Unchained - How Lighter Powers Robinhood Perps With USDG as the Quote Asset

Starting point is 00:00:00 I think also on-chain technology is just at a point where it's just better, right? Like if you trade on lighter, it's faster, it's cheaper, and it's decentralized and verifiable and more superior than centralized players. Like, I think Telegram integration is a good example because their product is actually centralized, but they would still rather use defy rails underneath, meaning lighter than centralized rails. Hi, everyone. Welcome to Unchained. You're a no-hype resource for all things crypto. I'm your host, Laura Shin. First, we'll take a quick word from the sponsors who make this show possible. This episode is brought to you by Cape, America's Privacy First Mobile Carrier.

Starting point is 00:00:39 Same premium service you'd expect from any other carrier, but designed so your number, your location, and your data actually stay yours. Get 33% off six months at cape.co slash unchained. Fidelity has been investing in blockchain since 2014. They're not wondering if digital assets will shape the future. They're hiring the talent to help ensure they do. Explore opportunities today at crypto.fidelity careers.com. Fidelity is an equal opportunity employer. Today's guest is Vlad Novakovsky, founder and CEO of Lighter.

Starting point is 00:01:17 Welcome, Vlad. Glad to be here. Thank you. Just a heads up, everyone. Unfortunately, Vlad was not able to be in a quiet place. We will do our best to mute the extraordinary. journal noise. Robin Hood chain had a big announcement last week, and it's already showing promising metrics, and lighter was a part of that announcement since your perp decks is powering perpetual futures directly into Robin Hood wallet. This is a big deal since now Robin Hood's

Starting point is 00:01:47 retail traders, except for certain jurisdictions, including the U.S., will have easy access to decentralized perps. Robin Hood was an investor in your round last November. Was this part of the plan from that time and just tell us generally how the deal came together. Yes, yes. Well, I joked with the team, you know, this deal is, you know, 12 years in the making or, you know, 25 years if you could get another way because I went to high school with the Robin Hood founder. We were the two lads at our school. And 12 years ago, I was an early advisor to Robin Hood, which had just, I think their corporate name before that was actually Cashcat, right? they had just become Robin Hood and were getting their weight list.

Starting point is 00:02:32 So I've kind of known their team and been, you know, involved a bit at that point. But then as you mentioned late last year, they participated in our last equity round before we launched the token. And, you know, we've actually, I think, talked about doing something with them for a while. A lot of things had to come together for, you know, for the tech to work, for Robin Hood. chain to go live for kind of perps to become something that's interesting to customers in the Robin Hood ecosystem. So yeah, I would say this partnership started a lot earlier than just that equity round. And yeah, we're very excited about it.

Starting point is 00:03:16 And it's also kind of the first step of what we hope will be a deepening level of partnership. And what are the deal terms? Is there a revenue share? Yes, so the revenue is shared 50-50. The 50% that goes to us is kind of immediately accrued to token holders for buybacks as is 100% of the revenue for Lider. Okay. And how does this product differ from Lider's own app? Well, for one thing, as you mentioned, it has a unique front-end access through Robin Hood wallet, which for many customers, they can bring, if they already have the wallet app, They can use it seamlessly, but also if they have Robin and 4-Up, they can fund that the wallet with USDG, start trading perps if they're in the area that has a jurisdiction for it.

Starting point is 00:04:13 I mean, also, it'll be like a different mix of markets, but it'll be settled, or it is settled in the USDG stable coin. I think we've already seen, like, some of the markets that folks are interested in to trade are, you know, more stocks, you know, tokenized stocks, some memes. as well so it'll be a different customer base different mix of markets one thing that's interesting on the back end there's high level of interoperability between Robin Hood chain and and lighter and so like a market maker can actually quickly move capital around between the two lighter domains as we're calling them and that creates a lot of advantage as well right because a market maker can up to speed on both and in a much more efficient way than if they

Starting point is 00:04:57 were just like you know I don't know trading on one exchange on salon and other exchange of theory, I'm just like that. Oh, interesting. Okay, I wasn't aware, but I guess since USTG is the quote asset on lighter and the Robin Hood app on lighter, then like doesn't that create a little bit of fragmentation anyway, but, you know, with your main app? So, yeah, fragmentation is interesting to think about, like, I think it's not as, as black and white as that, right? Because if it's on the same underlying chain,

