Fireside chat - The Future of Stablecoins & Interoperability 1

about the future of stable coins and interoperability with James FR from Axel Network welcome on stage how are you good good uh so welcome to unstable um I'm your moderator Jazzy as you may remember from five minutes ago um and we have uh the pleasure to speak with James today James is the director of uh business development at axel uh and today we're going to talk a little bit more uh in detail about interoperability in in blockchain so James do you want to kick off with an introduction yeah I'm happy to I don't think this is on is it people hear me all right okay cool uh yeah James Freel Director of Business Development at interop Labs we're a technology company that builds interoperability software and we're the initial developers of the axar network um axar for for those that are unfamiliar uh is a fully decentralized interoperability Network so we're actually we operate our own uh Cosmos SDK layer one delegated proof of stake validator set securing uh this bridge and I think we'll get into more detail about how we view you know a key difference between General message passing arbitrary message passing within interoperability from simple token bridging which was you know just previously discussed yeah that's great so um yeah let's start high Lev interoperability is obviously uh becoming more and more of a a common term in in blockchain uh how do you think about interoperability what is it why is it important yeah so obviously the last group you know really dug into it so I'll try to keep this answer rather short but uh it's about like composability of users and assets across different chains you know we do see that different chains are going to optimize for different use cases um you know we are of the belief that even uh with like paralyzed execution and some of the developments that are coming out that there will not be a single ecosystem that will serve every audience and every every purpose and for that reason you're going to have fragmentation of users and liquidity and so in order to create uh a web2 type experience where we can really onboard this next billion users that everyone talks about interoperability is a key component of that infrastructure that can allow you to compose those assets and users without you know abstracting that away so that the user themselves does not have to be switching wallets um but to be discussed yeah yeah that that makes a lot of sense uh and so axlr so far has integrated you know over 55 blockchains uh how do you think about the additional value of of each new blockchain in in the network so I think it's related to to the point I was just making which is each uniquely brings different properties uh so if it's xrpl who has a great reputation with an Institutional audience uh and has a potential to really become a hub for the issuance of rwas uh and and become a central Hub of trading you know that's a unique um proposition to the rest of the network where be it it it might be a app specific chain that has a kick-ass game uh or it might be a modular stack that has super high throughput that uh enables you know different type of dii Primitives so I think with each one that we add as long as there are users who believe that there's a unique value to operating on that chain then we want them to be a part of the network so that we can create these oneclick experiences for them yeah yeah that that makes sense and and to kind of piggyback on that um I think something that I really appreciate about Axel uh as compared to some of the other bridges in the ecosystem is sort of that Hub and spoke model right where um you know each additional chain allows for access to you know 55 other chains and it doesn't require uh you guys as an intermediary to integrate with each individual chain and so you're two you're really two hops away as a as a user um regardless of of where you want to go yeah it's exactly right I think there's um there's two main designs that we see in the space there's a hub and spoke architecture and then there's a pairwise connection so Point to-point Bridges uh and there there are other interoperability providers who may support you know various chains but for connection you need to build independent endpoints that connect to all of the other chains you want connection to uh and they are unaware of each other which creates security risks which we saw with the multi-chain hack uh it also creates more infrastructure on that L1 or that L1 or L2 team to operate and you have to pass that down actually to the application developers as well so having a single endpoint that connects into the axar chain as a hub and then providing that on to end connectivity so as we scale the network there is an additional Bridge work or infrastructure that needs to be built on xrpl I think is a really unique value prop of what we've built yeah yeah definitely Ely uh and speaking of of security uh you know elephant in the room that's been a massive a massive challenge area area for bridges over the past couple of years um it you know partially was responsible arguably for the decline of of defi you know a year and a half half ago uh how does AXA really think about security and what are some of the mechanisms that you guys have introduced to bridge technology to allow for uh safe cross chain uh bridging of financial assets yeah so I think you know our approach to security is is multifaceted so we introd things like rate limits uh on this Hub in Spoke architecture again to to prevent you know contagion should there ever arise an issue with one of these spokes on one of these chains but the core of security in our view comes from decentralization if you believe that decentralization provides security then you know that that's where axar lives through utilizing what's battle tested for the rest of the evm world and in salana which is proof of proof of stake validator set so we have the Axl token which is the governance token of the axar network we have a fully permissionless validator set anybody can spin up a validator 75 validators you can acquire Axl through any means publicly and the top 75 validators that hold Axl are a part of the active set and so 2third of the validators sign off on every cross chain message and so through that we have not seen in the industry two3 you know 2third of 75 that number of notes compromise we've seen quite small centralized Bridges where either a single key holds the bridge uh or a you know two of three or three of five multisig uh and that's just not sufficiently decentralized enough for the amount of liquidity that's passing through these Bridges and so you know we were slower to Market because you know as some people here may know and you guys do building a validator a robust validator set with good partners on an L1 is difficult um but you know now we're here and we really think that this is the right approach for scale yeah yeah definitely and I imagine that's there's another advantage of the The Hub and spoke model there um you know with you guys effectively serving as an intermediary blockchain uh and also specializing an entire company uh that's very Innovative very Tech forward uh living breathing uh you know cross chain interoperability every day that uh I imagine new Innovations will come out to to further enhance security and make sure there are you know checks and balances between the two chains and if if a single chain in the network is compromised uh that doesn't necessarily mean that every other chain is is going to be compromised because you have that layer in the middle is would you say that's right I would say that's right and those are some of those you know other the multifaceted uh aspect that I was getting at you look at things like using quadratic voting key rotations for the validator set I think you know if if you look at our team and the founding team you know these are some of the best cryptographers and security expert experts in the industry and I think you know the team is very thought about you know how Security even just beyond