Whiteboard Series with NEAR | Ep: 31 Kevin Davis from Kava Labs

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1. 0:04

   everyone just Illya from near and we here was Kevin from kava we're gonna dive deep into how stable coins work and learn more yeah we're gonna talk about cross chain defy that's what I'm building a kava so I'm an engineer there I've been working on this project for about twelve months and before that I was doing stuff related to inter ledger so that's sort of how I got started and let's take it

2. 0:27

   from there all right all right so I think the the place to start is sort of what is the fundamental unit of defy right now and that is the over collateralized loan and so I'm gonna go through the story of an over collateralized loan and then we'll see if we can sort of get to all the technical details and dive into where these things break and how they work sounds good all right so fundamentally someone controls an address here with

3. 1:01

   some amount X coins and it would be nice right if we could put our coins to work and sort of a lot of people think of various different ways that we could do that and one of the ones that's very hot right now is defy door over collateralized loans and what I'd like to think of this is just an automated loan facility that sort of can be run relatively autonomously and we'll get into where it's not autonomous all right so we move our coins to a new box and

4. 1:34

   this box is a special box so I'm gonna draw it as a circle it's a special box with this a circle yeah and and some protocols you need to like convert your coins into a pool of coins and other protocols you don't the one we work on you don't so I can imagine I can just transfer my coins X and - we'll call it my coins in CBP and I'm just gonna use the CDP term apparently we're doing like rebranding and we're calling them like safes now or something but I think a

5. 2:07

   collateralized deposition is a reasonable description of what we're trying to do here and so we have balance X in here and it still can rolled by me so I didn't I didn't change the ownership but this box here is now capable of creating a bunch of financial contracts that can be run on a blockchain and so the first sort of thing we want to be able to do with this is to take my balance X and to create a coin off of X and so right i can't

6. 2:37

   probably create more x so would be surprising right protocol just let me create more ex probably x would have an inflationary problem so instead we're gonna allow me to create a debt that it's denominated in something that is widely used so I could imagine right I could be like this is gonna be Apple stock I'm gonna draw Apple stock off of my debt X here but not that many things are denominated in Apple stock and so

7. 3:01

   turns out the thing that almost everything is denominated in is USD so we're not really creating USD and we're not guaranteeing that this debt is going to be USD at this point but we're just gonna say somehow I can denominated in create a dollar denominated debt so dollar debt first we have to figure out how much debt can I draw off of X and then why anyone would do this so first question has to be I need to know the

8. 3:33

   value of x acts in dollars to USD and I need to be able to get there with high frequency like it can't be like that if this value is changing a lot I need it to change a lot here and then because typically X is a very illiquid super highly volatile asset we're going to require that the value of x in USD is large relative to the debt that I am drawing so if x equals 100 we typically

9. 4:07

   limit the dollar debt to something like 66 and this is a parameter they say 1.5 yeah yeah and people people say 1.5 has become the sort of gold standard here mostly because maker hasn't broken yet yeah so 1.5 works nobody wants to drive it down because nobody wants to write it down nobody wants to drive it up because it's already super economically yeah it's not a common set up and financial things I

10. 4:36

    think one thing that's worth pointing out is like the traditional thing you do with collateral as you post highly liquid collateral to draw an illiquid debt or sorry you take illiquid assets and draw a highly like yeah debt here we have two illiquid assets and so we're we're not in a traditional set up and I think that's sort of the first thing to like when you look at this box here you're like that's a weird box this

11. 5:00

    dollar dad even more traditional setup is that you don't have any collateral would ya or you have a very small number lateral X's ten yeah yeah and I can use X to make many different loans right alright so we we've we've agreed that I can draw some amount of X here and we're gonna allow this system to be replicated both across the asset X mhm and then across any other assets so it's going to go deep and wide in terms of many assets that something's multi collateral dies

