How Decentralized Exchanges Benefit Everyone? - Sunny Aggarwal | ATC #510

This episode discusses the impact and mechanics of decentralized exchanges, focusing on the benefits they provide to users and the broader financial ecosystem.

1. Decentralized exchanges offer enhanced security and user control compared to traditional exchanges.
2. The Cosmos network plays a crucial role in enabling blockchain interoperability with its innovative protocols.
3. ATOM token is central to the Cosmos ecosystem, not as a currency but as a utility for security and transaction facilitation.
4. The future of decentralized finance (DeFi) will likely focus on overcoming current usability and accessibility challenges to attract a mainstream audience.
5. The importance of community-driven development and open-source collaboration is emphasized throughout the crypto industry.

1: Introduction

Stephen Sargent introduces Sunny Aggarwal, discussing his background and the agenda for the podcast. The chapter sets the stage for a deep dive into decentralized exchanges and their ecosystem. Stephen Sargent: "Welcome to another episode of Around the Coin with your host, Stephen Sargent. Today we have Sonny Agrawal, who's the co-founder of Osmosis Labs."

2: Sunny's Journey

Sunny Aggarwal recounts his entry into the crypto world, starting from his college days to co-founding Osmosis Labs. Sunny Aggarwal: "I dropped out of college to focus full-time on crypto because I found that the hands-on experience and opportunities in this fast-evolving field were more impactful than traditional schooling."

3: Cosmos and Osmosis Labs

This chapter explores the Cosmos ecosystem, the role of the ATOM token, and how Osmosis Labs is leveraging Cosmos to enhance DeFi. Sunny Aggarwal: "Cosmos isn’t just a blockchain; it’s a network of blockchains designed to scale and interoperate with each other."

4: The Future of Decentralized Finance

The discussion focuses on the challenges and future directions of DeFi, emphasizing the need for improved user experiences and broader adoption strategies. Sunny Aggarwal: "Our goal is to make DeFi accessible to everyone, reducing the complexity currently associated with blockchain technologies."

1. Explore using decentralized exchanges for a more secure and transparent trading experience.
2. Educate yourself on the different tokens and technologies within the Cosmos ecosystem.
3. Consider the benefits of participating in or contributing to open-source projects within the crypto community.
4. Stay informed about developments in blockchain interoperability and how they might impact or enhance your current operations.
5. Engage with blockchain communities to better understand the practical applications and benefits of decentralized technologies in real-world scenarios.

In this episode of the Around The Coin podcast, host Stephen Sargeant engages in a comprehensive conversation with Sunny Aggarwal, co-founder of Osmosis, about his journey in the cryptocurrency space, the inception of Osmosis, and the broader developments within the Cosmos ecosystem. Sunny shares his background, from being a student at Berkeley interested in Bitcoin to dropping out and dedicating his career to cryptocurrency, specifically working with Cosmos and Osmosis. He discusses the evolution of blockchain education, the significance of decentralized finance (DeFi), the concept of app-chains, and the unique functionalities of Osmosis as a decentralized exchange (DEX). Furthermore, Sunny explains the innovative features of the Cosmos ecosystem, such as IBC (Inter-Blockchain Communication) and Mesh Security, and touches on future focuses including the Bitcoin renaissance, improving user experience in crypto onboarding, and enhancing privacy in DeFi. The conversation also delves into the importance of learning Rust for blockchain development, and Sunny's perspectives on Bitcoin Spot ETFs, privacy in the digital age, and the mission behind building a decentralized equivalent to Coinbase.

People

Stephen Sargent, Sunny Aggarwal

Companies

Osmosis Labs, Cosmos

Books

Leave blank if none.

Guest Name(s):

Sunny Aggarwal

Content Warnings:

None

Stephen Sargent

Hey, everybody. Welcome to another episode of around the coin with your host, Stephen Sargent. Today we have Sonny Agrawal, who's the co founder of Osmosis Labs. We talk about his early days working in the cosmos ecosystem and how he built out this Dex that is actually transacting over $28 billion worth of volume on the Osmosis labs and Cosmos ecosystem. We talk about app chains, side chains, blockchains, both layer one and layer two.

I think they even throw in a couple questions about two chains. That's how great this conversation was. And we even talk about the recent discussion around mesh security and how this plays out to real world examples like NATO. This is a must listen to technical episode where we go deep into Cosmos and what they're doing at Osmosis Labs. Stay tuned and, and reach out to me if you have any questions or you absolutely love these episodes.

And while leave an amazing review, welcome to another edition of the around the Coin podcast. Your host, Stephen Sargent here with Sunny from osmosis labs. Sunny, tell us a little bit about who you are, and then we'll jump right into your background and what you're building there in the decentralized space. Yeah, thanks for having me on. I'm really excited.

Sunny Aggarwal

Hey, everyone. My name is Sunny, Sunny Aggarwal. I am the co founder of a project called Osmosis. But, yeah, some of my background I've been in, I've been working full time in crypto since 2017. Been involved with the space since 2015.

Originally was just as a student, just at Berkeley. I was getting interested in bitcoin. I helped teach a course there at Berkeley. That's kind of how I, for me, the best way to learn anything is to teach it, which is, I assume, for you, why you do a podcast as well, because it's like, just, you know, just like such a good learning opportunity. Right.

And so, yeah, so, you know, learned a lot of crypto by teaching that course, then kind of went full time into crypto 2017. I dropped out of college to, you know, I found I was just, like, learning way more by. I was interning over the summer originally at consensus. Then I thought the Ethereum stuff was cool, but I was like, oh, what is this? You know, it wasn't what I was looking for.

So I kind of, like, switched to working on Cosmos halfway through the summer. And I just loved it and dropped out of school, worked, and I've been. Working on Cosmos since. It's been like six and a half, almost seven years now. At this point, what were your plans.

Stephen Sargent

When you went to school. You know, you studied for it to become an electrical engineer. It looks like computer science, which. It makes sense why you got into the blockchain. But what kind of were your plans when you're like, hey, I went to school.

You weren't like, hey, let me jump into Ethereum full time, and this is why I'm going to Berkeley. Tell us about, like, your thought process at that time. What did you think you were going to become, and what did you, you know, envision your life being at that point? Yeah, I was originally, my plan was to go into, like, robotics. I was like, you know, in high school, I was.