Starting point is 00:05:34 which is Ethereum, you know, Robin Hood chain is also on top of Ethereum. Like, you know, the liquidity is very quick to move around where a market maker, you know, can participate on both and quickly provide liquidity to order books on both and kind of hedge across the two. So obviously it's not as consolidated as if it were on one instance, but it's a lot less fragmented than two completely separate instances, like one in the theory

Starting point is 00:06:04 and one, it's a lot of right? So it's a lot closer to being consolidated than to being fully fragmented. Okay, yeah, I guess it's... Because of how the circuit's work to kind of move capital around. Okay, yeah, I guess it's more that it creates a little bit of friction for the market maker. Yeah, but just a little bit, not a lot. Okay. Okay. So I have to ask for my largely American audience. So this Perps product is available in Europe, but when do you expect that this offering might be rolled out in the U.S.?

Starting point is 00:06:36 So we have been in the process of working with CFTC on, you know, a license for decentralized perps in the U.S. And that license would cover both lighter zone front end and brokers like Robin Hood plugging into it. Like right now, if you look at the Robin Hood US product, you know, for stocks, they obviously plug into US exchanges, but for prediction markets, you know, they're plugging into Cal She, which is not a license for prediction markets a long time. But basically the components that need to be there are the integration itself but also the license necessary and we're very you know involved with

Starting point is 00:07:25 CFTC on in that process no one has that kind of license yet right but we we think with how innovative this CFTC has been and how you know with the process that we're going through has looked like we expect that to happen you know in in a relatively you know, short time frame and then then we'll be able to open up to open up both Lider 4 and Robin will be able to plug into Lider from their US app too. Okay, yeah, and I'll ask you a bit more about that in a moment, but let's go back to the USDG issue because, you know, as we talked about, that's the quote asset on Lider and

Starting point is 00:08:11 Robin Hood chain. And I imagine that that, the usage of that brings some interest income to Robin Hood since they are one of the corporate partners of USDG. But going back to what we said about the market makers, I would imagine that usage of that also creates friction just for users because USDG is not as liquid as USTC or USDT. And as we talked about, market makers would have to probably charge a little bit more, I would imagine, to quote against USG. I also would think that it creates a little bit of risk for the venue because if USDG pegs, then it could cause liquidations, you know, and yeah, you could protect against that by like hard coding the value at $1.

Starting point is 00:09:03 But doing that also creates its own problems. So how do you account for these issues so that having USG as the quote asset is, asset is also a good deal for traders. Sure. Well, for one thing, the market makers, there might be reasons why they would be less aggressive on, you know, in the Robin Hood instance, but there are a lot of reasons why they would be more aggressive because they know they're getting a high percentage of the flow they're getting as retail flow. That's the flow ultimately they want.

Starting point is 00:09:41 Like, so they're going to balance that out right and kind of run the calculations on their side, how they manage the risk I mean, there are risks they have to think about the same time their rewards they have to think about right and the reward of being on top of something like Robin Hood chain is that you get a lot of retail flow, which is their bread and butter. So you're right the risk to consider it here, you know, from our perspective, in the long run, we want to support a variety of stable points as collateral on lighter core as well. I mean, we think us DG can be collateral and lighter core as with other stable points there would be some you know the risk model would involve some haircuts when liquidation happens but you know that's all of that can kind of be factored in to the risk model so I guess from our perspective you know we're we're building the core infrastructure you know some stable points may be treated by market makers in

Starting point is 00:10:41 different ways, but ultimately, like, the vision we're building towards is that you can use any major stable point as collateral. You can also use ETH collateral, BTC as collateral, and tokenized stocks is collateral. And there are going to be some, you know, the liquidation model will account for that in the way it measures risk. But ultimately, that gives customers the widest choice of products to use. Okay. And so you also recently, um, announced an integration as the PIRP-Dex on Telegram wallet. And I wondered how that deal came about and how it's been performing for you. And if you have any numbers to share, that would be great.

