Episode 15: Yenwen Feng and Nick Tong | Perpetual Protocol - Optimizing DeFi with Layer2
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Status
A discussion and Q&A session with Nick and Yenwen of Perpetual Finance. Recorded on December 2, 2021.
Briefing Information
Timestamps
1:35 - 5:34 - Yenwen’s Introduction
5:34 - 6:22 - Nick’s Introduction
6:32 - 8:08 - Brief introduction to Perpetual Protocol
8:08 - 10:54 - How has Perpetual Protocol grown?
10:54 - 12:00 - Benefits of using Perpetual Protocol
12:00 -15:55 - Why Perpetual Protocol was on XDAI
15:55 - 18:08 - Explanation of the Perp Token
18:08 - 19:24 - What’s Changed with Perpetual Protocol V2
19:24 - 24:54 - What is Kiri, Perpetual Protocols V2
24:54 - 30:08 - Why did Perpetual Protocol version 2launch on Optimism and not XDAI
30:08 - 32:43 - Why was Arbitrum not utilized
32:43 - 35:14 - The Evolution of DeFi
35:14 - end - the Future of Perpetual Protcol.
Transcription
Perpetual Protocol
Humpty: [00:00:00] Welcome to Crypto Sapiens, a show that hosts lively discussions with innovative Web3 builders to help you learn about decentralized money systems, including Ethereum, Bitcoin, and Defi. The podcast is for educational and entertainment purposes only, and it is not financial advice. Crypto Sapiens is presented in partnership with BanklessDAO, A movement for pioneers seeking freedom from the limitations of the traditional financial system.
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Hello again everyone, and we are back with the first episode of 2022. Today we are talking to Yenwen Fang and Nick Tong with Perpetual Protocol about perpetual swaps, concentrated liquidity for derivatives and scaling [00:01:00] Ethereum on layer two solutions. We cover Perpetual Protocol v2, AKA Kiri, and their choice to migrate from XDAI to optimism.
Let's get started. So let's welcome our guests here today, Yenwen and Nick why don't we get started with a brief introduction to yourselves. And if you wouldn't mind, give us a bit of a backstory, as much as you wanna share or feel comfortable sharing in terms of, how, what, what got you started in this space, how you fell down that rabbit hole and how you ended up working on this project.
Yenwen why don't we start with you?
Yenwen: Thanks for having me. I'm Yenwen I'm the co-founder of Perpetual Protocol , I know the co-founder and I we work on like different projects since 2015. And we act we kind fell down the crypto rabbit hole in 2017 because of crypto kitty, I used to do like development, so I like why, the first time I see that you can actually own an [00:02:00] asset in, I think that's really psyching but at that time because I think the platform is not ready yet, so we have a hard time so we actually game at first but we have a hard time because there are no tools and then people are just getting into crypto more in like 2017. So we end up like abandoning that idea but we are more attracted to the whole like the DeFi how we can build a financial system on chain and then have it be more like transparent, more trustless, like the more per permissionless.
We really like this ideas that we decide that we should spend all our time on this. And actually at that time there's no DeFi yet, like nobody called the whole like essential finance DeFi I think only like Maker and Compound at that time they're still working on this kinda concept. So at the time we want to [00:03:00] work on, i mean in 2018 we have this new idea that we want to construct an option protocol on chain but it actually failed. We, it's hard to get attention and then we, it's also like they system design issue so it's all first time so I think it's it's really hard to decide on trend protocols but we have been like talking to a lots of people, so we end up joining the Binance, they have this new accelerator, so we joined that accelerator. We kind are working on another idea that actually a quick accounting software and then actually the market crash. We have been like in the ecosystem for a while, laid down and working with the content to deal with some accounting stuff. And then quick forward to 2000, so we have been doing that for a what you and then good forward to 2019, the end of 2019, we actually see the growth of like uni swap that's really classic. [00:04:00] We feel that the AUM is the thing that we haven't figured out in 2018, but it actually works. And then we also look at like the Synthetix we lot of on Synthetix the token model, their staking model is really interesting. So we feel that if we combine this too we can probably bring back our like option idea. So we actually pivot, we drop that accounting software idea and then want to build a I mean give derive the protocol at first we work on options feel is so be hard and it's much harder than like other derivatives. So we end up trying to do a perpetual protocol online on chain.
