We were expecting to maybe get the same amount of value because obviously the file had a really big peak, but what happened more recently is that it got a lot of more traction. There is somewhere between I think 1313 above billion worth of value locked over the past years. The stakes are growing in terms of what we're actually having in D5 in terms of value, how much we have to secure and also how incredibly well the space is growing still being very small.
The reason Go exists today is is because all they had from time to time liquidity crunches to avoid this crunches, we could actually have a protocol owned stable coin that could be minted into these pools for users to borrow against. But what's important here is this liquidity premium is actually and pricing the liquidity is the answer to these types of situations that happen incur because.
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Today we're speaking with Stani Kulichov, who is the founder and CEO at Avi Labs and Avara. We'll be diving deep into the recent Avi Before proposal and what that means for the protocol and also talking about Defy and the future of decentralized finance in general. Cool. Stani, thank you so much for coming on again. I mean, I had to like talking to you 2 legends. It's it's, it's always a pleasure. Thank you. So we're here to talk about Ava
V4 today. There has been a number of proposals that just very recently passed. Before we dive into that, can you maybe walk us quickly through the evolution of Ava V1 through three? Well, yeah, it's it's definitely been really, really out saving long journey. So as some of the listeners might, might know, and I started building decentralized finance in 2017, two 1016 already kind of like thinking of ideas and what to build and, and what's important for the ecosystem as
a, as a product. And, and what came out of that was, was a project called Eastland shared for Ethereum lending. And I had this idea that if you can actually swap assets on chain, you could also use those assets as a collateral and borrow against as well and also earn yields. The way I started was more of like a peer-to-peer setup in a market because mainly a lot of these assets were very low liquid and there wasn't this a
concept of pulling yet. But later with, with Unisfop and a lot of the innovation, pulling assets became a more of a common thing. And we iterated into all the protocol, which is essentially a a pooled model where you can get liquidity, access to liquidity right away and then use whatever you supply as a collateral to draw basically borrow any other asset. And the difference between what
you pay for supplying. So you receive as an interest as a supplying and pay for borrowing than it is your different cost difference cost there. And looking at each deployment we had, I guess it land was more of experimentation. I was still studying in university. I've I've been, I've been builder for quite a long time. I built Fintech and various web applications back in the Ruby and Rails and Web two era.
And I think of the protocol was something that evolved as a kind of like a ideal way of of actually gaining on chain liquidity. And when we launched, I, I think our expectation was that maybe the protocol will have 10 or 20 million worth of value in the smart contracts. And with based on like the TVL mimetic metric of value lot in and ended up ended up having several 100 millions.
And by the V2, our goal it was to basically create a better protocol and being more capital efficient, more risk management tooling. And that ended up being what we expected to have maybe few 100 million became a protocol that had few billion worth of value. And then V3, which is our most recent development of the other protocol from other labs, we were expecting to maybe get the same amount of value because obviously D5 had a really big peak.
But what happened more recently is that it got a lot of more traction again and we have all these different network deployments that the community developers are deploying now. They is now over 13 different markets. There is somewhere between I think 1313 above billion worth
of value logged. So it just showcases kind of like how over the past years the stakes are growing in terms of what we're actually having in D5 in terms of value, how much we have to secure and also how incredibly well the space is growing, still being very small, but still exciting to see how things have been evolved. And that's basically where we are now. And the V4 is something that where we want to build a lasting protocol, which should be the
last like a major iteration. But I give you a little bit of warning because every time we are building a new iteration, we think it's final and we don't need to do much changes. A year goes past or two and we're still, you know, finding things that we can do better, new innovation. And it feels like whenever we say this, we still have some work to do in the future. Stani, you and everyone else, I think this has happened. This is what happens to our
bidders. So let's quickly just say on V3 before we keep dive into kind of what you're planning for the future. So you guys have a stable coin called Go that works similarly to makers die. There was recently an escalation between maker and Ave. regarding the use of certain collateral. Can you quickly walk us through what happened and why it escalated?
No, it's an interesting topic because what happened factually is that from the maker community, there was an initiative to to actually use ethinos EUSD, which is essentially kind of like on chain yield fund where the collateral is in this different centralized exchanges and you're capturing the the yield of that, that type of activity. That's the the staple core had in the underlying model.
Now the model is very interesting and the project is extremely interesting and got a lot of traction, but obviously it's still very new. And what we saw from maker is that there was this initiative to actually meant a lot of dye against this collateral, which basically meant to the extent of couple of billions of words over the short time horizon.
So this is kind of like interesting because from all the protocols perspective in the Abbey DAO and risk manager perspective, holistically the the the Abbey DAO and risk management has to go and is seen through asset by asset perspective and risk parameter perspective. So this changed the risk profiling of make it out, but also specifically die with this initiative.
