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- [00:03]
Ryan
Welcome to Bankless, where today we explore the frontier of perp dexs. We're here to help you become more bankless. You got Ryan and David on the podcast today. There's been a huge breakout this cycle. One of the themes has been decentralized perps exchanges led primarily by a application and a blockchain called hyperliquid. But now some competition has entered the ring and one in particular is is moving up the charts in terms of open interest for perps and volume. It's caught our eye. It's called Lightr. It's now the second largest perps exchange. They're only two weeks in to Mainnet, so it's quite a feat. It's getting a lot of traction. The difference here is that lighter is built on Ethereum. So the question is, is this Ethereum's hyper liquid? In this conversation I think you'll find this is not just a battle of perps exchanges. It's certainly that, but it's also a battle for Ethereum's vision of the world, which is L2S backed by Ethereum grade security versus maybe some other visions of the world. A multi chain vision of the world where every single app has its own new fresh layer one. A few things we discuss in this episode. The benefits of an L2 can L2s really scale? Also the massive flash crash of on October 11th and what were the causes? Vlad also gives letter grades to all of the major perps exchanges in terms of how they operated. We also discussed the Lightr roadmap and their upcoming token, including how to earn the airdrop and the future of Lightr and their plans to become a platform chain.
- [01:36]
David
I really enjoyed talking to Vlad and just getting his perspective as like, why build a layer 2 pertex? And we didn't really specifically ask Vlad this question, but I don't think he's doing it because he believes in Ethereum or like wants to do the layer 2 model. He's doing it because between ZK and between a layer 2, he can build what he thinks is the fastest, more performant perp Dex. And so it's not a question of ideology, it's a question of just can he build the most technically performant chain? And so that I thought was pretty refreshing.
- [02:07]
Host/Interviewer
Before we get into that conversation with.
- [02:08]
David
Vlad, a moment to talk about some of our friends and sponsors over at Immunify. Security has been one of crypto's biggest issues. Hacks and exploits have cost this base not only billions of dollars, but billions of dollars worth of PR. So stop getting hacked. Don't get hacked in 2025. Immunify can help you with that. They are one of the most trusted brands in crypto security, with $180 billion in value protected in over $25 billion in hack damage prevented across over 650 of the top protocols. And now they have a security operating system, the first ever security operating system for the onchain economy. It's a little bit command and conquer station, a battle station to help you protect your crypto protocol. So if you have a crypto protocol with deposits in it, you need protection. Don't accept customer deposits without protection. You can get that protection at immunify. Com. You can also follow them at X at Immunify. There's a link in the show notes to learn more, let's go ahead and get right into the conversation with Vlad from lidar Bankless Nation.
- [03:04]
Host/Interviewer
We are here with Vlad Novakovsky, the.
- [03:06]
David
Founder and CEO of Lightr, a newly launched ZK L2 perp DEX on Ethereum, a ZKL2 perp DEX that's fun to say, which recently crossed $1 billion of TVL deposited all in USCC. Vlad, welcome to Bankless.
- [03:21]
Vlad Novakovsky
Thanks, David. Thanks, Ryan. Good to be here.
- [03:23]
Host/Interviewer
I want to read out a tweet.
- [03:24]
David
To get us started here because I enjoyed this tweet. Ryan, enjoyed this tweet.
- [03:27]
Host/Interviewer
This is a tweet from you.
- [03:28]
David
You said being a layer one is.
- [03:30]
Host/Interviewer
A bug, not a feature.
- [03:31]
David
A layer one is just an Ethereum layer two without any of the security and verifiability parts. So Vlad, why did you build LiDAR as a ZK layer two?
- [03:40]
Vlad Novakovsky
Yeah, well, I think that one obviously was a little bit tongue in cheek, but, you know, there are some very good L1s as well. Like, you know, like, like Bitcoin is obvious example, but. But I guess my point was that right when we were making this architectural choice, like, you know, the hard part was inheriting the security layer of Ethereum while still having really good performance. And, you know, it's like, if you don't do that, then the way you can achieve security and verifiability is, you know, it's a much harder problem to kind of rebuild all of the functionality that Ethereum already has. So it's like if, if the. Because a lot of, a lot of people would say things like, oh, well, like, like after we built later, you know, it's one thing in the beginning, maybe we could have made a different choice. And we were very happy with the choice we made. Right? But like, after we'd done all the hard work and made it work as an L2. Some people were saying, oh, well, lighter app will be in L1. And it's like, yeah, all we have to do is just remove all the hard work we did and call it an L1. Like, like having, like having the good performance and the verifiability and the security, that. That was always our goal. And we think we are, you know, well on our way to achieving it with, with the structure we have.
- [04:54]
Ryan
Can you get into that, Vlad? So we'll talk about performance maybe later, but the things that you get as an Ethereum layer 2, the security piece, the verifiability piece, what. What do you get by virtue of being AN Ethereum layer 2?
- [05:07]
Vlad Novakovsky
Right, right. So the security piece is ensured through something called an escape hatch that we have. And, you know, if you look at our white paper, it explains that in kind of technical detail. But also if you go to L2 beat, you know, that's. We're one of the L2s that has that. But basically what the escape hatch means is that if the L2 messes up or does stuff that is outside of the rules, or if it gets hacked or, you know, kind of, or let's say our own team somehow gets corrupted or whatever happens, if that happens, then, you know, within a certain timeframe, if it's not fixed, customers can get their assets back through Ethereum. And so that's kind of a very strong way both to disincentivize bad actors, but also to ensure security. And so then, which clearly you don't have if you're building your own L1, if that L1 is facing a problem, that's it. I mean, it kind of lights out. Whereas here, obviously we don't want that scenario to happen. But A, it's like strong and disincentivized, and B, if it did happen, customers can still get their assets back.
- [06:21]
Ryan
So, like, just so it's clear, what happens if A, maybe we'll not say binance, but say something like a hyper liquid, let's say hyper liquid goes offline or becomes, God forbid, corrupt or gets censored by some government, which could happen. What happens in that case versus what happens in the lighter L2 case?
- [06:44]
Vlad Novakovsky
Right, right. And I mean, I think we, you know, we certainly, you know, we're. Our team is, you know, we've always been friendly with, you know, Jeff and his team, so we, we, we certainly consider them good actors. But I guess in, in the scenario where something like that happened, they would probably do their best to compensate users. But it wouldn't be through smart contracts though, Right. It would be something like kind of outside of that. Right. So if that were to happen in, in or with any like other L1, right. Like if, if it was corrupt or hacked or just like, I don't know, if they had an outage and never recovered, you wouldn't be able to get your funds back through smart contracts. Hopefully those projects and then we think hyperliquid is. They're certainly good actors. I mean they would try their best to compensate users in some other way, but it wouldn't be done programmatically. Whereas with our architecture you can actually they escape hatch. Like all those assets, you can't. No one can move money in a route between the L2 and Ethereum until the L2 can prove that what it's doing is correct and fair. And if it can't prove that, then within a certain amount of time, you know, users can just get their assets out programmatically through the escape hatch.
- [07:51]
Ryan
Of course, this all presumes Ethereum stays up, but it has a fantastic track track record of that has a fantastic track record of security as well. Just the other piece here, verifiability. So I feel like we've talked a little bit about security, but there's a different concept here where you say, you know, verifiability of being in Ethereum L2 is important there. What does that mean?
