Why Builders are Flocking to Interchain DeFi and How Users Can Reap the Benefits - Josh Lee

gme denver uh my name is josh lee and yeah here to talk about app chains in the interchange and it's kind of relating it uh to the project that i'm currently building called osmosis and yeah let's get started uh brief intro about me i'm a co-founder at osmosis as well as kepler wallet and right now in case you don't know osmosis it's the largest cosmos amm right now uh currently has about 1.38 billion dollars worth of tbl and kepler wallet is the largest causal swallow you can think of it kind of like a meta mask but a little bit more ibc native interchain native and yeah i've been a dogecoin fan since 2014 uh i still have my doge that i bought in 2014. um planning on selling it on the 10-year anniversary and yeah i really got into crypto through knowing cosmos and that was about 2017 and it's been kind of a crazy wild ride seeing a lot of the things we kind of talked about now becoming reality and being able to build a lot of that yeah i'm based in south korea and i also kind of consider myself um a home for indonesia as well so shout out to all the asian builders out there and yeah i'm a personally a film camera enthusiast so yeah that's me yeah and what is osmosis right i'll just give you guys a brief intro i think it's better to just like actually talk about what it is what it does and more of a concrete example than just going into a very generalized uh description of what it is but essentially osmosis is a dex app chain and let's get into kind of like what an app chain is oh and before i get into it this is kind of what like our ui looks like we have cool characters of this cool scientist mixing all the fluids uh we have dogmoses and a lot of cool characters so um yeah so app chain is i think what we've started to call what we started calling app chains are what used to be called a big application specific blockchains and i think it sounds a lot better sounds a lot more approachable um and you know when you're building blockchains i think kind of have to think of it like a swiss army knife right um kind of have a smart contract platform and that gives you all the tools to build the applications that you need but uh you know where smart contract uh platforms are right now and a lot of the languages are it does feel like a swiss army knife so you get to do a lot of different things with the same set of tools but at the same time you know each tool isn't very specialized right and we've seen different efforts of like being able to do more things uh being able to do more specialized things but there kind of comes a point where you can't really scale a swiss army knife right we can see this like ridiculous i don't know like 42 swiss army knife but at that point it's just kind of getting cumbersome i think it becomes more of a annoyance than something that helps you build right and i think the entire idea of an app chain is rather than trying to scale a very you know swiss army knife into a 40 60 different tool why can't we just go into this like specialized tools right um i think swiss army knives is kind of what you want when you're deserted on a stranded like stranded on like a deserted island and you kind of need all these different tools you don't care how sharp a knife is and as long as you're able to get the job done you can but as applications become more complex and you want to do more uh more things with your application uh to kind of set yourself apart from a lot of the competitors you do end up requiring specialized tools um a swiss army knife is great when you're on a deserted island but if you're maybe a car mechanic that needs to fix cars you're not going to really want a wine opener that's like there um you're gonna need a lot more heavier tools more tools that kind of fit your trade right and that's the entire notion of an app chain is when you're able to kind of work on a lower level than just a very smart contract platform rules where i think a lot of it kind of revolves around being a least common denominator something that can fit everyone but it's not necessarily specialized for one specific use case and i think that's great because a lot of the composability and the network effect that comes from it but as our crypto applications become more complex and more advanced we are going to see a lot more app chains and for example so we're building a dex and typically a lot of other dexes i think um end up having this you know what how do you define a decks i think is typically it's a set of smart contracts and it's a front end that you can access and typically and maybe you'll have more than one front end that you can access uh the decks from but for osmosis i think because we are an application specific chain uh we do kind of have a lot of these features baked into the blockchain that works together in synchrony with the application itself and i'll go ahead and go into the example and you know i just want to make sure that like hey just because you're doing kepler wallet you're trying to like own the entire stack that's not the case i think um i think the future is where you kind of have a common app chain that's a blockchain that's tailored for your app but you kind of have multiple front ends that uh have different user paths and multiple wallets and things like that so kind of diversifying the user experience and from an application standpoint you're kind of able to um yeah maximize the uh blockchain's ability uh to tailor to your app so i think best way to kind of show what's possible is actually just going into some of the examples of what's possible right so one of the things that you can do is like set custom fees for your apps and right now i'll suppose this we don't charge any transaction fees on you know any type of transactions and things