So it's it was a question of the conservative die as A and and maker as a system is basically taking more opportunistic approaches and that risk should be repriced. And there was a lot of discussions in the Aberdau how to reprice this risk and also signal of change of risk profile within the, the protocol and, and, and greater D5 community. And that was essentially like what, what was it all about?
And I think that they, they, the actual question is that's the, the, the underlying collateral itself could be and make it some extent that the way it's for example, to some extent in as of today, you know, the V3, but it's a question of magnitude and risk profiling as well. So that's the kind of series of events that that happened. So makers deployments are actually just deployments of the other V3 contracts, right.
So kind of do you think the difference between Maker and and Abe at this point is kind of just risk appetite in, in terms of underlying collateral or where, where do you see the differences? Yeah. I mean, the tech that we usually build, build from the other labs perspective and and the tech IC in wider of a community, it's
very innovation driven. So even things like go, the underlying technology, go stability module and compared to what exists today out there, we usually don't fork directly code what we do, we actually figure out things that are could be improved and and innovate on on top of the existing status quo. So do you think that they vary different type of technological risks and over time they mature, especially more air pairs, pairs come so kind of like the the last bastion of risk.
And I think this just doesn't apply specifically only to Abe and and maker, but in general, the whole DFI ecosystem is is is the risk management on the underlying assets. So what is actually backing all that activity, all those borrowings or or mints of go or or die and and So what is the kind of like a last standing collateral there?
And I do think that makers risk profile has changed since if you go back in for example, in a couple of years, obviously T3 MA module where you can printmaker into different protocols that existed quite a while and that's been very useful for the Abe protocol as well. But essentially, what with the, the way to think about these two different protocols is there's two different risk management communities that are seeing risk
differently. And this is important because previously, you know, everyone was relying upon dye and, and maker and there was so much vested interest because it was one of the main projects on Etherium in D5, the main state
decentralized stable coin. And now there's options and, and I think this optionality is really important because it allows the the avenue risk management community to decide what direction to to take go for example, and monitor as well what direction the maker community takes die and reflect
towards. Yeah, I mean, at the end of the day it's all about communities and how decentralized governance decides about what risk parameters, you know the community wants to accept for in this case the the collateral types on their protocol. Yeah, let's let's talk about V4. I think this is quite an ambitious proposal to move as you said towards, you know, what might be the final version of of Ave. I I have doubts about that. I think they'll be further versions and and possibly more
innovation. But we have what inspired this, this development of V4 and can you maybe just give us an overview of some of the main things that Avidi 4 innovates on with regards to like V3? Yeah. I think 2 important, I would say categories of of innovation pretty much is consistent with with all of these other protocol releases. There's a focus on risk management and, and the tools that protocol enables regarding risk management. And the 2nd is capital
efficiency. Yeah, and, and also in before we have these two categories as well that we focus quite a lot. And a lot of these features are actually improvements of existing way of managing risks, bringing more flexibility as well bringing more capital efficiency. But there's two additional categories and and one of them is actually related to both risk and capital efficiency, which is
a pricing component. So for example, given the way the other market is, is built, it's actually built in a really user friendly way. So users can come in supply different kinds of cryptographic assets that are eligible and then pull the liquidity that they need. So effectively, you can utilize pretty much your portfolio on whatever you need to, to borrow, can repay. It's really flexible. The, the, the experience there is relatively simple, but also intuitive.
And you don't need to go to separate markets and, and kind of like, you know, put it into another place, put like, let's say another asset, let's say of it to another place and, and then borrow from here and here and monitor all these positions and, and, and manage them, right. So, so that's kind of like a one part of it.
So because you can do this all this activity in one same market, it also means that whenever you supply a particular asset that is yielding, so let's say you supply USDC, it also means that you're earning based on what users are borrowing that
asset out. And it creates an interesting scenario for the users because it means that USDC is priced across the protocol in a, in a one, I'll say price regardless what is the user's risk positions, how much they're adding risk, whether they they're not adding that much of A risk. And we wanted to change that. So we wanted to change the pricing in a way that it reflects how much risks these users are actually bringing into the protocol. Yeah.
And that's the new category. And another category is the governance overhead. So the way we are thinking about the whole protocol, the architecture, it's more modularized. It, it means that you can fix different parts without actually needing to upgrade the whole protocol, the code base, it gives a lot of flexibility there. But in this category, we also want to minimize the governance overhead.
So how we actually can create let's say liquidity layers that are immutable or we can create different kinds of parameters that are immutable or time based where they only affect from from the moment proposal gets into execution and new positions as as an example. So these are the kind of things and I think a lot of these new categories are really optimizing the existing really good product and and also removing the overhead of governance, which basically means maturing.