- [08:13]
Vlad Novakovsky
If I think about exchanges and what do customers need as far as guarantees? Like kind of the hierarchy of needs there. Right. I think like at the top, maybe at the top is like, you know, your money isn't stolen. Right. Which certainly we've seen that, you know, FTX and other cases that that can happen and certainly would not happen with I think, you know, decentralized exchanges. Obviously, you know, module. The point about the L1 or the L2 being secure, but certainly the design of the exchange makes sure that funds are safe. I mean, you know, self custody, right. So that's the first thing. The second thing you want is that the trades you think happened are the trades that happened. So it's like kind of, you know, that there's. Because that's not true for centralized exchanges, right? Like centralized exchanges, if you like, if you think you bought and exchanged things you sold. Like it's like kind of, you know, your word versus their word. You know, there's not really a way to prove which is correct right now that one. The reason I point that out is just to give credit to other projects like DYDX v3, like they had that right. They proved that using kind of starkware technology. What no one had done in the Ethereum ecosystem is the third hierarchy of needs, which is like when you send an order, it gets matched correctly. If you're an active trader, that's actually very important. It sounds like it's academic, but it's actually very important. Because if that's not the case, especially during a high volatility environment like the last few days, if you're sending an order to buy at 4200 and somebody else is buying it 4300 or somebody else sends an order to buy 4100, what if that 4100 actually gets matched before somebody who's willing to pay 4200? You can do a lot of things if the matching is off chain and not verifiable. A lot of wealth can be transferred unfairly if that happens. So it's very important for the matching to respect time, price, priority and all the rules that our circuits have. But also not only matching liquidations have to be verifiable, right? Because again, liquidations, it's like, well, who's to say if the price falls from 4200 to 4000, you get liquidated? Well, but maybe somebody else had the same exact position, they didn't get liquidated. All of those things also have to happen fairly. So anyway, both of those things are insured by the ZK circuits. But again, the L2 is only as good as the L1 it's on top of. Right, like you can verify all that stuff. But then if, like, let's say those proofs just stay on RL2, well then the whole thing can, like as we talked about, like the whole thing can just go rogue. Then like, yeah, like you can complain all you want about those proofs being wrong, but like there's not much you can do. Whereas here, the only way that assets can move and forth, can move back and forth between lighter L2 and Ethereum is if Ethereum knows that the proofs are right. And that's kind of the key part here about the verifiability.
- [11:11]
David
Will you say, Vlad, about fair order matching, order execution? Are these like theoretical concerns or are there examples in perpdx history, in the perpdx landscape of actually corrupted or unfair or untransparent order matching that has created just a bad environment for traders, Right?
- [11:32]
Vlad Novakovsky
Well, certainly with MEV that stuff happens all the time. I mean, I guess it depends on whether you look at into the order book model or the AMM model. I mean, I think we. With, with. With mev, it actually happens kind of out on the open. It's not even a secret that stuff like that happens, I think with the, with other order books. Yeah, it's a good question. I don't know if there have been any like demonstrable. Because the thing is that you wouldn't know it, right? Like if something like this happened, the only way you would know about it is if someone involved in that scheme, you know, if there was like a whistleblower or something like, like if it is off chain and there's no proof, there's no verifiability and there is. Well, I think we know that sometimes like other projects in the past have had like special deals with market makers. We know that. But how far those deals went and how much did they hurt retail? I don't know if there's like evidence of that that's been out and open. But that doesn't mean it doesn't happen, right? Because if it. We don't trust. Yeah, I mean, we know. Well, it probably does happen, right? It's just like again, if you don't, if it's not provable, you can't really. If it happens, there's no way you would even know about it, right? The only way someone would know that that happened in the past if someone involved in that scheme kind of spoke out. Right. But we know that customers complain a lot about why with other. With kind of even on centralized exchanges, like why did I get filled here? But this other trader didn't. Anecdotally, it kind of comes up a lot, but. And we know in TradFi, for example, like the flash crash of 2010, like a lot of like there are like, there's a lot of really weird price action. And to this day, like I think Congress did an investigation like five years later and they still couldn't figure out what happened. So this stuff is like very important. And if you don't have it, then like the whole point of again this hierarchy of needs, it's like, you know, money not being lost. The trades you think happened are the trades that happened. And then everything that you did is verifiable. That's kind of why you want to use blockchain for this in the first place, right? If you don't care about those things, then you can just trade in tradfi.
- [13:36]
David
There's a bunch more technical architecture conversations that we want to get into, like the ZK stuff more about the capacity, the throughput of Being a layer two. But we'd be remiss if we didn't also talk about the recent market volatility. Just for context, for listeners who are less familiar with lighter. LiDAR launched a public mainnet on October 1st. And LiDAR at the perp text has been around for months. People have been trading on like the beta version of LiDAR for months. But the public mainnet happened on October 1st. Ten days into mainnet, one of the largest and most chaotic liquidation events across Crypto occurred with $19 billion of liquidations happening inside just a few hours. Now Vlad, when you build a perp Dex, I think you know that this day comes eventually. I don't think if you, I don't think you are ready for it to come. Ten days into the public main net. So a pretty fast trial by trial by fire there put us into your shoes during that time. When did it turn into an all hands on deck moment? Like how much of a crisis was it? Kind of walk us through what it was like to be Vlad in that moment.
- [14:40]
Vlad Novakovsky
You know, I guess like one thing to point out and we, this, we, we, we wrote a postmortem about, you know, there was an outage that happened. Right. But the outage actually happened five hours after the high volatility period. Right. So actually during all during the specific, you know, timeline you're talking about where markets got really crazy for about four to five hours actually the system handled that correctly. Right. There was, there was no problem there. And in fact, I think LLP also maintained liquidity. A lot of traders who would have been wiped out on other platforms didn't get wiped out. So actually the system worked fine during that time. Then after that kind of the database gave out. And it's a little, it's more of really like kind of like a bit of like the issue I think was kind of bad timing in the sense that we, we, we launched public, you know. Yeah, we went from private beta to public mainnet. Like we upgraded some things to prepare for the higher, you know, kind of higher throughput new more customers. And part of that was kind of upgrading the database. We, we were planning to that on Sunday morning on the 12th, just as like a scheduled maintenance, right. And like upgrade the database. And you know, we, we picked Sunday morning as the time that would bring the least disruption to, to the users, to the traders. And so the, the plan was to like do that database upgrade, you know, take the system down for 10 to 15 minutes. But the fact that there was this huge volatility like Friday night obviously was not planned. Had we known that we would have just done the upgrade like Thursday morning, they wouldn't have been happy because the reality is that users, they don't like it if there's a two minute outage. So it's kind of like the perfect being the enemy of the good. We're like, okay, let's time this upgrade exactly when there's the least activity. And then a day and a half before that we had the most active trading day of the last 10 years. And so, and again it actually database didn't die during that spike, but like five hours after that it finally gave out and we had to like. And upgrading it when it's unhealthy is different than upgrading it when it is healthy. So that's actually why it took like four hours to do that, four hours to fix the current thing. And then we still, we upgraded on Sunday as we planned to do. So now, now we're kind of. The system has the infrastructure that it needs to have to kind of survive another event like this and with, with, with some buffer as well. But yeah, I mean I hopefully that gives you a little bit of the time because it's not. Yeah, you know, it's like we, a couple of things happened like us getting a lot more users happened a week before and then we were already planning to upgrade the database and then this like volatility happened a few hours before it finally gave out. So you know, I think just want to make sure clear about the timeline because people I think have conflated some of the stuff.
