Exclusive Interview with ALLUVIAL CEO Mara Schmiedt | KBW2023

I think um so just a little bit of background my name is Mara uh been working in the staking space for almost seven years having seen you know the space evolve over the last couple of years I think it's fair to say that we're starting to see some really meaningful you know participation in in the ecosystem every cycle you know is sort of an innovation cycle that we start seeing across you know distributed ownership and the first cycles that we saw um as well as you know the nft market and uh the last you know 2018 2019 and so I think what's really interesting is we're starting to see major adoption not just across the retail Market but actually Enterprises and institutions starting to participate uh moving into supporting things like you know branded media engagement through Innovations like nfts we're starting to see you know meaningful interest from traditional financial institutions thinking about uh custody structur products and other things um and so you know I think we're on the verge of you know really building to scale this technology uh for for mainstream [Music] adoption I think with staking and this is actually something I just spoke about on stage um really you know most participants think of staking as something that is you know inherently an opportunity for them to you know participate in you know providing security effectively to the network that they're supporting uh but in many ways it's also inflationary protection um and so most participants that we work with you know really think about staking as something that um you know primarily serves the purpose of you know asset preservation um and so security is actually a really important you know consideration um today the main risk that you have with participating in staking is actually slashing and so slashing risk is you know something that occurs when you have you know double signing events or other Mal configurations that effectively result in some losses um associated with you know stake that is affec ly on chain and so the protection or the security around this you know particular you know risk Vector is is really you know top of mind for a lot of players when you think about how the market has evolved over the last couple of years you've started seeing you know uh staking as a service providers for example as well as like with staking protocols that are starting to take security as you know principal priority or a design objective making sure that they have the right distribution or diversification set when you think about you know infrastructure distribution Regional distribution client distribution ethereum has been designed in a really interesting way for example when you um look at how the network has been configured and so um you know the considerations of creating decentralization have actually been incorporated into its design when you have a higher level of correlation the associated risks are much larger and so when you have a correlated failure say because a large amount of the network is using the same client then the losses actually scale proportionally to that correlation and so the network has been designed to ensure that the distribution and decentralization of certain components um is is done effectively and so Security in many ways is a question um and also design Choice um that becomes really important in that context so I think there's probably layers to this question I think in the first instance um decentralization and security are correlated and so when we think about security one of the first things we ask is what is the most impactful way for us to reduce um the risk of you know slashing uh within the context of our users and our products um as I just just discussed within the context of ethereum actually the risk of slashing or the risk of losses is higher when you have correlated designs and architectures and so one of the things that we do is mandate that our note operators you know within our protocol distribute their stake across uh different clients uh different Cloud providers different regions and really ensuring that we have a diversified basis and so when you ask me you know how should users think about this I don't really think the question is to think of this as a trade-off as much as building the Consciousness and the education that is required for people to be able to assess risk in a meaningful way today we do not have like you would kind of consider in the traditional markets a Consolidated understanding of risk or even performance for that matter one of the things that we started doing um you know on our side we've actually been working with a lot of different partners in the space to think about how to create the right methodologies the right parameters and the right metrics to measure performance and risk side by side so that people can make more informed decisions about the risk relative to the reward um that different solutions inherently offer them and we're hoping that we can leverage some of this work to built towards that standardization and that understanding in the market so that users can become more conscious um and also more aware as well as having the right access to information as it relates to you know considering security and risk trade-offs for different solutions I think it's a super interesting question so I think uh Simplicity and complexity are in the eye of the beholder right when you think about the principal objective of a blockchain right or at least let's reflect on ethereum as you know a baseline that effectively is trying to establish a global settlement layer you know you're always going to want to optimize for design choices that maximize security and the Integrity of the network and so the staking mechanisms that have been designed for ethereum are really trying to maximize those vectors and so when you think about you know the staking flow today you have things including activation cues and exit cues that are monitored and managed by something that we call a turn limit and so there's an effective rate limiting on the amount of validators that can enter and exit the network at any given point in time and that is actually a security focused design when you're a user right you might not care about that design for you what might be important is that you're able to you know participate and exit the network you know at your convenience um when today the reality is that most traditional staking flows you know probably take a couple of days um to support you know you to exit a position um on on a stake position and you know multiple weeks actually to even get activated and so when we talk about Simplicity I think there's just an inherent question of the perspective that we're taking I think issuing receipts effectively liquid what liquid staking does is basically prove that there is a stake position on the network and IT issues an onchain receipt of that position that users can use you know in otherwise you know meaningful ways and so um in many ways I think of this is a primitive that is built on top of you know Bas blockchains um for the purposes of facilitating Simplicity transactions and you know Capital efficiency and I think we're going to see this phace continue to evolve at a pretty rapid pace and so when you think about the movement of stake in the last couple of months you're starting to see a pretty notable trend of you know more more of the market actually moving to liquid staking Solutions because of the inherent Simplicity as well as the ease of using and exiting positions on you know on on staking positions for the market you know collusion risk is always higher when you have a smaller amount of parties that are at risk of colluding what's really smart about the way that you know ethereum for example been designed is the fact that you know today we in many ways designs want to optimize for better distribution and decentralization of both operators and users um in order to support support the right security principles and so I think in many ways like we you know as a project but also me as an ethereum supporter you know really believe that it's important that we build the right Technologies uh and they write on Rams to support a very Diversified set of participants I think it's very important that we you know have the right solution enablement to support solo stakers who might want to run nodes at home that we support node operators that you know are going to be held to certain standards uh and requirements when it comes to their security practices and you know together sort of raise the bar for what we considered to be a safe and secure environment um for people to you know support validation infrastructure on and so um I think in many ways that is you know sort of the point of you know the market coming together to really think about enabling those types of solution um and capabilities more broadly