The protocol is getting more matured and the technology is getting more matured and reflecting to that. Right. And I noticed you didn't mention the the unified liquidity layer. I think this is actually one of the most interesting aspects of B4 is pooling liquidity from all of the different markets that Ave. is present in. This is an interesting and probability challenge I think that you guys have solved with this this Portals product that
you released some time ago. What are the main architectural challenges and and maybe changes from V3 that folks will notice in V4 with this new unified the query layer and maybe we can then get into what the unified the query layer actually offers users. On a high level, without going too much into technical specific specification, I think one of the challenges is that the other version three is a little bit built in a more like a monolithic model.
Meaning it all the main kind of like a ingredients of the protocol are very interconnected. And if you have significant changes that you want to change, for example the borrowing logic, maybe you have changes regarding to you know, a liquidation model. You will have to go kind of like into the core protocol layer and make those changes and upgrade a a code base that might be affecting 12 to 14 billion worth of value in a smart contract
upgrade. Now we haven't seen those type of upgrades that many at at this level, but a stakes are going high and more value sloped in, in these protocols. That is something what where we have to mitigate also risk and and the way we think about unified liquidity layer and also this new modularized architecture is is that the unified liquidity layer is is a way to capture liquidity into one specific like a pool or layer and everything else can be
connected to that liquidity. So that's ranges from for example, a borough modules that might differentiate amongst each other, updating the borrowed logic. It can be a changes to a liquidation engine, different kinds of modules that might affect might be also like a portal module that manages the main thing and burning a tokens between different networks for like a cross chain type of a use
case. And I think this is the fundamentally different difference between what we're doing in the V4 and previous versions. So what we want to actually create is that as a, for example, community developer, you can work on a specific module, improve that specific module, or create a new module. And by governance process, it can be plugged into the architecture as well. And you can this way iterate
faster. So you can change this different modules without actually affecting the whole core pool logic. And this also means that this allows institutions and other entities even create their own liquidity layers and somehow manage them as well. And this brings a interesting new opportunity for institutions, for example, to to create something on towards
their own use cases. Maybe let's go into detail as to how the unified liquidity layer handles risk profile of assets across different chains in the market. You you were talking about risk earlier and how we risk boring and sorry, how you price boring and lending on different assets.
Does the unified liquidity layer sort of create a like a single price for an asset across all these different markets, or is there a way for users to specify and target certain types of assets that you know may get them a better rate or like a worse off rate depending on what chains those are on?
So unified liquidity layer, what's amazing about it, it's, it's simply a, it's simply a place to store value the, the actual liquidity and, and the accounting of that liquidity that who and which users it belongs to. And also there's a connecting points into these different modules. So it's, it's as simple as that.
And you can also register your liquidity into a liquidity layer without actually supplying it and keeping it, for example, in a Gnosis safe as an example, which means that you won't be able to lend out your funds, but you will be able to borrow against. And it's something that is an interesting feature from institutional perspective or mitigating that type of lending risk.
But essentially all these other modules, for example, what is the interest rate curves, what are pricing mechanisms and everything else it's is outside of the unified liquidity layer. And they can exist obviously between different networks. And to give more details about what, what what you mentioned said about the, the pricing. So we have this new feature
called liquidity premiums. And the way it works is that with liquidity premiums US with your position, it's priced the, the, the asset that you're borrowing is priced with the position that you create. So we can take an example where you create a position where you supply only it and you borrow
USDC. So for example, today you will be paying a certain price for USDC, but also a a person that is supplying, let's say, more riskier assets that are eligible in the protocol and borrowing USDC, they're paying the same price. So I don't know if you remember there was over a year ago this scenario with CRV where basically the Curve founder had a big position in in all of it. And, and basically the Dow started to off board the collateral by mitigating the loan to value ratios,
liquidation thresholds. And effectively the the founder went to other protocols with which later today, as of as of today, recently suffered actually bad debt because they they took those positions to their protocols. But what's important here is this liquidity premium is actually and pricing the liquidity is the answer to these types of situations that happen incur.
Because what you can do if, if a position is borrowing the same USDC and they're providing more risk or the market conditions, dynamic market conditions changed significantly, we can add a liquidity premium much more higher. So basically even if you keep the position in the protocol, you're paying more to the protocol into the Dow for that position. And then it's up to the user to to take that additional cost or living out of the protocol.