- [17:30]
Ryan
How long was that outage, Vlad?
- [17:32]
Vlad Novakovsky
It was four hours.
- [17:33]
Ryan
Four hours. Okay. And this was somewhat after. So I'm curious because it was like.
- [17:37]
Vlad Novakovsky
Hour five through hour nine after the. It's like the high volatility was like the first five hours. Right. And then it actually survived. Then finally it gave out. And so like that's why we were gonna compensate, you know, people affected during that four hour block. But those, you know, it'll be pretty manageable. Right. Like if it had happened during the previous five hours, that would have been a much more complicated process to compensate.
- [18:04]
Ryan
Right, right. Okay. So, so lighter did have an outage, but it was five hours after and you've talked about why. So yeah, I feel like all eyes in crypto were on these perp dexs and perpetuals exchanges, centralized or not. So sort of the three that got the limelight. One was Binance. Of course there's a lot of mayhem going on there. Just Binance the exchange and Then also, you know, the perp side of things, the other was hyper liquid, of course, which did stay up the entire time, but had this auto deleveraging type of event that, you know, some traders kind of raised an eyebrow at. And the third actually given, given your volume and given the significance of size, was, was lighter. And so maybe I want you to give kind of a letter grade to these exchanges and like, or the, these perps, like, how did they perform during the time when they're most supposed to perform, which is incredibly high volatility positions. So may maybe start with your own letter grade for lighter. Like what, what would you guys, what would you give yourself? And then we'll go to Binance and, and hyper liquid.
- [19:07]
Vlad Novakovsky
I'm probably not the right person to roll up those grades into a single score and let you know the customers can do the, you know, it's up to kind of do their own homework on that. But I can at least provide some input here. I think. Whereas like, if you look at the categories of reliability, liquidity and communication, maybe if you look at. Break it up that way. I would say speaking about us, like, clearly the reliability, we did have an outage. It didn't happen during the worst period, but it happened. So I would say unreliability. It's like again, just talking about October 10th. Right. Not the entire. I would say on the reliability part it was something like, like between, between a C and a D or let's just say D to be, you know, F would have been if the outage happened during the worst period. Right. We'll say like, you know, D plus C minus, something like that. Right. I think on the liquidity part we actually did great. I would say like, you know, B plus. The only, the only thing that went wrong with the liquidity is that some of the market makers kind of left and it was really entirely up to L P to provide liquidity. And so no, the market makers is.
- [20:12]
Ryan
Sort of the insurance policy. That's the pool of last resort in the lighter system. Yeah.
- [20:16]
Vlad Novakovsky
Is the public pool. That is kind of the, you know, the market maker. That's, that was run by the protocol. Anyone in the community can buy into it. And it takes, yeah, it's, it's like it's always there. It, you know, it makes markets. It, you know, it does process liquidations as well. If liquidations happen, it kind of takes over positions. And, and by the way, LLP does have ADL as well. It's just that the ADL policies are less aggressive, so. Interesting. It's not like ADL's didn't happen for you know, for any market at any time. It's just that the, you know, we tried to provide as much liquidity as possible before getting to that point.
- [20:53]
Ryan
And the ADL's for people who aren't familiar with these perp perps terms, that's automated deleveraging. I don't. Deleveraging in on your platform. That did happen on hyper liquid.
- [21:04]
Vlad Novakovsky
Well I wouldn't say it didn't happen on our. It happened on our like ADL isn't just something like it either. It's not like black or white. It's like okay, in some smaller markets and in some, for particular blocks of time it did happen, but small. Right? Like it affected maybe customers to the tune of you know, tens of thousands of dollars versus like on some of the other platforms, the ADL's affected customers to the tune of tens of millions of dollars.
- [21:25]
Ryan
Can you define that more? Why, why is ADL in place in these perps exchanges?
- [21:29]
Vlad Novakovsky
Like why is it there at all?
- [21:31]
Ryan
Yeah, why is it there? What does it do and how did it take in?
- [21:34]
Vlad Novakovsky
Well, you need it in a crisis. I mean at some point, right? Like let's say that you and I are trading a market and like I'm long 50x and you're short 50x and like you know, let's say the market is trading at a hundred and some. Some catastrophic thing happens and the market goes all the way to zero like in, in like before anyone has a chance to do anything. Well like what would happen in tradfi, right is like you would actually like, you know, like maybe you could potentially go after the person like claw back other assets. But in defi. You can't like all I have is the deposit I made in the wallet, right? You can't like get other funds from me or from you. So like, like let's say that something like that happens. Well basically like kind of the, the total amount of like money in the system is now less than what would right? Like like European L. Now let's say if that happened in this case, like, like I put in $20, you put in $20 but now your P L is. Is 200. Well like I only have that $20 to give. So like you're not going to make the 200 you think you're making. Like so now I'm not going to make money either of course, but like I'll be wiped out with like the whole system has to deleverage until like the money, the total Amount of money in the system is like equal to the total amount that that would be owed to all the different parts. And then, yeah, the insurance fund can contribute to that, but not, not, not, you know, doesn't have like that, you know, the insurance fund is not big enough to like, make everyone whole relative to what they're supposed to have. But then, but the point to avoid that, though, you can kind of like do partial liquidations along the way, or, you know, you can just provide more liquidity so others can. Can trade kind of in and out. So. So the ADL is like the last resort thing that happens, but the reason it's needed is because of this example, right? Like, like, ultimately, if the moves are strong enough and there's just not enough of a backstop, like, you have to. Because the total amount of money, you can't like, call a bank or like, write a letter to a lawyer and get other money into the system, like in defi. Right. Like the amount that's been deposited to the exchange is the total amount of assets that's there. And that's not going to, you know, like, you have to make do with that. And so that's why the ADL is necessary.
- [23:42]
Ryan
Right.
- [23:42]
David
Inherent to any leverage platform with margin. Right. Then generally speaking, longs and shorts moderately balance out. And if price doesn't move that much in any direction, that's just, okay, we're operating in the happy case. But if price moves violently and there's any discrepancy between a long and a short, then all of a sudden that gap can become more money than was ever deposited into the platform in the first place. And so you need to make sure that that doesn't leave some people hosed and others people not hosed. And so an ADL is like a equity equitable mechanism, equality mechanism.
- [24:17]
Vlad Novakovsky
Yes. And all of these platforms have some version of it, I think. You know, like, I think some of the discussions online have been like, for people who've never seen it before, it's more like, wait, how does it. Like this thing doesn't.
- [24:32]
Ryan
Yeah, they're learning about perps for the first time.
- [24:34]
Vlad Novakovsky
Yeah, but like, like, I think not.
- [24:36]
David
I think.
- [24:36]
Vlad Novakovsky
Yeah, yeah, not you guys, Right, but, but like, I think some of the discussion, like, because there's been, like, I think this turned into a lot of. There's been a lot of, like, bad blood online as a result. And I think the differences between the different exchanges on this are pretty nuanced. Right? Like, if you look at, even our, if you go to our documentation and you read how the ADL works. It's like there's a lot of math in that, right? Like the differences between that and Hyper liquid or Binance ADL is pretty nuanced. Now those nuances do matter and we can talk about that. But. Yeah, but, but, but then you want. It's not like some have a deal and some don't. Like it's not. Yeah, but let's talk.
- [25:19]
Ryan
Let's get back to the letter grade. So reliability. We got your letter grade for, for lighter. How about liquidity then? How'd you do it?
