EthCC #5 | "The Cosmos (ATOM) Thesis" - Sunny Aggarwal

🇫🇷 Welcome to the Bankless EthCC 2022 Experience 🇫🇷 With fantastic guests from all corners of the ecosystem, this 8-part series is an exploration of crypto culture and the current state of Ethereum. In episode 5, Sunny Aggarwal joins us from the Cosmos ecosystem, and gives the high level on one of the more compelling theses in the crypto space. ------ 📣Rhino. Fi | Massive Mystery Airdrop https://bit.ly/3o9trRE ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 🚀ROCKET POOL | ETH STAKING https://bankless.cc/RocketPool ⚖️ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum ❎ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🦁BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave 🌴MAKER DAO | DECENTRALIZED LENDING https://bankless.cc/MakerDAO 🔐LEDGER | SECURE STAKING https://bankless.cc/Ledger ------ Topics Covered: 0:00 Intro 2:30 Sunny and EthCC 4:00 The Cosmos Vision 7:50 Horizontal vs Vertical 11:50 Acceleration Strategies 14:40 Ethereum Cosmos Overlap ----- Resources: Sunny on Twitter: https://twitter.com/sunnya97 ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:03David Hoffman?

  Welcome Bankless Nation back to the ETH CC Experience episodes. On this episode, we're bringing in Sonny Aggarwal from the Cosmos ecosystem. Did a fantastic talk at ECC about Cosmos if you want to dive down more. Sonny is as bullish on Cosmos as I am on Ethereum, which means to say that he is quite bullish. But his vision for Cosmos is a little bit antagonistic to Ethereum. And you can get a little bit of sense for that in his talk at ECC. But I am very interested in the Cosmos ecosystem, which of all crypto theses that's out there, I think that's one does actually hold weight, which is rare to find in the crypto world. Sonny has been around for a very long time. He's been very committed to this vision. And so I just pick his brain on the Cosmos thesis and how ECC always has this Cosmos presence.

• 0:46David Hoffman?

  So I hope you enjoy this in-person episode with Sonny Aggarwal. We usually do our full pre-recorded ads for these podcasts, but instead I'm just going to speed run through them right now. And we're going to start with Rocketpool. Rocketpool is Ethereum's decentralized validator network where you deposit ETH and you get our ETH in return. And you can take that our ETH into DeFi. And if you run a node, you let other people deposit their ETH into your node and you get to charge them 15% for staking rewards as payment for your node operating services. And then you can take that our ETH and use the ACROSS bridge to join over $2.3 billion in the Arbitrum ecosystem. ACROSS, of course, is the fastest, cheapest and most secure cross-chain bridge and one of the safest ways to bridge your hard-earned assets in the world of crypto. And of course, Arbitrum is where you want to be.

• 1:30David Hoffman?

  With over 35,000 contracts and 1 million unique addresses, Arbitrum is leading the way into the age of rollups. You know how I know these numbers? Because I watched Arbitrum's talk at ECC, which you should also go watch, but not before you're done watching this. But when you do watch that video, make sure it's on a privacy-first browser, which is why you should be using Brave. It blocks all the browser ads, it's got a native Web3 wallet, and it puts the user first the Web3 way. You know what else puts the user first? Ledger hardware wallets and the Ledger Live ecosystem. I know Ledger is a great product because I have literally nine of them and I have 99% of my crypto assets on my Ledger wallets. And the Ledger Live ecosystem is all you really need when it comes to living a bankless life such as Buying with fiat, swapping and staking.

• 2:12David Hoffman?

  But for the rest of you that are sitting on stablecoins because the market is scary right now, make sure you're using a decentralized bankless stablecoin. May I suggest DAI from Maker DAO, the most tried and tested stablecoin in existence. But with Maker, you don't have to hide your stables on the Ethereum Layer 1. Maker is building DAI portals, so you can mint DAI natively across all the Layer 2s. So you can make sure that your assets don't go down another 90%, but you still get to go do all the DeFi things across the L2 verse. And so I hope you use all of these sponsors on your quest for going bankless. And now I bring you my in-person conversation with Sonny Algarold. All right, Sonny, hey, we're in ETC at Paris. You've been to a few of these before. Are you excited?

• 2:51Speaker 01

  Yeah, I think this is my fourth one. I think ETC is always my favorite conference of the year.

• 2:55David Hoffman?

  Yeah, four out of five. Wow, that's almost all of them. Why?

• 2:58Speaker 01

  I missed the COVID one.

• 3:00David Hoffman?

  You missed the COVID one. That's a good one to miss.

• 3:02Speaker 01

  My parents were like telling me that like, hey, don't, you know, you shouldn't go. This is COVID thing. I'm like, no, no, it's all in like Italy. Nothing is happening in Paris. And then like, they like convinced me to skip it and then like half the people got it. So I'm like, okay, that was good.