So we start trying to design that AUM and spend like several months on this and in like the beginning of 2020, we have this new idea that we code this AUM which is it's a methodology of how we can [00:05:00] place virtual asset into AUM and then we actually can can have an AUM that trigger trait against each other without equity provider. So that's actually the thing that's we really excited about. And we go ahead and then build that I mean build a perpetual protocol at the time we go with strike oracle . So that's actually how I got into like crypto and then the whole journey Yeah.
Humpty: Yeah. That's wonderful. Thank you for sharing that. Nick how about yourself? How did you get started in this space and how did that lead you to perpetual protocol?
Nick: I’ve been in and out of the space a couple of times. I guess the last time stuck. So way back in 2013 bought Bitcoin got Gox'ed so left the space for a went into kind of startups, founding my own and then in about 2016 came back again and started running like an arbitrage fund. I left again post the post the massive crash when things got quite quiet and joined a, another FinTech startup as kinda head of product and then more [00:06:00] recently, just around uni V2 around the time when they launched just before really got into the Balance ecosystem as kinda the first project in Defi. From there just started helping out and reaching out to a whole bunch of projects. Joined to the Perp community and eventually just asked and landed a role of Perp which is now where I'm at and currently running strategy and partnerships.
Humpty: Great. So there's a few things you talked about here that I do want touch on, but I think it's only fair to do a a, I guess an introduction to the project or the protocol itself. So what is perpetual protocol and really what sets it apart from some of the other DeFi protocols that we may be familiar with.
Yenwen: Yeah, sure. Let me do a quick like intro. So perpetual protocol, so we are building this like decentralized perpetual swap on chain with AAM so we have this special new design that we launched last year called Virtually AAM that I just mentioned. That we, I mean we figured out like [00:07:00] how we can place a virtual asset on in xyk AAM and yeah, actually we company like a degree provider in that AAM so that's I think that's how we like differentiate ourselves from others. And that's a V1 of like our like like a perpetual protocol and then we just launched V2 like two or three days ago. So V2, we actually take a step like forward and then we use a Uniswap V3 as our kinda like a big layer. So In V3 you can actually, So it is still a perpetual contract book. So means that you can leverage up to 10x and then you can also short the asset you want, we don't really need to own the real asset its all perpetual contract. But with UNI V3, we provide concentrate equity so you the I think the capital efficiency is much higher than our V1. So yeah, I think that's just a quick [00:08:00] intro of like how, what we did. I think we just have this the team is very good at AM design, so yeah, that's about it
Humpty: Thank you. So for me that leads to I guess maybe the next question and so I think for many of us who are familiar with DeFi, Perpetuals isn't something that is the traditional flavor of it. So could you give us just a brief description of what our perpetuals and really how that makes DeFi or how it improves DeFi or how it improves or makes that experience different
Nick: Sure Sure I, I guess if we start very briefly Uniswap Is a spot kind of exchange and you have the underlying token you swap one for the other. So you put in USDC you get ETH back. For example, the next kind of iteration of that I guess from a product perspective was then kind Okay, how do I get leverage on that? And so you started to see kind of margin protocols which is okay, I will borrow more USDC to either buy or sell, for example, and I'll just borrow the assets. The prob it's not necessarily a problem but one of the issues with that [00:09:00] was that imagine the borrowing costs is quite expensive, and it's not as efficient as you would like.
Perpetuals basically is then one step further where it's kind of a synthetic. Asset where you don't hold the underlying asset, so you don't hold the ETH when you buy it, You don't hold Bitcoin if you buying it. But it just reflects the price of that asset and how it kind of moves. And the way that we've done it,I guess is popularized, I guess by BitMax is the perpetual kinda future product futures in itself, I guess normally in, in the TradFi sense. It expires after a certain amount of and because of the expiry the price of kind of the market is forced down to the index price. The index price being kind of what the actual spot market is. So if it's, if ETH is trading at like 4,600 on kind of this futures market and then on Uniswap like for example over time as it gets towards the end of expiry that 4,600 will converge to 4,500 because people can arbitrage it. But in, I guess in a perpetual sense, we then removed the [00:10:00] expiry component so, and we've replaced it with a funding rate. So the funding rate tries to do the exact same thing but because it's a perpetual, you don't need to worry about expiry. So a lot of the time you have to worry about how do I roll over a contract or how do I continually think about managing my position? But in this case, you can literally just go 5x long, for example, And not worry about it too much and how the funding rate works is quite simple. So if your your current market price In, in our case again, ETH was 4,600 and if the index price again, spot price, let's say is 4,500 then what happens is every hour the people who are long will pay the people who are short a funding rate. And the idea of that really is that the higher the difference that is, that more expensive it becomes and so people are more likely to kinda of selling or get more short sellers basically and those prices kind of line together. So I'd say those are probably the high level mechanics of perps.