12. 5:31

    that's what sort of the the premise of these systems is so we're gonna have X Y & Z and they're all going to map just a dollar these structures yes and then very importantly we're gonna always draw a dollar debt that's fungible so the total sum of all debt will be these fungible coins and the total sum of all this is the collateral backing those fungible coins and that's what gives us the expectation of dollar parity and I say

13. 6:02

    expectation because I cannot take dollar coin dollar debt coin turn it back into collateral there's no in protocol thing that just swaps those around and there is no guarantee that this thing will ever settle so my maker has sort of what they call emergency you know yeah we can unwind the system but it's not guaranteed to during normal protocol mhm so the expectation of sort of value is mostly based on market expectations and

14. 6:33

    right now the the collateral ratios we see are even higher than yeah everybody's like covert car drives me five to one because if there's a run on the price of whatever your collateral is you don't want to have to spend time effort and money and transaction fees to collateralize your positions also people just have way too much ease so then we can get into the like what is who is the person that's doing this it's probably someone who has way too much if they literally have a problem of I have too much II and this is something I can do

15. 7:05

    with it yeah and so what I sort of like to look at this system here is this thing that is controlled by the the debt ceiling it's gonna be pretty hard to scale right with a single asset mm-hmm and finding good XY and Z candidates is very difficult I think a lot of the work that I do is focused on sort of what is the best way to get even candidates for XY and Z and to assist them like this

16. 7:36

    and if it's all eath in the ERC 20s I'm skeptical yeah and if you claim that you're going to do it sort of with new XY and Z that I haven't heard of or that assets are that are that are trusted mm-hmm I'm questioning why you need a blockchain hmm and so that's sort of where we step in and we're like I think that this set up is actually a good candidate for an application-specific blockchain I know

17. 7:59

    that Zak he's been here before so we've talked plenty about sort of cosmos on the whiteboard series so I won't go too deep into that we also had family yesterday with or Thursday was IKEA about application specific James versus not versus building - for sure versus depth sources shared chains yesterday this this composability argument so let's let's erase this and and sort of look at the specifics of an application-specific blockchain for d5

18. 8:30

    so first off we have guv token in any blockchain right that wants to do unchained governance so that wants to sort of govern a set of parameters we have a gov token we have a security token security in the sense of literally the token it's providing security and not with the sec we have I may need to figure out a different neighbors yeah stable token and what Maker does right is we have MKR eath I have

19. 9:08

    what cover does is it takes these out replaces them with a single token yep and this token is providing security in the form of staking using tenorman and governance in the form of sort of government wait votes yep so then we have sort of this dynamic token economic model which is like the Gov token is inflationary in protocol mm-hmm and then it is deflationary relative to fees you

20. 9:51

    mean you're burning fees yep okay so users interact with the system they create these collateralized loans loans accumulate fees which are controlled the fees themselves be controlled by governance when users close positions they pay those fees in the governance token so you have both inflationary and deflationary and then we have lender of last resort so in the bad times when

21. 10:23

    collateral goes either collateral goes very quickly down in price or people sort of lose faith in the underlying system you can expect that the global collateral ratio will be below whatever the minimum is in that case we're gonna mint a bunch of cava mm-hmm and try and reflate the system by minting cava and basically recapitalizing and so this is like hyper inflationary pressure this is

22. 10:56

    literally how a central bank would do it yeah it's pretty more money can fix the problem yes on this sort of the permission to print money is much more less defined ya can do it whenever you need to which is nice and so the the daily operation of the system probably looks something more like this and then this is your edge case one of the bad times happen so let's go into what's

23. 11:26

    your table tokens named USD X X X no it's got an X on things so what we want to do or want to think about is that XY and Z mm-hmm should come from outside the system mm-hmm and they should pour it into this alone facility dad let's call cotton and so today right we can do this via IBC we can do this via something like TB TC yeah if you had these people on yet so we can overhead a lot less and DEF CON yeah yeah so we can