Starting point is 00:11:22 I actually couldn't find any. So I'd be curious to know how that's going. Well, if you go to, we recently released something that shows kind of all of our integrations. It's called LitHub, right? Like GitHub, but with an L. And it should actually be pretty easy to find where, we show all the integrations, you know, in terms of partner attribution revenue,

Starting point is 00:11:46 that the telegram one is right at the top there. It's done very well. I guess if you compare it to, I mean, we don't focus on competitors as much, but it's just a data point. I think one comparison to this is kind of builder codes and hyperliquid. And so out of all of those, they have many different integrations as do we. The Telegram one, there's only one builder codes on on hyperliquid that has had more revenue, or that has had more volume than our telegram integration. So, so Telegram is right at the top of our list and it's, it would have been number two, you know, if you compare it to the kind of builder codes list. So it's pretty good. We'll see where Robin Hood ends up. It's only been, you know, hasn't even been first week yet, but yeah,

Starting point is 00:12:35 Yeah, Telegram one has done very well. And we're very happy that they picked us as a partner. Okay, great. All right. So in a moment, we will be talking about just the massive competition we're seeing in perps. But first, we'll take a quick word from the sponsors who make the show possible. If you hold crypto on your phone, your biggest vulnerability isn't your wallet. It's your carrier.

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Starting point is 00:14:23 That's crypto.fidelitycareers.com. Fidelity is an equal opportunity employer. Back to my conversation with Vlad. So there's a huge competition for the perps space that's shaping up here in the U.S. Kalshi now has its Bitcoin perps. Coinbase is now cleared to route U.S. customers to Deribit perps. Krakken now has CFTC regulated perps in the U.S. Coinbase also has its own perpetual style perps futures that are just long-dated futures.

Starting point is 00:14:58 D-YDX also just launched Arcus, which is a stock token plus perps decks, and that's also on Robin Hood chain. And meanwhile, we've actually, you know, while this is shaping up, we've actually been seeing the on-chain pert volumes are falling a little bit while RWA perp volumes have been hitting all-time highs. And then if we sort of, you know, look back and kind of see how lighter has been doing during this period,

Starting point is 00:15:24 the top volumes and lighter were actually during kind of the points farming period. So I'm sure you have been thinking so much about how to, compete in this space. Tell us a bit about your plans. Yeah, I mean, I think just to clarify, like I think RWA perps are also on chain, right? So I think it's true that perps on crypto native assets haven't seen as much growth in volume the last six months, whereas perps on RWAS assets have, but all of that is on chain, right? Like the growth that we've had with other OVAs and growth that competitors like trade XYZ have had, that's all on-chain. So I think the thesis of on-chain growing relative to centralized,

Starting point is 00:16:10 like I think that thesis has definitely played itself out. I mean, when we started building later, like on-chain perks for 1% of the overall market. I think now is between, depending on how you look at it between 10 and 20%. So, you know, so I think there's that. I think also on-chain technology is just at a point where it's just better, right? Like if you've trade on lighter, it's faster, it's cheaper, and it's decentralized and verifiable and more secure than centralized players. Like, I think Telegram integration is a good example, because their product is actually centralized, but they would still rather use defy rails underneath, meaning lighter than centralized rails. So now, of course, there's a lot of

Starting point is 00:16:55 legacy reasons why the platforms want to keep doing things, you know, not move, to new technologies right away. But I think overall, like if you zoom out, the ratio of decentralized, decentralized is moving. And I think more and more folks are understanding the value of the tech. I will now to your other point about like RWA versus crypto native, you know, cryptocurrency in general, there's been a lull there. Right.

Starting point is 00:17:23 Like we can talk about why that's happened. But like if you look at BTC, if you look at ETH, you know, others like they're kind of down on the year. RWA's on the other hand there's tons of stuff going on between you know like AI and you know geopolitics that there's like tons of activity there that's so there are these market cycles we expect by the time we get into Q3 Q4 that'll correct itself back to closer to where it was last year but but yeah we do we do go through these market cycles

Starting point is 00:17:56 but I think that's that's separate from the point that like more and more trading is happening on chain. Okay. And I heard you say on the roll-up that tokenized stock on Robin Hood chain will now be collateral that traders can use on later. But first of all, I don't think that's in place yet. Is that correct? It's not in place in the first week of that product rollout, which I think is reasonable, right?

Starting point is 00:18:20 Like you don't want to have that kind of risk, you know, like when you roll out a new chain. I mean, think about Robin Hood, you know, the ambition of what they're doing, right? They roll out a whole new chain, a bunch of products on top of it. Right. New forms of collateral. So that's all going to happen in the weeks to come. Okay. But so that in and of itself also feels like it will carry some liquidation risk due to the fact that tokenized stocks and the underlying could have dislocations in the price because equities don't trade 24-7.

