypto, you own your access

to various DFI protocols, you should also have ownership on your profile and the audience and basically distribute your content to kind of like a VETRI on chain ecosystem. And I think the important point to see here is that building a social network itself is very hard. So we saw with Clubhouse how much effort it takes, where all the VCs were pushing a lot of effort to actually break through the network effects. And this creates a very big barrier for many. But for example, if you as a developer, you don't need to focus on the network effects, but you can actually come. create a completely new, innovative way to interact with content.

The next thing, you know, you might get traction because you created something new or you create amazing, cool, interesting algorithm. So it just showcases like how different approach we have from what we've seen before. And I think I observed that, like, these internet networks, they don't need to grow very fast. So normally you have to build a good social media application in two to three years. If it doesn't be attraction, you need to start thinking something or pivoting to something else. In a web networks can grow slowly. Good examples is ENS.

You know, Ethereum names are we started as basically having your Ethereum name. There's utility. And now, you know, there is quite vast amount of ENS names to date. but it started from very small. Poops is a good example, you know, where you have one person, Patricio, going to events in different hackathons, DefCon and so forth and giving proof of attestation badges.

Essentially, over the time, it actually grown to a kind of like a habit to many people in a Web 3 and continues to grow. So it just shows that if you build something very valuable and something that is useful. E&S is useful because you can send funds to a more simple address. Lens is useful because you can create your profile, have followings, and no one can take that away from you. And if you create a big brand, you can even transfer that profile NFT to someone else.

So it just showcases that there is sort of a lot of goals to actually the building, but also that you create utility. And we've seen already, we had a LF Grove hackathon together with it global. We had over 530 hackers with 130 submissions, which was unexpected for us a few weeks after the TestNet launch. So it just shows that there's so many developers out there that are just eager to build something new in the social media space. Yeah, I mean, I think this is true hands down. And I think, I mean, Twitter is many people's favorite pet peeve, right?

I mean, basically how it displays the different tweets and which order shows them to you in and how badly searchable it is. And so you actually pulled a social media stunt on Twitter. a week or two ago, where you got banned supposedly for writing that you were the Twitter interim CEO and you have implemented the edit button. And yeah, supposedly Twitter banned you for that and you made it on to Bloomberg. So give us the download. How did you really get banned?

Yeah, so that's the thing, because there was sort of narrative about E. Musk buying Twitter and making it private. So essentially, that means there's sort of freedom to do whatever you want to do. And also at the same time, he was talking quite about the freedom of speech narrative. And also kind of like he's known to post a lot of jokes in Twitter.

I mean, I found that very funny. And I found very funny to actually tweet that, well, now then I'm the new interviecy of Twitter. and people started to kind of laugh about it. And then I also made a tweet about setting up on 90-day roadmap for Twitter, including shipping the edit button next week, integrating with supporting Ethereum and ENS, integrating with Lens Protocol and so forth.

So essentially, I think I went to sleep. And when I woke up in the morning, I heard from my partner that I'm, from Twitter and and there's supposed to get big hashtag free stunning movement going on. And I think after a day, I got back into Twitter and then I was joking that I'm back as in terms of Twitter. And I think it's a good example of, you know, kind of like, you know, testing the waters, but also like how like how the algorithms work, who decides, who gets banned, you know, and what happens?

because for me, Twitter was the only, like, public-facing social media that I'm using. That's where all my audience is, because, like, if I lose that connectivity with my audience, I lose my voice, essentially. So that was very scary, but also, like, gave a lot of ideas how and why it's so important to build decentralized social. What should Twitter become? I mean, should they adopt land? I mean, if you were to... That's easy. They should become affronted for the lens protocol because it's empowers.

But, I mean, we're not there yet. I mean, lens protocol is just, it's being on test net, it's going to main net, and probably it's in mainnet maybe when this goes live, who knows. But like... This goes live tomorrow, so I doubt it. Yeah, okay, good. Good, good, unless we make some magic. So, but I think it's also like we want to experience how this goes and see what kind of, you know, what kind of feedback we get.

You know, if it works, I hope that, you know, the future of social is built on the both of lands and has an element of blockchain. So that's my, that's my kind of like a mission. As a heavy Twitter user, do you think Twitter under Elon is going to become better than it currently is? Better. The question is better for who? Because, you know, essentially Twitter is a company. They need to make profits. They need to have algorithms that just basically find ways to basically get value from the users. So the users are the product there. There are people who are willing to pay for for utility, but it's really hard to tell. I personally think he could build a better Twitter, better product, but also it takes time to get things through with an organization that big. What do you think of Twitter's open source initiative, Blue Sky?

I think it's an interesting also approach. It's quite different. It's more federated, and it's more of like they believe in approach. where you know you could have nays space in in blockchain but we believe that you can have way more i mean we we approached the social media from the perspective of decentralization and how we've we've been always native smart project builders so that's what we we're betting on but also i think i would love to see some more tangible initiatives and experimentation from them. And I think there's so many topics to solve in these social and social media in general.

So from moderation, modernization and so forth. So like we need more people in the space to build things. If you look at your day, I mean, your day, I assume like mine only is 24 hours. So how are you going to split your time between Arba and Lenz Protocol? Or are there synergies even? There are synergies, but I pretty much spend half of time in the Avey-related things and half in Lens. But it really depends. We have a great team. There's almost 100 people working at Abe and the team. And, you know, it's not the only things we're working upon.

So there's sort of things we're planning and building and researching. So it's more about, I mean, at all of it, the actual product is, organization. So yeah, so I think I'm not worried about my time that much as far as I get like a couple of days a year off. What's on the roadmap for both Lens and Ava? And I mean, basically maybe let's set two years as the time horizon here because when you extrapolate from past data, this is when we'll have you on again. So I think we're going to be doing the same thing. So we're going to build Web3 infrastructure, product services, and so forth. But like, what we want to achieve is that whatever we do move the space forward as fast as possible, because I think

decentralization and Web3 can bring a lot of impact to all the users. So definitely, like, that's where I think space is going. So if we are able to be one of the builders in the space and contribute a lot of infrastructure, then we're in the right place. Looking back on the last couple of days, we have seen again that this ecosystem, there's never a boring day, right? So basically things always often turn out different than you think they were. But if you would make a prediction for the rest of this year, what do you think, what do you think the major trend is? going to be, not just for lens and other, but for the wider ecosystem.

In terms of like the trends, I think definitely, obviously, VAP3 social is something we, I think is a big trend and it's coming because naturally, especially with the discussion about social media, moderation and the issues with the, the three platforms, that's going to be like a big trend. I also think the layer two is very important infrastructure. So layer two's, you know, they allow scalability and there is where we see new applications being built. If I'm pressing you now for one prediction of something that people generally do not expect in the ecosystem for layer two's and how that's going to go until the end of the year. Do you have something you would want to venture here?

I don't know if I want to say anything to get trouble later. I would say there's going to be more users than now. At least more addresses generated in WebTree. Yeah, I think this is a pretty safe prediction. At least I hope. Yeah, I don't want to promise that Luna will get back to Pegg. sorry, the USDA gets back to back or anything like that. So I think I'm going to go with a save bed.

Cool. Thank you for coming on, Stani. This was very illuminating. Thank you so much. It was very good. Thanks, very good. Thank you for joining us on this week's episode. We release new episodes every week.

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