24. 12:13

    over collateralize assets like Bitcoin and try and create a fungible Bitcoin and then we have continued to overcook Hydra is that which kind of that's what I mean like collateral collateral ratios here are 150% collateral ratios yeah here 150% some people like that that is the thing and then you can do these sort of federated pegs mm-hmm yeah and sort of you go from a trust model of like pretty trusted pretty cool but pretty inefficient maybe lower trust and then

25. 12:47

    here sort of what I would call like amortized trust like IBC you're still going through places that require you to trust the Federation itself the sort of relayer there has to be one honest trailer but we're much less than sort of there's three signers on my point and so we think this is a really cool construct right here that if I can take an application-specific blockchain and could be a Dex could be a sort of I would be skeptical there are money

26. 13:22

    tokens in application-specific chains but Dex is things that are useful and tradable it could be on application-specific block chains I can use IBC to issue them into kava and then have CDP's inside of that system and the user experience there can be pretty slick right so this probably round trip on the order of seconds I can imagine sort of you can under in chains on tender machines and on anything that's doing IBC I would say well you can have it unless you're doing like ithi a thorough smart contractor that's

27. 13:55

    bridging and I would say that's yeah that's another option well you can have a way I should you know figuring out by client bridge so yep yeah so maybe bridges are another option because I don't have to use IBC and sort of the design space here a little bit nicer than the design space you can have in eath and I think that's sort of where we we want to be mm-hmm sort of I can imagine applications built on top of this that don't look anything like the way make her Dao looks because I can do things a lot faster I can sort of cater

28. 14:30

    my experience to what users want versus sort of the tools of the CDP so when we think about CD piece today it's like you open a dashboard and it looks like a finance dashboard and you open a position and then you way over collateralize it because you're worried about the fees and how long it's gonna take and you don't want to worry about it if it's just a button that's like lever up whatever you're doing right here in the background like CDP gets opened a stable deck gets drawn an

29. 14:54

    automatic conversion happens through something like Yunus whap and boom you just have more of X mm-hmm that's a pretty sort of slick thing to do versus like constantly managing yeah holding the very fragile CDP and hoping that that sort of the blockchain is around when you need it I mean yeah that's the limitation more on on the kind of structure that it runs on right yeah as well as certain it it I would say kind of constrains the design space the way that I think about her

30. 15:26

    yep so I guess so the interesting questions that I have for any multi Calero stuff right so you're saying you have like X Y & Z here and then you kind of issued that which is use DX now is it true that this actually is fungible because like because it's kind of relies and really depends on the risk profile yes right so and this is something where we're already starting to get into is like if there's only one exit is nice but you're totally capped on how yeah you need lots and lots of eath whales to participate

31. 16:05

    in your system but if like Y has a default risk that it's completely outside the blockchain I think that Y can be seized by some outside authority then how do I sort of judge this debt here yeah if I really don't want to be exposed to Y or at least I don't want to I don't want my users to have to think about sort of exposure to to why mm-hmm if Y isn't pretty trusted and then I would argue or at least our philosophy is like you should really avoid these well so my question is in the world of

32. 16:37

    like let's say IBC or any kind of like cross-chain stuff as a user like I need to at least have some understanding where as the origin of the like if it's just like I'm using all the examples like a cryptic ad right on my chain but it actually was from another chain right yep like using it here kind of requires me to understand a little bit about especially you know nft but this isn't that's not even specific right if this is oh yeah piece of information right

33. 17:07

    that's our value yeah yeah so so the here like you're saying well we have a multiple of this which are like pretty much lever up one one thing so that's why I'm like how are you guys thinking of risk profile and I think we kind of skipped a few studies so we need to go back and talk about Oracle's yeah yeah let's do the action actually gets in here because there's a great question

34. 17:36

    which is like we want to denominator sin USD and I want to control the collateral ratio here well how do I know if it actually goes below mm-hmm somebody feeds in prices the gods of the Oracle feed in prices right that Oracle's are no gods themselves this is what we want to do here and so our approach to prices is the same as staking which is that the people who govern the token should be subject to