- [25:25]
Vlad Novakovsky
Yeah, so liquidity I would say, right? Like kind of like B plus, right? Normally.
- [25:29]
Ryan
Okay.
- [25:29]
Vlad Novakovsky
And the only reason I say not A is because like LLP think did great with liquidity provision. Like I think the other market makers and you know, certainly don't want to throw them under the bus or anything but like I think, you know, they kind of all left. Right. And I think they left not just us, but like other exchanges too. I think like they were very busy.
- [25:47]
Ryan
Freaking out at the time. How about comms? How'd you do on that Comms?
- [25:51]
Vlad Novakovsky
I would say we've done, you know, again, not to, you know, be self serving. I mean I would say like a minus. You know, I think we updated our users pretty quickly and you know, our customer support team was in touch right away we had a form for folks affected. Like we immediately announced compensation. That compensation will be given. We did a postmortem on the technical outage and now we're also going to do a write up on what happened with llp which even though it did what it was supposed to do, like a lot of people didn't know that it, that that's what it was supposed to do. Right. So I think it's definitely worth a comms piece on that as well. But I would say again, bias, but I would say like a minus on the comms part.
- [26:28]
Ryan
Okay. Same for hyperliquid. How'd they do Reliability, Liquidity, Comms.
- [26:32]
Vlad Novakovsky
Right. I mean I think on reliability I would say like, yeah, like maybe like B plus in the sense that like you don't know outage. But there's definitely performance degradation and different, you know, like I think the, certainly the high throughput and high volume was felt by the end user and. But, but overall pretty good. I would say like, yeah, something like a B plus. Okay. But on liquidity was the problem. Right. Like a lot of people got liquidated who weren't expecting to. And you know, I would say that one, you know is like, you know, like maybe at a D there that.
- [27:08]
Ryan
Was because you think the, their ADL mechanism was too aggressive you said?
- [27:13]
Vlad Novakovsky
Yes, I mean we're not experts in how their ADL works but just from talking to customers who trade on both. That's, that's the, you know, that's, that's what we've heard. And also if you just look at the numbers, right. Like the 40 million that HLP made, like that 40 million didn't come out of thin air, right. Like that. A lot of, you know, people lost a lot of money. Now some were just on the wrong side and should, would have lost money anywhere. But like I think the, that you know, again I think others I'm sure will parse the on chain data and kind of figure this out in more detail. But just anecdotally from talking to folks like the liquidity really dried up quickly and they, they were, they had a hard time getting in and out of.
- [27:51]
Ryan
Positions and it's the traders really that are losing here. It's kind of that user clock.
- [27:56]
Vlad Novakovsky
The traders. Yes. As opposed to who?
- [28:00]
Ryan
I guess, I guess LPs or something. Or the LP.
- [28:04]
Vlad Novakovsky
Yeah. I mean. Right. The LPs are, I mean it's zero sum. Right. Ultimately the traders have to, it has to be a good experience for the trader. Right? I mean all this other stuff like having liquidity pools and having, you know like having points and airdrops and all this other, I mean that's all good and well right, but like it has to be a good trading experience for the trader. Like if that's not there then like all this other stuff is just smoke and mirrors.
- [28:30]
Host/Interviewer
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- [31:15]
David
Conversation going on that when I said Ryan and I are not we're generally Less informed about the Perex landscape than the average trader, for example. So we're kind of like learning about these things in real time. There was a conversation going around on Twitter about the opinionated nature of the ADL system, because every single per, like, per platform has to have an opinion on who gets, you know, demargined or deleveraged first. There's a queue of sorts and there, I don't know to what degree that this is, this is real, other than this one tweet thread analysis, which seems pretty good. But it was talking about how hyper liquid LPs made money where lighter LPs lost money, like lost a little bit of money. And what that, what the interpretation of that means is that, well, lighter preferred traders over their LPs and Hyper Liquid preferred their LPs over their traders, meaning because of the opinion, nature, opinionated nature of the respective platforms, ADL system, ADL design, lighter just allowed traders to retain more capital than their LPs and hyper liquid was, was the inverse of that. To what degree do you think that that is an accurate statement? Is that reflected in what you just said? Where you said like, you know, you have to build a platform for traders first. Talk about the nature here.
- [32:31]
Vlad Novakovsky
Yeah, so it's like, if you think about it, like, let's say you're running a casino, right? Like your Caesars and you know, people come and play blackjack. Maybe somebody goes on a great run and now they're up a lot. Like, now does the casino have other, you know, maybe they're, you know, like, I don't know, maybe have a credit line from, you know, blackrock or something, right? Or Goldman Sachs or like, maybe they have shareholders and they have all these other constituencies too. And yeah, you want to treat everyone fairly. And certainly the goal isn't to screw over all these other constituencies, but at the end of the day, the customer has to come first, right? If you're running a casino, somebody comes in and they hit blackjack and it's like the whole point of that is you get three to two when you hit blackjack and the casino is like, actually we're not going to give you three to two. We'll just give you, we'll just give you your money back. Like that, that's not. That really violates the kind of trust with the customer, right? I think so. I think you kind of want to avoid that at all costs. It's better like, whereas if the casino has to like take out a loan at a higher rate for whatever, you know, with Their creditors, whatever. That's like, it's better to do that than have to than, like, violate the kind of. The understanding with the customer. So that's kind of how we think about it, right? Like, the customer has to come first, and then, yeah, you treat all the other constituents fairly as well. Like LLP holders, like, you know, they had 15 updates in a row before the down day, and LLP as a whole is up, you know, 220% year to date. So, like, obviously we're not, you know, it's not like there was an intentional choice to, like, for. This stuff all works programmatically. Going back to the point about verifiability, right? This stuff all. It's all encoded in the ZK circuits. It all works programmatically. And we made some design choices in the beginning that work this way, that kind of favor the trader and those. They're all in the code. And so it's not like we pushed a button and said, let's make this trade off in real time. This all kind of worked the way it was supposed to work. But the reason we feel good about the trade off is, yeah, you have to put the customer first.
- [34:34]
Ryan
Let's finish up that report card real quick. So comms for hyperliquid.
- [34:38]
Vlad Novakovsky
I mean, I think in general, hyperliquid is very good at comms. I think in this case, I would say that, you know, not the best, though, because, I mean, I wrote something around, like, going back to the casino knowledge. Like, they were kind of saying, well, you know, we're. We're sad people are going after us. But I mean, I think a lot of the questions that were raised were fair questions. And it's like, you know, they did very well both in terms of fees and the hlp. So it's almost like, you know, there's this saying, like, no crying in the casino there. It's almost like no crying in the casino owner's box. Like. Like, they, you know, I don't know what there's to be sad about for them, right? Like, they. But, you know, if they want to revise their leverage policies, they can then. Or if they think what they have is fair, they can keep it going, like, as long as it's transparent. Everyone knows the rules of the game they're playing. You know, I think it's fine. So I would say comms there, like, maybe like B minus, whereas usually their comms are in an A.
- [35:32]
Ryan
Okay, okay. All right. How about Binance? Would you give them on those scores?
