Ken Chan: The Future of dApps are App-chains |15th Oct 2023 | Sunway University | ETHKL 2023

hey everyone I'm Ken Chan uh co-founder and CTO of AO we're formerly known as ribbon Finance so AO is a decentralized derivatives exchange where you can trade perpetuals options and strategies we are backed by the best invested in the space Paradigm dragonfly capital and coinbase Ventures so I think before going into the topic itself I just wanted to share my story really quick so I am an alumni of Sunway University and I think that just shows almost like the power of defi or crypto where essentially if you can start from somewhere like here we can you can actually progress in your career and go further so I think that's like a testament of how um great cryptocurrencies are as a developer if you're 14 years old you can actually get started with a project raise money uh transact permission permissionless so I think that's really powerful and if you're a student in Sunway or student wherever else I want to hear your story I want to talk to you uh I want to get you excited about the crypto space okay so moving into the topic itself the future of DS or app chains and um first a quick shill um on AO you can trade these things this is how uh face looks like so we have a refling here that you can use app. aoxy zrk and get 10% in trading fee discounts so why does it matter where your app actually lives so it's important for a few reasons you first actually have to think about where your existing users are do they care about cost like what sort of applications are they interested in or do they care about nfts that exists on that chain and so forth next is what tax stack are you familiar with as a death do you write code and solidity are you familiar with evm or maybe you're do something more esoteric like rust and last and final under appreciated point is the pum mentals I know this this is not brought up a lot but like obviously as a Dev you want to create value for the world you want to actually gain some value yourself as a developer developing this projects so this matters as well so right now what are the few choices that you can go for right so um you can first create your app on an existing L1 so that's ethereum Avalanche salana and then you can launch your own L1 this is maybe more rare but it's happened before with Terror and next I think this is where we are right now which is to deploy on an existing L2 that's arbitrum optimism and I think we're going to progress to the next stage which is to launch your own L2 as a developer so existing l1s nothing special here next is um launching your own L1 I think this is not explored as much so some projects that have tried this are like Terra dydx with your own Cosmos chain in their V4 upgrade so um I I think there's still space for exploration here but I I guess the alternative here is to run your own evm chain have your own custom valid dator set that is one option as well then you have existing l2s you can launch on arbitrum optimism or base I think the final step here and what I think DFS would be is to launch their own l2s so that would include running on the op stack running on arbitrum orbit and potentially Stark ax so why does this better in the first place why run on an app chain so the important part about an app chain or an L2 is we inherit security from ethereum itself I think that's very underappreciated and then you have some control over Network parameters as an application developer which you don't normally do on an L2 or L1 and you get a familiar Tex stack with evm and solidity if you're developing on all these evm l2s so first thing security guarantees if you're running your own L1 we've seen issues with this before you have to actually bootstrap your own valid dator set and the problem with that is that it takes huge effort in building the culture around running valid data getting groups interested in running and maintaining it consistently so I think it's difficult in general and so the next part is that your tokens market cap is essentially your security budget almost so um if it takes 100K to 51% attack your network then really you are in huge trouble and so this quote from vitalic here if the price of ether is at zero then your network cannot be secure this is true both in proof of stake and proof of work and so we've seen issues like that happen with Tera before where essentially the price of Tera traded down to zero and then it suddenly cost like 50 bucks to attack Tera so that's not great they had to restart and hold the network and so I don't think this is the path you want to actually Venture down as an app developer right next thing is pumpamentals I think the issue we with having an L1 token to be tied to your D app is that it's only tangential to your D app so you've seen issues like that with Luna token and us you would have us be backed by Luna in some way and I think that's not great because you suddenly have to care about your security of your L1 and your stable coin so the problem with L1 security is that you have to inflate your tokens or issue or print new tokens to give to validators that gets quite expensive right you get your tokens done by these validators if they they are not long-term holders and then what what is it for really it's just to incentivize people to run computers to validate your chain but really if you are let's say derivatives exchange like AO we would rather prefer actually giving that token out to incentivize liquidity or to incentivize Traders so the other interesting point in running your own L2 is that you get to collect sequencer fees sequencer fees is the access between what users pay on your L2 versus what is paid on ethereum so you collect that access there and that becomes essentially protocol revenue for your Dow right one important part as a developer is to control your availability and your bandwidth right with an L2 or an L1 when a meme coin or an nft drop happens you don't actually have control over that so one example is like basy when they launched a land drop I don't know if anyone remembers that ethereum got really congested gas was at like 500 gay or something and network was essentially unusable right so that's something important to consider because we want the network to always be available and not have any variability in gas pricing then the other important part is to have customized withdrawal periods um the issue with arbitrum and optimism right now is that you have this fixed 7-Day withdrawal period which I think is unreasonable if you run an exchange or an application because users essentially have to wait seven days to get their