Anna Rose (00:00:05):
Welcome to zero knowledge. I'm your host, Anna Rose. In this podcast, we will be exploring the latest in zero knowledge research and the decentralized web, as well as new paradigms that promise to change the way we interact and transact online.

Anna Rose (00:00:28):
This week, I catch up with Zaki from Sommelier and Dean from Agoric. We catch up about their respective projects and then explore some major narratives happening in the cosmos ecosystem. Specifically, we recap the UST collapse, fallout and impact on Cosmos. We talk about the move of some apps from rollups to their own app chain, as well as projects, looking to be increasingly exposed to IBC or bridging into the cosmos ecosystem. Finally, we look at IST or inter stable token, a project being developed by the Agoric team, which is meant to be a Cosmos native multi collateral stablecoin we look at how they're thinking about it, how other project successes and failures are influencing its design, as well as the role it hopes to play in the ecosystem. Now, before we kick off, I do wanna highlight a new video series that we are launching this summer called the ZK whiteboard sessions.

Anna Rose (00:01:18):
It's produced by ZKhack as well as the ZK crew from Polygon in it, host Bobbin and Brendan interview top experts in the ZK space, exploring the most important concepts and building blocks of ZK. I'm gonna add the link to this in the show notes, and it's definitely a great resource to watch out for. We're just starting to release these whiteboard series now. So you, you might wanna check it out. We also have three introductory videos for the ZK whiteboard series produced by Dan Bonnet from Stanford. So you can already check out a lot of these videos over at ZKhack. One more thing. This September the ZK summit returns for its eighth edition, and we are bringing it back to Berlin it's happening during the Berlin blockchain week. Be sure to apply, to attend sponsor limited. So get your application in soon. Now Tanya gonna let you know a little bit about this week's sponsor.

Tanya (00:02:09):
Today's episode is sponsored by Aleo. Aleo is a new layer 1 blockchain that achieves the programmability of Ethereum, the privacy of Zcash and the scalability of a rollup. If you're interested in building private applications and check out Aleo's programming language called Leo. Leo enables non cryptographers to harness the power of ZKPs to deploy decentralized exchanges, hidden information games, regulated stable coins, and more. Visit leo-lang.org to start building. You can also participate in Aleo's incentivized Testnet three by downloading and running a snarkos node. No signup is necessary to participate for questions, join their discord at aleo.org/discord. So thank you again, Aleo. Now here is Anna's episode with Dean and Zaki.

Anna Rose (00:02:55):
Today. I'm here with Dean from Agoric and Zaki from Sommelier welcome to the show guys.

Zaki Manian (00:03:00):
Thank you for having us.

Zaki Manian (00:03:01):
Great to be here.

Anna Rose (00:03:03):
I'm very excited to catch up with both of you. One of the reasons that we're doing this episode is to talk a little bit about general kind of Cosmos narratives. I wanted to talk to like people about the UST fallout from a few months ago, and I felt like the two of you would be fantastic people to talk about this with. And also we wanna touch on sort of a new plan for something called IST. But before we do that, I mean, you're both from different projects. You've both been on the show before, but it's been a few months and I think it's, we're kind of due for a little check in on what each of you are doing. So let's start with Zaki. You were actually on the show last October, you presented Sommelier. I can definitely link to that in the show notes, but you did just tell me before we started recording that a lot has changed. So do tell me what has changed.

Zaki Manian (00:03:49):
So probably the last time we spoke Sommelier was focused on like Uniswap v3 liquidity management. That was kind of our game. What we learned over the course of a few months was that basically any sort of decentralized liquidity management on like v3 style DEXes is going to lose money. Outside of like a relatively narrow set of use cases around stable coins and like, you know, paired assets like some of the stuff that like Arrakus and Gelato are doing, it's a relatively narrow set of things. You know, if you are making money on Uniswap v3, you are hedging on centralized venues, you are doing like, you know, there was 200 million of flash liquidity on Uniswap v3. In the last year we basically like analyzed the whole Uniswap v3 space. And like came back in December and were like, oh, we are not gonna launch this product.

Zaki Manian (00:04:52):
Like, whoa, I'm not gonna launch this product. I'm not gonna launch a product that I like am a hundred percent sure people will lose money on. Oh man. So in the meantime we'd actually been like specing out like a different set of use cases for Sommelier and we have sort of entirely pivoted to this. Okay. And the new use cases are actually probably going to be launched like within a week of when this episode goes live. We're looking at like July 20th as our most likely launch date. Everything is done. Chain is upgraded, smart contracts are audited. Like UI is done. It's like really great. So what we decided we really wanted to focus on is this like combination off chain, computation model, or off chain strategy model with validator driven on chain execution. So like you have some entity who knows what it is.

Zaki Manian (00:05:43):
It could be a program, could be a bot, could be a guy on a keyboard. You have no, like the system does not define what this is. Is sending messages to the validators, telling them what trades need to be executed on various smart contracts that we call Cellars. And then those contracts are executed. So we are initially launching with a AAVE, stabl coin rebalancing Cellar which is just going to go and say, Hey, I would like to know which stable coin I can get the best yield on AAVE and just like rebalance my funds into it. I don't want to take like spot risk, essentially like risk on the appreciation of the asset. Like here's a list of stable coins because there's actually quite a bit of volatility between different stable coins in the lending market. And like rebalancing this yourself is like a full-time job.

Zaki Manian (00:06:34):
Got it. So this is the first thing that we're launching, but really what's very cool about Sommelier now is that we are a platform IE you can launch pretty much any Cellar you want. We have already started onboarding like external teams who are building Cellars on our platform. Really. The only thing that is like slowing us down at this point is everybody's like, this sounds really cool. I just wanna see money moving through the system. I'm like, I feel the same way. And that's why we're starting out with this like very low risk stablecoin Cellar that it's like, will this make insane amounts of money for any, especially right now, it won't yields will eventually go up. Like they will. But like right now, like stable coin lending yield, like demand is like, is terrible. But there are actually strategies that we see coming that are really good for like kind of a, a bear market environment.

Zaki Manian (00:07:25):
Like this is a great time to be like, Hey, like buy stETH if the stETH discount goes outside of a range. Buy ETH when it is like, you know, when it has moved out of like the two week moving average, right on the bottom side, like there are strategies that are going to do that are potentially like huge money making trade, but are like, you need to be a, like full-time trader to really run yourself. Strategists can provide these strategies on top of Sommelier and get this like sort of high reliability execution environment. And we are like, we have a fully generic platform that can support sort of arbitrary, smart contracts and arbitrary strategies today. So, yeah. Cool. This is what Sommelier is now is like, we are sort an, an arbitrary strategy execution platform.

Anna Rose (00:08:10):
I mean, you did have that strategy mentality before. I just wanna check something though. Are you primarily, still looking to kind of work from the Cosmos area, but working over a bridge to with Ethereum, Cuz like if you're doing Aave, you're talking about like the ETH Aave.