But this also means that actually if you're just supplying eats and you have the most leanest collateral, you're effectively paying much lower rate than the average because you are essentially having the the the leanest position within the same market. And architecture wise, we are not segregating these pools from each other, but it's still in
the same market. And I think that's the beauty of it is that you can do all this activity on the same market, but we have a way to price the user's position based on how much they're providing risk into the protocol and whether there's sufficient reward for the protocol. How does this pricing work? Is it algorithmic or is it something that you kind of need an underwriter function for?
Technically speaking, it's essentially just a delegation on the contract, which means that it can be a fixed logic. And that can mean, for example, certain asset could have a certain parameter which is the risk premium parameter. And I think that's the way to start in the first iteration.
But of course, because we have this amazing module architecture it it also means that that type of pricing module could be changed to something or asset specifically change for example, that reflects actual market conditions. So for example, if an asset decreases in liquidity that could automatically increase the the premium.
And this is the beautiful thing about it is that you mitigate so much of the governance overhead of actually managing these parameters where they could actually be automatized between certain specific accepted range. How do you think the liquidity layer will benefit GO? So kind of if you look at the Go market cap today, it's about a third or so of the die market cap. Do you think it stands to benefit from from this unified liquidity?
Yeah, I think Go is quite interesting because and Go as a kind of like a, as a, as AI would say like infrastructure within our ecosystem is, is really fascinating. So when we think about Go internal and, and, and the benefits, the the reason Go exists today is, is because all they had from time to time liquidity crunches.
And there was an idea that we had that to avoid this crunches, we could actually have a protocol owned stable coin that could be minted into these pools for uses to borrow against to avoid the liquidity crunches. And while we were thinking of this idea, we realized that actually one of the benefits of of Go is and compared to make it out die back in the days is that when you supply your assets to other protocol, you earn on the collateral while you're borrowing Go.
So you have this kind of like a capital efficient stable coin. And on the other, other protocols perspective, it also brings to the users predictability on their interest rates, which is a great feature especially when all the markets are on variable rate basis. And when we look from the other protocol perspective, what's the benefit of of Go? It's quite exciting to look at it because Go doesn't have LP's to at the moment you don't supply into the other market Go.
It will change in the future with Crosschango first in arbitrary and Dandelion also will be available in in mainnet. But because Go doesn't have these LP's, it means that the reserve factor which is the way to collect Orbitdao revenue from the protocol, it's actually 100 instead of like 10 that is in USDC. So just to give you a magnitude of the revenue, 100 million fourth of GO minted brings equal amount of revenue to the Orbitdao as 1 billion USDC.
And that's remarkable because that revenue then cascades into building and innovating more on the community side and on the technical stack and also figuring out different ways to to reward users. And in the view for perspective, obviously with with liquidity layers, there can be different facilitators that meant directly go on onto these liquidity layers that can be then borrowed out.
But we have in V4, we have basically multiple features that kind of like make the Go integration more seamless with the protocol. You have Go soft liquidations, which is kind of a feature that the CRVUSD pioneered. So basically you can soft liquidate your positions and go and and vice versa. You can get paid interest, for example, in Go on any asset that you have that can be done directly under the hood on the on the protocol.
And there's a couple of like technical improvements, but before will bring the integration between Go and the other protocol more kind of like titling it together I. Wanted to ask also about the, the, how does changes the UX or how does it improve UX for Avi users? So like maybe walk us through an example here.
Like hypothetically you have a user who's on Polygon and has collateral on East L1 and, and they want to borrow against that collateral on Polygon on, on the Avenue market on Polygon or at least on the Polygon chain. How does that work for the user? And like in the background, what's happening to those assets? Where are they being sort of locked? And more importantly, maybe like
who's paying for the gas fees? Because we haven't talked about this, but the the orchestration of the unified liquidity layer, I believe is still happening on on Ethereum mainnet. So maybe just describing like that user flow and what's happening in the background there? Yeah, and I can. It's also like a the kind of like subsequent iteration of the unified liquidity layer, which is the cross chain version of the liquidity layer with the
portals. And what is effectively means is that the the of it as a protocol can actually move liquidity between these different deployments and that can be iterated to cross chain positions effectively. You could you could technically then keep your collateral for example, one Etherium mainnet for example, eat and then you can draw, for example, go on another network. Portals is just a a simple feature of minting and and burning unpacked a tokens that then are subsequently backed
right away. And they kind of like a key component of this feature is having caps of how much you can actually do that and, and what's the purpose? So the, the original idea of the portals was actually to allow third parties to come and get some sort of credit line up to certain points to be able to, to, to use portals. It it's a tool for, for bridging as well. We see the idea for for portals also kind of like an, I'd say a way to move liquidity very fast between networks.