the idea that 2third of the validator set you know won't be compromised you need to be prepared for those edge cases yeah definitely so shifting gears a little bit uh when a lot of people think about uh interoperability we think about token transfers and the ability to move your usdc from uh chain a to chain B uh but there's a new innovation uh that's General message passing that Axel has has come out with that allows for not only the transfer of tokens but the transfer of information uh could you tell us a little bit about what general message passing is and what some of the use cases are that you're excited about yeah so so as Jazzy was was getting at you know there are some bridges that can only transfer tokens axar can pass arbitrary messages and so we've you know coined it General message passing uh and what it allows you to do is pass any payload so you can execute a function on a smart contract that exists on a destination chain so those can be data calls or function calls you can imagine a data call would be if if somebody had their credit score stored on chain B uh and this was a privacy preserving chain and chain a xrpl had a lending protocol that was going to give you a rate based on your credit rating that we could actually send a data call to a contract over on the other chain just receive enough of the private information that says this is your ban without revealing your private information that allowed you that credit score and then we send that data back in that instance no token or nft was actually transfered over the bridge it was just a data call you can imagine a function call would exist if someone on xrpl wants to use the the assets that they hold as collateral in order for them to be able to get a loan on a separate train call it avalanche now we're actually executing a function in a smart contract which is allowing that user to receive those funds and maybe stake them uh and you can start to append in a single payload multiple steps to start to create some more complex complex dii applications which ultimately the complexity of the payload results in Simplicity for the user because now they can just do super cool things where those multiple steps are completely abstracted from them yeah yeah exactly that's definitely something that that I'm excited about you know from a blockchain infrastructure perspective I feel like this finally gives chains permission to specialize uh and not try to be you know a jack of all trades if we look at The xrp Ledger uh you know that chain is really great at at Value transfer payments at trading uh and and has a long history of of user development liquidity aggregation uh and so you know using the institutional relationships and Trust as real world assets for example are issued on The xrp Ledger uh those assets can be held and traded but what if a user now wants to do some complex Advanced um you know Niche use case with you know derivatives training trading based on on that asset and that's not possible on alleger like like xrpl where there isn't full programmability of of smart contracts so you can actually call Smart contracts on other chains using GMP uh and really unlock the best of of Both Worlds and and liquidity aggregation as well in one so it's quite an exciting Tech yeah yeah exactly great um so one more question for you uh is about axar Network and some of the applications that are being developed on top of it you know I'm familiar with Squid router which allows for for cross train cross cross chain trading um but what are some of the other applications and can you tell us a little bit more about where that that space is headed yeah absolutely so for those that might not be familiar with Squid router uh it's a liquidity routing layer that's built on top of axar GMP and it's it's using existing liquidity within dexes so some bridges you actually need to put liquidity pairs on both sides of that so that somebody can trade instead what it's doing is it's just observing existing liquidity within Dees on these 55 plus chains that axar supports and it's you know routing messages in order for you to swap from an asset you may hold on chain a into a native asset that you hold on chain B um but you know I'm careful not to just call them like a swaps protocol because they're doing some new cool things using this liquidity routing layer now they're composing on top of that swap purchase this nft and return it to somebody's wallet so now you can imagine a checkout experience in a game or an nft marketplace where somebody's getting that stame experience as long as you have an asset that's on any of the chains axar supported you disintermediate what the actual nft is denominated in uh and so there's some other cool ones I think that apply to this group is like you look at uh Prime protocol who's allowing you to collateralize assets that you hold on different chains in order to issue a single loan you know historically you would have had to bridge all of those assets over to a single chain in order for that application to be able to observe that Jazzy owns $5 million of usdc it started as a million dollars on five different chains but we need to observe that over on the destination chain with axar and GMP we make it possible for you to actually keep those assets on those different chains and if you think about the scale of like trying to bring in institutional trading or some higher sums the slippage that you'd incur to aggregate those assets is less than ideal you want to be able to keep those assets in those portfolios be able to just show that you own those and issue a single loan against them and that wasn't possible before which is super neat so I think you know we're continuing to see new Innovations AS application developers understand what they can do on top of GMP and I think that the depth of liquidity that xrpl can potentially bring to this network is only going to expand these use cases and what can be built yeah yeah definitely well well said um and it sounds like the perfect solution to the next generation of of onchain finance and really uh simplifying the user experience and and the depth of the markets to allow a broader adoption and broader us user base so definitely excited for that that next chapter um I'll ask you I know we only have a few seconds remain but I think the answer would be helpful for this group can you talk for just maybe 30 seconds about how you see the compatibility of xrpl and the evm side chain that you guys are building yeah yeah so I think it ties back to the example I gave before xrpl is really great at Value transfer it's it's incredibly fast and cheap payments cost less than a fraction of a of a penny and executes in um you know a second or two um and there's also a native Native decentralized exchange that's based on order books um hopefully that's soon soon to be expanded to include uh integrated automated Market making in addition to the order orderbooks based trading system so tra trading and value transfer is is definitely a sweet spot there but when it comes to more complex uh operations or highly specific um you know Financial protocols that's that's not the sweet spot and and you know the xrp leder community doesn't necessarily want it to be uh so that's where we can really lean on our our axle our partnership um use General message passing and actually allow applications to uh develop their tokenization engine on xrpl Main net their trading engine on xrpl mainnet and then tap into you know Advanced derivatives uh and other capabilities on the evm side chain and those users never actually have to move their wallet um or or interact with the side chain it itself so it's a very seamless experience uh and really allows for for The Best of Both Worlds and is made possible by by Axel and and GMP so definitely excited about that that's awesome uh we're very excited for this partnership uh for anybody that's interested in learning more feel free to grab me uh or feel free to check out axar ax. Network yeah thanks so much James really appreciate your time and insights here thanks Jazzy