- [35:37]
Vlad Novakovsky
I don't follow. Binance too closely. But just from. All I know is just what I hear from like I don't trade on Binance anymore. Right. I used to before, I guess before Probe Dexes were good enough to, you know. So I don't, I don't know firsthand, but just from what we hear from our customers who are also on Binance, like I think on the liquidity side it was also not great, which is surprising. Right? But because you would think they have like tons of market makers and everything. But I think maybe like a C on the liquidity side. And yeah, I think performance. Some centralized exchanges had some outages as well. I actually don't know if Binance was one of them. I think so. I don't want to speak out of turn. I think some centralized exchanges had outages though. Binance maybe just had degraded performance, but I think there were some issues with withdrawals. But I would say like not an A there, but I don't know, somewhere between a B and a C. I just, I just don't know. But I think on the comm side from, from what we've seen, again secondhand, but like it seems like there was a lot of stuff about like the price of their token and all. Like it like that's probably not the right time to talk about that.
- [36:48]
David
Zooming out, Vlad. What have we learned? What have you learned and what maybe has the industry learned as a result of this cascading liquidation event? Like the microstructure that just builds around, around crypto. Anything. No.
- [37:01]
Vlad Novakovsky
To take away like the details matter. Right. Like, like small differences in the math. Like I think most people when they see these ADL formulas, like and we, I think we're, we're guilty of this as well, right? In the sense of. Yeah, like we stated what the formulas are and when we designed them, we favored the traders. But like it doesn't say that in, in, in the docs necessarily. Right. Like here, you know, the reason we made these trade offs and not those trade offs and you know, it's like it was more just like here's the formula and we prove that that's what happens and that's. I mean it's correct. But like I think a lot of the stuff is like some of these really kind of technical, like super technical things, right. Like are kind of, you know, in, in. In the back of a documentation, you know, of like a hundred page document of how the exchange works as opposed to really being like front and center. And everyone needs to know because I think it's like this Only comes up during like the crisis environment and then everyone forgets. And then next time it's almost like the financial crisis, right? Like the credit crisis. It's like as soon as people recover, everyone forgot about what led to the crisis. So I guess the, the learning here is like details like keep them in the forefront. Like I think whether, you know, we're certainly going to review our, the way that our mechanism works. Like you know, we're, we were already in the process of doing that, right? Because one of the complaints we had before was our liquidation fees are too high now. No, we know now people see why that makes sense. Because yeah, the fees are high where like maybe during like a big market move, you pay a little bit more in liquidation fee than you might somewhere else. But during a really big move, the system LLP is there to protect you. But again being more clear about that trade off. And like I think, certainly, I think there's a lot to be said about the verifiability piece too, right? Like, like I think in a perfect world these systems should be audited, they should be verifiable. Like I like teams like Chaos Labs for example, that kind of like, that's kind of what they do, right? Like ideally it should be audited by like a third party, like a Chaos Labs or you know, other teams, like, like Gauntlet, right. Like, like it shouldn't just be, you know, like the protocol design something and like publish some formulas in the back of 100 page doc and that's that, you know, so, so I think there are those learnings like that. I'm still trying to process everything and maybe work with other folks in the space for kind of more holistic solutions. But I think the solutions, it's about transparency, it's about verifiability, but also about decentralization in the sense that I don't think these decisions should just be made by an engineer working on this thing who's running out of math. And they made a decision and that's that even if it was the right decision, there should be more transparency, more collaboration.
- [39:50]
Ryan
I mean you've watched crypto markets for a while. This was, we've seen things like this before. Maybe 2021 was a kind of a big leverage sell off then. But this maybe seems similar, but this was also an order of magnitude larger. Do you have any theories for like what caused this? I mean people are talking about like, oh, is this a coordinated attack? There's a few pairs that they saw some liquidity on. Of course there was, this was Timed with the Trump kind of tariff scare is it just generally crypto has just so much leverage. This type of thing is bound to happen every so often. What's your theory of the case?
- [40:22]
Vlad Novakovsky
Well, I guess before answering that I want to come back. This is related but I want to come back to your, like one of your first points which is like, you know this happened right after we launched public mainnet, which is true, but we have been running in private beta for eight months before and actually there were some like, like in February there was a tariff thing too. Right. And then like I think like April 2nd there was as well. There, there are some, not, not as big as this but there's some pretty volatile moves. And then there's some volatile moves on the upside, right when like people like you know, like Tom Lee and others started like buying eth. Like, like there's like, there's some pretty scary looking charts this year in general. And for example like our system, yeah like we had that outage five hours after this one. But like all those other ones we, we, we were able, we handled without issue. But, but so I guess I don't want to over index on this particular crash. Like there have been kind of lots of them this year and you know, I think what caused this one I have, you know we're, we spent the last 72 hours kind of just getting our own house in order. Like we haven't really been looking at like you know, you know, looking just looking at our own data with, with our own trading, making sure everything worked correctly, making sure customers who need to be made whole are going to be whole. Like we've really been focusing on that. So root causes, can't say too much but I've been in the markets for a long time. I think the Napoleon quote does apply. Like never mistake for malice that which can be explained by incompetence. I think a lot of times in the markets it is like that. Even the flash crash of 2010, it was I think the most kind of widely accepted explanationism or just kind of some like fat finger trades. And I think it could have been something like that here. You know, was it a coordinated attack? I haven't seen any evidence of that. But again we've been pretty busy just keeping our own house in order to do like a full, you know, a full diagnosis of that.
- [42:21]
David
So this is a very interesting way to get mainnet up and running and just get a lot of stress under the system. But I kind of just want to zoom out and learn a little bit More about you and lighter.
- [42:32]
Ryan
Yep.
- [42:32]
David
Where'd you come from? And also what made you decide to just build a perps Dex? Like what. What's your background and what was the.
- [42:38]
Vlad Novakovsky
Motivation if you zoom all the way out? Like, and you know, there's. First of all, like, we have a really talented team. And so I really, you know, kind of. I will talk about my background, but I want to make sure it's not like I'm building all this stuff solo by any means. Right. So but, but just my background, I guess I'm, you know, I'm not like a crypto guy that discovered finance. I'm more like a finance guy that went into tech, discovered AI and then discovered crypto and then built something in. In defi. It's kind of like the arc. Right. But so I started out. Well, I did a lot of, you know, STEM stuff growing up. Like I was, you know, was on the US team for the IOI and the ipho and you know, was it did a bunch of math stuff too and economics at Harvard. And then. Yeah, so then I actually was at Citadel and like when Citadel first started looking at high frequency trading and then did that at another firm as well. So kind of in total for eight years doing high frequency trading and tradfi through the. So these crisis environments, as I mentioned, like crash of 2008, you know, Madoff, you know, flash crash of 2010, I was there when all that stuff happened. Right. And then in 2012 I kind of shifted gears and came out to Silicon Valley and worked at a couple of startups, mostly in AI and fintech. That's also when I first read the bitcoin paper, got really excited about that, wasn't sure kind of what there was to do. That was actionable though, because from a trading perspective, it was very small. Like a friend and I built a bot in 2013 to try to trade bitcoin. I was like, we calculated that even if our bot got every price move exactly right and traded at 10% of the market volume, we would only be making like 10,000amonth. Like just enough to pay our, you know, like our living expenses. Okay, this is where's like, you know, kind of put that aside. Right? And this is when bitcoin was trading at like 30 or something. Right. But anyway, so, so for this and then another later on, like another friend showed me more around like Ethereum and EVMs and you know, that was really interesting. And then the thing that really got Me excited was zero knowledge proofs though. And so 2017, 2018 like reading a lot of that literature, thinking about what that means for scaling. So when my co founder Scott and I started a company though, we considered a bunch of crypto ideas, but in the end went with an AI idea which we built called Lunch Club AI, which was like an AI that essentially connects people. So it's like, hey, Vlad, you're into defi and markets, David, you're also into that stuff. You guys should talk. Right? That's kind of how Lunch Club AI works.