like that and obviously you know it's not sustainable in the wrong long run but because we're an app chain there are kind of like few different ways we can tackle this rather than you know hey we have to move out to a new scaling solution or like a separate thing like that where a lot of the logic of the amm is baked into how the state machine works so for example you know we have an amm and when people swap they pay swap fees right and whereas you know if your unit swap on ethereum you're not going to be able to tell the miners it's like hey i'm uniswap can you make sure that all the unit swap trades have zero fees you can't do that because you're kind of sharing that block space with a set of different applications but because you know we are our own chain we could do something where like hey what if swap fees count as transaction fees right like at the end of the day it's a civil resistance mechanism to prevent uh you know clogging up the block space too much and maybe we can you know dynamically said it's like what is the minimum amount of fees that you you know that blockchain takes where you don't pay a transaction fee and another example could be hey different type of transactions have different types of like different amount of importance in the blockchain um because we're a cross chain like multi-chain decks uh we do have like ibc relay transactions that are critical to keeping the decks running and uh the infrastructure running but you know should could those you know fees have a cheaper price for each unit of gas than someone who's trying to do arbitrage transactions who may be more willing to kind of pay off for the transaction fees themselves and you know maybe we want to incentivize more people to stake osmo and increase the security of the network and maybe one way that we could do that is like hey if you don't say oswald that's fine you're going to have to pay a transaction fee but if you stake you kind of get a discount on each unit of gas so um and then the other thing is like mental level encryption obviously mev has kind of been a big topic that everyone's been talking about but i think everyone's been trying to kind of like approach it from an economic perspective where hey like how can we sell this blog space uh create an auction for it or you know there's like amazing approaches such as cow swap but you know i think it's like a lot of the economic uh solutions to meb wild novel the kind of like solving the issue at the fundamental level has been fairly underexplored probably because you know the amount of app chains out there hasn't been huge but something that we're trying to do is you know when the user submits the transaction and it's sitting in the mempo the contents of the transaction is completely encrypted right so um you know if you don't know what the transaction is you can't really front run that transaction and that's something we can do because we are able to kind of modify how the logic of the mempool logic of the consensus and once uh there's you know actual consensus happening and it's finalized that this unknown transaction will be included and executed in this block that's when uh the transaction gets decrypted so then it can be ran by the state machine so that's one of those like cool things that i think only app chains can do whereas you know if you're kind of renting someone else's blockchain you're not able to do and one thing i'm super excited about that we're fingers crossed launching by the end of the month is super fluid staking uh i won't get too deep into it uh because it is kind of a handful but superfluid staking is kind of like what happens if you're able to kind of combine the staking logic which you know tends to deal with the security of the blockchain and consensus and the amm logic that we also have and you know we have liquid staking and things like that and you know all that is is you have your let's say eth or osmo you kind of give it to a liquid staking platform they stake it for you they give you the voucher and that voucher is one to one peg to that base staking token and you can use that in these different d5 protocols so that the base staking coin uh won't be competing for different interest rates uh you know high interest rates that are offered by d5 so you're able to stake while you know there's sufficient liquidity happening in defy but the issue with kind of you know doing liquid staking and things like that is because of the network effect of fungibility and liquidity you kind of end up you know having to centralize or or choosing one specific liquid staking provider uh to kind of custody uh this all these like staking coins right and right now i just checked this yesterday and that's the amount of like uh staked eat that stake through lido finance and you know it's like there's nothing that's happening like you can't really run applications on needs too but what if you could and you know is it right that one liquid staking provider holds maybe 20 30 percent of all eth in that one smart contract and what are some of the potential risks that happen uh if it's you know if something that happens like that and what happens if the dow token decides to kind of decide what the state eats will vote for in specific governance proposals or how the upgrade should happen and that kind of divides up the uh you know the you want the base asset to be kind of the governor of the blockchain whereas once you're kind of splitting that up into different applications you end up creating uh different kind of central points of failure and that's not what we want so what we've thought of was like super fluid idea let's turn this like you know staking derivatives on his head and just kind of try to do it backwards because we are an amm that's also a blockchain right and um we have this thing called the osmo atom pool