Sunny Aggarwal

I loved robotics, so that's kind of why I was doing, like, electrical engineering and computer science. So you have some cool circuits behind your head over there. Yeah. So I really loved, like, any. That kind of stuff.

And so. But, you know, making plans, life hits you. I was. I'm also just. So when I Berkeley, I was, my major was, like, the electrical engineering and computer science, but I was doing a minor in political economy just because I love, like, economics and history and politics and stuff like that.

And so at basically freshman year, I learned about bitcoin. And I'm like, okay, this is the perfect combination of these, my two interests, right? It's. I'm literally using computer science to do, like, political economic change. And, yeah, as soon as I learned about it, then my whole life trajectory just changed, I guess.

Stephen Sargent

And how did you learn about bitcoin? Was it the ecosystem there? A lot of people studying different things, and into the DJ that forms back at that time, the bitcoin forms. How did you first learn about it, Joe? So the first time I ever heard about bitcoin was, this was like, when I was still in high school, some one of my friends, or maybe I overheard something.

Sunny Aggarwal

I forgot what it was, but I heard the sentence, dogecoin just sponsored the jamaican bobsled team. And I was like, what does that even mean, that sentence? I don't even know what any of those things mean. And so I go home that evening, I look up dogecoin, and I'm like, oh, that's interesting. And I look up, obviously, it talks about bitcoin.

And so I look up bitcoin, and I'm like, oh, that's really interesting. And so that was, like, the initial seed of what I learned about bitcoin. Then, you know, fast forward, you know, six months later, I'm in college. There's a small, small bitcoin club there. Like, I'm talking, like six guys, basically.

It was just like, we would just hang out, get dinner, and talk about bitcoin, and I just. You know, as a freshman in college, you know, you join all these different clubs. You're trying to find your. Your people, you know? And so I joined a lot of different clubs, going to robotics clubs, and.

And the bitcoin one, despite it being so small, I just felt like those. The guys who I met there were, like, so smart, and I was like. They were just talking about stuff that was just, like, way over my head, and I was like, I don't know what you guys are talking about, but you sound really smart, and I think I'm just gonna keep hanging out with you, and hopefully I'll get smarter through the process. I feel like that's, like, what's talking, like, anyone that's deep into the space is their just level of thought process. It's funny that you make that statement.

Stephen Sargent

I think if there wasn't for the movie cool runnings, the Jamaicans having a bobsled tea would probably have been the thing that you went home and started googling versus dogecoin, I think, at that time. Yeah, yeah, no, co writing is a great movie, but, yeah, so, yeah, that's how. That's how that happened. So that's how I learned about bitcoin and then, yeah, that club. So, basically, what happened then was, like I said, there's six guys in this club.

Sunny Aggarwal

We were like, eventually we were like, okay, why is this thing not, like, bigger? Like, why is, like, why is no one else into this thing? There's, like, so much exciting stuff happening, or at the time, it was also, like, bottom of the bear market as well. So it wasn't like. Like that.

This is, like, the 2015 bear market, basically. Oh. And so we're like, oh, you know what? Maybe because no one understands this. So me and two other guys, we started this course.

So Berkeley has this really nice program where, like, students can teach classes as long as you get a professor to back you. And so that's why three of us, we started a course, and we. The first semester, we had 60 people join the course, and we kind of. That old bitcoin club kind of ended up dying, almost, and we. We started a new club called Blockchain at Berkeley.

And that. That's, like, a huge. I think it's one of the largest, like, student clubs. It's still running today. And one of the things I'm proud of is, you know, I think there was a period of time for.

I'd say, you know, two years, let's say from, like, 2016 to 2018, where the best way to learn crypto was our course. I think nowadays it's like, if you want to learn crypto, there's so many educational resources for you to go look up. But I think there was, like, a good two year period where anyone's like, how do I like zero to zero to 75 on crypto, right? And I was like, I think the course and all those YouTube video lectures and stuff are still on YouTube. I still sometimes, like, direct people there.

Stephen Sargent

That's awesome. We'll make sure to include that in the link. And it's funny, like, going through a lot of the interview prep that I do. I do see that Berkeley, you know, Berkeley comes up in a lot of those conversations. So I think you're right.

Yeah. That 2016 to 2018 period, there wasn't a lot of, you know, I'd say institutional level, you know, training. Right? There's a lot of drifters and other people in the space giving the basics, but there was never anything attached, I think, to a university. So then you go an intern at one of probably the most notable companies in the world, consensus, you know, the creators of Metamask and Fira mid may.

Tell me about that experience. Was that like, hey, you're just kind of getting copies, or was that like, hey, you're sitting down beside some of the brightest minds that are launching, you know, you know, projects alongside Ethereum? Yeah, no, it was so. It was really good. So, like, consensys at the time, it used this thing called the spoke model, where it basically has a bunch of, like, mini companies or projects within consensus.

Sunny Aggarwal

And so the project that I was working on was called Alethio. I don't know if it's still running or not, but basically it was like, it was like the proto version of the graph. So we were taking, like, Ethereum data, putting it into a graph database, and making it easy for people to run queries on top of. So good idea. Probably just a bit too early at the time, you know, right idea, wrong timing, but yeah, so I was working on that.

And so I think two things. Like, I enjoyed it. I think I learned a lot about Ethereum. It was nice because what I got, I basically, part of what I was doing was, like, going through the Ethereum yellow paper and, like, taking all the concepts and turning it into, like, data schemas, which was really nice. I learned a lot about how the EVM and how Ethereum works.

But then for me, I think the two things were like, one, I think a lot of consensus was very focused at the application level at the time. I wanted to work on more lower level stuff. I got really interested in proof of stake. I got the proof of stake bug, and I spent all my time reading all the proof of stake, white papers and everything. Consensus just wasn't really involved with that at the time.

So I was like, I want to go figure out how to work on proof of stake, because that's kind of how I reached out to the tenderman team, because out of all the proof of stake whitepapers I read, the tendermint one was like, oh, this is like the simplest, and, like, you know, makes the most sense to me. That's why I reached out to them. But the other thing was, honestly, like, I'm a little bit of a bitcoin maxi. And so at the time, I let. So I joined consensus because I was interested in learning more about ethereum because I had followed it a little bit, but I wanted to be like, okay, well, I want to understand this thing.