- [45:13]
David
It actually still is a dating app for friends.
- [45:16]
Vlad Novakovsky
Yes. Based on kind of professional interests overlap and kind of mutually. A lot of data went into it. So anyway, we built that and did really well during the pandemic. It's one of these startup ideas that like, because some ideas are just like obvious it's not going to work and others work right away. But this one, like it worked pretty well but then plateaued after the pandemic. And so then we came back around and a bunch of our team, me, our engineers, like a bunch of folks were like doing crypto stuff on the side anyway, whether it's trading or reading ZK Research or doing going to Ethereum hackathons this and that and like, okay, let's really build something here. And anyway, going back to why lighter? Well, we looked at, to me, like, okay, there are all these digital assets and I used to trade, right? It's like, where would we trade them? Well, it's kind of weird, like, why is 99% of the volume of digital assets trading traded on exchanges that don't actually use the blockchain to trade digital assets? So it's like that doesn't really make a lot of sense because many, not all, but many of these assets, their whole point is to build blockchains for stuff like finance. But then when they're traded, do you actually use those Rails, you just use centralized stuff, which is less transparent than TradFi. And so we kind of had that high level idea and then back then when we looked at it like the closest thing that existed to what we thought should exist was DYDX v3, as I think I mentioned earlier. And they got a lot of things right, but the actual matching and the liquidations were still off chain and not verified. So that's where, okay, we think we can solve that problem. And we worked on it for 18 months, launched the testnet last September and launched the private beta January 19th of this year. And then now we're in public mainnet.
- [47:04]
David
So why a perp Dex though? Because you could have built I mean Uniswap is a Dex Uniswap. It does the job of kind of what you are talking about.
- [47:11]
Host/Interviewer
Why do you care?
- [47:12]
David
Why do you care about.
- [47:14]
Vlad Novakovsky
I mean it's not efficient. I think that the AMM structure was needed at the time before Ethereum L2s existed and before ZK was really ready for prime time. Like if you were, if you just want to trade like directly on the Ethereum on, on, on L1. Like yeah, the only way you could do it is, is through an AMM structure. That's, that's true. But AMMs have other problems, right? Like MEV there is just slow, right? Like if you're waiting 10 seconds to trade, like that's not that, that's not a good consumer experience. So I mean and, and, and candidly, right, that's why a lot of the volume was centralized, right? Like it's not that all these people are like oh like I'm really excited about Bitcoin and Ethereum and Solana, but I want to trade all that stuff in a centralized way. Like that's not, it's more just because you couldn't trade it in an efficient way using its own tech yet. So like I think because the cynical view is like oh, people just want to gamble on this stuff. But I mean, you know, people can gamble a lot of things. You can gamble on, go to the casino, you can bet on horses, right? You can bet on sports, you can bet on whatever. I mean people who trade digital assets, I think by and large do believe in decentralization. So it's like why aren't they using platforms that use decentralization? I think they were just not efficient enough to work for most forms of trading. Right. So yeah. So anyway, so now why perps specifically? Not like why didn't we build like a Spot version? We actually did build one along the way and the problem was that the ZK part of our stack wasn't ready yet for one thing. And secondly we just saw like Spot is really good if it lives side by side with perps, but Spot on its own. Like you know, like active, you know, if what you're building is the value prop is really great platform for active traders. The active traders trade burps. That's just the reality. Like you know, because of, it's just more efficient, right? Like when you use leverage, if you, if you have a view on the market and you're a short term trader, it's just much more efficient to do so with leverage than not. And so like Spot Markets also have a lot of uses, more for just like doing swaps, like kind of one off things like, oh, I want to move some assets from this book to that book, whatever. Right. Like, but, but if you're an active trader, like there's, there's not a lot of active traders who say hey, like I'm a day trader and I trade in uniswap, right. But that's not really a thing. Like we've interviewed thousands of traders that, that unicorn doesn't exist. Like it's like people who are active traders, they're trading burps. And so now of course once you have that, because you have to start with something that is like the thing customers want the most and then you add other parts to it. So we're adding spot in a couple of weeks in fact and then we're going to add universal cross margin and we're going to add the ZKVM sidecar. And that's kind of the roadmap.
- [50:02]
Ryan
I mean it does seem like you're right, like trading in general is a crypto's killer use case. But then perps specifically a highly efficient form of trading. So on L2B actually lighter is number six in terms of total value lock, the sixth largest L2 already. It's pretty impressive. You know, 10 to 15 days into mainnet also the number one, you know, layer two app chain, let's call it, because you're focused just on, on perps itself. I do have a question here. So there's perfect. Been a lot of discussion around say why HyperLiquid did an L1 rather than an L2 or even why Tempo from Stripe or Arc from Circle or Plasma from, you know, kind of invested by, by tether, why they're doing their own layer ones. And a lot of the answer comes down to like a technical type of answer. I'm not sure if this is the real read between the lines answer or if this is correct, but a lot of them say, well Ethereum is just like not performant enough. In particular, L2s are not performant enough. So I want to ask you the performance question. So it sounds like you spent a lot of time trying to, you know, make sure that lighter had the performance necessary for high volume perps trading. So where are you on that? What is the, you know, TPS throughput of lighter today? What do you expect it to be? How scalable really is your architecture? Are there some limits to it and trade offs?
- [51:26]
Vlad Novakovsky
Well, let me talk about lighter first and then I can talk about Some of the other projects you mentioned and kind of the bigger picture of the industry, right. So with lighter.
- [51:34]
Ryan
Right.
- [51:34]
Vlad Novakovsky
Like our goal was always to have to build, you know, kind of the best decentralized trading experience, you know, in, in that, that you can have, which means low latency, low cost, verifiable matching, verifiable liquidations and security. Right? And so, you know, the security part we talked about, right, the escape hatch kind of being on top of Ethereum. The really nice thing about being Ethereum L2 and you know, Vitalik talks about this all the time, right. Is like, the more secure the L1, the, the more performance can the L2 be, right? Because the, the, you know, when you're trading, like the, the L2 can be. First of all, the L2 doesn't need consensus since we use ZK proofs for verifiability. Like, anyone can generate the proof and it doesn't matter if the proof was like, because the proof has to be correct and the rules for its validity are enshrined in the, like, you know, these ZK snark circuits that are public. And so like, you know, if the proof, like if our sequencer generates the proof and it's wrong, then that's not accepted by Ethereum or someone else can generate a proof too. So there's no need to wait. So basically what I'm saying is like, even if there was a decentralized sequencer, like whoever generates the proof first goes like, there's no need to wait for consensus. But the, I guess more to the point though, the performance essentially, like the L2 can be as performant as hardware can get. Like, there's no limits to the performance of the L2. The only limits are just economic, right? Like, because you have to pay, you know, someone has to pay to run those machines and both the machines to. There's like, you know, it's like, you know, think about like a race car that goes around the track and then there's like a big car that follows it to clean up. But like, and you kind of have to pay for the. So the, the race car is just actually doing the matching and like responding to requests within milliseconds and all that. And then there's like another, like, bigger car that like generates proofs that what the race car did is correct. So you need to pay for the performance of both of those. So now the latency part, I think even right now, later has the best latency in the market. Like if you try it out, like, especially if you're you know it is a centralized sequencer but that sequencer is co located close to where our customers are. And like it's, it's pretty fast. It's like you can feel, you know it's sub 100 millisecond latency. Like it's, it's noticeable. TPS again is a matter of hardware and it's a matter of costs. Like you know I think the like could lighter run at a million TPS right now. Yeah, like we could if we were okay spending 10x on infra that we do right now. Now we don't want to do because like right now there's not a customer demand for that. If there was, then the cost structure should be adjusted. Like we've thought about like if someone wants to do really high like the kind of high frequency that's never happened on chain before. Right. If someone wants to do like ultra high frequency, right. Like million tps then they should pay for that TPS directly. And we haven't. That's not, you know, right now we have the free tier and the premium tier. There's no like pay for your own TPS ultra HFT tier yet. But that, that's something we're thinking about. Right.