35. 18:07

    slashing conditions both for the security of the chain and for the prices that are fed into the chain all right and so the the conditions for slashing and atom is like double signing mm-hm and live nestled up very so this is like big big slash yeah this is small it's like tiny tiny slash in Kaabah you have these two and then you get plus price deviation and then plus like failure for

36. 18:40

    quorum to post so price liveness and so rather than n of em sort of trusted Oracle's posting prices mhm you at least get I know that the the Oracle is here are posting a bond in the governance module token and are subject to slashing should they fall outside of some deviation of the median of prices so pretty much yet so they busting like what they think is a price you find a median and then you have like some kind of standard deviations or 1.5 standard deviations away and then you figure out

37. 19:20

    sort of over time what are the actual incidences here and how how hard do you need to punish them mm-hmm sort of are our first guess is that price deviation should be a plus like pretty large slash and price liveness should be like a really big slash because the Oracle is going down yeah at that time for everyone as well as suggested that there was either coordination or correlation

38. 19:43

    amongst these Oracle's that was so tight that like very god why not your your M was one yeah so I mean that the reality though is right now everybody draws prices from the same so at the end is like well I mean that's just kind of the way I think of it like building like I've been thinking about yeah using validators to post prices I'm sure this is like sort of the first whiteboard yeah that you get to the the problem that I have is that like if everybody knows and like probably validate it's running default code and

39. 20:17

    kind of things like that yep although they probably shouldn't post how they're getting their prices they probably shouldn't about yeah right now it's like everyone's running the media nicer and so cool great but I would say yeah in equilibrium that this should really actually be provide Terry yeah you wouldn't want people to know how you're deriving your prices yeah yeah I mean that I go is that like yeah men is a problem is like if people do no

40. 20:42

    attacking on like API is actually providing this price it's just actually not that expensive but you guys are really not something that's not what they're written for yeah they're not actually protected and secured yeah yeah so so you can actually like mess it up by just like attacking is it kind of the source yeah I mean I think exchange infrastructure would have to change and yeah to be sort of core like how much security model and price

41. 21:08

    and you see exchanges exhorting interested in this area of defy so I don't think it's like there's no interest in this I just think that the the movement towards here will require things to break and right now nothing has broken no one has ever lost money Oh Tara gathered actors in the right yep on the Oracle side yep terrorists have been attacked or sort of like messed around and said incentive incompatible the Oracle design and I just mean like in terms of cascading

42. 21:38

    failure posting bad prices yeah we haven't seen that yet I mean the interesting question is if you do have a decentralized exchange here which you have connection to already yes endogenously get my prices for example yeah or at least like use that as kind of a like to do market making from the prices I suppose like anyway there's some something too something will come of that yeah sure yeah cuz they even see

43. 22:03

    that with you to swap right sort of yeah an Oracle from you swap exactly yeah except like except the rely on it yeah like the dog is eating the work indefinitely yeah and sort of the the marrying of exchange data with decentralized exchange data with a security model related to prices being important and the api's that protect them being valuable mm-hmm it's sort of very immature right now yeah and so coin market cap Carol McCoy market cap grab

44. 22:34

    that's not crap post price right yep so that's the thing that holds these systems together today and that's so just practically like when these guys are producing blocks does it just include like so I'm a leader right now I post a block I post my price all right so everybody gathered in the block so the cut of the work practically lecture so it's message transactions that everybody oracles so you have to be in consensus you mean the top 100 power and

45. 23:06

    then you post prices and if your price is included in a block you're subject to these slashing conditions there should potentially be actually sort of reward withholding if you don't right so as a block producer I can actually censor people from including their price and this is true of all yeah you can sense her pre commits and transactions if you have a one-third code coalition and no