Humpty: Yeah. Thank you. So Over time I guess, how has the perpetual protocol grown evolved? How what are some of the [00:11:00] results from the product so far?
Yenwen: Sure That's a good question. So like I said, we launch, like we won the end of last year, so actually December, it's almost a year stuff on there and we have around like 33 or 34 billion check in value totally. We don't incentivize anything It just people check here. So I think that's really great. One thing I want to mention is that the per viewer one actually built on top of a XDAI so we actually, one of the, like first like project, like DeFi project moving onto a site chain solution, it actually benefit us because the gas price is low so the cost of transaction is pretty low then the traders can actually place a lot of shows I mean build their own strategy more free on the XDAI so I think that's one of the reason we have this like high transaction volume.
Humpty: Oh, that's interesting. So actually that's one of the questions that I usually like to ask of projects that are on the [00:12:00] show and really that is what are some of the benefits that people can reap from using this protocol or this project. And it sounds like one of these things is the ability to use it a little bit more freely, just because of the cost benefits that are associated to it. So was that one of the, one of the main reasons why Perpetual protocol was launched on XDAI day originally?
Yenwen: Yes. So cost is definitely a big factor for the traders. So yeah, on a XDAI the gas fee is pretty low, maybe like transition is several cent. And also in the sense all transaction fee is like a 10 based point, so it's not that high compared to UNISWAP. So it, it just like over the cost of your trades so if you, if you have large trades or many trades, you, I mean like a perpetual Swap is much like a lower cost to you and also at the same time you can leverage up without borrowing, you don't need to pay interest compared to like margin.[00:13:00] So that's also benefit and yeah, so I think that's about, Yeah.
Humpty: You mentioned earlier that when you were developing perpetual protocol there weren't very many DeFi products around, right? I think you mentioned compound. I think I think you might have mentioned also Maker and Synthetics. So were you one of the first to move to XDAI because I think all of those projects were built on top of Ethereum If I'm not mistaken
Yenwen: Yes, we are kind of like one of the few like DeFi projects Move on XDAI. I think we still like one of the few like part Defi projects that on on XDAI right now. Because I think most of the projects like the I mean, last year when we launched the project, most of people are on if like you said not lots of people looking for like year two or station solutions. When we go to actually that's kinda like October last year, and the gas price it's actually quite high. Not as high as today, but at that time, I mean from like you place a trade, it probably cost you [00:14:00] like $100. We actually just don't think that works for perpetual protocol or actually for any trading. Yeah. So we are just a, one of the pioneer to just move to like day or two and then see how it goes
Humpty: Right, So what do you what would you say are, were some of the challenges in doing something like that? Going against what other people were doing in terms of like where they were launching their protocol and what were some of the clear advantages? Obviously, the maybe the speed and the the cost would be, What would you those two things would look like in terms of like challenges and opportunities
Yenwen: Yeah, that's a great question. The challenge of course is that there, there is like no one like before us, like deployed on XDAI for DeFi project. So we have a lot of internal debate as so we go to the Estai or actually should we go to MATIC at that time? So at that time, MATIC actually just finished their proof of stake client and then they kinda relaunched their whole protocol at that time, still [00:15:00] called MATIC and we have like some of some engineer support that we should go to XDAI and I mean it just like a lots of people because there is no like clear route to this so we just know
Humpty: It sounds like you were just experimenting, right? Most of this space is just really built on experimentation anyways.
Yenwen: Yeah. But they it did take a lot of I mean like research and to kind of make, made that move Yeah. So I would say like the challenge is just like the team has to have like convince that themself to do this. I think that's actually the thing that we spend most.
Humpty: Maybe the protocol wouldn't have scaled so quickly, or maybe it would've been some of those other challenges would've been a lot more clear in terms of people wanting to create those strategies, like you mentioned earlier on Ethereum versus maybe they weren't so free to do it the way they were able to do it on XDAI.