- [54:42]
Ryan
So and again what is the current kind of TPS?
- [54:45]
Vlad Novakovsky
Well, the current TPS, yeah, I mean it's like around you know 5,000 or so is like normal like enduring these like these crazy environments. It spiked, I mean I think and for some blocks it was like in, in the hundreds of thousands. You know, it's okay.
- [54:59]
Ryan
So if you're getting to 5,000 already and you can scale to a million, I think for a lot of bankless listeners they're asking okay like why are other layer twos different? Because while there's no sort of theoretical limit to the scalability of something like base or arbitrum, there's a practical limitation to it. And there, you know, Jesse from base is working on to get to giga gas levels of you know, block based throughput. Does that imply something different about your architecture versus some of the other more more general purpose L2s?
- [55:30]
Vlad Novakovsky
Our circuits are like we did not build a, a ZK vm, right. We built custom circuits to run an exchange and that's why later we'll also have a ZKVM sidecar for less for applications that whose performance needs are a bit less. They can kind of be run in a smart contract that translates into circuits and then share sequencer. To your point about the L2 beat, like we are an app chain Right now. But. But I guess what you're getting at though, I mean our design is I think very good optimization wise. But the other part is the economics, right? Like maybe some of those other L2s, you know, if they're used for stuff like payments, like they don't have, you know, Citadel or Jump or Jane street who want to use them for high frequency trading, who would pay for that? Tps, right? So like I think that's part of it too. So it's not just like, I mean we are very proud of our engineering, but I think also this trading use case just has. There's just more economics to be brought to bear for it in the first place.
- [56:31]
Ryan
Okay, so then this gets to the second piece of my question, which is like, well, how come all of these other platforms are opting for layer ones and citing performance reasons for that? Do you buy it or is there another motivator here?
- [56:45]
Vlad Novakovsky
Those guys, they should talk to teams like Succinct Labs, right? And build a performant L2 on top of Ethereum. You know, I don't know exactly what made into like maybe like, I don't know, like maybe they made a technical choice two years ago that's not relevant today or something. Like I'm guessing the stuff that's come out recently, it wasn't built yesterday, right? Like I'm guessing they were building it over time and a year or two ago, like they're the building blocks on Ethereum weren't as advanced and maybe they didn't want it. Like, I don't know if you're, if putting myself in their shoes. You Start building in 2023 and all you have to go by is that you know Vitalik's vision, but the stuff hasn't been built out yet and you're thinking, okay, it may take two years, but what if it takes five? Do I want to risk my business on that or do I just want to build on L1?
- [57:29]
Ryan
Well, I don't know.
- [57:31]
Vlad Novakovsky
That's probably the thinking that went into it, but I don't know.
- [57:34]
Ryan
Another explanation I've had which is just like it's not a technical explanation, but I'm wondering, so Lighter does not have a token right now. Maybe it will at some point in the future. There does seem to be something that I've called before the L1 premium, which is for whatever reason, if your Token is an L1 token versus an L2 in these current market conditions, there's some sort of premium associated with that L1 token. Maybe it's just the simple logic of, well if it's an L1, then we can take Ethereum's market cap which is like $500 billion. We could be a small sliver of that market cap versus taking an L2 market cap. So it's possible that the explanation could be it's higher ROI. You have the option and you have the L1 premium if you do an L1 rather than an L2. And that could be some of the explanatory reason why I don't know if that's cope or if like there's something I'm missing here that's not only based.
- [58:27]
Vlad Novakovsky
Like I'm a first principles thinker, right As I think you guys are too. Like to me that's not really based on any like that. Like that narrative probably is, is a thing, but it may be, I don't know, like maybe some famous VC said at one time and everyone is like, oh yeah, like it's like, I don't think that's based on anything. Right. If you think about how other things work. Like who, like you know, I don't know if Ethereum is like HTTP like, or whatever like you know, or like Cisco, you know, there's a value in their other applications on top of that, like Google and Facebook, like they accrue a lot of value too. It's not like, you know, Facebook built their own version of HTTP, you know, I, I just, I just don't think that really like I think you have to look at each application from first principles, like who are the customers? Who, you know, what are the risks? Like where, where does value accrue long term and stuff like that. Just like a VC meme from a first principles perspective.
- [59:20]
Ryan
So you've talked about all the benefits of being in layer two, verifiability, security, you have to maintain a consensus layer, you don't have to inflate your token in order to pay for validators. All of these things I imagine factor into it. Are there any downsides though? Do you lose any sovereignty being an L2? Is it, is it maybe harder from a technical perspective? Are there liquid?
- [59:41]
Vlad Novakovsky
Yeah, I certainly don't want to belittle kind of the technical efforts of other teams. So you know, but like maybe some of the projects you mentioned, the reason they didn't follow the kind of path we did is like they just didn't have the in house expertise to do it. And that's why I mentioned teams like Succinct Labs and others like Axiom that are helping developers kind of do like build efficient L2s on Ethereum using ZK. But, like, but the sovereignty thing. Yeah, I mean, I think that's, that's probably, I mean, of all the arguments I've heard, there's probably something to that, right? Like being reliant on Ethereum. I mean, I think if one of the risk is like, what if Ethereum itself becomes corrupt? Like, that is a risk. And if that's the risk you're solving for, you know, that could be a reason to make a different decision. Right? I mean, I think that that is, that is real. I mean, but I think, yeah, like, keeping the technical stack easier, more under your control is a reason too, right? Like, we're definitely like, are we somewhat at the mercy of the. Of, like, like, if, if, if Ethereum stuff happening on Ethereum was like two years behind, would we be where we are today? Like, probably not. Right? So, so there are, there are things like that. But, but yeah, we're, we're very aligned with the Ethereum community and I think that's certainly a bet we've taken and we feel good about it.
- [61:01]
Ryan
When you say harder, it's interesting, right, because it's harder to do an L2 from an engineering perspective, there might be lots of reasons why. It also seems very hard to bootstrap your own validator set and work on decentralizing that and making that kind of the consensus layer. That's a whole nother moving part that L2s don't actually have to contend with.
- [61:20]
Vlad Novakovsky
I mean, is it though, like, I mean, I think there are frameworks to do it, like Cosmos, like, like it's not. Like, they're not.
- [61:24]
Ryan
Also, like, that's been done many more times. You're saying, like, I mean, it's been.
- [61:29]
Vlad Novakovsky
It'S not like no one's, you know, like, what we've done has never been done before. I guess the closest was DYDX V3, but even they did it in partnership with Starkware. Not alone.
- [61:39]
Ryan
I get it.