I personally believe that maybe most of the users will, they might have their liquidity in one specific network, but you will have users that are operating in, in, in multiple networks and it's going to be very useful. But for from like from for me, like the the the most exciting actually UX part of of the whole before and and this works with with the portals and unified liquidity layer is the aspect of
the waltz and smart accounts. And, and it simply means that, for example, if, if you want to supply liquidity, but you don't want to supply the assets into the liquidity layer for some particular reason. One, you don't want to, to get the funds lended out to, you want to see the collateral segregated from the other parts. And then you want to keep it a three, you want to see it in your, let's say, smart account.
So what, what we are essentially doing is that you can see your, you can, you can register your collateral in the protocol, but you don't need to supply it. So you can keep it in your knows it's safe and then you can draw the liquidity against it. And, and obviously this is like a really interesting thing because you, you don't really need to put your assets into the to the protocol and you can keep them segregated. And this is also opens up some interesting institutional use
cases as well. You can provide some asset station to avenue that the liquidity is in a contract. It might be locked there that that liquidity is that the the position is backed by something even though it's not in a pool on the protocol. Yeah, exactly. So that's the, the, the key difference. It's, it's mainly of kind of for, for some, some users, it feels more intuitive to see those assets in there, basically
smart accounts. And then you can still borrow without having to kind of like we don't see in your assets leave. And I think that's a interesting thing. And then obviously using smart, smart accounts itself is a big UX improvement because that enables things like for example, gas less and silence transactions and bunch of other interesting things that can be built upon that even further. Cool. Stanley, can you talk about the role of real world assets in our
V4? Yeah, there's, there's obviously the, the, the segregated world applies also to the real world asset type of A use case and could be very useful way. Maybe there's some sort of extension of like tokenization, tokenizing, storing in your own vault, borrowing against. What I'm excited quite a lot about the V4 is that it allows to have with this new V4 liquidation engine, it allows to
have liquidation strategies. So typically the way these protocols are lending protocols are built is that when when liquidation happen, there's certain rules for that. And and that might be, for example, you have a liquidation bonus that happens when a certain price range is hit and the liquidator keeps that portion. It might be Dutch auctions as an example.
But what liquidation strategies actually allow is that you can have a a different type of liquidation strategy depending what the asset is. And why this makes sense is that not all of these assets that will exist on chain will have the same liquidity profile or the same redemption time period or or profile as well for some most of the assets that are
listed today. Their redemption profile is really similar where you can go and swap the asset on a secondary exchange and replace it and and you you created a successful liquidation. The protocol is healthy, but in more kind of like a real world assets of chain assets.
They might be, for example, a time period of like 2 windows a day, once a day, every couple of days where an asset, for example, the underlying assets, you can redeem it liquidated, take the proceeds and return it to the protocol. So these type of liquidation strategies allows to onboard this type of assets where, for example, you have to, you have some sort of like a time component involved. And that's where I'm very excited about as well.
And of course, I combined that with the idea of segregated bolts. It's quite appealing for an institution to to consider using RV. Yeah, absolutely. So Maker Dao also has a very alive RWA offering. Can you, can you compare that to kind of what you will be offering? Yeah, I would say that most likely obviously depending on what direction the DAO chooses on the RDBA to proceed with. But I would say that there's going to be a lot of similar
profiling. But with the the with the aspect of liquidation strategies that extends to new type of use cases or things that for example didn't exist as a collateral. Because you know, let's say in institutional context, Bitcoin might be stuck somewhere in a custody for under 12 hour to 12 hours. So you can't liquidate right away. So those kind of scenarios.
So I would say that's what we're trying to achieve is that capturing the ability to technically support the existing use cases in RWA operations, but at the same time innovating to support anything that is new or assets that that they don't have yet a a similar support in from like technical perspective. So there's going to be a little bit of similarity, but hopefully we see also new exciting use cases with RW as with with the
before. And obviously Go by itself is really helpful because that's Go works in a way that there is this concept of facilitators that can be created to to mint go against some sort of strategy and that can be also real world assets that can be anything that fits the Dow's risk profiling.
Yeah, well, I mean, maybe. Taking a step back on RW as a little bit here, which asset classes do you think are most likely to really take off in the next like 12 months and which of those like you think will have a significant impact on Ave. markets? I would expect treasuries to keep growing and and see more initiatives to bring treasuries
on chain. I think there's a little bit of slight stagnation of the growth because of the yield on chain is higher than what Treasuries are providing at the moment. But it provides a really nice diversification for anyone that is holding a portfolio on chain, on chain yield portfolio, being able to earn on treasuries, but also diversify their yield sources and also risk profile. I think tokenization of money market funds is going to be also a growing aspect.