Zaki Manian (00:08:28):
Yeah. The primary place that we're executing right now is Ethereum. Okay. we have multi EVM support coming. But like, it's gonna be interesting to see how compelling that is in the bear market too. All of the liquidity has retreated to its home on Ethereum. But like the general framework that we've built is applicable to cosmos it's applicable to Ethereum it's potentially applicable to other chains. We're mostly looking for like where economic opportunities arise because like the whole point of this thing is to be able to like aggregate significant amounts of capital underneath It.

Anna Rose (00:09:07):
When you say the word Cellar, I think we're continuing with the wine metaphor. Am I right? Yes. It's a C it's not a Cellar like an S

Zaki Manian (00:09:15):
Yeah, it's a C E L L A R, Cellar.

Anna Rose (00:09:18):
Okay. And these Cellars are strategies. There are contracts that execute strategies, or

Zaki Manian (00:09:24):
They're vaults, they're like comparable to like Yearn vaults or Enzyme vaults. Right. But the difference is, is they have this sort of unique thing right. Where you have off-chain strategies. So, you know, you have this off-chain strategist, the off-chain strategist can sort of make discretionary orders. Right. It's the, strategy's not fully on chain, but you also have this validator set that can potentially swap out the strategist. And so we have this like sort of interesting governance dynamic between the strategists, the validators, the Sommelier holders, like one of the other things that is just like, we're really pushing for is to do a cosmos chain that where the rewards are not inflationary.

Anna Rose (00:10:09):
Oh.

Zaki Manian (00:10:10):
So basically som holders and some validators do not make money until users make that money. Okay. And so that has been another big big piece of the experiment,

Anna Rose (00:10:21):
But you already have, you have a chain.

Zaki Manian (00:10:24):
Yeah. Yeah. We have, our chain has been launched for a while. Yeah. We've even done the Cellar upgraded, like, I don't know, two months ago we have been in solidity smart contract audit hell process for a while. And like that concluded on Friday. And so now we're just like, we're like rearing to go

Anna Rose (00:10:44):
Very nice. All right. Let's switch over to you, Dean. We ha we actually had a conversation about Agoric more recently, I believe like this past year February, actually 2022, where you introduced Agoric we talked about hard in JS. I'm also gonna link to that in show notes if people wanna find out more. But you have since launched, I think, right. Or had you launched then I think you had not launched then. So tell me what's going on, on your side.

Dean Tribble (00:11:12):
Okay. So Agoric is a, you know, big platform play. That's really important to getting mainstream developers, into being able to do smart contracts by enabling smart contracts and hardened JavaScript, as you mentioned, but there are multiple stages to that launch. So last November we launched the layer zero, you know, the cosmos layer, what we call mainnet zero, which allowed the deployment of BLD tokens. It allowed us to do a public sale at the end of December and so forth, but that was, you know, phase zero of several, right. Phase one is the important next step where we launched the hardened JavaScript platform. And once that's launched, then smart contracts will launch on top of that. And I'll talk a little bit more about that. We'll talk about inter protocol in, in a little bit, but that's mainnet one. Now we're sort of steadily marching towards that with testnets with a preview release of the bunch of smart contracts and the platform on top of it.

Dean Tribble (00:12:15):
So a preview release of the inter protocol for other projects, we've got lots of security audits, third party security audits in progress. And we have a economic stress test where economists are testing you know, the economics of an analyzing the economics of the stable token infrastructure, the AMMS and the, and the other smart contracts that are critical to the mainnet one. Right now our strategy was always, you know, launch a set of contracts that provide a stable economy, right? The platform is, you know, build faster and fast rapid development using a modern component architecture of interesting smart contracts and being able to deploy them in a stable, vibrant economy, which to our mind includes having basic trading and having a stable token to grease the wheels of commerce in that economy. And so all of that launches those first round of contracts launch in mainnet, one targeted later this year, targeted Q3.

Dean Tribble (00:13:22):
After that is the next couple of stages are permissioned release, you know, governance, determined release of new smart contracts of additional smart contracts, so that experts building things carefully that go through security audits, they can convince the community that this would in fact, enhance the robustness of the environment or enhance the richness of the economy that can get voted in and, and released in a permission fashion, moving towards through additional security audits, additional, you know, metering support, all those kinds of things to eventually mainnet phase three, which is permissionless. And so we, you know, very carefully staged to allow this thing, cause this is not, this is not a, oh my gosh, let's rush out a platform that people can whack together crap, right? And, and maybe some of it will stick. This is, you know, building a platform that non crypto developers can get into. And if they can build an application now in web two, they could go and build it in web three. And that requires a level of support and tooling and familiarity and training and all these things that they just take time to build. What's really exciting about mainnet. One is it turns out that what we need to launch a economy is what the interchain needs for the, the rapid growth of DeFi in the interchain. And so this is the inter protocol and our stable token for the Agoric platform. So

Anna Rose (00:14:51):
Inter protocol, like when you say that, is that the name of the token? Cause I've been calling it IST.

Dean Tribble (00:14:57):
Yes. The token is IST for inter stable token. Okay. IST and so, or IST as someone, someone on Twitter, every time I said that he was envisioning this iced tea. So now I want a glass of iced tea and, and to have you know, a rapper actor dictate our advertisement. Right.

Anna Rose (00:15:18):
You didn't think of the drink you thought of the rapper.

Dean Tribble (00:15:20):
Yeah. What, you know what I can do

Anna Rose (00:15:23):
Okay. But you keep saying inter like the other word you're using

Dean Tribble (00:15:27):
Inter protocol.

Anna Rose (00:15:28):
What do you mean by that then? Is that just like IBC or,

Dean Tribble (00:15:31):
Oh no, no, no, no, no. So, so inter protocol is about having a stable token that works across IBC. So it is IBC native, but it is a collection of smart contracts that form the, the backbone of, of an economy, basically. So it is a maker DAO CDP style vault infrastructure, right. But you can take assets over IBC. So this becomes a stable token for the interchain. Now that's sort of the thing that has happened with main net one is it goes from being an initial release for this larger platform to being really critical and interesting for enabling economic growth in the interchain. Right? So got it. It is a stable token where the assets are not, you know, one token on one, one zone that now you have to care about, but they are community determined, set, starting, for example, with ATOM, where you could bring ATOM over IBC lock it up in a vault to

Anna Rose (00:16:30):
Make it collateral guess

Dean Tribble (00:16:31):
To make it collateral. So it becomes collateral that you then mint IST against, and then you can take that is T and you can of course use it on local smart contracts on the Agoric platform, but you can also take that over IBC over to other chains. So over to Psalm, over to Junos, Osmosis, you know, evmos, et cetera, it can become not just a stable token that is usable in the cosmos ecosystem, but because those chains can provide the asset, that is the collateral that they're using. It's not that they buy into our chain. It's that, you know, I've got a bunch of ATOM, I can unlock its power by using it as collateral and taking IST back to ATOM, evmos, et cetera. Right.