Yenwen: Yeah, true.
Humpty: Tell me a little bit about the perp token. How does that fit into the protocol? [00:16:00]
Nick: Currently the main usage for kind the token is around staking, staking currently earns some inflationary rewards. The idea with kind of the token really is it currently acts as a backstop to the protocol.
So similar to what I guess all done in that, like if the insurance fund gets drained, then kind of the perp tokens are the ones that are kinda backstopping it. I would say currently we are still working on like future tokenomics so nothing is like super finalized, but the way that it's kind of shaping out currently is the stakers have kind of two, two roles. So one is they can stake in kind of the public markets which is all of the markets that we currently have. They earn a percentage of the fees and then if in the case where the insurance fund gets hit, goes to zero then up to third percent of their staked perp gets slashed to repay the debt. Then from that they can take their staked perp and they can then stake that into private markets.
So very quickly on private markets the idea of private markets is that, If you look at all of the [00:17:00] perpetual kind of protocols that kind of exist both in DeFi and CeFi everything is permissioned, right? Like you, you have to go through a process to kinda figure it out and there's a really good reason for that because if you launch, I dunno, if you launch a token goes to zero, it's going to have impact on the insurance fund and that would be negatively impacted. So with private markets, what we see going forward is almost like private market DAOs where all of these markets that they want to run are very isolated. So you'll have this sorry, isolated in the sense of the insurance fund is isolated. So a private market DAO may run kinda 3, 4, 5, how many markets they want and the insurance fund is only shared between these markets. So you could launch your set of DAO tokens if you really wanted to but you are taking the risk of doing that. Now perp tokens then come into play here because you need to use your staked to launch those private markets and what that allows you to do a is you are again backstopping those private markets. But what that means is you take a larger cut of the fees from those private markets.
[00:18:00] So as a perp holder, if you stake in kinda both public and private markets, you'll then take a percentage of fees from the public markets as well as a percentage of the fees from the private markets. And then that, that's probably the main use case that we're seeing right now. Again, it's kind we still need to fine tune and kinda tweak it before it's finalized.
The second piece is there's kind a lot rewards programs I guess that we are coming up with in the future. And a lot of this will require staked in some way, shape or form. We'll still kind of probably that, that people who don't steak per can still have access to. But the idea really is you might have 3, 4, 5 kinda tiers of varying levels of stake perp which then kind of impact the wards that you're able to access and so forth
Humpty: So how has any of this changed or been improved now with the release of Kiri?
Nick: With, I guess with Kiri we're one step closer to, to, to kind of getting there. In V1, there wasn't a very large kind of emphasis on building out the staking mechanisms and so forth of the perp token and [00:19:00] that was just because we had to focus really on launching and staying up to date with that.
With the launch of V2 we're able to dedicate a little bit more time and kinda think through this a little better and spend a little bit more time on the research site, just given them whatever tokenomics kind of solidifies, it's gonna be fairly like obviously it be changed with governance we wanna set the right ground work so that it's lasting at least for the last 6 12 months lets say
Humpty: Walk me through just query V2 because that's a major release, a big update to the protocol. What are some of the things that have, have been updated to the protocol? Looks like also a change on where it's operating which it's on optimism yeah. Walk us through and give us an introduction to what that looks like and what that means for the future of perpetual.
Nick: Yeah. Yeah. There are, yeah, So I guess first off we have moved from XDAI over to optimism as you mentioned, we, and we've done that because we've, we care quite a lot about composability. So I think we have the last time I counted like maybe 10, 15 [00:20:00] projects that are directly integrating with us right now, there's probably another 10 in the pipeline. And so being on kind of a layer two where people actually want to build on is quite key for us. And we had the problem where, for whatever reason, I dunno why people just didn't wanna be on our XDAI and so moving over to and then from a protocol kinda perspective, there's three major categories I would say from a V2 that we're looking at. We've kind of staggered them into phases.
The first phase, which is the one that we have deployed right now is probably the biggest one I would say. And that is moving from a Uniswap kind of V2 model to a Uniswap V3 models. And that means we've directly integrated with Uni V3. I would think of it more as using Uni V3 as like our our accounting or our pricing engine i guess, but what that did is it change on the surface, it looks quite simple, but we, it's changed a whole bunch of parameters we now have LPs who provide liquidity. They can be kinda like market makers and whatnot and so the design space of what you can do on this kind of AMM based perpetual product has opened drastically. And this is why I think a lot of projects like the way we we do it [00:21:00] because your price is not determined by a formula that's been set by someone.