BlackRock has been doing pretty nice job there with the the middle tokenization and in a in a fund that they have. So I would expect that coming quite a lot. Centrifuge is is doing a great job on technician credit. I mean, they're O GS in the space and keep always iterating and and bringing new assets on chain. So I, I think those type of short term depth instruments are going to be quite popular for the next, I think 12 months. OK, Stani, let's change gears a little bit.
So you guys expanded on to a number of EVM networks with Arbor V3. In the Arbor V4 proposal, you guys actually talk about expanding to non EVM networks as well and kind of introducing a central hub for accessing Arbor and Go. I think the rationale why you guys want to do this, that's pretty clear to me. But can you talk about how you think you're going to achieve
this? Yeah. So the way I think about it is that we'll see a lot of L twos where they're growing their own ecosystem and need a financial layer. And when you use a financial layer, you need the usual suspects, obviously on the D5 side for for actually the technology infrastructure execution in terms of ongoing support, but mainly of being able to create a financial layer that supports whatever the use
cases are on those networks. The way I think about these L twos and EVMS and non EVMEVMS is that they're kind of like they're they're all their own cities or like countries or operations and a lot of cities. They actually need banks, financial infrastructure and to support everything they have in their economy. And that has been the case with
Ave. so far. And we have community developers that been able to deploy across multiple networks with these EDM deployments, which have been like a really big expansion. I mean, Ave. is is leading in, for example, in in base, which is now focusing more and more defy and it's amazing to see there also Coinbase bringing like more and more of like their business or thinking at least towards an on chain feature to
some extent. The way I think about non EV Ms. is that it's kind of expansion, but obviously you have a different tech stack. So which is good and and which is also like creates complexity. So good parts is that there might be things that are helpful for let's say D5 from security standpoint for code implementation, but it's also a new language, a new implementation that requires a
lot of effort. And the way we think about expansion is that we can go so far with Ed Miss, but there's big communities around these deployments where which which which exist in the non EDM ecosystems. Obviously that means running codes from scratch. And I think that's the way to think about it. So we just have to think these implementations we we have now are in EDM implementation and how to get it into a non EDM
implementation. And it's obviously it's not as easy as copying, pasting, it's actually a work of trying to figure out how to build in a completely new environment with a new language and whether to make that type of effort in the 1st place. But I do think that's it's really important to kind of like keep these options open and treat non EDM ecosystem also as users that are coming into space. And then obviously that bridges into the wider of a ecosystem which direction to actually go.
There's also discussion whether obvious should be an L bond because just in the matter of like DVL, there is, I personally think that there is argumentation behind of that. But I do think that obvious roots are on Ethereum and being able to support the Ethereum ecosystem, have Ethereum alignment is beneficial for for the Ave. protocol in the Orve Tao. But there should be bridging towards these newer communities that are also focusing on
onboarding newcomers. And we just want to win in the sense that we get to see more of blockchain implemented into more mainstream and seeing more users. And I think that's how we think. But yeah, the hardest part is actually fighting the code and ensuring it's safe. Yeah, there's a, there's a lot I'd like to unpack there first, maybe which ecosystems are are you guys like looking at as potentially being your, your first steps outside of the EVM ecosystem? We've looked quite a lot into
move based ecosystems and trust. So those are the the kind of like a main areas and obviously that's where our head is at at the moment. So it's actually where and I think it's a lot where the future is going towards in, in some sort of process direction. And we want to also ensure that we have enough know how on trust, whether it's an implementation or some sort of back end services we build and kind of like a have that approach as well.
But yeah, I think there's going to be more information about concrete plans of how we think about the expansion to no need VMS. Right. So it sounds like it it's, it's not simply just a kind of copy paste deployment, but there's more thoughtful consideration as to, you know, the specificities of those VMS because I mean on like on movement, for example, movement does have like an EVM interpreter that it converts down to move into the move op
codes. You guys are thinking about actually rewriting the contracts in the native languages and maybe making use of some of the unique features there on those block chains? I think so, because the the interesting part is that all these non EV Ms., they, they decide to build non EV Ms. also because they have some sort of concrete direction they want to take and they want to focus on some sort of kind of like propeller in their ecosystem.
For some it might be for example, being able to get low cost on transactioning. Some might be for example parallelization of transactions. Some might be that they have benefits already of charting. Some might be just basically certain type of activity in their ecosystem that is basically tailored for somehow more consumer or mainstream.
I do think that Rust based and mood based approaches are interesting and it provides really interesting tooling as well from how to think about the actual implementations from a
security standpoint. So they all offer a little bit their own peculiarities and it brings also a lot of complexity at the same time, because we have to think from a complete new perspective of these implementations, specularities of the the non AVM and environments and, and the changes we have to do. And all they isn't really the most simplest protocol. It's really quite an architecture and and and and and it's a lot of work.