Anna Rose (00:17:14):
All right. So I think, I mean, one of the reasons you're here is to definitely talk about this particular topic, but I do think we need to do a little bit of backstory sure. Into why this is very relevant today. And as I mentioned at the beginning of the interview, or at the beginning of this episode, you know, UST and it's collapse, I mean, what I now wanna touch on is basically these like three narratives that I see kind of like coming, they're very different, the UST fallout and its effect on cosmos, the sort of movement for like applications that we're trying out roll up. And now they're creating their own app chains over on cosmos. And I'm also learning about a lot of bridge projects or projects trying to bridge to IBC. So these are like other networks trying to bridge in. Let's kind of like rewind to May I don't think I've talked about this at all on the show.

Anna Rose (00:18:05):
So I I'm excited to do it. I always like doing this by the way. I always love doing recaps rather than trying to report news, cuz then people have digested and like they can kind of look at it a little bit more calmly, but I think the two of you were probably looking very closely at this as it happened. UST was the stablecoin on Terra was very, very key in cosmos because Terra was built on the cosmos SDK. So it was the first stable coin to really like proliferate within the cosmos ecosystem and then had a very dramatic collapse. That's my quick summary, but Zaki, tell me a little bit about your take, where were you at when this happened and what did you think was going on?

Zaki Manian (00:18:43):
So I was in Croatia for a conference. Okay. Fede was there, it was good Fede from Evmos was there and like this was going on, you know, it had been interesting like, you know, right before that I had like literally been talking to Mike Novogratz about Terra. I had talked to Conno about Terra, you know, I was continuously sort of like the potential risk about Terra was always well known, but like what do you really do about it? You also had this problem, which we can come to later. Right. Because you know, USDC is coming to Cosmos all of these things, but like bringing USDC bringing the sort of dollar back stable coins to Cosmos has always been a challenge because in a bridged environment, right. How do you implement the blacklist that like a sort of core to the theory of compliance on these chains? Right. Part of the reality was, so Terra had been on the Cosmos SDK since like mid 2019, right? Oh, wow. So long time Cosmos SDK user, right? Yeah. So, you know, both been part of the ecosystem and not part of the ecosystem IQcclusion was a validator on their network in the early years.

Anna Rose (00:19:59):
Iqclusion is your validator company.

Zaki Manian (00:20:01):
Yeah. IQclusion is my validator with my partners. And so like we had been part of this world, we had been like paying attention to we were very familiar with it. We actually wrote an implementation of like the terror price, Oracle like a bunch of stuff. Like, so we pretty engaged like sort of into 2019 and 2020. And then as 2021 sort of rolled on, we got less and less comfortable with kind of where the Terra ecosystem was going. But on the other hand, like they had a lot of money and we were trying to get some money to like support cosmos stuff. Right. Okay. That was one aspect of it. Right. Like, you know, you know, they had, had announced this like project dawn thing right. Where he was like gonna, you know, allocate 150 million to Cosmos projects and like Cosmos infrastructure, which was great.

Zaki Manian (00:20:47):
And we were trying to figure out like, okay, so like how do we actually get this money into, into things that are worthwhile? Like this was our engagement. Okay. So, you know, keeping an eye on UST and then the other thing that was like very, a big thing for cosmos, right. Is a lot of like smarter actors in the space, sort of figured out that the best way to do the sort of, one of the most efficient ways of doing the sort of UST carry trade, where it's like, Hey, I'm gonna take, stablecoin swap them to UST get my 20% on anchor was to actually route through ATOM route through ATOM, route through Osmosis, go to go to Terra. Right. And so you actually saw this like massive volume and the way osmosis sort of does incentives, right. Is pools that have volume get incentives

Anna Rose (00:21:36):
Yeah. From the actual Osmosis treasury, right. Yeah. From, are providing extra incentives to those large pools.

Zaki Manian (00:21:44):
So that creates these like recursive feedback loop where like, the pools get bigger because of the volume, the volume's getting bigger because of the anchor incentives, people were like smart actors were figuring this out. So then I guess, so all of this stuff was very familiar with all of these things. And then like was basically like watching the Binance order book in real time. Well, you know, they were jump and LFG were like trying to keep the peg and like, watch it collapse, watch it explode. But then, you know, the thing that happens. So like Sunday and Monday were about that, then what happened was, you know, there's this famous like leaked telegram group that you can see me in for a period of time. And then I leave cuz basically what happened was, is like I was very familiar, many other cosmos devs were very familiar with like the mechanism by which UST gets converted into Luna. So like Luna, like the mechanism of the stablecoin is that at any time well to some limit, but the limits are fairly large. You can convert Luna to UST by burning Luna and getting UST and you convert UST to Luna by burning UST and getting $1 worth of Luna. Okay.

Zaki Manian (00:23:01):
At some point sort of Tuesday-ish

Anna Rose (00:23:05):
So you're talking right around May 20th. I'm assuming. Yeah. I don't, I don't know what the days were, but we're going like May 20th.

Zaki Manian (00:23:11):
I just remembered as like crazy week.

Anna Rose (00:23:14):
Okay.

Zaki Manian (00:23:15):
So one of the things though about this mechanism was it, there was never any UI for it. You had to use the command line to do it. Oh. And so at some point, people who were on the trade realized that they could buy UST on the market, turn it into Luna and sell it as a profit. Hmm. So this put Luna into this, like hyperinflationary sort of cycle where like the price of Luna kept dropping. The price of UST was kind of actually stable. And people were just like, recycling were just exiting by dumping Luna on like binance and other markets that were forever. And it was like, okay, like what is going to happen here? So like the cost of taking over the validator set, like becoming the single validator, we would just watch it fall from like, okay, now it's like a hundred million dollars like an hour later, it's like 10 million.

Zaki Manian (00:24:10):
Then an hour later, it's like a hundred thousand dollars. And like, you're seeing this collapse. Right. And I'm like, guys, you know, so I start tweeting about the potential risks of all of this. Sunny is also in a chat with them. There are a bunch of other Cosmo devs. We're like, okay, validators, you have to halt the chain and then restart with staking disabled because otherwise, like we have no control over this, like Luna UST disaster, but there are like $80 million of non-native assets on this chain. Whoa. Primarily like ETH and bETH and like other assets that had been brought over the wormhole bridge and were like real worried about like the next phase of this after your head has become essentially free to take over the chain down is some sort of attack on those assets. Right. That's wild. So I'm sort of yeah. Ransom on those assets.

Anna Rose (00:25:02):
So I wanna just give a little bit of context, timing wise to what we're talking about. It looks like I'm just checking it. It was may 2020 May 7th was when it started to dedeg. That's like, I think a, what is this? This is a Saturday. And so I'm guessing Zaki the Tuesday that we're talking about would be around the 10th. And it was that week that you were seeing this. And what you're saying is at this point, like the de-pegging has fully happened. It's deep pegging. It's like there's this automatic sort of like liquidation or like the price of Luna is just going so long. No,

Zaki Manian (00:25:37):
It's not automatic. Like someone has figured out, okay, that there is an arbitrage opportunity here, which is I can take UST which no one will buy. I can convert it to Luna, which someone will buy.