So I got a lot of understanding of it. But then for me, in the back of my head, it was, all, this stuff is so cool, but what is this ETH shit coin. I thought we were building for bitcoin. And so that's kind of how I got, why I got really interested in cosmos as well, was like, I'm like, oh, this is how we build the app layer for bitcoin. Bitcoin isn't.

Cosmos is all about app chains, like, application specific chains. And bitcoin is the original app chain. It's the money app chain. And the idea for bitcoin was always that we're going to grow the ecosystem via side chains. Right?

This was Blockstream's idea. They coined the term side chain, but then never really shipped anything. They never delivered. And at the time, I'm like, okay, Cosmos is how we build the app layer for bitcoin. We're going to have all.

Every app will be on its own blockchain, but bitcoin, the asset, will flow and be the money of every chain. And so, you know, that's the vision I had seven years ago when I started working on it. And I feel it's just now, in the last, like, few months, really, actually finally starting to take shape. Can you talk to me about. Bitcoin obviously has BTC and its actual native token, but Cosmos has Adam.

Stephen Sargent

How does that relate? If you're kind of using bitcoin as the ultimate money stream, why, just for the viewers, why does Cosmos have its own cryptocurrency. And maybe that will be helpful to understand the cosmos ecosystem and how it differs from bitcoin or ethereum. Yeah. So one thing actually.

Sunny Aggarwal

So that's actually a, I guess a common misconception is Adam is not the token of Cosmos. It is a token of a specific chain called the Cosmos hub. The cosmos hub is just, unfortunately, it's like a naming. It's a little bit of confusing naming, but it's unlike, you know, most ecosystems where like, you know, you to use ethereum, you need to use ETH or to use Solana, you need to use soul. Right.

It's Cosmos is not about that. Like Cosmos is all about self sovereignty. You can. So you know something, someone like Dydx, like they're built as a cosmos chain, basically have almost nothing to do with atom, right? There's osmosis.

So what is Adam? Right? I think Adam serves a couple of purposes. Right. They're really focused right now on shared security.

So all of these kosos chains, they all have their own staking tokens right now, but some of them are just not very high value, right. Some of these tokens, market caps are like less than 20 million, lets say. And thats not in a proof of stake system. You want to have high economic security and Adam is just a token that happens to have a multibillion dollar market cap. And what they can do with that is they can lend out security.

So honestly, a lot of the stuff you see in ein layer today was ideas that originated from Cosmos of this idea of restaking and shared security and stuff like that. Thats the purpose of atom. So its an option in thing. That's the big polka dot and everything you have to use the Dot. Shared security, Cosmos is all about.

You choose whatever security you want to do and Cosmos hub will provide you some security if you want it. The Eigen layer is providing security to cosmos via ethos. There will be bitcoin security on Cosmos via Babylon. Cosmos has always been this idea of give developers and builders like all the options and tooling and they can choose what they want to use. And is this the biggest feature why developers come build on Cosmos?

Stephen Sargent

Because I think with so many chains out there, so many blockchains, you have so many options, whether it's specific blockchains for gambling. ETH is very vast, but there's so many blockchains popping up now, especially with the use of AI and being able to kind of like what you're probably doing as most of these labs is being able to build those app chains or side chains? Why are people coming to Cosmos versus maybe another chain? Yeah, I think people are coming to Cosmos when they want to have a lot of control over the functionality of their chain. So all Cosmos is.

Sunny Aggarwal

Right is at the end of the day, maybe that's a good place to start. Right is it's a set of tools that make it very easy for you to build your own custom blockchain. At the end of the day, that's all it is. Now they have all these other features as well. We have this thing called IBC which makes it so you can have these blockchains communicate very easily with each other.

But at the end of the day, it's a toolkit. It's like Linux. Linux is just this open source toolkit. And on top of that you have a networking stack that allows Linux computers to talk to each other. But it's Linux.

Why do people want to use the cosmos SDK to build their own blockchains? It gives you the most control over. If you are trying to build a very simple thing, it's probably easiest to deploy it on an EBM chain or just as a smart contract. But if you're trying to do something like DYDX, where they wanted to have so much control over how the order book works on their chain, they have their validators run order matching in the mempool, all this stuff. You can't do that on any of the other stacks right now.

Or Thor chain. Thor chain wanted their validators to run bridges to bitcoin and to Ethereum and to all these other chains. Celestia wanted their validators to do all this data availability sampling and stuff. So if you want to do something that goes beyond just a basic smart contract, what you can do in a basic smart contract, that's what. And the thing is, it's like most applications are probably not that, but in my opinion, the most important applications, the biggest applications are the ones who do need that level of like control.

Stephen Sargent

Are there any other use cases where you can see like an organization building like a lot of what you're saying is like infrastructure or modular blockchains are building on top of cosmos. Is there like any business use cases or is this all more infrastructure pieces? Regards to more technical blockchain usage? Yeah, I mean, so a lot of, for example, you know, if there's Fincha. So if you know, line.

Sunny Aggarwal

Line is like the, one of the biggest. It's like the what, WhatsApp of East Asia, basically. So Japan, Korea, all these places. And so they built up a Cosmos SDK blockchain, because they're trying to, you know, some or even binance, like, finance chain, right? It was built using the Cosmos SDK as well.

So it's like a lot of these, even one thing people don't realize is polygon is actually built using the polygon. Pos chain is built using the Cosmos SDK as well. A lot of the things you might be using already are actually cosmos under the hood. And that's the beauty of it. You don't it as an open source toolkit.

You can be, you can say, I'm Cosmos, or you don't have to say you're cosmos. It's up to you. Right. It's like a lot of the things are actually cosmos under the hood. And so, yeah, so, like, someone, like, lined, right?

They want to build, like, their own blockchain ecosystem for payments and all this stuff, right? But they just want to have a little bit more control over it. They don't want, they want to use their own token for paying fees. Like, you know, on any other chain, you have to use ETH to pay fees or something. Right.

And so that's why they're building their own chain. Or there's, you know, a bunch of, like, RWA chains being built on causes. Like, consortium chains is another, like, big use case of why you want your own specialized chain. And it makes a lot of sense if you want to use your own token. You know, ETH could get expensive with gas fees people don't want, and it's like not doing exactly what you wanted.