Starting point is 00:18:53 So how does that work on the back end? Like, what do you need to put in place that? would from, from, you know, unfairly getting hurt. Right. Well, they do trade 24-7 on lighter. They're, you know, obviously liquidity. No, but I'm talking about the underlying. The underlying as well, right? The tokenized stock would be traded 24-7 too.

Starting point is 00:19:17 So the perp and the spot assets would be traded 24-7. I mean, the liquidity in the middle of the night would be less than, you know, right in the middle of market. open, I think we can agree on that. But yeah, basically essentially the liquidation model, like lighter for, for let's say, Bitcoin, right, if you're trading the liquidation fee is 1%, right? If your collateral is stable point, if you're trading your collateral is, acquisition fee may not be 1%.

Starting point is 00:19:52 It could be higher that that's that to kind of account for the risks involved in using that as collateral. So you're saying that's if the collateral is tokenized stocks. Yes. Same thing as if the collateral was, you know, Solana or something, right? So maybe the liquidation fee in that role would be, you know, 2% or 2.5. And that's where kind of these risk models come in. But ultimately, you know, the LLP and the Isoquimland on the Robin chain trade these assets.

Starting point is 00:20:24 And then, you know, like that's like the LLP collects the liquidation fees. then uses that to protect customers when liquidations do occur. As we know, in October 10th, we've had the best performance in terms of the least amount of ADLs and liquidations. And so we think our risk models are pretty good. Obviously, they'll stand the test of time and we'll see how they play out with various forms of collateral. But yes, I mean, it's not going to be the same exact.

Starting point is 00:20:57 it's not like you can just say, okay, like 1% liquidation fee will just work for any more collateral. You have to price the risk of that collateral into that as well. Yeah, yeah, because like obviously on weekends, it would be much more thinly traded. All right. So I know you have to run in a little bit, but let's just talk about how you were recently appointed to the U.S. CFTC Innovation Advisory Committee. And I noticed the lit token is issued from a deliver. we're C Corp. So it sort of feels like, you know, these are somewhat strategic moves.

Starting point is 00:21:33 What do you feel like me might be a way for Dex's or other Defi protocols with tokens to find a regulatory path on shore? That's right. So as I mentioned earlier, the CFC leadership under Chairman Seelig and his team in the chairman's office as well as a lot of the staff, they are very forward-looking, right? Like they want to make innovative products available to U.S. customers. They've already done it with centralized perps, starting with Kalshi. And from us coming in from DeFi world, that may not seem like a big deal. But if you look at it from the world of DC, like there's, there have been no new products like that in 10 years that the CFTC approved. And they did right now.

Starting point is 00:22:13 They're working on decentralized perps with us and others figuring out that, you know, honestly, some of these same questions we're discussing now, right? Like how are different forms of collateral treated? How do ADLs work? And yeah, we expect this pathway to end in a good place. I mean, separate from the process of lighter working on a license, you know, I'm happy to serve kind of on this broader committee, which helps the team at CFTC think about on-chain trading more broadly as well as things like prediction markets and even other things like agentic trading and AI, right? So we're going to have the first meeting of the committee soon. I'm sure there'll be a lot of fireworks there, right? Because it will be mixed.

Starting point is 00:23:00 Some of the folks of stratify will be there too, as well as some of our partners like the founder of Robin Hood. And as it relates to tokenization, I mean, that's really more purview of SEC. And so I think SEC is working on questions like, you know, kind of when our token securities, right? Like how is that all going to work? You know, on chain KYC. I mean, I think that's a little bit orthogonal to what the CFTC is working on, which is really more around leverage at risk and, you know,

Starting point is 00:23:39 matching viz and cells fairly and all that. So anyway, we're, most of our time has spent with CFTC, but we're also, to the extent that it's helpful, providing input to others in D.C., you know, whether it's Senate, Congress, or other agencies. Okay, well, Vlad, as far as I understand, I think you have to run. You know, it's unfortunate we didn't get to all the questions, but we'll just have to have you back some time. But thank you so much for coming on unchanged. Absolutely. Great to be here, and yeah, I would love to be back.

Starting point is 00:24:11 I apologize about the audio issues this time. Yeah, no worries. All right, everyone. much for joining us and we will catch you next week. Bye now. Nothing you hear on Unchained is investment advice. This show is for informational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit Unchainedcrypto.com.

Unchained - How Lighter Powers Robinhood Perps With USDG as the Quote Asset

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