Anna Rose (00:25:51):
And that's hard to do you have to use command line to do it? I guess there's no

Zaki Manian (00:25:54):
Use line, but have there's. But people started realizing you could do this and started buying UST to do this. Okay.

Anna Rose (00:26:00):
Right. But why wouldn't it re pay UST if they're buying it?

Zaki Manian (00:26:05):
Well, because

Anna Rose (00:26:06):
It was dropping too fast.

Zaki Manian (00:26:08):
Yeah. Like there's the Cellar, like basically the minute any liquidity showed up and like, there wasn't infinite Luna liquidity, but like a lot of traders were looking at this coin that was worth a hundred dollars. And they're like seeing it for pennies. And they're like, oh, like, there's an opportunity here. Like, I'll buy this. Not really understanding the mechanism that like infinite Luna was being printed.

Dean Tribble (00:26:31):
The key here of, about being able to take over the validator set is where there might have been a billion tokens before. I don't know how many there were now. It was so cheap. And the mechanic of Luna was such that you could do uncontrolled minting, that someone literally minted trillions. And so now if you could take trillions and stake them, you now have a validator that is a thousand times larger than the entire rest of the network. And so all blocks would go to hit. It'll do whatever you want. And you're now in complete control from a protocol point of view.

Anna Rose (00:27:03):
And what could it do though? Like you just mentioned, there's all these other tokens on the network itself. Could they have started to just like, make those tokens land in their wallets?

Dean Tribble (00:27:12):
Exactly. You could just, you know, do a vote and vote to give all the money to themselves. Right. Okay. Transfer all

Anna Rose (00:27:17):
But they still have to bridge off.

Dean Tribble (00:27:17):
The money to a wallet on another chain. Well, but the, but they're in control of the end point of the bridge. So now they can give all the money to themselves and transfer it off chain, you know, Luna, implodes, but their money, as far as Ethereum is concerned or Binance or whatever they've been told by Luna was transferred into the attackers chain. What, what are they gonna do?

Anna Rose (00:27:36):
Although there would've been a couple stop gaps there. I can imagine like bridge operators could have maybe done something.

Zaki Manian (00:27:42):
Yeah. Or it, it would just have gotten like a lot worse, a clear and you know, clearly people in that chat room decided to like arb, this whole process of halting the chain also, cuz they like somebody decided to arb, the process of, oh, I realize this trade is gonna stop right. Because of this chain halt, it was all pretty chaotic,

Anna Rose (00:28:02):
Crazy.

Zaki Manian (00:28:02):
It's like basically the like most chaotic environment for validators that I think I've ever seen. Wow. But I wouldn't say that it was like a complete fail. Right. Okay.

Anna Rose (00:28:12):
It's cool that you are in that group though. It's kind of crazy that you had that perspective that you, you were still running a validator at this point, right? No, no, no. Oh you weren't. Okay. So you were just like giving your thoughts, but then you didn't have to turn anything off, but other Validators actually had to turn off.

Zaki Manian (00:28:26):
Like yeah, yeah. It was just like, you know, I'm familiar way the code works. The TFL devs like really did not know what to do. They're like this thing is like, you know, everything is falling apart. They didn't have like a good crisis plan.

Anna Rose (00:28:41):
They didn't have a plan.

Zaki Manian (00:28:42):
Crisis response was really not happening. So, you know, like a bunch of cosmos devs showed up advocated for a course of action that could be executed quickly. Was it perfect? No. did it achieve the stated objectives? Were those the right stated objectives? Who knows?

Zaki Manian (00:29:00):
But the stated objectives was to like create an environment in which people who have foreign assets in smart contracts would be able to like extricate their assets from those smart contracts.

Anna Rose (00:29:11):
Okay. Did that happen? Yeah. I mean the chain froze. So like, I guess the validator set decided to, is that what you call it? They just stopped the chain.

Zaki Manian (00:29:18):
They stopped, they stopped the chain, all the validators stopped. Yeah. Then there was an upgrade

Anna Rose (00:29:22):
IBC stopped. So the relayers also stopped or was that after?

Zaki Manian (00:29:26):
Yeah, so, you know, one of the things we put in the chain in the upgrade was close the IBC channels. Okay. again, who knows if this was the right solution but it was all, you know, under fire. Right. Hmm.

Anna Rose (00:29:41):
Do you feel like, I mean, I got the sense that the, the sort of chaoticness the intensity of this particular event that it is like, it needs to be dissected and studied in a way, because I think in it, there are lessons. I mean, I think there's the obvious lesson of like how to design a stable coin differently. That that's not a good model that there's, that's dangerous. I think they, people kind of already knew that that was dangerous.

Zaki Manian (00:30:10):
People already knew this was dangerous.

Anna Rose (00:30:11):
Yes. Yeah. I mean, but then it's also this like to see what, what is a cascade from this? What is the domino effect? What happens after I think us being able to see it will become useful for the future in design.

Zaki Manian (00:30:26):
I think the other thing that was kind of interesting about this is the way you could construct something that basically functioned as like a waterfall credit instrument that like does not look like a legacy finance waterfall credits. Like there's a sense in which this thing was like, oh, like Luna as a chain was operating in a conceptually similar space to like a mortgage backed security where you have like the triple A rated transition in the

Anna Rose (00:30:57):
2007 or something. Right.

Zaki Manian (00:30:58):
Okay. And it was like, you've constructed a cosmos chain. That is the functional equivalent of that system.

Anna Rose (00:31:05):
Wow. When you use the word waterfall here, what do you mean? Is it like waterfall of money pouring out of itself or something?

Zaki Manian (00:31:12):
The idea of the system was that like essentially in the risk management system, Luna was supposed to be the junior tranche where it was supposed to absorb risk. And the UST was, was designed to be the senior tranche, but like if the entire system turns to garbage, like Luna fails to absorb the risk.

Anna Rose (00:31:34):
Mm could Luna have acted differently? Was there something reckless in the way that like it was promoted or how it was connected?

Zaki Manian (00:31:42):
There, I mean there's, there are many layers of recklessness in this whole thing. Yeah. there's the way it was promoted by the centralized exchanges. You know, who promoted UST as a, on the same level as other large, you know, more secure dollar back stablecoin there was really no quality filter there. You know, I think it would've been wholly ineffective to fight this in cosmos governance. Like it would not have worked. But the other mechanism that I would say was a big thing was like TFL was reckless, right. Mm. There with like withdraw on that Saturday. I you remember?

Anna Rose (00:32:21):
Actually I I'm gonna have to re correct. So it was the seventh. I have a graph. Yeah. It was May 7th. So May 7th was a Saturday.