It's quite dynamic now. You can do a lot more than you can before. So that's the first piece and that's the one that we've currently to the twos, the next two phases we are looking to kind of deploy in the next one or two quarters and the second piece around that is trying to get to centralized exchange kinda from a functionality perspective. So we want to offer multi collateral types. So being able to deposit ETH for example, instead of just USDC and being able to trade against that and then cross margining, which we have actually implemented in this release and then the final one which is the one that I talked about which we're particularly excited about which is kinda private markets and yeah, I think I've already gone through it before so don't need to go through again.
Humpty: Yeah. So I always like to imagine that our audience doesn't know what some of this vocabulary means. So would you mind giving us maybe a brief 101 into some of the benefits of like multi collateral and cross margining as you described being available in the future on carry
Nick: Yeah. Yeah. So Cross margin [00:22:00] is already available and what it so there's two types. There is Isolated margin and there is Cross margin. So the best way to think about this is when you open up a position with any form of leverage, there is a liquidation mechanism which means that If you bet too much, you'll get wrecked effectively and someone will come in and close your position and take a percentage of of your position. And just, that's just to ensure that kind of the system doesn't have any bad debt as a whole. That liquidation kind of mechanism depends on the margin that you have. So you always have this you have this concept of having to maintain a minimum amount of margin for a position. Now with Isolated margin, what that means is that each position that you have, let's say you open an ETH position and a BTC position, they will both require specific amounts of margin for each one, and so when you open a position for your let's say your BTC one, let’s say we take 100 USDC as margin and when you open your east one, let's say again we take a 100 USDC as margin. What's happened now is we've [00:23:00] taken 200 USDC in total and they don't like these two margins like they don't talk to each other. Whereas with Cross margin, what we can do is that instead of depositing I guess collateral into the positions themselves, you can imagine that you have a wallet that you would deposit into. So now all I would need to do for example, is deposit a 100 USDC into this wallet, and I could open the same kind of BTC and ETH positions and so it's a lot more kind of capital efficient because the margin requirements are shared across all of my positions rather than with with some of them rather than them kind of being isolated. So that's kind of the Cross margining element of it and then I guess from a multi collateral perspective, what we, I don't think we have a super solidified we have an idea of what we're gonna do, but the effective idea is imagine you have a compound within perp, so you would put in Ethereum, You could then borrow, let's say 75% of that Ethereum in U S D C in a $0 sorry, [00:24:00] 0% loan. And then you would trade whatever you wanted to trade against that. So it opens up why that's interesting is it opens up a lot of different use cases for people. One really basic one is Lema, for example, they are building like a basis, almost like a stable coin. So if you imagine that if you can put it one ETH into perp and you can exactly shoot one ETH you effectively have like a synthetic stable coin because your. If ETH goes up, then your collateral value goes up, but your position value goes down and vice versa. So you almost have this synthetic stable that now is not dependent on kind of circle holding USDC or hoping that whatever has your money. And it opens up this whole new design space basically for people to kind of deposit assets that they normally have but they still wanna kinda utilize it. So similar to I guess, how people use compound or are right leverage, but kind, this is 10x of that.
Humpty: So walk me through the [00:25:00] decision for launching, carry V2 on optimism instead of like another, another solution like arbitrum
Yenwen: Actually when we design Kiri we we always targeting at Arbitrum because I think they are, I mean like the ecosystem is strong and then we really like the what they provide, they design. So we actually like built on top of it and then we launch a testnet checking competition like two or three weeks ago actually. And it actually worked quite well until the last day. We have sound like like bandwidth issue with up, we see the guest actually spike alot on the testnet.