Yeah. No, I, I can, I can see how that would be a lot of work to, to rewrite all those contracts and, and roster move or some of the language coming back to this, you know, the, the sovereignty topic. I'm really quite curious to understand how you're thinking about this here, because Ave. has become one of the largest protocols in Etherium, largest lending protocol by far in, in
all of crypto. Yet, you know, the cost of using Etherium for for users and, and the the sort of, you know, challenges that you guys need to deal with regards to MEV and and and other issues that come with using a generalized purpose
chain. You know, could easily be solved by building your own chain, which would allow you to have specific policies around how you capture every VE doing things like on chain Oracle's and like all these other kind of support functions that evaluators that provides. You know, DYDX went down this this this path. I don't know what the kind of status of the maker chain idea or I know at some point they had discussed maybe doing the maker
chain. So like, yeah, just maybe getting your thoughts on like how you think about sovereignty for Ave. and like what that means, you know, as as being sort of a theorem aligned what that means for the protocol.
Yeah, obviously I think Ave. as a community is always kind of like more towards of a line and doing whatever is best for the of a community and and the the future of this protocol and its principles obviously like creating more access to finance transparency and and just better execution. And I do think that's if there is of a network which is in in the plans. And the question is whether that is what kind of file to what kind of differences.
It really creates an amazing design space because I do think that assets should actually yield how wherever users are holding them. So users can subscribe to certain type of phrase score choose not to. And being able to have a have a network, it actually means that there are a lot of benefits where the network can be tweak and adjust it towards being very driven by D Defi behavior and
transactioning. And I think that's a really powerful thing to do. I I do think that whatever the orbit out chooses in terms of like an implementation, I do think that even that design space should be as simplistic as
possible. And just to prove what actually AD 5 specific of a network as a liquidity hub can actually do and benefit for the users, especially the newcomers that don't really mind or care about it specifically what network they are, but wants to tap into a good brand and A and a good product. And with the cross chain liquidity layer benefit from all these movements between deployments of Arbeit across different networks.
So what I think is going to be fascinating is to figure out that delta and design space that is going to be really powerful for the ABA users and the whole ecosystem here. And I think there's a lot of benefits that could be created within our ABA network. So zooming out, when you think about D file or open file and so however we'll call it then in the 2030, what will that look like and how will others role look like within that ecosystem? Yeah, I would say that's, it's a
great question. I think the idea of the ARBE 2030 proposal, which essentially includes a completely new brand identity, you know, taking ARBE into a more kind of like approachable fresh look with the V4, bringing new innovation, bringing a lot of flexibility, module architecture, pace, not only a good way to build iterations, but also support institutions as well coming into the space.
And I think that's what's going to happen over the next years and obviously of a net for bringing efficiency and to the whole kind of like organization of capital and TBL across these networks with cross chain liquidity layer. I think just looking the upcoming years, we have to have infrastructure that is actually really, really ready for
adoption. And, and I'm thinking about mainstream adoption, institutional adoption and being just a infrastructure that can be used in many different ways with all the, with all the Dow or whatever that particular use case is. So I I think that the idea here is that DFI is definitely, you know, better way to organize finance and financial infrastructure, but it will take a decade to actually mature because it just needs that
maturity to scale. And then thinking about the overlaps role, we want to build the things that we, we, we think are necessary. The overdow is growing. There's more contributors there, technically technical and non-technical contributors. It's probably most interesting Dallas out there at the moment all the way from from the early D 5 days. So effectively, hopefully the other labs kind of like moves more towards other types of initiatives that might be supportive for the Dow or the
other ecosystem. But the actual technical architecture is solved to the point that if there is any changes in the future that needs to be made, they can be done very locally without upgrading the whole system. I think a lot of inspiration of, of the Linux ecosystem, kind of like whole way of how things work in Linux Foundation and how different people can work on different parts and being able
to kind of achieve that. Where student team can focus on optimizing liquidation strategies, certain teams can be focusing on improving borough modules and and so forth. I, I think that's the kind of like a big vision here and obviously governance minimization. To the extent that governance can be really much an overhead and I think when it becomes an overhead it, it removes the kind of design to to to people what we basically try to go away
from. And as of a matures, some of these parameters can be immutable dataline and reduce that governance overhead. So I think that's the kind of future I would love to see. How do you see the future of stablecoins evolve? I think it's a price point question. So they lower the price point the more adoption we see and also the UX tooling.
I actually think that's for stablecoins especially to get it, getting them into payments, a validio might be a really good option because you can hit a really low price point for the transaction costs, which is amazing. And with things like smart wallets kind of obstruction, embedded wallets, even you can, you can have an experience that is really smooth. Stable coins have taken adoption in places where there's a lot of uncertainty.