Zaki Manian (00:32:29):
Yeah. Yeah. So on that Saturday, they withdrew a huge amount of liquidity from the curve pool. With the intention of later in the week, setting up a new curve pool and that created,

Anna Rose (00:32:42):
And they told they communicated that, right? Yes. Like this was somehow made or was it just visible on chain or was it actually,

Zaki Manian (00:32:48):
It was both.

Anna Rose (00:32:48):
Okay.

Zaki Manian (00:32:49):
Yeah. It was, you know, the setup of the new pool was planned and the fact that they did this, you know, in like, not like one atomic operation, but like over the course of days created a definite moment of like maximum instability where like all these other forces around instability, the general de-leveraging of the space, like the general de-leveraging that was going on the like amount to which TFL had sort of burned their own Luna to create UST swapped into other coins, you know, for various reasons like all of these things like had been like sort of converging and like, that was definitely like, you know, the straw that broke the camels back. Yeah. You know, or like the janga block.

Anna Rose (00:33:33):
Do you think it was malicious? Do you think that there was someone or a big group that like saw the opportunity to crash this out?

Zaki Manian (00:33:41):
I have heard rumors of people raising money to attack UST. So like, I don't know whether or not those rumors are true. I don't have the slightest idea, but like again, the other thing though, you know, that I've heard in general is that like a lot of funds had their risk management systems on UST sort of go like overt them over the weekend that they thought something was wrong. And like pull liquidity out, banker sell Luna, like all of this stuff. So, you know, it could have been any number of those things, but it was certainly like the, the way in which the, the three pool to four pool set like conversion was. And so this, I think this is like, again, like a, another lesson for, for blockchain teams. Right? Totally. Is that like, you know, operating, assuming sort of a non adversarial environment, whether or not the adversary was there or not, but operating as if no one is going to attack you at a publicly broadcast moment of vulnerability is just, you know, a recipe for disaster.

Dean Tribble (00:34:47):
Yeah. There's a couple of critical things I'd like to insert here. There are lots of layers of failure or attack or vulnerability. What have you. So at the bottom, there was robust software that was functioning on a continuing basis, you know, sending messages back and forth, all of which, you know, were, were the intended action. And then there was the design of the economics that could cause this minting of trillions of Luna that was fundamentally flawed. Now people can talk about it as it was an experimental, what have you, but no, no, there was a lot of people going it's really bad over there, but it'll never get there. Mm. And that was the fundamental bogus error on which this stack was layered. And there's an important sense in which, you know, better, that bubble was popped now, before it got worse. I mean, you know, Do was very actively wanting to get too big to fail so that if his bubble popped, it would take everything else with him.

Dean Tribble (00:35:38):
Wow. And you know, and that's not the way to build a robust economy. That's not the way to build a robust system. And that was the problem at the bottom. There were plenty of other ways you get problems, but many of those could have been coped with if there wasn't this core problem that would cause the whole infrastructure to collapse because someone could take over the chain. And so, you know, cuz every system is gonna have, you know, people that are, I mean, you know, when you talked about, do you think it was deliberate or malicious, let's be really clear that does not mean criminal. Mm. You know, hostile takeovers happen legally all the time, that kind of economic activity to notice an opportunity and take it. I mean, arbitrage, yours, malicious. I don't know. They're just doing their thing. It's tricky. Right. And so much of blockchain is all about being robust in the face of this Byzantine environment. That's just a Byzantine economic environment. Suck it up.

Anna Rose (00:36:31):
Yeah. what about your, like on the Agoric, front, I mean, you were your busy building. Did you feel this, did it hit you? Like, did your team feel it or were you just guys like, oh, well we're not really like, we're not IBC enabled yet. It doesn't matter.

Dean Tribble (00:36:45):
Well, okay. So, so several things and it'll go, some of this will go back to Cosmo verse in November, whenever it was where we started talking about inter protocol or at that point it was called run and talking about, we've gotten through mainnet. We, we launched our mainnet zero and then went to Cosmo verse and talked about it. Right. You know, many of our investors are people in the Cosmos ecosystem, so they suddenly could actually get their tokens and start to stake them, even though rewards weren't turned on. Now you can start to see that, you know, there could be governance, there could be all these things that they're, that they're used to. But when we describe inter protocol, you know, folks like Zaki, Sunny people from, you know, Fede from all these different chains, you know, Sunny was like, huh, finally, an ATOM back, stable token, you know, that's just what we've needed forever.

Dean Tribble (00:37:33):
And I really had this sense related to UST, you know, people were using us T heavily in the cosmos ecosystem cuz it was kind of the only game in town. Yeah. And everyone was leery about it. Partly cuz it's architecture was to use this, your relying on that chain over there that has some potential issues. And not only you're relying on that chain, you must buy into their token. Right? Yeah. You have to buy into the, you know, so the only way to exit is through Luna. That means, you know, if you've got really active use of it on Gaia, you gotta go over to, to Luna exit. And so there's sort of a relying on some other project to have yours be successful, you know, that can always be challenging. And so they were very excited about being able to unlock the capital in all of their chains in Cosmo, in, in Gaia, you know, Cosmos hub and et cetera.

Dean Tribble (00:38:17):
And the fact that, you know, sort of attitude wise we were much more about, you know, IBC enabling the world and inclusiveness so that they could feel economically that they were engaged in the stable token. And so this changed our vision of what was, you know, our initial launching to being something that was suddenly a huge service to the entire ecosystem. And that's part of what inspired renaming it. And the inter protocol in the stable token was sort of important, but not central. We need a stable token in Agoric. The particular mechanics don't matter to us, but it needs to be robust. It needs to be healthy. It needs to be economically sound and solvent. And so we've been working on that.

Anna Rose (00:38:54):
Got it.

Dean Tribble (00:38:55):
So obviously we saw this happening cuz we'd been paying attention to stable tokens in the cosmos ecosystem because we were planning to roll out with a new, you know, very robust one. And it was, you know, interesting. Couldn't keep your eyes off of what was going on. Partly because you know, oh my gosh, is it gonna get all the way to where it hits that death spiral? That's sort of inherent in the architecture. And we had a conference the very next week, so gateway events, one of our investors Rockaway put it on and it turned into a big Cosmos conference. We were one of the sponsors and this is in Prague. It was in Prague. And it was inspired originally by Cosmoverse like, oh, that worked, let's get a bunch of people together in the community and, and make something happen. And that was starting right after that Tuesday that you talked about earlier. Right. So starting on the 15th. So we're showing up there. So you know, me, Zaki, the Agoric crew, all of these cosmos chains and at the start of the conference, everyone's like, what's gonna happen. It's really scary. I mean, you know, there was really this, yeah.