At first we, we thought that you just it's a test net. So the bandwidth is a cap. So we notified the team and then we ask them that will it happen the same way? And then they actually respond at the testing and [00:26:00] the mainnet actually are the same. Which means that we might create some like gas spike on the mainnet like with the same traffic. We kind of dig into it and then found out they some, they have a cap on gas per second. So Which means that the layer2, so I think like all the layer two roll up system, they separate the gas into the layer1 gas, layer2 gas. So for Arbitrum, they have this a cap like 80k per second gas limit on the layer2 gas. But we actually looking good thing at our transaction, most of our transaction costs around 5k because it's more complicated leverage platform. So we actually give lot calculation talk to the team about, but they are not really comfortable like raising the cap. So we have to make a decision again that we need to like maybe like use other like platform so we end up going to UP, we talked to the team like also several months [00:27:00] ago. And I think it's quite strong but they have this like issue that it's not like fully compatable to the ETH client. So For for the solar key contract we built, we have to modify that so it is actually a major block blocking thing that we don't want to do. We want to it to be like a 100% compatible to the mainnet. So we, so we just like so UP is got an option at that time, but with their v2, they actually fix it. So it's like a 100% compatible to the ETH client. So it actually, so we start like putting our stuff on of course there are like details that we need to get more, but the only cost us like two weeks and then we launch on UP I mean in just like two or three days ago, Yeah. So its just a re I think it, it actually, it'll be like I feel the same when we launch the view one on XDAI. I mean just this are new, Now lots of people like, [00:28:00] of course they are like projects I build on top of it, but they are like they made that not yet test out yet. We just kind of like need to test it and then make a decision on that even though there are not lots of people like working on that platform yet.
Humpty: Right. But it probably made it easier the fact that Uniswap is there too, right? Because I think I heard earlier there's a dependency to Uniswap, so maybe that just made it a bit easier as well.
Yenwen: Yeah, of course. Yeah. We need to be on top of Uniswap, so that's why we only consider UP and UP. And also we are now real, like once Arbitrum they have this like new update nitro probably like in q1 next year. We will definitely reconsider going back to once they give that the cap, I mean gas payment cap,
Humpty: Walk me through this here, right? Because the topic of the discussion is, building DeFi on layer2 solutions. So would you say that there is a consideration of running Kiri on, on Optimism and Arbitrum at the same time and Uniswap
Yenwen: Yes, definitely. I mean It is just that post [00:29:00] and comes, I'm running on more chance, like we can reach more users, but at the same time the would be fragment so I mean It just like a choice to us. Yeah, so we also consider other chance maybe like public, maybe others but I'm personally ETH maximalist so I just want to do everything on top of it. So that's just myself but like also I consider like the, like potting to polygon. So once I have that, we will definitely take a look. And then I think on Polygon, there is still like a fee benefit, like I said before, the lower the fee is I mean the more trading we can have so definitely also interesting in that as well.
Humpty: At the end of the day it's a matter of making sure that the protocol is accessible to the users that want to use it. So following them to where they're at and building it and giving them that ability is I guess part of the focus of where you decide to launch and that strategy. So you wrote on [00:30:00] one of your latest blog posts announcing Kiri that one of the most exciting aspects of Curious is it's high degree of composability.
Talk to me a little bit about that composability. What does that mean to perpetual protocol and what are some of those ways that the protocol itself is composable and being used by other projects or using, or integrating with other projects I should say?
Nick: Yeah. I to kind of frame the outlook of what we see at least we believe very heavily in composability and I believe down the line, let's say, it's impossible to kinda forecast anything past three months right now, but like assume like down the line, we actually believe that a large majority of the trading volume will come from partner projects that are built on top of perp and the end user won't even know that they're trading on top of perp.
So we, we believe quite heavily in that and which is why we've taken a very different approach to, I guess Most of the projects in the space and very heavily pursued kind of partners to build on top of perp. And what does that kind of mean and what does [00:31:00] that kind of look like?
I think if you look at the design decisions that we've made, for example the simple fact that we are built on top of Uniswap UP b3 is that was quite a deliberate choice. What that now means is that kinda all of the uni v3 kind of LP Strategy providers that are currently building on top of V3 because they're building on top of if they port it over to perp, they're building on exactly the same kind of infrastructure, and the same kind of concepts. We've basically got all of the major ones that are integrating and seeing how they can pull their strategy over and add leverage on top. So that's kind of like a very simple use case. Why we made the decision that we've, whether we've done to use UniSwap V3 because I guess we're very big fans of that. We have been funding, I guess a lot of grants to kind of help either from like a research perspective or kinda building on top of perp and then hopefully if it kinda works on perp you can imagine it also works on kinda UNI V3. So we're trying to help build the ecosystem in that sense.