Stephen Sargent

So you're almost overpaid for functionality when, when you're really not using to its full potential, you just want to use it for one subsector. Exactly. It's kind of like open banking. Right? You mentioned open source.

It almost feels like open banking where a lot of times you don't really realize you're using open banking because the bank that you're going to has this open banking application underneath it that, as you say, you never see or that's been white labeled. That's really, really interesting. Talk to me about this idea of IBC. Can you explain what IBC is? Because I believe you mentioned it.

I think it's integral to what you're building at osmosis as well. Yeah. So basically, in a world of app chains, you don't want everything to just be this isolated island, right. Where, okay, how is money going to get onto this thing? How is capital going to get in?

Right. Like, how are people going to move between these app chains. And so basically IBC was, at the end of the day, it's a bridge that's a fancy, it's a fancy way of saying bridge. But it was a very well designed bridge from a security perspective, because most bridges today are like really just multi sigs, right? There's a set of people who are like, okay, in wormhole or layer zero or anything.

Sunny Aggarwal

It's okay, here's a set of, in wormhole, I think 29 people. But basically here's a set of people and they hold funds on one chain and then they mint it on the other. And so there's some intermediary there. The idea behind IBC was, can we build a bridging solution that removes this intermediary altogether and have. So this is concept in blockchains called light clients, which is when you, if you want to know that a transaction happened on the chain, you can just get the block headers and then these merkle proofs to show that, hey, this is what happened on this chain.

It's a way of getting proofs that something happened without having to run a full node. And in this instance, you could say that's how a lot of these apps on your phone are being used. Right. It doesn't need to download the whole blockchain, but it's showing you that you have discern balance based on the transaction headers that it can. Exactly.

And so what we, what IBC was said was, hey, this like lite client protocol that you usually have on your phone or something, what if we put that into a smart contract? And so as, so basically, let's say you have two chains, right? Let's say osmosis and DydX and you want to send token from USDC, from DydX to osmosis. What will happen is you make a transaction on DyDX saying, hey, set, I'm depositing my, blocking my USDC here. And then instead of a multisig that's watching that and then attesting to it on osmosis, the osmosis chain in a smart contract has a lite client and you can prove to the osmosis chain that, hey, I really did lock my USDC on DYDX.

And then it will give you the USDC on osmosis. So you remove all the intermediaries. And so for us, you know, our take is eventually we need to have all bridging, be fully trustless and permissionless, no more, no intermediaries. And that kind of was the purpose of building IBC. Does that make bridges?

Stephen Sargent

What you're implementing there with IBC, is that more safe and secure? Because we saw in 2023, like in October alone, I think chainalysis reported, you know, $700 million worth of hacks that were on DeFi. Most of them had to do with hacks on like, things like the Ronin bridge. Does what you're building help the security of that? Because they can do that attestation automatically.

They don't have to almost send the tokens in order, you know, and that's where, you know, criminals are kind of attacking is these bridge protocols. Yeah. So there's basically two, you know, there's two types of hacks or that, that have happened. Right. There's one that are smart, like code bugs, and then there's that are like centralization bugs.

Right. Attacks. Right. So some of the wormholes hack that happened two years ago, that was a, that was not a, that was a code bug. Right.

Sunny Aggarwal

And there was a bug in the code that was exploited. Another thing is IBC is also just code. You know, we're not going to say that IBC is never going to have a bug or get, or something. Right. But I think it, you know, I think there's a lot of people using it.

There's a lot of eyes on it. You know, it's, it stood the test of time. It's been running for years. Right. Now, the thing when centralization bugs, the thing like the ronin one or the axie one or the, was that other chain there was the one where like the farming Dex thing, there have been a number of bridge hacks where it's like, oh, the multisig of that bridge, it says it's eight people, but it actually turned out that one person had access to four of them.

And it's, that's the thing that IBC is meant to solve where it's like, hey, like, a lot of these bridges are just like smoke and mirrors, like how decentralized they are. That's what IBC is. Okay, get rid of these intermediaries there. And. Yeah, which make a lot of sense because I believe in the ronin hack, they didn't find out about it like $600 million.

Stephen Sargent

They didn't know about it until a week later. Whereas you're saying because of the eyes, because of the activity, because of the decentralized nature, someone would have seen that transaction happen almost instantaneously. Yeah, exactly. So I think, like, actually IBC is probably the most used bridge in all of crypt. In all of crypto because, I mean, let's see, I'm going to check.

Sunny Aggarwal

I think right now we're at. The total volume is in 24 hours. Was like, no, that. That can't be right. Okay, I'll have to check what the number is.

Oh, about. About eight, nine. About $90 million bridged in 24 hours, which I think is, like, probably higher than any other bridge. That's interesting. Now, tell me about.

Stephen Sargent

You talked a little bit about osmosis labs. Tell me about the relationship between osmosis labs and cosmos and that ecosystem, and then specifically, what is osmosis labs doing and why are people using it? Yeah, so osmosis. So, you know, I was part of, like I mentioned, I was part of the original core dev team of Cosmos, built a lot of that tooling, and built, helped build the Cosmos SDK, helped build IBC. And then after a while, it was like, all right, we built all this tooling.

Sunny Aggarwal

Now I want to, you know, like I told you, I left consensus because I wanted to go build, like, infrastructure stuff. But then after I spent years doing that, I say, all right, I want to go start building, like, all right, now that. Now the infrastructure is at a point that I'm happy with, now it's time to go start building apps again. And that's kind of why we started osmosis. In order to build, we're like, okay, what are the things we want to do?

What does a new ecosystem need? Obviously, it needs Dex. Really, our passion was we were trying to figure, you know, we took, like, a bunch of winding routes until we figured out that we want to build a Dex. We kind of originally wanted to start with, like, privacy stuff, like building private payment and all this kind of stuff. But then we, like, thought about it.

We're like, okay, what is the things that privacy is, like? Not a product in and of itself. It's a feature. People don't come to something for privacy. They.

It's an add on bonus. And so we're like, okay, even when. They think they're coming to something because of privacy, they end up seeing that the functionality might not be 100%, and they end up giving up some of that privacy for user experience anyway. So we see things like ironfish, same thing, privacy blockchain. But if you want to do certain functions, they'll reduce that amount of privacy for functionality.

Stephen Sargent

So you end up being probably right where you end up right now. Exactly. Yeah, I remember that. I was looking to the ironfish stocks, and they were like, oh. I was like, wow, you figured out how to do this thing that zcash can't.