Dean Tribble (00:39:57):
I don't know what to do yet. Right. And there was a lot of Terra people there and all this sort of thing and a big impact, I think of that conference sort of, and will look back historically and sort of measure some of that is a, you know, it started with, you know, okay, we had a plan, but let's talk about UST because, oh my God. Right. And so many chains stepped up. I mean, the first thing was, you know, what happens to the Cosmoverse. So, you know, first off IBC executed beautifully, Terndermint executed beautifully. All these things were happening, but it wasn't a bug in the software. It wasn't the systems collapsing. It was everything functioning, just amazingly well to accomplish this thing that had an economic problem. But that thing imploding over there. Yeah. Prices fell, but, but everything kind of stayed up and was fine. I mean, this is an important way in which loosely coupled systems working together, they'll take some dependency, but they get to control it. They get to bound it and they get to stay up when that other thing over there dies. And so it was just a tour of force.

Anna Rose (00:41:01):
Yeah. I mean, I remember I spoke to the wormhole folks. I mean, this is maybe a bit more of a centralized bridge, but like all of their system also worked. And that was one of their takeaways. Exactly. Because nothing crashed, nothing broke even though there was like liquidity flowing super fast over that.

Dean Tribble (00:41:15):
Right. And then the other thing that happened is the develop ecosystem worked. So just one more point about that is at this conference, everyone's like, there were also a bunch of good projects on Terra, you know, that were quality things that they built there because, you know, there was a stable token there first that's critical to making an economy Hackman, as I've mentioned multiple times. And so the community of Cosmos was just incredibly welcoming. Right. You know, there's several CosmWasm chains that are all like, you guys have expertise in projects, you know, here's a new place to build. We fund it, get over here, you know? And, and so the transition of attitude across the two days of the conference from, oh my God, what's happening to wow. Cosmo is healthy and driving and growing. There's a place for these people. Yep. There's gonna be a big market downturn, but this is a robust place to build. Was huge.

Anna Rose (00:42:04):
I wanna move on to sort of the second narrative I had sort of mentioned here, which was like apps, DApps that have been thinking of deploying on rollups potentially launching their own chain. I think the biggest example here is DYDX moving from Starknet to the Cosmos ecosystem. But I do know that there's some, like talk of other chains doing or other applications doing this. I am curious, like, it almost feels like a narrative that counter, like the UST narrative, as much as it showed sort of like that the network stayed up. It was also, I think we could say it was a bit of a hit because it was like a somewhat toxic asset that had like spilled into the cosmos ecosystem. It pulled down a lot of prices. It made people sort of like feel a slightly shaky, then this, this new kind of narrative of like, rollups potentially not being the place where people wanna build, but rather them moving to the Cosmos ecosystem is an interesting narrative, I would say. And I just wondered, is that a blip narrative or is that something you're seeing like in a bigger way?

Zaki Manian (00:43:04):
So there's a lot of conversations about this going on. So I wanna link it, two things to this one is applications that were on Terra have gone in a bunch of different directions. Right? Okay. Some of them have gone to, you know, Polygon and Solana and all of this stuff. But there's been quite a few applications that have stayed Cosmos. Some of them have gone to Juno, but some of them have also launched their own chains. Some of those chains are already live

Anna Rose (00:43:30):
Oh, crazy.

Zaki Manian (00:43:31):
You know, and the other thing that was kind of funny about all of this for is Terra was always this, like both part of Cosmos and not part of Cosmos they were always kind of like, oh, we're our own things separate from the rest of the Cosmos ecosystem with like loose connections to the Cosmos ecosystem.

Anna Rose (00:43:48):
Wasn't there some sort of like schism with Kepler wallet in them too. Like, I feel like they weren't added for a long time or something like that. Or ever?

Zaki Manian (00:43:58):
The Kepler team have, have not been fans. Okay. Its sort of been an interesting thing though, you know, as, as close as the Kepler osmosis teams are, the Kepler team was not fans of Terra and UST and you know, even though it became such an important asset for a while on osmosis. Okay. So a lot of these have come. Some of them have launched their own chains kugera just launched like within so you know, this is early July and then Kugera just launched their main net, which is like a DEX and stuff like that. A lot of things that were sort of in the Terra ecosystem have been very seamlessly able to move into the Cosmos ecosystem. You know, Delphy digital has their Mars project, which is now gonna be another chain on Cosmos like all of these things, right. Huge amount. And like the world of, Hey, like we mostly talk to TFL people. We mostly talk to people on the Terra site has now transformed into a world of, we talked to Jack, we talked to Zaki, we talked to David at Galileo. We talked to like this whole network of people. Right?

Anna Rose (00:44:57):
Yeah. Do you think what we're also gonna see though is like some projects just shouldn't have their own chain. Like do you think that might swing too far into, like everyone has a dev chain or like has an app chain, is it, is an app chain or DApp chain or is it a app chain? It's not a zone anymore. I was, I was schooled recently for calling it a zone. They were like, what are you saying?

Zaki Manian (00:45:17):
We were really worried about block stream's trademark on side chains for whatever reason when we looked the white paper. That was why we did it.

Anna Rose (00:45:24):
So it's app chain.

Zaki Manian (00:45:26):
Yeah.Whatever,

Anna Rose (00:45:26):
Not zone.

Zaki Manian (00:45:28):
I don't know. I honestly like I don't really care.

Anna Rose (00:45:31):
Okay. All right. All right. All right. But go back to the question. Do you think we might swing too far with too many teams?

Zaki Manian (00:45:37):
So I think this, like, that's a good routing now into your roll up question, right. Are all of these chains going to be able to economically secure themselves, support a lot of economic activity, all of the stuff

Anna Rose (00:45:50):
A full validator set,

Zaki Manian (00:45:52):
Et cetera, et cetera. Yeah. You know, and what I would say is one of the biggest differences between the cosmos ecosystem and the rollup ecosystem specifically the execution layers of the roll up ecosystem is right now, the execution layers are not really community projects. There is a company, the company has a, a business model like frequently source available business source license stuff. You can't just like fork the code. And you know, all of these entities have roadmaps, right? They have all have these like elaborate roadmaps of stuff that they're working on. And you have an entity like dYdX who's. Like we do not want to couple our decentralization to our vendors decentralization roadmap. Right. And we would like to be able to throw our own engineering resources to solve our decentralization problem and the roll up ecosystem today. There's nothing that architecturally about roll ops that forever makes this true. It just means that the roll up ecosystem today did not have anything to offer them. And so that is how, you know, dYdX sort of ended up on cosmos.

Anna Rose (00:47:05):
Could you imagine where like a lot of these groups launch app chains, aren't able to fully create secure validator. Like they just don't get enough value into their validator set. They can't grow the value high enough that it's not corruptible basically, or they can't get enough validators or something, would they then potentially become like a roll up on Celestia?

Zaki Manian (00:47:27):
Is that an option? That's that is like largely a world. I like there is a lot of work going on into again because the execution environments are so immature. You know, going back from like 2019 when Celestia was founded to now, as we get close to Celestia launching the thing that is most surprising to me is how immature the execution environment still are compared to the cosmos SDK. And in theory, I I'm not as familiar, but compared to something like substrate,

Anna Rose (00:47:56):
Wait, you're saying CosmWasm, is that what you mean?