• 3:15David Hoffman?

  What about ETC? Do you like so much?

• 3:17Speaker 01

  Um, I don't know. It just feels like way more community oriented and stuff like, you know, DevCon is cool and stuff, but it feels a little bit institutional-y. If the EF is an institution, I don't know, but like this just feels like the energy here is just very different. I also really liked the old venue. I don't know if you, if you were at the early ones, but they had this like huge courtyard and like, there was always for some reason right around ETC, there was always like governance drama that used to happen the first two times and like, you know, there's always this like, it felt like we were in this like big courtyard, you know, like the, the Agora. And we're all just like talking and arguing about governance. It always felt really cool to me.

• 3:58David Hoffman?

  So I've noticed definitely a trend of like just more and more Cosmos stuff going around in both like people's minds, but also in development. Overall, like how would you, and Cosmos, obviously like kind of in my mind, the Ethereum's like other half, like the, where I've been, I've been told that like, and I'm trying to learn a little bit more about this myself, is that like the long-term conclusion of Ethereum and Cosmos is like super, super similar. So maybe for the Ben Close listeners that, I mean, they mostly hear about Ethereum stuff. Can you kind of give them like the high level rundown on Cosmos and like overall where you, where the Cosmos ecosystem is currently?

• 4:34Speaker 01

  Yeah, sure. So Cosmos sort of is this idea that the future is application-specific blockchains and that the, a single chain is not gonna, you know, be it. And like, I, I think every sort of blockchain ecosystem is coming around to that, right? Like, you know, Ethereum has also shifted more towards this more roll-up centric view on Avalanche, you have Subnet. Maybe Solana is maybe the only stickler right now who still thinks that a single chain could work. Um, but I think one of the views is that like, what makes it a little bit different still than like maybe the roll-up view is today, at least for now, they're all the roll-ups are very much like generalized EVMs.

• 5:17Speaker 01

  And you just have like the sort of same internal ecosystems that they're still relatively isolated. Like optimism and arbitrage are like, yes, they share a security from the same system, but like they're not, I wouldn't really consider them the same ecosystem. Like the ability to interact between them is not, arguably is more, is less seamless than like, you know, maybe between other L1s, because just because of some of the latencies on the bridges.

• 5:43Speaker 01

  What the view of Cosmos is that like, hey, instead of having these like generalized VMs and have like, you know, sushi swap go redeploy on every single spot, it's like, no, we're gonna build one chain that, so Osmosis, which is what I build, it's a Dex app chain. And so it's like, you know, we're not deploying Osmosis on every chain. We build one app chain that connects to everything else, but then we put all of our liquidity and so we, we concentrate our liquidity in one place. We concentrate our UX flows in one place and then use these like bridges. Uh, IBC, which is this like very trustless bridging system that's based off of light client proofs whenever possible. And then whenever not, then we use more traditional bridges as well.

• 6:26Speaker 01

  But that, and then when you have your own app chain, you kind of get a lot more flexibility to do things you couldn't when you're building. On, you know, I call it building on someone else's chain, right? Like you're kind of stuck with the design constraints that they're that they they laid out for you. And basically, we're seeing this big shift right now where a lot of applications are choosing to move into like their own app chain. So, you know, the one I've caught a lot of headlines was D Y D X. They wanted a lot of customizability about around like, how they do their, because they, what they're doing is they're running an order book in the mem pool and only submitting settled trades on chain. That's like,

• 7:06Speaker 01

  a really cool architectural architectural design, but they needed to have their own custom chain to do that kind of thing. Um, another big one is just that, like, you know, you can keep, you know, uh, Anatoly had a good tweet a couple of weeks ago. He's like, the only value of L one tokens is the M E V that they can capture. And it's like, well, okay, as an application developer, why am I giving my product, the the value that my protocol is creating and giving it into someone else's uh token when instead that can be that M E V capture or that fee capture can be going to as protocol of revenue for uh, you know, our gap. So that's kind of the couple of the reasons we see the shift towards app chains.

• 7:50David Hoffman?

  So the the image that I have in my head is like, we have these generalized layer twos, which are large and flat, right? You can come like settle on them and like set up shop. Uh, but then on the application specific change, you have these like large verticals uh that are highly optimized for their one thing. Uh, and so we, this is, there's a spectrum here of like how flat and generalized you want to be versus like how vertical and specific you want to be.

• 8:12Speaker 01

  Yeah.

• 8:13David Hoffman?

  Do you think that like the long term conclusion of this multi chain world is that we find some balance in the middle of these two things? Or maybe we find more chains that are on the polar ends and less in the middle? Do you have an uh an attitude towards that?