46. 23:29

    Penryn the idea is Spencer with 1/3 per block the idea is that it's supposed to be attributable yeah and so if you're if you note that every time you post a price and this producer has a block and they're censoring you you might have some sort of out of protocol find them and angry at them and propose 40 minute out of the chain like those are your options there but yeah yep so yeah did

47. 24:04

    you get that so yeah we've posted messages yeah so you're pretty much in a block yeah at the state transition you have like a pride in just meeting eyes right here and then the sign slashing mmm-hmm same and then after that run through the CDP's and see who's been so did you that was pretty much poke automatically pretty much yes that's the other thing it's like because we get this nice begin block here yeah we can

48. 24:29

    poke automatically we do not auction automatically so what happens is you poke or bite and I CDP gets bitten we have some bad debt in the system mmm collateral gets seized and sent to the oxygen module and it accumulates until it has a lot of collateral and then anyone can kick an auction off once there's a lot what is a lot an amount of collateral equal to X basically in the current price feed so it's just a

49. 25:09

    parameter you can set your like if I have ten dollars with the clutter I'm not gonna call that a lot maybe you might have a ten thousand dollars with the program we'll call that a lot and then the idea is because I don't have to spend transaction fees biting I don't really need to pay my keepers here yeah I don't need to incentivize here so what actually happens is you kick an auction off and this will almost certainly present arbitrage opportunities so rational value of the collateral is say

50. 25:33

    100 I bid 95 I might find that I've made all the other bidders irrational or indifferent to that 5 and sort of like this is just a arbitrage producing the machine as well as because you can run it from a like client it doesn't require really anything to participate in other than collateral and so this is where the keeper notion comes in mm-hmm is these people can participate in auctions and presumably win them at a rate below all right so just just to walk through this okay so we have a bad CDP right so this is so

51. 26:06

    let's say it's 100 acts right the price went down so it's actually not cauterizing enough of 66 of is DX yep so this gets put here so you have hundred acts in in auction let's get really of 66 X in bad it's 66 us DX yeah so yeah so what will how lets religiously this enough to kick out an auction so cause the process here works yep so we're imagining that 100x is say now worth fifty fifty well that would not be

52. 26:46

    too low that would be or no fifty with two too much um leave the right so there's gonna be a rational value of x and they're just going to bid and then if that does not cross out the sixty-six debt then we have a really bad auction and that accumulates to the inflationary table so now I have two so let's imagine that this auction raises fifty mm-hmm us DX yeah I now have 16 that is on us

53. 27:17

    DX that is uncovered and now I'm an auction table for that so here I'm actually in collateral mm-hmm here I'm auctioning cover so you pretty much what this means is the people who are participating auction they need to have ideally set of asset the collateral so I can do I'm assuming not having a unit swap or some form of I mean on cover not day one yeah so pretty much as a like market maker or

54. 27:44

    whatever participant I need to like bring a bunch of this assets to here yep could be able to produce yeah and I don't I would say that Lots should be larger than smaller because of that yeah but then what while you wait pretty much a lot is waiting to be accumulated right can it be I mean the price can keep all right of course so what's so like I mean pretty much need to find a balance

55. 28:09

    between like yeah yeah yeah I would say you don't want your loss to be so big that's if you are near a percentage of your debt limit yeah yeah if your debt limit is a million wouldn't want your lot to be a hundred thousand yeah that's scary but maybe ten thousand mm-hmm can't you be probably ever like captive yeah the percentage of our debt limit yep and then you also in this system need a

56. 28:33

    pretty liquid governance token yeah so if I minting this and there's just absolutely no way to sell it or to determine its price very accurately of the governance token then you also have problems because no one's gonna participate in these up so yeah so let's say like this is an auction of Cour like to pretty much to sell cava for 16 years DX yep so I'm here I mean you also need like somebody who is who is let's just mmm