Zaki Manian (00:47:58):
No. What I mean is the cosmos SDK itself? Like what dYdX wanted is like a full distributed system, right? They wanted, you know, propose selection. They wanted fairness. They wanted to be able to implement their own business logic on top of a roll up system. And no one offers that today. No one in the roll up ecosystem really offers a solution in that space. And what, one of the things that we're seeing is like a surprisingly large amount of interest and using pieces of the cosmos SDK on top of optimum to build rollups on top of Celestia for custom chains, because there isn't an execution way or toolkit that really works for them.

Anna Rose (00:48:41):
Do you think, I mean, could they also use something like interchain security eventually, or is it too hard to do that kind of migration? So interchain security being like, yeah. Using potentially a validator set and creating almost like a subset of those validators that could be used for other projects.

Zaki Manian (00:48:59):
So interchain security is gonna appear in multiple forms. Okay. Just like everything in Cosmos. Right. We make open source technology. We give it to the world, multiple go-to markets run simultaneously. So one of the go-to markets for interchain security is like expanding the ATOM economic center. Right. And that's not really like, Hey, I have an app chain. I would like someone else to run it. I'm worried about security. Like for that specific go to market, like our focus is expand the ATOM economic zone. Okay. but like you have teams like saga which are trying to sort of make it as easy, like make it much, much easier to like sort of deploy app chains, get it secured by validators all of the stuff while without having to go through all of this. And that might end up being a very appropriate solution for that kind of environment.

Anna Rose (00:49:50):
Mm, okay. I wanna talk about the third narrative, cuz then we know how to get back to IST. The third narrative is bridges bridging to IBC or just generally other projects looking to bridge into IBC. You had sort of mentioned USDC as well using Axelar, but yeah. Tell me a little bit about, I mean, Axelar is a Cosmos app chain itself, so maybe that's a bad example, but like I know that there's, you know, a lot of the bridge teams we've talked to I've had on the show, I'll sometimes ask them about IBC and there is often some narrative, some kind of like exploration happening there. So is that a narrative that you think is taking hold of Cosmos too, which is like other networks trying to bridge into it.

Zaki Manian (00:50:30):
So two of the most amazing teams that we've sort of found in the last, you know, six months or so one is the composable finance team has just like been crushing IBC to the substrate Polkadot ecosystem and then also been doing it for the Near ecosystem. The other teams are Polymer. And they're looking at other ecosystems to build IBC clients to, too. Rollups et cetera. Right?

Anna Rose (00:50:58):
Interesting.

Dean Tribble (00:50:58):
It is worth distinguishing getting IBC connected to those other chains cuz IBC is designed to be largely technology stacked, neutral. It's designed to be able to do IBC over to substrate or even over to proof of work chains it's designed so that developers can accommodate that they can adopt it as this neutral mechanism. And that allows you to have the, you know, robustness and usability and extensibility of IBC all the way through to those other chains. That's very different from IBC to a node that is then doing a bridge where there's some, you know, multisig five party bridge to, to just transfer assets. And so it's useful to distinguish those two cases,

Anna Rose (00:51:38):
But I mean, every time you touch Ethereum, you are doing that. Like every time you have to convert IBC to something else, cuz they wouldn't have an IBC.

Dean Tribble (00:51:46):
But for example, the substrate bridge is IBC to substrate nodes so that you are doing end to end security without trusting the layers in the middle, which is one of the much more robust elements of IBC versus bridges where you're trusting the software in the middle to faithfully move your money back and forth.

Anna Rose (00:52:03):
Yeah. On the Polkadot front, they also have the XCM and I, I was wondering if the XCM and IBC will ever speak the same language or somehow talk to each other, but we'll see maybe they're too different.

Zaki Manian (00:52:14):
That, that is, that is a composable finance question. But I think it's the most exciting thing about all of this stuff is again, we are disseminating out the IBC expertise to the point where other teams are able to implement it. Very cool in other places, in other places, environments. I was always kind of frustrated to be honest with the ICF teams like unwillingness to like really go after some of these other environments as like places. It's fantastic that we have new participants in the ecosystem that are, are doing this work,

Anna Rose (00:52:44):
Doing that. Cool. Okay. I think we've covered some like good background narratives of the Cosmos ecosystem, which I think does bring us now to talk a little bit about IST I guess in that conversation, maybe we can talk a little bit about how it could compete. I mean, I think Dean you've already mentioned a little bit like where it comes from, you always had the plan for a stablecoin but now it's sort of become, I mean, at least it sounds like you're thinking about it a little bit more like taking the role of what UST was doing, but obviously built on much, much sturdier foundations. I hope. Yep. It better but what about like USDC coming in? Like do you see it? Is that a competition? There is a stable coin coming in it's bridged in it's not IBC native, I don't think right. Correct. There's no like USDC. Well, even if there is it still in cosmos

Zaki Manian (00:53:35):
It's coming. It's coming. It's coming.

Anna Rose (00:53:37):
It's that's coming. Yeah.

Dean Tribble (00:53:38):
Oh, I mean, even at that point, in some sense, not IBC native cuz your money's in a bank account, but yeah. Native fair direct bridging into Cosmos is coming.

Anna Rose (00:53:47):
Oh, where is that live?

Zaki Manian (00:53:49):
Actually native from uh to be announced. Okay. I mean the main story is, you know, well like dYdX has like been tweeting and they represent like $1 billion of USDC TVL. Right. we've been working very closely with the dYdX team to find a USDC solution that is acceptable to them and acceptable to the broader cosmos DeFi ecosystem.

Anna Rose (00:54:11):
Like, so that will then be a native asset as well in cosmos mintable well, minable like some centralized body will be minting it there.

Zaki Manian (00:54:21):
I think there are, there's a fundamental reason even in an environment like the Ethereum ecosystem is economically stable in a world where both multi collateral DAI exists. Yeah. And USDC exists and tether exists. Right. Like economic stability of these things is like real and actual and tangible. And they're actually complimentary to each.

Anna Rose (00:54:44):
Right. And you think different ones have different use cases? Like is there different use, like, are there moments where you should be using DAI in moments where you should be using USDC?

Zaki Manian (00:54:53):
Well like, let's say you have a lot of a right. You're like I have a lot of ATOM. I would like to take out a loan against that. ATOM. Sure. You could go to some lending protocol, you know, lending protocols always have this mismatch between depositors and borrowers where like, if you deposit, when there's no borrowers, you're just, you know, not earning anything. And if you are trying to borrow when there's no depositors. And so like lending protocols are constantly trying to smooth this, this is literally what we're doing in Sommelier is building a smoother for this is something that smooths this. But when you have a maker style protocol, you can show up with your atoms and get your stable coins. There does not have to be a deposit. Right.