Argentina is a really great example where stable coins have taken adoption and there's numerous other examples in I mean, in general, they work better. Like it's so amazing to send someone go and, and then seeing it on chain directly that it the transaction landed. You don't need to deal with banks and figure out whether someone received whatever part of this. It's just that kind of like the middle where we're like the the ends, the, the, the the ends of the whole stock is, is where
it's broken. The off boarding on boarding. When once we solve that, I think we will see a lot of stable coin adoption and especially in. Payments. So when talking about adoption, you know, one thing that I think about is just the, the, the, the demographics or the, the kind of persona of crypto and DFI users. I think it's safe to say that the majority of liquidity in DFI markets today are crypto native
users and institutions. But we haven't, I don't think we've seen so much crypto native institutional capital using Defy. And I think that I feel like there's a lot of potential here for crypto institutional debt to enter Defy markets, specifically in the context of restaking where protocol on liquidity will be very useful to build out the the restaking kind of market, you know, when it comes to protocol on liquidity and creating a more fluid market for
for that liquidity. You know, a lot of those deal, a lot of these deals now are I think are being done kind of, you know, manually with multi Sags or perhaps even without multi sags. What's the role that lending markets like Ave. might play in allowing a lot more crypto native institutional capital to enter lending markets?
This is a really, really fascinating question because institutions usually have their own kind of fun needs and requirements, and we're still in a phase where the markets in D5 aren't clear or strong enough for institutions to draw more and more attention into it. And for me to explain what I am saying is that if D fight is overly appealing as a market and there is enough clarity, how do you track with D fighters
tooling and everything. It's basically that the insertion adoption will come just basically from from from as a market opportunity. And what I think is we're in a stage where institutions are describing kind of like their own preferences and needs and figuring out with their compliance teams and figuring out with their own kind of like teams of how to manage, you know, funds, custody risk and
various types of new risks. Because DFI is a leapfrog technology from existing financial technology that we have. It's just is so much advanced what we have and I do think that people will still do paper agreements, people will do a lot of simple boring stuff in closed doors of chain, but it's really creates a a unique kind of like
a global borderless market. So once we hit to a a point where we have more institutions doing this experimentations with their own kind of requirements in collaborating with D5 projects, like for example of it, maybe we see more and more excitement around the space and more education. But I do think that once we hit into a point where the risk profiling is acceptable and maturity is acceptable for institutions, we're just going to see more and more kind of
like an inflow. And obviously the more clear it is on how to interact from regulation perspective, from tooling perspective, that will help quite a lot. So now we are in between where we see the most bravest, the smartest in institutions, the big brains actually hear and defy and trying things out, building and experimenting. But we don't yet see actual this kind of like a high inflow. But I do think that will happen over time.
That's why I I mentioned earlier that it it will take a decade for Defy to get adoption. Well, as we're nearing the end of the podcast here, we've been we've gone a little bit long. I do want to just maybe circle back to this before proposal, which I think you mentioned earlier is has passed and that that the payload will be going on chain as we're recording this on on July 1st. What's the next steps here and how can the Avenue community get involved?
And yeah, what what's your call to action to to the community? Yeah. So we are essentially building at the moment. So our work has started and our goal is obviously to to give ongoing monthly reports to the to the ABBA Dow and and explain the progress. And we collaborate quite a lot with existing Dow participants and and service providers interest brainstorming and and
different areas. So I do think naturally organically some of these service providers or Dow members will going to contribute to the V4. And obviously once the actual implementation is done, the security contributors we're going to contribute and then the risk contributors will contribute as well.
Whereas they have to set different type of parameters, a lot of these different strategies as well and kind of like the the economical pieces together and get ratifications from the Dow. So yeah, it's kind of like a heads down type of face for us, but we're super excited about this because hopefully this moves all the further in terms of innovation, institutional adoption, but also brings just better, better tools and infrastructure for for everyone
using D5. So we're super, super excited about this and also nice to see that the orbit out has a lot of blessing for us on on this proposal and we're able to do this and and build it. So it's really appreciated. Cool. Well, Sonny, thanks so much for coming on the podcast once again and learned a lot today about Ave. V4. Excited to see Ave. moving more into a cross chain, multi chain world and and definitely like pushing the boundaries of of
defy innovation. So, yeah, thanks once again and hopefully we can get you back on in a couple of months when Ave. V4 is deployed and you know, we'll have ample questions I think about about the progress there. Yeah, definitely. Maybe takes more than a couple of months, but hopefully we have a test net by then. No pressure for us. Good, fantastic. Thank you. Thank you for joining us on this week's episode. We release new episodes every
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