The second point I guess is that we are fully on chain, so [00:32:00] we don't have any element of our system which is centralized. And what that means is that partners can integrate with us in a completely permissionless way. So we've had many partners come to us We've tried to integrate with other systems and because there are components of it that are centralized, it's very hard for them to kinda permissionlessly integrate and then kinda build on top of it
And then the last piece, I guess is really around optimism by being on the fact that we're on a chain where everyone wants to be. We're seeing a, we're seeing a lot less pushback in terms of as opposed to like when we were reaching out to people in with excite in the first place to do that. And I guess the only other thing I would say is probably from an AMM perspective It makes it quite easy to integrate with us. You don't need to kind worry so much about trying to connect in with kind of like an order book and a matching engine. And so it's a lot simpler in that regard.
Humpty: Great. Thank you. So one of the things that you said really early on in the discussion, I think that was actually Yenwen who mentioned it in terms of the evolution of DeFi from the moment that perpetual protocol was first being developed through today, where it's at optimism, a lot has changed, right?
[00:33:00] The landscape is very different, not just in Defi, but overall in Web3, I think. So what do you think if you could make a wild guess, I know you can't predict what's gonna happen in the future. How do you think that Defi is going to continue to evolve in the future? And just generally, what is DeFi's role going to play be in Web3?
Yenwen: That's a great question. Okay. In general, I think DeFi is only it, it's only like here for three or four years and then it actually be more like a popular only like recent, like a year or two actually, I think just maybe one a half year. Stuff like compound with their token and then the whole DeFi summer, right? so it's it's just like a year and a half before. So I do feel that we have a lots of things that we can build I think on the spot market side, I think we have accomplished lots of things. And but the on derivatives side, of course like we, we are doing, I think we are doing well, but compared to like central change, they [00:34:00] are still a long way to go, do I say is doing well, but also compared to like central change, I, there still like lot of like thing that we can do. So on the derivative side, I think that's definitely one area that we can do much better. And then there are lots of growth in this area. And the second thing is that I mentioned that the gas fee, so I mean because everything on crypto is so popular right now, so gas fee is weird they, they got lots of competition from a one chain. So they offer like last gas fee But I do feel that the user haven't move out from ETH yet, a lots of user scale in ecosystem scale. So we they are two, and also ZK roll up in the future or like other things. I do feel that the lower fees definitely Increase the whole check volume and then adoption for the PFI project that we see right now. So I think that's the second area that the, once everyone move together to there, and then [00:35:00] there two can further cut down the cost. I do feel that we can have much more like either bargain, either like trading, either a user and also like the strategy that you can build on top of DeFi. So yeah.
Humpty: Yeah. Thank you. Nick, did you wanna add anything to that in terms of what you think the future holds for Defi and how perpetual protocol will, have a place in that as well?
Nick: There's a, yeah, that, there's a, may, maybe this is me being optimistic, but I'd love to see In the future at least like if we look at the users, there's always gonna be two groups of users, I feel there's gonna be the users who us within the ecosystem or people who may not have access to like a solid banking system who wants to hold their keys. But I, I also think that there's always gonna be a large group of people that are very happy with a bank custodying their assets because they don't want to, they don't wanna know how it works. So like if I try to convince my grandparents, for example like this there's no chance that they're going to download MetaMask and try use it and whatnot.
So I, I almost see that in the future we, [00:36:00] we'll probably have kind of these institutions and this kind of I guess CDFI style products that cater to this kind of audience that will then plug into DeFi in the backend. And that's where I see the power of what we've built, right? Like we are positioning ourselves exactly for that kind of future where a, we will still cater towards for people who kinda wanna own their keys. And obviously we're not gonna cut anyone out there, but we're also getting ready to be the infrastructure for where these kind of CFI products that then want to tap into DeFi want to provide a better service to their customers through this kind of decentralized infrastructure. So that's kinda what I see in the very, very long term for how long? I have no idea.
Humpty: That's a wrap. I hope you enjoyed this conversation. If you'd like to learn more about Perpetual Protocol, go to perp.com that's perp.com, and on Twitter @perpprotocol. Thanks for listening to Crypto Sapiens. Please give us a follow, like and a five star review [00:37:00] wherever you enjoy your podcast and stay tuned for our next discussion.