57. 29:05

    today like as an arbitrator right what I wanted I want to have a bunch of your DX that I can buy this cow with and then yeah go to yeah I want I need to be able to exchange it in order for this to present actual arbitrage opportunities there needs to be a liquid market yeah all right cool make sense all right and this is why I assume that multicolor will died did not launch first right

58. 29:29

    yeah maker is here in 2016 mm-hmm no one's gonna participate in these auctions and so that's why we saw that maker was not inflationary in single collateral death mm-hmm sort of now that there's a more mature market around these things you can do this but you want to control your debt limit right yeah I mean you're always want to control you badly yeah course that limit and you want to make sure that X Y & Z are actually credible assets people have some yes so

59. 30:03

    that goes back into like yeah so let's just say there's multiple assets they have they will have a different risk profile all right just both the way that they are moving right to the system like just the security you know whatever weights right is different the way that they're moving so so how as a like let's say I'm I am market participant I do need to evaluate like both which

60. 30:28

    portfolio to hold to actually do this as well as if I'm holding it use DX like when I want to close a position oh yeah so what one thing we didn't talk about is when I want to pay it back right yep so I paid back I can only close my own CDP or correct we did not have like repayment yet repayment from other addresses you could delegate it perhaps like you could assign the delegation that's something you can do I don't think you could have anyone pay off your CDP so so let's just say if I open the

61. 31:00

    CDP gonna bench is your expected on some presumably more of whatever you opened your ATP more for actually you know used it for stuff it's questionable I mean you know we have seen the some use cases yeah when a really few people ever point five that was a legitimate thing to do yeah oh yeah so so yeah so then when I repay right so I need to repay the debt yep so like 66 plus plus B's plus fees

62. 31:29

    in Cabo right yep so what like and ideally this can be abstracted all right we don't really want users to have to purchase copper yeah and so we go to exchange in units whap yes Dex that underlies this ecosystem mm-hmm so today that's finance Dex I don't know how I'm gonna how cyberpunk that is but that would be the sort of user experience goal there mmm-hmm so so what is a feel like how does this VD termined determined by which collateral you opened with mm-hmm so X can have stability fee of oh it's a

63. 32:10

    purr purr purr collaterals to go do fee as well as per collateral collateralization ratio okay and then does this gets an effect here as well like when Oh like I'm assuming here it would be you as a discount right like when when I will the clearing price yes yeah the clearance price is a discount I'm assuming that will offset like this percentage will affect the scan because we used okay as well as you have the supply bad collateral yeah all right

64. 32:53

    yeah so going back to how to evaluate the risk pretty much on the whole when you have like a mixed bag of different assets a grab bag a grab bag of different assets yeah with different risk profiles different like you may get like you know I wish me it stall stall because it like something happen and that chain can yeah the hub big here could go away that's a bad guy yeah I mean I think it mostly comes down

65. 33:24

    to at this point being super selective and not having this beep these be permissionless right so it would be odd if the governor's were like anyone can put an asset you know this system and so I would say you want to do things that generally are bilateral so if you're doing like cava to Adam well the these hubs are sort of like well known to one another it's not cava - Adam - I've never heard of this chain over here okay

66. 33:55

    um and so there's there's that option and then anything that is sort of independent of that system so I may not love the security model of Finance chain but I may trust that it will exist or have sort of an independent risk parameter of Adam right - but how does that value into the pretty much like so yeah yeah it should value into the governance of the system so Adam assets that are lower risk should have a higher debt ceiling mm-hmm and then it should be on the governor's to adjust that relative to risk can you expect that

67. 34:36

    like your validators to be pretty much yeah over time you don't want to I would say what you want to start with is a smaller debt limit then sort of the risk tolerance of all of these assets you don't want to be fully exposed but yes over time I think the actual value or the actual alpha during it generated by any systems having governors who know what they're doing mm-hmm having governors who are pricing risk properly yeah and so you want to work with organizations who are thinking about that how - yeah how to do risk