- [61:39]
Vlad Novakovsky
I mean, none of this stuff is easy, right? By any means. Like, but in terms of the degrees of how hard it is, like, I think, like, what we've done is kind of right at the top.
- [61:48]
Host/Interviewer
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- [63:44]
David
Maybe we can place ourselves in lighter's roadmap. So mainnet launched 14 days ago, biggest liquidation event ever in crypto 10 days later. But that wasn't part of your roadmap. That was an external. Yes, an external force. What happens next? What are you guys working on next in terms of your roadmap? What's the grand plan and where are we?
- [64:03]
Vlad Novakovsky
Right, right. Yeah, I think I quickly talked through this earlier answer, but let me expand on that a bit. Right. So you know, Spot is. We were planning Spot by kind of end of this month. You know, the recent events might have set us back two or three days, but still like end of October maybe for Suico. November still schedule for Spot after that. You know, if you think about kind of core infrastructure Then there's like things like the ZK VM sidecar. There is the idea of universal cross margin, right. Where any asset just real quick vlad.
- [64:41]
Ryan
That the sidecar are you referring to? Basically besides just being a perps app chain, having more general purpose block space and more of kind of a platform type play.
- [64:51]
Vlad Novakovsky
Yes, yeah, yeah. So you could write. Because like right now let's say someone like an AAVE wanted to like. Well first of all we already can integrate with the stuff that happens on the L1 on Ethereum already. But let's say someone like an AVI wanted to like or whoever wanted to run an application that runs directly on the L2. Like they would have to be writing ZK circuits right now. Right. Or you know that's. But with, with stuff with ZK VM sidecar they can actually just take their existing smart contracts. They can run in the sidecar but that shares the sequencer with the perps exchange. So then you can kind of like, you know, like those assets would, can be used as collateral or used for liquidations, so on. So that's the ZKVM sidecar thing. And then there's the universal cross margin which is pretty cool, right? Like imagine that like all these people who hold eth. Imagine you can use your ETH as collateral when you trade. Now of course, like think about what just happened, like liquidations, like you'd have to be pretty conservative. Like maybe the leverage you take on if you do that isn't 50x, maybe it's 10x, you know, but like, but it's still better to have some version of that than that especially you know, instead of having to like force people to use USDC as collateral and then yeah, beyond that just on the market. So I write like different types of markets, pre launch markets, you know, real world assets, you know, options. Like all of that is like, like stuff for the next few quarters.
- [66:15]
David
So you're looking to become kind of a just a financial super app, super platform where any financial instrument can turn be turned into a ZK circuit and added to the platform.
- [66:25]
Vlad Novakovsky
That's correct, yeah.
- [66:27]
Ryan
Wow.
- [66:28]
David
Has it always been that ambitious?
- [66:30]
Vlad Novakovsky
Yeah, I mean it's always been like I said, markets. You know, we, we when we started it's like why are all these digital assets traded in ways that don't actually use the underlying tech? And let's build a way to trade digital assets that fully leverages kind of decentralization, verifiability, security. And the scope of what digital assets means has grown a lot while we were Building also. Right. For example, real world assets weren't really on a roadmap in the beginning but now with kind of new administration, new policies, now they are. Right. Or things like, you know, like prediction markets maybe as well or things like options. So all of that, a lot of that is driven more by customer demand though. Right. Like we're not, we're not just like building stuff in the lab and like seeing what sticks. Like we actually we're pretty transparent about it. Like we ask polls like hey what should we build next? And the one that came up was like pre launch markets. So we built pre launch markets.
- [67:29]
David
So the perp Dex landscape has this huge hyper liquid colored glasses around the whole concept largely because of just the absolute success of the launch of the hyperliquid token. No investors, no VCs, a very generous share given to the community. And then the token just ripped afterwards did it did a 10x and now I don't think you can be like a perp Dex in the space and not really have that fact that series of events kind of just in the back of your head. Lidar has a points program. Presumably points turns into a later lighter token.
- [68:06]
Host/Interviewer
Any details? How do I get points?
- [68:09]
David
When will the token drop? Any sort of details about this?
- [68:14]
Vlad Novakovsky
Well, how do you get points? That's an easy one because we're going to be publishing so as season two starts, we're going to be publishing the formula for how points are generated this week.
- [68:25]
David
Why has it been a secret so far?
- [68:26]
Vlad Novakovsky
Well, so season one, the formula used in season one was a secret. The formula for season two will be much more transparent. Why the secret? Because you know like we didn't have systems in place to at that point to prevent bad actors from gaming the system. Right. So also I think there's something interesting when it's like new people experiment like if they don't know what it is and they try different forms of trading, you kind of get like a better stress test for your product.
- [68:54]
David
People are poking around in the nooks and crannies of the protocol.
- [68:57]
Vlad Novakovsky
Right? Exactly, exactly. But now, now we know, you know we have like 250,000 traders, right. So we know what kind of stuff they're going to do. Like it's unlikely that a trader will come at this point and discover a whole new way to use, you know, to use lighter. So like I think we can be a lot more transparent now and the transparent like wide like the argument for the transparency is that especially like institutions, you know, market makers and HFT shops like they have quant teams run strategies for them. It's very helpful when they can actually say, okay, my, when I run the strategy and then this is how many points I'm going to get for the strategy. And that adjusts their models. Right. And that's good because they can for example, provide more liquidity if they know they're going to get points. Again, maybe if they had known that they would have stayed in more on the 10th and we would have had even more liquidity than just llp. But your question about like, yeah, we're, we're thinking about kind of year end as kind of to, to wrap up season two. And you know, I think you can expect kind of something to happen around that time, but we'll kind of make announcements as we get closer. And I think, yeah, I think your other point was about like, you know, the market, you know, market comps to other projects, right? Yeah. I mean again, it's like to me this is all about blocking and tackling. Like you have to treat the customer right, you have to have reasonable policies. Right. You have to be transparent about communication. Like this whole thing about like VCs. Well, we have some very helpful partners on the capital side. But for example, you know, Founders Fund is their, their, like their whole ethos is that they are there to help when you need it, otherwise they get out of the way. And so it's like the founder kind of has, you know, the founding team, you know, makes kind of the core decisions. Right. And for us, we of course get input from our customers when we make those core decisions. So it really depends. Like, I don't know, maybe people have been burned with some particular VC backed projects before. So this whole narrative appears. But it's like from our perspective it's no different than, you know, you know, if someone on a team won, won the lottery, you know, won the Powerball and had a billion dollars to inject into the project, it would be no different than the VC partners we have. Actually it's even better because they can help when we need them.
- [71:14]
Ryan
Vlad, you guys premiered on L2B, which is sort of a, a stakeholder that looks at the, the property rights assurances of all the L2s out there and you got, you got four out of five pie slots green. It's pretty impressive debut. Still a stage zero. What's the plan to get to stage one? Stage two? Is that a priority for you?
- [71:34]
Vlad Novakovsky
Yeah, yeah. I mean we're, that's kind of for the team that's working on the core infrastructure. The cryptography side. Like, yeah, L2 beat is, you know, one of their core metrics, one of their core KPIs. So I think we should be all green pretty soon, but guess you'll. You'll see it when. When it happens.
- [71:53]
Ryan
Very good. Vlad, thank you so much for joining us today. This has been fantastic. We appreciate it. Yeah, appreciate the questions for everybody out there. None of this has been financial advice, of course. Perps are risky. So is the rest of crypto. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot, Sa.