Anna Rose (00:55:32):
Got it. Okay. So IST yeah. Like is IST the, I mean, you've sort of said it it's a multi collateral DAI of Cosmos, I guess you could say, but is it multi collateral? Is it starting multi collateral? Like when you first envisioned this Dean, wasn't it more like a single collateral? No, it was,

Dean Tribble (00:55:50):
It was always multi collateral. Yeah. It was, it was always about bring assets over IBC to be able to mint against it because ironically, the one asset that we don't directly do this sort of CDP style vault with is Agoric build because then that competes with using build to secure the chain. Right. And so it was always about being able to bring other assets as collateral and enabling people across the interchain to unlock the value of those assets. And so the multi collateral was well, gotta do ATOM. Right. And, and, you know, Osmo gotta do Osmo, right. Gotta, you know, now, oh, well there's all these other chains coming up. Many of which are gonna be, you know, big chains with serious asset value there, enabling them to unlock that in a way that is consistent with how all the other chains are unlocking themselves. Right. What you would not want is a stable coin per chain, right. A stable coin per, per app chain. What you want is to know you can use the same thing. I can unlock my ATOM and use it over in this smart contract, running on Amos. I can unlock my Osmo and use that value over in the same smart contract, running on Osmos.

Anna Rose (00:56:52):
Right. Would you only allow Cosmos native tokens to be collateral or would you allow like synthetic E to be a collateral as well?

Dean Tribble (00:57:01):
Well, so first off it's a community thing. It's really not up to me. There'll be an economic committee that, you know, informed by Gauntlet, running simulations and all this sort of thing that determines the right profiles and risk for that. But, but one of the key differentiators about the implementation of IST on Agoric is because it is built with the same hardened JavaScript framework with composable,usmart contracts. It will be much more straightforward for it to grow over time, to incorporate other things like even synthetic assets for off chain assets, you know, or at the point where there's some robust set of NFTs or some robust set of securitized, you know,ureal estate assets, the community could decide with the appropriate risk models and liquidation process to add those as potential collateral types. That's a long way away. The key thing is it was always,uyou know, the assets are up to the community and if there was a robust bridge, then being able to use, you know, Sol or, or, or wrapped ETH or, BTC, those were always, you know, in something that we envisioned as being reasonable collateral,uit was always designed IST was always designed interprotocol was always designed to be multi collateral,uwith assets in the cosmos ecosystem so that you could uniformly use a stable token.

Dean Tribble (00:58:20):
Even if you were starting from having Osmo, having ATOM and assets from other chains, either as IBC connects to substrate, or what have you, or is it just brought over with bridges? So, you know, wrrapped ETH wrapped BTC, Solana, what have you, all of those are capital assets that have some kind of history, you know, models of volatility such you can come up with an appropriate role for them as collateral in our ecosystem. And, you know, and that's how you power an economy is by connecting disparate things and making it so you can do business across them.

Anna Rose (00:58:53):
So now I wanna throw back to the story a little bit of UST. And I guess a question I have is given the knowledge that we have from that kind of case happening from having been able to observe it, like, do you have protection within the design itself for if a toxic asset were to be used as collateral? Yes. In a system like that. And I guess here, I need to also check like, could a toxic asset really kind of mess it up, I'm assuming. Yes.

Dean Tribble (00:59:19):
So, well, we have protections against that. So the key thing, I mean, one of the biggest protections is dev limits for any particular asset type. And if you're gonna have a system that's extensible, you know, thinking about how you extend it, but bound the risk of any new extension is absolutely critical. So we were talking about USDC you know, that's a friend to getting DeFi going, right. We have a module which you can bring in USDC and directly mint IST against that because it's a high quality existing, stable token, but that too has a debt limit because that's another system it's got its own risks. You know, there's whether, whether it's contract bridge or US government. And so it's gotta have a debt limit. So every distinct collateral has a debt limit. And one of the jobs of the economic committee is if things start to turn south, you know, bring that debt limit to zero so that no new vaults can be created or no new IST can be minted against a collateral that looks like it's at risk. Right?

Anna Rose (01:00:22):
Yeah. Would there be like a risk assessment done on these different assets? Yeah. Is that how that happens?

Dean Tribble (01:00:28):
Exactly.

Anna Rose (01:00:29):
Is that how it happens in DAI? Actually?

Dean Tribble (01:00:31):
Yeah. There's a risk committee that evaluates new collateral types. There's a whole process for adding a collateral type in our case. We're working through that process now.

Zaki Manian (01:00:39):
The work of the risk committee at maker is actually like a shining example of prudence in DeFi. Right. Yeah.

Dean Tribble (01:00:49):
Yeah. It's an inspiration,

Zaki Manian (01:00:50):
You know, Monet, who's like one of the people on the risk DAO is also a big cosmos enthusiast. And so you know, we talk about this all the time, but I'm a huge fan of his work. Like they look at smart contracts, they look at the economics of the asset, they look at everything. Right. And, you know, I hope that with Inter we live up to the standard that is set by the maker DAO collateral risk committee.

Dean Tribble (01:01:13):
So yeah, we're inspired by their risk committee. In addition, we've engaged gauntlet, you know, they do economic simulations on other smart contracts and are very well respected, you know, Tarun Chitra, and company about how they understand these things.

Anna Rose (01:01:28):
Sometimes co-host of the show. Yeah.

Dean Tribble (01:01:31):
You might have met him. Right.

Anna Rose (01:01:32):
You might have heard him.

Dean Tribble (01:01:33):
Yeah. Yeah, yeah. And, and so Gauntlet will be doing ongoing simulations. So not only we do do risk evaluations up front, but every week there's a reevaluation of every collateral type to figure out what the right debt limits, interest rates, volatility, targets, all these kinds of things are for each collateral type independently in each of the different ways. It might function in our system. And so that will, as we grow either new collateral types you know, or new collaterals or even new collateral types, like if we wanna use liquidity tokens as a collateral type that has some important economic advantages from a capital efficiency point of view, that's something that we look forward to doing after, you know, in future mainnet releases. And that's something that they'll be able to model incorporate into the overall, you know, risk analysis models that's being continuously evaluated for each of these collaterals.

Anna Rose (01:02:27):
Very cool. I wanna say a big, thank you to both of you for coming on the show, sharing with us a little backstory on UST, also what you've both been up to and your respective projects and the IST slash, inter stable token, slash inter IST, whatever we're gonna call it. Upcoming token, I guess this comes out with mainnet one phase one, right? The one you were saying would happen potentially in Q3. So it's something to look for, I guess. Cool.

Dean Tribble (01:02:55):
And we'll be back after that launches.

Anna Rose (01:02:57):
Yeah, sure. All right. Thanks guys. Thanks for being on.

Dean Tribble (01:03:01):
Thank you so much for having us and as, as always. It's great.

Zaki Manian (01:03:05):
Thank you, Anna.

Anna Rose (01:03:07):
I wanna say big, thank you to the team that put together the ZK podcast. That's Tanya, Rachel, Chris, and Henrik, and to our listeners. Thanks for listening.