Sunny Aggarwal

How do you do that, it's. Oh, it's because they reduce the amount of privacy that you get in order to do those functionalities. But. So, yeah, so we were like, all right, well, we need to build up something that has users and people come for, and then we'll build privacy functionality into it. And that's kind of why we started.

We looked on crypto. We're like, okay, exchanges seem to be the thing that has product market fit in crypto. Right? So let's build an exchange. Let's build a Dex, and then we'll use that as a platform to build all of our privacy vision.

We have a lot of takes, and so osmosis is our platform to deliver our crypto takes. And a couple of things. Was there not already a decentralized exchange platform on the cosmos, in the cosmos ecosystem? There were a couple. Just none of them really nailed it, I guess.

I think osmosis came and kind of just got a lot of product market fit. We were the. It was well timed as well because we were like, we launched, like, just a few months after IBC went live. So what happened was you had Cosmos SDK was live, then it took a year for IBC to come live as well. And so we launched at a really good time.

Part of what happened was Cosmos has a lot of assets that are very high value. Even if you look today, look at the top 200 assets by market cap, Cosmos probably has the second most after EVM ecosystem, probably more than Solana. But the problem is that at the time, it was very hard for centralized exchanges to list them because it's not as easy as adding an ERC 20. You have to run. And so there was, like, a lot.

So you have a lot of pent up demand for liquidity on a lot of these cosmos assets, but it wasn't being addressed. And so with osmosis via IBC bridging to osmosis Dex, we don't have to run a full node or anything. We're just running a light client as a smart contract. And so that's the other thing that, like, makes, like osmosis is bridging, so. Or IBC.

Very nice. Is it's permissionless. Where? In a bridge wormhole or axelar or something. Right.

You have to go ask their team. Hey, please add my chain to it. With Osmo, with, with IBC, you don't have to ask anyone. The way to set up a bridge. Let's say you launched new chain today, right, Stefan chain.

Okay. And you have your own token. Steph and you want to have it on osmosis, you don't have to ask us to run a bridge. The way you set up an IBC connection is you make a transaction on osmosis, you make a transaction on your chain, and now the bridge exists because you're just employing the smart contract for running the light client. Very similar to the actual lightning network, right, where you open up that channel.

Stephen Sargent

Once that channel is open, you can kind of now transact back and forth without. There's a huge burden. You know, the most of the work is done in the first two transactions, and everything else runs freelance. That's really, really interesting. And now you're part of the core team at Cosmos.

Is this something that they encourage? They want, you know, the builders to go build more things on top of it, or are they like, hey, we kind of need you doing the core stuff here. How does that work when you're kind of building out from the main ecosystem? Yeah, so, okay, so sorry, I forgot a key event in this story. So that that core team at Cosmos, the company was called all in bits, AIB for short.

Sunny Aggarwal

But what happened was, the easiest way to put it is the CEO kind of went a little crazy, and he kind of, you know, because of that, everyone, like, no one wanted to work at that company anymore. And all the engineers sort of, like, quit, basically, but we all, like, were so mission driven that we wanted to keep working on Cosmos. And so we all had to figure out different ways of what do we. Okay. No one's part of this, like, core team anymore.

Some people created new companies to do core development. Some people started creating new companies to do new apps. So Slesio was built by one of my ex colleagues at AIB. Sommelier was built by an ex colleague. Juno was built by.

A lot of the causes ecosystem was developed by the people who used to work at that AIB company because the tools are there. It's all open source. They take the tools, and now they can build on their own infrastructure. Yeah, exactly. So that kind of acted like this, like, big bang event that, like, seeded, you know, it kind of, you know, in retrospect, it kind of worked well where you had a bunch of people spend three years building all these open source tools, then you blow up the company, and now everyone leaves to create new companies that use those open source tools to build their own products.

Stephen Sargent

The CEO probably didn't feel that way. I'm sure the eclipse is so. Really feels like, and I guess, you know, I think, was it Jaquan at. The time or is that. Am I thinking of two separate.

No. Jquan. Yeah. Yeah. Cause I think there was a lot of infighting, and actually, Adam token, fourth, if I'm not mistaken.

Right? Yes. So. So that that happened more recently. So Jay, like, he, like, pops up every, like, now and then.

Sunny Aggarwal

Like, he'll pop up, start some drama, and then go and, like, go into hiding again for nine months and pop. Up Kanye west of crypto. Right. Yeah. If he's coming out of.

Stephen Sargent

If he's coming out, you know, it's going to be. There's going to be fireworks. Right? Yeah. I mean, you know, the thing with Jay, like, he's brilliant.

Sunny Aggarwal

I think, like, from a technical level, you know, his tendermint consensus is, like, was just, like, a brilliant idea. And I just. Yeah, some of the. You know, I don't think he's necessarily the best leader of the ecosystem, but I think, like, his technical ideas were part of why we're all here. Can we talk about that?

Stephen Sargent

Not so much about Jay, but, hey, you're dealing with a bunch of technical people. You're still dealing with people. You can deal with the technology, and you're dealing with, you know, the infrastructure and SDKs, but at the end of the day, you're leading communities. How tricky is that for even you? Osmos labs?

Whereas, hey, I'm dealing with a bunch of developers, as you said. Some, you know, are more mission driven, like yourself, where you just believe in the mission. How tricky is that to deal with a bunch of technical people that may not have all the social capacities as maybe your. Your regular leaders, like the Jeff Bezos and Elon Musk? Yeah, that's a good question.

Sunny Aggarwal

I don't know. I mean, it's definitely been very interesting to see how some within crypto, like, some technical people, have just really stepped up to be. Turns out they're just really good leaders in general. Anatoly from Solana, I think he was an engineer, and then I think he's just stepped in and has done a really amazing job as just leading the community and stuff. So I don't know.

I think there's different people do different things. Right. Some of our engineers, they just want to code all day, not be in the limelight or anything. Right. But then some people that, you know, they want to actually be able to be more, you know, out outward facing.

So that, for me at AIB, that was me. Like, I was like, I liked to be more outward facing, and so I ended up doing a lot of Dev rel for Cosmos, actually. So I started as an engineer, but I was like, hey, I don't want to like code all the time. I want to go out and give talks. Yeah, talk to people like be the evangelist.