68. 35:09

    profile yeah and then actually I mean this to be security is my money my need to be a dynamic as it adjusts it should be yeah yeah the sort of inputs to the system should be dynamic and multivariable so yeah so let's just say for whatever there is some I could get security value of each chain right there like how much we're willing to tolerate the risk on this let's just say it actually going like in the Habs of God models the governor knows it's going

69. 35:39

    down 4x risk is going up or down risk is going out this is going up there's at all the other tolerance for so so displaying what let's just say they actually won't increase over colonization yep so your options are to increase the collateralization ratio would job that requires forward messaging right it's a bad time if exactly that that's be required 150 and it turns out it acquires 200 and no one told me yeah so that's a problem the other though right is to increase the relative debt limits of other ones hmm

70. 36:14

    and so this becomes the less tied to that mm-hmm how you can also imagine that CDP's could rebalance if you allowed one CDP to hold multiple asset types mm-hmm yeah then you have your own like portfolios pretty much yeah so then some what that would kick the problem to users mm-hmm which maybe isn't guaranteed to be any better than governors I think these are really hard systems to parameterize in terms of yeah I mean that's yeah that's kind of really

71. 36:47

    where we actually are today and how the changes and this is no good yeah especially how it changes as like the system's wall fee yeah yeah even though we want what is the permission permission our systems at the end they are still like life changing systems which interesting are you guys doing like multi collateral CDP's okay we're starting with one CDP per collateral time but this is not a not a hard to change actually in the SDK yeah we mostly did it as a convenience yeah

72. 37:20

    or just it's it's simpler to think about you eyes and things when it's like one two one two one yeah but managing the basket actually could be a useful I mean for like more professional I guess yeah because I think we also you ever is doing this right at my demise me my need like a basket to offset whatever because they're holding like bunch in a liquid form so they can participate here

73. 37:43

    we need to actually lever up here yeah it's actually refer to ya to create a thing and they can balance it yeah where's basket actually yeah I mean the bus gets interesting because you can have like multiple baskets across it like you know different baskets and pretty much hmm see how they perform yeah yeah it's kind of a financial instrument yeah this is a system for generating dynamic equilibriums and super complex financial instruments and we'll we'll see how that goes so one

74. 38:16

    thing that I've been I've been thinking a lot is how to use because you have cava here too right yep so unit you're not are you using cava as well for her CDP special abuse you know if people want to do that so well I can tell you what I was thinking because that if you think so there is let's just say there's some market cap of cava which you know large percentage of it is stay extinct correct so just

75. 38:41

    say like people want to creates taking derivatives and yeah and put those in CDP's that's a thing yes so and you kind of hard you have all the tools yeah our tools are here people have talked about doing that with Adam more than with cava because this is like sort of already subject to many many many different types of token economics there's Adams a little bit easier to understand what it's doing yeah I mean we were thinking about it

76. 39:07

    because like that's he's just like in maker I do have I mean it's the same idea like you have maker you have ether like but you're joining them into one it makes sense but then you also have this like a ton of the liquid asset that is city there which does have security like it does have a like sound risk on it yep being staked but at the same time at least from practice we've seen what this risk is chief yeah and we also don't we

77. 39:32

    we at least don't have lightness slashing so it's unclear if you needed you know yeah I mean I believe it's not because we just don't give you rewards downside is roughly the same just like you didn't participate and it looks way better on books or anybody so I mean well they feel you know if you're doing reporting and you're saying this week we have this many tokens and next we have this many tokens versus like we have this many tokens for anybody who is

78. 40:05

    like extra anyone who's not paying attention yeah like even though you know as a base increased but yeah yeah exactly exactly a little money elusion yeah well but it's the end you know that I counting right now does not account for total supply correct the modern world yeah modern world does not account for total supply yeah otherwise who would need to say like oh yeah I have one dollar out of what is that this is