• 8:24Speaker 01

  Yeah, I think most like, I think uh, generalized V M's are still going to be useful for like the more tail end use cases. So, you know, if I'm gonna, if I want to launch, um, I don't know, an N F T for something, right? I'm not gonna go spin up a whole chain just to launch my N F T, right? Maybe I'll go, maybe what will happen is you'll have a chains that are specialized for like N F T issuance. There's one in Cosmos called Stargate, so they can do cool stuff where like, you know, the validators are required to be running I P F S like, uh, uh. endpoints, but so that and like pinning data and stuff. So like you can still have chains that are optimized for that use case. But like, yeah, so there'll be this like tail end of things that will like be on generalized VMs.

• 9:07Speaker 01

  It just doesn't make sense to like launch your own chain. But then I think like things like, you know, the core protocols, like, you know, we're talking about DEXs, lending protocols, stable coins. Like these things that really would benefit from having their own chain. I think those are, we're going to start to see like, you know, the app chains are going to win out just purely because of like UX reasons and stuff over the generalized ones.

• 9:33David Hoffman?

  So in the Ethereum ecosystem, we generally have a pretty like good concept on like our roadmap and where we are in the roadmap. And like Vitalik had that like, uh, the Verge, Blurge, Merge, blah, blah, blah, all the urges, uh, which I did not correctly label out in time. But like for, for people that are super familiar with the Ethereum roadmap, does it make sense to ask like, what does the Cosmos roadmap look like? And where are we in that timeline?

• 9:57Speaker 01

  Yeah, so I would say like Cosmos itself does not have a singular roadmap. Like I guess one thing that's very different in Cosmos is like, we don't have a single dev team.

• 10:06David Hoffman?

  Right. You said Cosmos is more of an idea.

• 10:08Speaker 01

  Cosmos is an idea and a set of open source tools that will like help make that achieving that idea easier. So the three main tools I would say are Tendermint Core, which is like the consensus protocol. Uh, Cosmos SDK, which is like a toolkit that makes it easy to build your own app chains. And then IBC is uh, just the communication protocol. But these are just like code. There's no central blockchain in the Cosmos system. So there's no dev team behind the Cosmos. It's like, you know, our, our team, for example, is one of the dev teams because I mean, we're one of the biggest users of the stack.

• 10:50Speaker 01

  So we spend a lot of time contributing to that. But then there's like, I don't know, I would say there's like probably like. Somewhere between, you know, how you count it, somewhere between five to 10 like core dev teams like contributing to the stack. It's kind of, it's kind of more similar to how you see like the ETH two role, the client development teams, that's kind of more similar. But I guess the difference is in ETH two, it's more every team is working on a, for the most part, it seems it's more like each team owns an entire client implementation from like top to bottom, while in Cosmos, it's more like, you know, we're all contributing to one code base. And because of that, it's hard to kind of like say, here's the roadmap as much as it is like, well, here's a, here's a huge pool of things that we need to do. And then like each team kind of like

• 11:33Speaker 01

  picks and chooses what they want to work, what they need to do based off of their requirements. So like, you know, the developments that we need to see from the Cosmos SDK might be different than what a, a, a different project needs from the Cosmos SDK. And so we're all sort of just, you know, contributing to this large repo together based off of our own needs.

• 11:52David Hoffman?

  Yeah. And like I, I think a difference between Cosmos and Ethereum is like, first you have like the beacon chain as like the central coordinator chain of all of Ethereum and, and also ultimately all the shards and all the layer twos. And then you also kind of have like the central coordination of like the EF, uh, while like they don't coordinate things themselves, they basically pay for that coordination by, by pushing it outbound. In Cosmos, it seems to be like, build the code, make it easy for this thing to construct itself, but it still feels like very bottom up construction. Uh, so with, with that sort of like strategy, how do you like accelerate that? Because we all want to grow these things as fast as possible to like take over the world and replace the, the financial system. Is there like an acceleration strategy for, for Cosmos?

• 12:32Speaker 01

  Yeah. So, I mean, I think the, our, our approach has always just been like an application first approach. So like, you know,

• 12:42Speaker 01

  you know, I guess our roadmap, it would be like more focused on like how do we? Yes, okay. The main thing that we've been focused on is on the application layer composability. So one thing I like to tell people is that like, look, everyone is starting to think about cross-chain communication now. But in Cosmos like ecosystem, we haven't been thinking about it. We've been building it and shipping it over the last three years. Like, and we're like on the next step, which is cross-chain composability. So, you know, other token, other bridges, yeah, sure, you can send tokens between them. With IBC and the, the, this, the framework of cross-chain composability, we've been working on, you can send NFTs cross-chain, you can do, you can have an account on one chain, do actions on another chain. So you can have a DAO on one chain,