and oswa is the staking token of osmosis and when you get this lp share there is underlying you know redeemable osmo that's like underneath that lp token and what we've approached it as what if you know the user could actually take that lp token and stake it instead instead of this old flow if you get a voucher from a liquid staking provider and you put that into defy we put that d5 part first and then we put that lp token part into the staking logic so you're able to kind of maybe not get a full amount of osmo that's in the liquidity pool but you're also able to just increase the amount of osmo that's backing the network security of our chain and things like that which are i think some of the cool examples of what you can do with application specific chains and you know some of these like three use cases i've talked about i think are just like very small examples of what we've been able to explore as an amm as a dex but maybe you know you're trying to build a gaming chain and what are some of the ways that you can integrate the logic of your application into the blockchain so that the user experience is a lot seamless and maybe there are other things such as oracles and nfts that we haven't explored but at the same time if you're trying to build something uh where an app chain could actually really provide you with advanced features that you weren't able to have previously and now i have now i have to get into this interchange part because uh i think the first part of the app chain is how do you kind of allow your application to be more tailored uh for your blockchain to be more tailored with your application but that doesn't solve the composability issue and i think you know composability is obviously the biggest part of like building crypto networks and crypto ecosystems where you have permissionless access to this one d5 protocol from another d5 protocol but when everything is a different chain obviously that becomes very difficult and i think the idea of the inter chain is the attempt at that where we try to solve a scalability in a completely different manner right and then we try to also solve the composability with the blockchain interoperability layer so i think what a lot of people have been doing is uh you know going for this vertical scalability approach or where it's like hey we have a faster evm that can process more things because we have different consensus but i think the cosmos and the interchange approach has so far been hey rather than just having a faster evm why can't each chain have its own app chain that's very well tailored to their application and let them talk to each other so that's why that's where ibc comes in and two years ago when i was here i think we were like oh it's going to come soon it's now here and it's being used so that's really exciting but you can think of ibc as kind of that tcpip layer so it's not like a very like advanced application protocol it's just a very like basic um protocol agnostic way of how do you transfer data from this one blockchain to the other uh and be able to verify um the actual likes uh the contents of the blocks and how do you prevent some of the risks involved and we use like like clients to do a lot of these cross chain verification things like that but um it's a very rudimentary layer and you can build a lot of things above it but because you know these application specific blockchains are able to be talk to each other you that's how you get the composability where uh and then as well as the network effect of having different applications as well as the kind of the scalability and um being able to tailor your blockchain for your application as well and yeah so i think ibc is kind of that composability layer for app chains where you get the benefit of being able to create an app chain while not missing out on the composability of being on a smart contract and this was when all supposed launched in june 2018 uh ibc is now live and this is what the network looks like so i'm sure you know a lot of you guys haven't heard some of these projects but you know out here in kosovo's we've just been really excited because every one week or two weeks there's a new project launching uh there's a new protocol that's enabling ibc uh and then now in the background there's a lot of work that's being worked on to you know use this ibc standard for not just cosmos sdk chains but things like substrate and maybe uh fast finality evm chains there's a bridge to ethereum coming uh that's here as well multiple bridges to ethereum so i think it's a very cosmos approach of solving a lot of these issues and this has been like the 30-day ibc stats and you know i think at the beginning of ibc we weren't seeing a lot of uses but now it's you know i feel like a lot of people are using ibc without even knowing that like hey this is actually data that's hopping from one blockchain to another and that's exactly where we want to be right where you don't know that you're interacting with multiple chains you're just interacting with this application that you know interacts in the background with a lot of these other blockchains so yeah our our website is osmosis.zone we have a cool-looking scientist that's mixing all these fluids uh providing liquidity everywhere uh so love for you to check that out uh and we're also just very cosmo spirited we're maximalism minimalist we love to talk to kind of how different ecosystems are going about solving different problems and yeah not just about blockchain interoperability but also human interoperability so yeah i'd love to talk about uh more things and if you happen to be looking for a job and you like blockchain intro interoperability and app chains please come talk to us and love to kind of get talk to you more as well so yeah that's it and thank you guys all [Applause] thank you josh