79. 40:31

    guaranteed yeah it was gold cool yeah that's pretty cool anything else interesting yeah we have not talked about um I think we've I think we've hit on the real the real good stuff open questions that Coble will be a guinea pig insolvent how you guys I think actually yes sir the the long tail of this that is super interesting to me is governance and I think that so one thing that we think about a lot is that

80. 41:05

    security as a validating or it's kind of a commodity very very hard to differentiate yourself it's easy to set up a system that doesn't double sign liveness isn't really that important as well it's really easy to be live with servers on the internet governance is an area where you can see differentiation among orgs and I do think that that is sort of an actual interesting property of this system that orgs find themselves unable to differentiate in this category

81. 41:30

    can find themselves able to differentiate in all of these areas of because they're doing like better risk management yeah it's what we're like you're gonna do financial modeling you're gonna get into actual areas of economics that are hard and uncertain versus running a server mm-hmm but live lives just say I mean there's like many participants right in the governance as one of the participants even if I have the best model how's that actually helps

82. 41:55

    me was like I got only half like whatever some percentage of vote at the end you should be able to charge higher Commission for your vote if it is premium for your delegation yet people dug into your yep that's what all of me differentiation I don't mean necessarily that you're sort of have a like actually make money out of it yeah or your elbow essentially comes in from setting your

83. 42:18

    delegation yeah well the thing I mean that the interesting part here now actually as we were talking about it I thought is that as a validator you're actually in the best position to do marketing yeah yeah because you actually can like you know plug in some of your transactions from so actually have you guys thought at all about like front-running stuff like this not to the degree that we need to like this this works and

84. 42:47

    we'll figure it out when it doesn't work and I think there's a lot of work in the deck space that will be sort of applicable here and so we're kind of like waiting to piggyback off yeah I'm just thinking like if I'm eval there at which some with some weight so I produced blocks one every you know and times so I can actually in ceará like fun trance on people and make some money on this I have you know more information also I am instance in price yeah rightly all

85. 43:19

    you can do those get the first person yeah yeah and so how long do you run an auction I think the default is 24 hours and then each bow to the auction for 10 minutes so it's 24 hour option yeah yeah I see is it that's kind of long for maybe one hour I have to go look at the code it's it's some set time and then it gets kicked by 10 minutes and the expectation is sort of the first bid is worth money but it's not like worth all

86. 43:45

    of the money I see and that's sort of the hurry son like i-i've been thinking can we like have a pre filled book was orders like some of this market makers can just be filled book and then when you have something to auction off you just kind of littered a mattress and then you match it if is there something matching that sounds reasonable as a as a first order protector yeah well as first of reductants also speeds up

87. 44:10

    things yeah as well like much might in a minor problems ed if there's any kind of yeah additional issues of the system like but you have multiple auctions going at the same time but you're correct if you're like cascading you know then you want auctions de Klerk okay yeah it's also like doing this you actually have a price discovery which you know competing with whatever is Oracle are you imagining this book is unchain I was

88. 44:35

    thinking Unchained okay yeah but I mean all depends on that yeah architects it does seem like the bar pretty circumspect yeah I mean it's fine if you enjoyed I mean if somebody fills a book they actually like willing to take those positions right so that's fine if it's there oh yeah I guess knowing open interest yet doesn't mean it that's kind of like you're gonna continue on to corn-based and see that right now yeah yeah I mean it's just mostly like

89. 45:01

    the problem was this is that block producers can like like if people want to remove this which you kind of need to a nice moves like block reducers getting actually like yeah temper is that a little bit yeah as well as sensor transactions that alter that yeah that's even for one block like that could be bad yeah that's gonna be a yeah so maybe it should be like if it's on another X

90. 45:24

    or something but then clearing yeah slow yeah alright yeah I was interesting cool all right all right well thanks a lot yeah I hope that was I mean I had fun yeah I had fun as well yeah I learned some more things about CD peace check out kava-kava dot IO Caballero yeah for more information and