• 13:26Speaker 01

  do their token swaps on Osmosis. You can have a, uh, we have a smart contracting system that has been developed called CosmWasm. And it's very designed for interchain native, like native, where a contract on one chain can make a function call to a contract on a different chain, and it's the same APIs as calling a contract on the same chain. So it's like,

• 13:49Speaker 01

  our, our, our, our bet is that like, it seems that a lot of other ecosystems have been focusing more on like, you know, the, the base security, kind of like, you know, shared security, fraud proof, solidity proof, all which I think are like super great. And I think that like, you know, validity proofs and stuff are the future. But it's like,

• 14:11Speaker 01

  there hasn't been enough of a focus on the actual user level composability. How can I as a, how can my contract, my DAO on Optimism make use of a contract on Arbitrum? And that's kind of what we've been focusing on Cosmos is, how can we get that, our, our, you know, one of our North Stars for Osmosis is like, you know, we want to make sure the UX of the multi-chain is as seamless as the UX of a single chain. And so that's kind of, by building that and using that as our focus, I think that's how we're going to get sort of the usage and adoption.

• 14:42David Hoffman?

  So the Cosmos ecosystem and just like overall community, along with the Ethereum ecosystem and community have like been running in parallel for a really long time. There's a ton of overlap and especially at ECC, I see just like the, it's always when I run into the Cosmos community members the most is at ECC. So like just overall, like what would you attribute this like social alignment, like this overlapping Venn diagram that's not completely overlapping, but still does overlap between like Ethereum more than any other alternative layer one that I would ever, that I would mention, like, you know, Solana, not really much overlap, Avalanche, not much overlap. Cosmos, a decent amount of overlap. So like, what would you attribute this to?

• 15:18Speaker 01

  Um, yeah, I think it's, you know, we were never, you know, everyone else marketed themselves as, oh, we're the Ethereum killer kind of thing, right? Like that, I think that was never our approach. With Cosmos, you know, we just had a sort of different vision of the general architecture of blockchains. Um, we, and we just sort of started building it in parallel and, you know, collaborating on, you know, a lot of like, you know, proof of stake stuff, you know, our, our team was very early on a lot of the proof of stake stuff, along with the like EF and stuff. So we were collaborating on that kind of stuff. And then, you know, just letting, we'd kind of just been letting the rest of the ecosystem eventually like, you know, pick up on that. And I think that like, the, the stuff that I think basically,

• 16:02Speaker 01

  like I said, we're working on a lot of the application layer composability. I think a lot of the Ethereum ecosystem is working on more of like the core chain level, like integration. I think these things are going to go together. We're, I, I completely imagine that like, all these rollups are eventually going to integrate like IBC, for example, and then start using the application layer composability protocols that we've been building in order to allow this crushing communication. I do think that application specific rollups are going to be like, I'm, I'm way more bullish on application specific rollups than like these generalized rollups today.

• 16:33David Hoffman?

  Sure. Uh, so the, we've been calling it a bankless, a build market, not a bear market, implying that if we want to get out of the bear market, we have to build our way out of it. Uh, so like in the next like, you know, six, 12, 18 months, what are you looking forward to in the Cosmos ecosystem to build our way out of the bear market?

• 16:50Speaker 01

  Hmm. Um, yeah, I mean, there's a bunch of things that sort of our team is working on, especially the, one of the biggest things that sort of what, uh, trigger, you know, the original purpose of Osmosis was we got really interested in like MEV kind of stuff and MEV reduction especially. Uh, so, you know,

• 17:10Speaker 01

  I'm close friends with the Flashbox team and stuff, but like, you know, we were like, oh, we don't want to be auctioning off this stuff. We want to be like figuring out how to actually reduce it. And so we had, we spent a lot of time on this design called threshold encryption, which basically is a way of encrypting the mempool and only decrypting and executing transactions after a block has been finalized. So then if no one can read transactions in the mempool, no one can front run or sandwich or anything like that. And so this was, you know, so how I, how we started, we started actually with that. And then we were like, well, this is a feature, not a product. We probably should go build a product around this. And that's sort of like, okay, let's go build the decks.

• 17:49Speaker 01

  Um, and unfortunately, the threshold encryption stuff got just kicked down the road because it's like one of those features that we know takes like, you know, probably will take another like six to nine months of like development work. And then during the bull market, we just have to, you know, keep focusing on those like faster two to three month wins and just like shipping features faster and, and stuff. And so now with the, with the build market, we get a chance to be like, okay, we can focus on some of these like longer term initiatives. So for us, like threshold encryption and other privacy stuff is like one of the, the, one of the reasons I think app chains are cool is we're, we're able to iterate on like privacy stuff in a way that you can't on a generalized VM because you're stuck with the cryptographic primitives that the chains give you.

• 18:34Speaker 01

  Sunny, thank you so much for joining me at ECC. Awesome. Thank you. Cheers.