And so that's kind of how I like kind of my career trajectory where I started as an engineer, then turned more into Devrel. And I love helping people like onboard onto the stack. And then that kind of gave me more network with the larger community. And then when it came time, when we started osmosis, I had that network that I was able to like, you know, into. Let me ask you this, because I'm in, you know, marketing, content creation.

Stephen Sargent

I work with a lot of like crypto and blockchain investigations company, analytical companies. The chain analysis is of the world. What's it like for you as a company now to try and, you know, market yourself? Because are you marketing to more of the tech savvy people? Are you trying to bring, you know, some people that have a foot in the tech savvy door, but they're still kind of building up huge web two infrastructure and helping them bring, bring them open.

How are like, because I think a lot of tech people listen to this podcast. How do you approach marketing and business development? Is it just going to be in these hackathons, the East Denver's of the world? Are you trying to bring some more of the, you know, with the bitcoin ETF trying to bring some more of the traditional actors into the space to build on top of Osmos labs? Yeah.

Sunny Aggarwal

So I think right now, like we were very focused up till now, we've been very focused on like the cosmos ecosystem. There is a core community within Cosmos and we were trying to serving that. But our end goal is to, I want to build the decentralized Coinbase. I think Coinbase has done a really good job at onboarding people into crypto. Right.

And this is something I think most dexes just don't do today. Every bull market, a lot of people get into crypto, they enter via Coinbase and binance and less than 5% of it probably make it on chain and they all get stuck there. And so I think it's important for dexs to move up the funnel and be people. Like the way to get into crypto shouldn't be from Coinbase, it should be from a Dex. Right.

And so that's kind of what we're targeting is like how do we not really as focused on, oh, we want institutional traders and stuff like that for us or our vision is more on the, like how do we get retail people to come. And our take is that if you can solve that, everything else fits in where, you know, if the retail traders come, then other, you know, traders will come in order to, you know, the thing is, at the end of the day, if retail is kind of like the fish in, you know, in poker, you have the fish. And so, you know, wherever the retail is trading, that's where other traders are going to want to come in that then liquidity is going to follow that. And so it's, and they're going to. Be the ones talking to the, their institutions say, hey, why don't you for this?

Stephen Sargent

Or why aren't you involved? But tell me about the challenges of that. What's the biggest challenge of getting the retail? Do you think, you know, many, the average user, decentralized exchanges is kind of like you're being your own bank. Do you think the average user is ready to be their own bank?

Or do you think they should be dabbling? Should they be fully invested in decentralized exchanges, or should they be in decentralized exchanges and then utilizing those central points when they feel it necessary when they have to, you know, maybe off ramp or cash out? Yeah, so I think the, I mean, there's a bunch of. So I actually did this just to experiment where this was like, three or four months ago. One of my friends who works at Rob, he's a software engineer at Robinhood, so, like, technical in fintech, in fact, but has never used crypto.

Sunny Aggarwal

And I gave him a challenge, and I've recorded the entire thing. I told him, like, hey, one buy $100 of maker token on uniswap, figure out how to do it. And it took him, like, over an hour, like, of figuring out, how do you download, what is a wallet? Do you have to download this metamask thing? Oh, what?

Why am I saving these words? It was like, so it was a great case study. I had the whole thing, and then we documented it and made a nice video out of it. But it's okay. What are the pain points?

Okay. One, I think wallets are very hard for people to understand, and especially saving the words. So we're, that's kind of where we've been spending a lot of time right now. We've been working on this concept called smart accounts. It's basically like a way of doing account abstraction, but it's like, I want to kill the concept of wallets.

Like, you should not need to have a wallet. There's a lot of, you know, you can use the secure enclave of your MacBook or your iPhone or your Android phone or whatever. Phones now have so much like cryptographic, like cryptography, cryptographic material storage systems. Now we don't need to have these separate wallets to do that anymore. So that's interesting.

Basically, when crypto started, we kind of started our own web three, kind of had its own trajectory of cryptography. But in the meantime, web two has actually also been doing a lot of cryptography innovation, and I feel they haven't been like merged yet. And so that's what we've been spending a lot of time looking at, going through all the w three C standards and be like, okay, here's this thing that can actually be like very applicable to crypto. And so that way the onboarding experience feels more like the web two apps people are familiar with. So that's, number one, fiat on ramps.

That's the other one. And that's actually the harder problem. Binance has actually done a good job on this p two p thing that they've done that. But at the end of the day, the fiat on ramp is the thing that's very hard to decentralize. And I think that's why Coinbase was brilliant with USDC, because my take is, everything else that they do is going to get decentralized.

But owning that fiat on ramp and off ramp point, thats where Coinbase will be relevant in the long term, Preston. And I think the reason why thats hard and thats going to be my next question is because the lack of know your customer anti money laundering compliance programs that have now decentralized exchanges, how do you solve for that problem when people are like, hey, I would use you, but I need KYC know compliance. I need that check mark from a compliance standard. I need the tax reform that's going to be provided by the coinbases of the world. How do you kind of solve for that problem, which seems to be a more everyday problem of the people that you're trying to onboard.

Yeah, so, I mean, we're working on generating tax reports, for example, like from on our site for you. But the, the compliance stuff, that's where I think this kind of comes to. You need like some cryptography, like zero knowledge proofs. You want to be able to say, make a proof that, hey, I'm proving XYZ about myself, but like keeping that information private. So like I mentioned, even, you know, our goal is we want to suppose this, our goal was like a privacy platform, right.

And so, but we've had to especially like post tornado cash we've had to rethink a lot about how we design it and architect it so it allows still compliant, maintain levels of compliancy while keeping the privacy without undoing the whole point of the system. And is there any projects that are built on the Osmos that you're like, oh, on the osmosis that you're like, oh, these are really cool. More people should know about them. Or just even your personal projects are like, oh, I just love dabbling in this one because it's something that I had, you know, that I'm really close to. Yeah, I guess a couple of them that I'm excited about.

You know, there's one that's called stream swap. So that's actually a project that we started like internally, and then we kind of spun it out into a separate team. But that's basically like a launchpad. It's like a new auction system that we designed because I just didn't like the way that the auction system today seemed a little bit too gamable and didn't feel fair enough to me. And so we kind of designed this new mechanism.