funds out I think the analogy here is that running your own L2 is running your own dedicated server almost this diagram here so if you are running on an existing L1 or l to you are sharing bandwidth with other uh users and D apps on that Network it's not a Perfect Analogy but I think this is the right model to think about it next is Tex stch familiarity so if you write solidity code you're familiar with the evm it's perfect for you so you don't actually have to pick up something esoteric like Koo or rust and so on but if you are interested in writing Russ or C++ uh arbitrum stylist actually offers you that ability so if you're a DA app developer join the future it's a very bright one with app chains so we have Zora AO that is uh leading way around developing uh l2s that are specific for an application so as a de D app de developer you then have to think about what stack do you use what data availability solution do you use shared sequencing and if you are going to sign up to these rollups as a service so data availability solution just just means where you want to post these call data or state proofs to so right now by default optimism and arbitrum post them to ethereum so it gets quite expensive still to transact on arbitrum and optimism this is a very simplfied diagram so right now each rollup run on their own and then if you have something like shared sequencing you can actually do cross-chain interactions between the two rollups so maybe you have mcoin a you you want to swap it into memec coin B that only exists on another rollup you can actually do so with Shar sequencing so which stack do you use I think the most common one right now is the op stack it's forked a lot at this point so it's very well understood and then you have arbitrum orbit and starx as other Stacks that you can adopt as well and data availability Solutions so ethereum is the default right now for arithm and optimism so that's what people are sticking to and then you can consider other upcoming Solutions like asria and igon da shared sequencing this is what I mentioned before where you can do cross rollup interactions you can either sign up for the op super chain so super chain initiative is when any uh rollups that use the op stack they can interact with each other in this super chain next is espresso and Astria uh um these are shared sequencing Services which um D apps can actually sign up for then finally if you want to go hardcore you would run the rollup yourself but I don't highly recommend you do that I think it's quite difficult because these providers actually solve a lot of the complexity around security and maintaining the notes for you so you have conduit and Caldera to pick from this how ao's tax stack looks like so far so you have ethereum which we're posting call data to that's our data availability solution then we run on the op stack and then we have uh conduit as our service provider to actually run the rollup itself right so thank you I think I hopefully that was a quick one if you have any questions do let me know and yeah sign up for AO and uses raffling awesome thank you very much Ken all right we'll open it up for Q&A we got some time for Q&A anybody got some questions please uh raise your hand and I'll pass you a microphone incidentally what did you study at sway computer science okay I was a lecturer at sanway actually a long time ago I used to teach psychology okay anybody got a question please raise your hand and I'll pass you a microphone okay oh all very quiet today maybe I should do a session about the benefits of using a CeX fun it's going to be a panel right yeah uh when did you graduate from Sunway was it recently it was 2019 19 okay wow cool huh amazing what Sunway can do I'm kidding amazing what you can do uh okay any questions about decentralized trading using op stack is anybody here building on optimism using op stack raise your hand if you are yes oh you have a question to ask yes you do fantastic I'm I'm going to come and pass you the microphone okay please introduce your name and ask him a tough question okay ask any question wow I'm actually really curious oh sorry introduce myself uh my name is Shan uh thank you for your presentation I'm not a very tag person so I guess uh it would be really helpful if you could uh share a little bit about as someone who's new to trading right like how can we use um AO um not asking for financial advice but along those lines sure so um on AO I think we want to bring centralized exchange experience to uh decentralized exchange so here you can actually trade Perpetual Futures which are leverage uh Futures which you can trade on up to 20x and then you can trade on options as well if you are an options expert okay hope that answers your question and helps you generate generational wealth um just kidding uh okay hold on I'll pass it through here you go introduce your name please and your question thank you yeah hi good morning uh my name is Ryan um I'm convert from trfi to defi so I was just going to ask you a question earlier when you on a D5 panel but I think since you're talking about Dex um two-part question very simple um first is do you think Financial inclusion is the primary aim of defi or Dex and secondly you think is yes um how do you think you can reconcile the regulation with financial inclusion if you're going that way because I think you were a bit of a pro regulation when you were in a panel earlier yeah I think yeah almost like two streams of thought to this so when ethereum started uh people almost treated ethereum almost like this private bank that's decentralized you will have people have huge usdc balances and then essentially they're okay with paying like $100 per transaction which you know it's a private bank so it's fine so with with financial inclusion I think we can really see that with like the new l2s that coming up with arbitrum and optimism so yeah I'm very much in favor of that so on AO we have this deposit method where you are able to deposit from arbitrum and optimism so I think yeah that's a huge point and as for the second part of the question I think um I don't think we are going to implement okay I I I that okay so I think kyc will happen if you grow large enough and I don't think we are large enough to do that yet so um yeah I I I I think you still have to conform to some form of Regulation to do Financial inclusion as you mentioned yeah okay thank you for the question thank you for the honest answer as well um if no further questions ladies and gentlemen we are going to take a lunch break let's give our speaker Ken another big round of applause thank you very much Ken