And now that's been being used for a lot of the token launches in cosmos happen via the stream swap auctions. And we actually just had, for the first time, had a NFT being launched via the stream swap and it actually ended up being the biggest stream swap. I think there's over almost like $2.5 million. I think $2.5 million, like in that. In the, in that auction right now.

So that's like pretty exciting to see it be used for more use cases. There's also like a perps platform on osmosis called Levana, but they do this thing called, they call it well funded perps, but basically it's like, it's like a GMX style thing, but it's actually designed to be much more, in my opinion, safer for LP's because the collateral is still in kind. So, you know, the problem with most per platform, you're using USDC as collateral, but here you're able to, like if and so that, that limits their ability to, like, support a lot of things. You know, you can't create a perp on some shit coin, right. But because it's just too risky.

Stephen Sargent

When you describe what a perp is, you know, a lot of audience members aren't going to be, you know, know about these acronyms. This kind of gives a basic understanding of when you say perpetrating. Yeah. So a perp is basically, it stands for a perpetual future where it means that your trick, you know, in traditional finance, a future is saying, hey, I'm trading this in the future, I'll trade you, instead of selling you one bitcoin today, you can buy from me like one bitcoin a month from now. Right?

Sunny Aggarwal

What's the point of this, hedges? Yeah, what's the point of this? It's because it allows you to do leverage very easily. So instead of being like, hey, I give me like one bitcoin now, it's like, hey, give me ten bitcoin in the future, I'm going to put up this much money as like collateral to buy that ten bitcoin from you. Or really what you have to do is you have to buy the difference.

So you only have to put up the money if bitcoin's at, you know, I want to buy ten of them a month from now. I only have to, you know, I think it's going to go to only have to put up the money to buy that difference in the value. And so that's kind of. Yeah, people, you know, people love trading on leverage, basically. And so people love trading with money that's not theirs.

Yeah. So basically, Levona has built a new design for how to do this sort of leverage trading that is, just allows you to trade on leverage with a larger variety of assets because they've reduced the risk to the protocol. The reason why most perp stacks can't just list like random new coin that just launched is because there's not enough, it's too risky for the platform because. The market manipulation is definitely there, where if it's not enough volume and not enough transactions, whoever is launching this token has the ability to influence it, which we see with a lot of these new tokens. I think chain analysis and others have reported like 50% of the new tokens on either binance chain or ethereum are all really easily manipulable and people have to be very wary of because they're pumping them.

Stephen Sargent

Yeah. Quick question. You, you know, I've read up a lot about mesh security, which sounds very interesting. You're saying basically it's the NATO of maybe the blockchain, maybe this kind of describe what mesh security is and how you're embedding this in some of the projects you're working. Yeah.

Sunny Aggarwal

So mesh security I talked about a little bit earlier about choose what security you want to use. Mesh security is sort of the framework that enables that it allows you to bring. Most blockchains today have always been like, oh, you have to have your own security, or you have to use only ethereum for security. It's like messenger is. No, no.

Why can't we actually get security from many different places? Right? Obviously you'll use your own token, but you can also get security from other. So as an example, can you build. Out the concept of what security, like, what security are you talking about?

Stephen Sargent

Especially because we have a lot of finance people, they think you're talking about securities themselves. So it might be helpful. This kind of like build on what. Security means here is economic security that's staked, protect the network. Basically what that means is most of these blockchains today are proof of stake based networks.

Sunny Aggarwal

And what that means is we have, people have staked, let's say, $500 million of assets on osmosis. And our platform custodies like $300 million. Right? Now, let's say what happens is what keeps these, like this $300 million from being stolen is that if they try to steal that $300 million, the people that are like, they're going to lose $500 million. So no one would do that, right?

That'd be ridiculous. So the idea is, but let's say the assets under management of our system goes up and up and up, right? Let's say it gets to a billion dollars and then our token price only increases to where it gets to $750 million. Okay, we have the assets under management is higher than the economic security that's slashable in case of misbehavior. So how do we solve this is let's bring in, let's get let more.

Let's not only rely on the Osmo token for, for, for economic security, we can say, hey, if you have bitcoin, you should be able to stake it on our chain, help provide more security. And why you do this is because you get the cut of the revenue from the chain, right? It's a Dex. This trading fee is being earned. So if you are staking your tokens to help, you know, secure the network, secure you're getting, then you're getting revenue.

Stephen Sargent

You'Re profiting as well with the, which is almost like game theory, right? Because now you're profiting from the success of the network, which is almost like you're double, if you game pay double the strength of the network, you're a part of it, you're getting paid for it. Why wouldn't you, why would you want to try to do something elicit to it? Because it's where your success lies. Exactly.

Sunny Aggarwal

And so, yeah, that's why it's like for the Osmo. So, you know, our osmosis today, it's only secured by Osmo, but we'll, with mesh security, we'll have it be secured by bitcoin, by ETH, by atom, by partner projects, tokens. You know, there's like, like Levana, right? Like I mentioned, Levana is a project built on top of our chain. They have their own token LvN.

Why, why can't people stake Lvn token to secure the chain as well? Right. We'll be able to secure osmosis with more than just Osmo. That's the, especially people that are already. Or projects are already in the cosmos ecosystem.

Stephen Sargent

It makes a lot more sense for them then to like, maybe pull ethereum, right? Exactly. Yeah. So I have this, like, concept where it's, okay, you're building, you know, a military, an army to protect your chain, right? The first people, when you build an army, the first thing you do is get that, you know, you staff your army with citizens, right?

Sunny Aggarwal

That's your own token holders. They're the most value aligned with your chain, right? And so you give most of the revenue to them. But let's say there's a security deficit, right? Who do you rely on next is your allies, right?

Do you say, oh, okay, hey, Levana lvn token holders, you can stake as well. You get some revenues because we're trying to increase our security of the chain. Or, you know, and that protects that. Would that protect their chain as, would that help benefit their chain as. Yeah.

Stephen Sargent

Similar allies now to, you have more people, more security, and it protects now more of the ecosystem. So finally, if even with all your allies, you're not at the security threshold you want, then you finally rely on mercenaries, and that's where the bitcoin and ETH of the world come in, because, you know, the bitcoin people who are staking on your chain, the ETH that's staking on your chain, they're mercenary, right? They're just doing it for the revenue. They're not that value. Osmos or cosmos?

Osmosis or Cosmos makes it. Yeah. Let me tell you, as we end this conversation, you joked about, you know, being kind of like a bitcoin. Maxi, what are your thoughts about the bitcoin spot ETF? Is that getting us further away from, obviously, your ethos of more people being onboarded in the decentralized nature?

Or do you think it's good for the industry that hit eventually, if there's enough players in the game, right, if there's enough people at the stadium, you as a decentralized network, maybe able to sell them more hot dogs versus, hey, there's not that many people. Even if we had the hot dogs, there's not a lot of people to buy them in the first place. What are your thoughts on that? Yeah, I mean, at the end of the day, I think it brings in more people and, like, more attention. Right.

Sunny Aggarwal

I think people are, you know, I think bitcoin will replace gold. That's just always been my thesis. And I think that gold, like, you need to make it. Gold works as everyone in the world has the ability to, like, access it. And some people, a lot of it comes from the gold ETF, but also, people just buy gold directly.

Like, if you go to India, like, so many people, you know, they take the excess salary and they put it into buy, like, bricks of gold, basically. And so, you know, I think the ETF just increases the options for how people can hold bitcoin. Right. They'll be the people who want to hold it in, like, self custody. But then, you know, not everyone's gonna do that.

And I think your analogy with the stadium is just, like, spot on. I don't think it's like I just saw the. So I'll make sure to clip it. Give more people access to bitcoin. That's the, that's.

That's the goal. Yeah. If they're sitting there, if they're talking about it now, at least so you can introduce in the conversation they even understand what the underlying asset is. Whereas before they probably didn't. They just know it because it comes up on a ticker on CNN or BNN.

Stephen Sargent

Any advice, you know, for anyone that's looking like they listen to this podcast, like, hey, you know, I have a concept I would love to try and build on osmosis or, you know, in the cosmos ecosystem using the tools. What advice do you have for new developers are looking for a little bit more similar to you, right. You're looking for a little bit of a different application or to actually create applications. What advice do you have to anyone that's looking to enter your ecosystem? Yeah, I guess my advice would be learn Rust.

Sunny Aggarwal

Rust is probably like the smart contract. The main smart contracting environment of Cosmos is in Rust and for Solana as well. So basically, like today, if you're learning, if you want to do smart contracting on EVM, it's solidity. But I think that's, you know, solidity feels like it's like the thing that's going to, you know, but I feel it's like very similar to Java. Right.

For a long time, people thought Java was just like, you know, it won. Right. But eventually, new programming languages come out, and I think most smart contracting systems are going to be moving towards rust based things. So, you know, Cosmos, we have this thing called Cosmos, Solana Move. These are all rust based.

So if you want to, like, have a, like, development skill set that I think is long, more long term rust based smart contracting is probably what to invest your time in learning. That's. That's really interesting. And any other insights that you have about what you're building osmosis labs, like the thrill of the show right now, as I got from the MFM podcast, what do you want to talk about that you're looking forward to in 2024? Yeah, I think what I'm looking forward to is, I think the three big focuses are things I kind of touched on throughout our course of our conversation.

But just to recap them is like, bitcoin renaissance is happening, right? Bitcoin for a long time was just Petrock, and now very valuable pet rock, but now there's a whole ecosystem of development growing around bitcoin, and osmosis intends to be a big part of that. We want to be the Dex for bitcoin. So that's. That's number one.

Number two is account ux. Right? Like fixing, onboarding. Onboarding is really broken today. And, you know, we are.

We have a roadmap of steps that we're taking to do that. And then number three is privacy. Do you think people really care about privacy? You know, I always think about. We always say we care about privacy, but we'll give all ten pieces of personal information to save 10% on bed, bath and beyond.

Stephen Sargent

So, like, where do you that people really sit on the privacy scale? So I think that. So I think, actually, people do care about privacy, but there's certain things people care about. Right. So, for example, for us, you know, you have this, like, all this, like, front running and mev, that happens in crypto, right.

Sunny Aggarwal

That's a privacy problem. That's because the mempool, the, you know, before your transactions make it on chain, anyone can read your transaction. That's a privacy issue. So that's solving. That is number one.

Stephen Sargent

And what front running is, is that they can now spend more on transaction fees to either offset whatever you're trying to do or to see, hey, everyone's trying to buy this NFT. It must be very popular. I'll just double the transaction fees. I'll get the NFT. But I know, because there's so much pent up demand that they'll be coming to me when I go to sell them on the secondary market.

Is that. Yeah. If you want to buy an NFt. Right. You can.

Sunny Aggarwal

Someone can see that that's what you're trying to do. They can buy it and then turn around and try to sell it to you. Oh, now you pay me more. Pay me 50% more. Right?

That's not cool. The other one is, like, on chain privacy for traders. So a lot of traders I know don't trade on decentralized exchanges because everyone can see every. They're leaking their trading strategies. Right.

Everyone can see every single trade that someone is making that, you know, a lot of these companies spend, like, a lot, like a lot of money developing these proprietary trading strategies that are private. If you go on the stock market or even on centralized exchanges, you can't see which account made which trade. Right. That's today. That's just a no go.

This is table snakes. Twitter sleuths are able to figure out your whole strategy in a matter of seconds. Running algorithms. Exactly. Awesome.

Stephen Sargent

Where's the best place? Do you like to talk to people? Is it Twitter? Can you stand crypto Twitter? Where's the best place for people to get in touch with you?

And we'll share it in the show notes. Yeah, Twitter, definitely. So my Twitter handle is Sunny, a 97, and you can follow osmosis at osmosis zone. I love it. I love it.

Sunny. This was such a great conversation. I learned a touch a ton about decentralized exchanges. But more importantly, the ethos of why you're building it, I think people just think decentralized exchanges, we're trying to avoid compliance, but you're a lot more thoughtful as, hey, we're trying to build on top of something that most people should get involved in, which is bitcoin. And this is the best way that we can think that you can interact with multiple chains without there being that centralized authority that we started from trying to get away from in the first place.

So it was great hearing your thought process, and I think that will help more people understand about what decentralized networks are really are about. Yeah. Thank you for having me on. This is really fun. Thanks, Sunny.

Thanks, Sunny.

Sunny Aggarwal

Thanks, Sunny.

Stephen Sargent

Thanks, Sunny.