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- [00:00]
A
Institutionals who want to provide liquidity in a specific environment, like maybe Robinhood chain and maybe even RWAs, they don't want to mix own funds with other people's funds. Right, because there's also some hackers and and maybe sanction people and your cool house is isolated. You are with own position. The settlement on Aqua is done by professional market makers who are passing specific compliance checks from 1 inch compliance team and all also passing through KYB.
- [00:33]
B
Hi everyone. Welcome to a special Unchained paid partnership interview. My name is Andre Bagansky and I'm here today with One Inch co founder Sergey Koons to discuss Aqua, a shared liquidity wire for Defi that just debuted across 13 networks. Welcome Sergey.
- [00:50]
A
Hi everyone. It's a pleasure to be here.
- [00:53]
B
Heads up everyone. This conversation is sponsored content paid paid for by 1 inch. It's produced in partnership with them separate from Unchained's newsroom. One Inch is one of Ethereum's most prominent decentralized exchange aggregators. And today you launched Aqua, a product that is meant to offer an alternative to Defi's traditional pool based model. What problem were you trying to solve for users with Aqua?
- [01:18]
A
So I actually solved my own problem. I faced multiple times problems in Uniswap liquidity pools. I provide some liquidity and I played around with the maximum acceptable price impact and somehow like I forgot to reset it and I got sandwiched by providing liquidity and lost like 10 Ethereum or something. Kind of. It's attackable by math bots. It's kind of a problem. Additional problem with FSS liquidity provider as well are the just in time equity provisionings from Mathbots. So when you sit in the pool and there a big trade is coming to the pool and there's a math bot jumping in into the liquidity pool before the trade with a lot of money and after the trade it removed the liquidity so you don't get almost anything from this swap. And the fact that you get diluted with like sitting with the others in the liquidity pool with the piece what are defined by Uniswap team, you know like you can only choose 30 bips, 5 bips, 1 bip, you know, 1 percentage. But you know, if you do proper analysis of the market and we did deep research of it, one of it we reported with together with June where we are highlighted that 85 percentages of the liquidity sits actually idle. It's participating in the price formation but actually it doesn't move at all in like 95% of of the time in a year. So and we were thinking like, like how we can address all these problems. We did already long research from 2021 when we introduced limit orders. We built some strategies for limit orders. What allowed you to sell in price range in one direction, for example. Somehow we didn't continue to work on that. But I think right now is the right time for this approach since we have much more liquidity also from institutions coming in with RWAs and there's a demand for more efficient on higher utilization of liquidity. So we came to the idea, okay, like we are very good in intense. We have our intent based swaps, we have the intent based cross chain swaps highly atomically and non custody. And then we thought like why not to make liquidity provision also based on intents. And this is at the end kind of just like a strategy, you know, you define a strategy, you say okay, I'm okay to buy this asset until this price and I'm okay to sell it until this price. And I want to charge specific amount of fee and how much you should charge it should not be gut feeling. Yeah, it should be based on the historical data, based on the trend and based on demarcate situation. Market situation can change. So you should be able to close all your positions with one single transaction. Such things are possible to do. On Aqua we have benefit that you don't need to distribute your liquidity into different pools. If you look into Uniswap, if you have like 10,000 USDC and you want to provide liquidity, you need to split it. Yeah, if it's only one pool, you have to split it by half to disperse USDC Ethereum maybe. And then if you want to provide USDC to wbtc you cannot. You need to reduce your amount what you put in the pool so your liquidity gets very fragmented. So and in our protocol you can just keep your assets in your wallet, you have all the benefits. For example, you can participate in uni swap governance with your uni token because they are on your wallet at the same time. You can have a position for uni ethereum in a specific price range. And if you look in the history of data what we provide in our interface, you see what happened in the last six months with the price, how it moved. And then you can set your price range in the right manner so you stay kind of in the range and are always and can also utilize the utility of the token. There are some other really nice solutions as well for looping looping on our V3 kind of I love it very much. Today I built out of my position 3, 3 to 4 times leverage with like just same assets. Like you can deposit WBTC for example in aave you can borrow CBBTC and you can deposit again and you can just loop it multiple times and then you have like 3 to 4x and then you put Aqua position on that just on AAVE tokens. All the arbitrage traders and market makers who who participating in Monish network after passing KYB and compliance check from a team they can settle it and they are okay with settling it in other tokens. It's kind of. They don't need to. These are not like retail users something. These are professionals who know how to do that. So and you get trades, you know and you made out of your 10k, you can make 30 to 40k means could earn 3 to 4 times more fees. Yeah. So this the idea kind of like Aqua Sergey.
- [07:19]
B
I appreciate the overview and there's some details that you just mentioned that we're going to dig into now and later in the segment. First off, you mentioned this research that was commissioned by dune showing that 85% of concentrated liquidity was underutilized this year. Is this an ecosystem wide issue and why do you think it's the case?
- [07:41]
A
Yeah, it's like on every chain the same. Because they use the same design. Yeah. Smart contract custody you need to put into smart contract your assets and the assets are isolated and cannot be shared. And actually this shared liquidity approach becomes more famous I would say today I have seen that last week Uniswap launched the dual pool hack hook. So what is a collaboration with Spark and it's kind of use also the shared liquidity approach. So it's very nice to see that what we launched in November last year as a developer release of Aqua now getting adoption also by Uniswap team. So um, yeah. And the design of shared liquidity allows you to utilize on the same assets in multiple positions in the same time. It's kind of really beautiful and increased utilization.
- [08:49]
B
You know you talk about that idea multiple positions sort of happening at the same time. Can you talk about how that's able to happen without the creation of debt or anything like that?
- [09:03]
A
Yeah, just you have just normal wallet one big thing. What we also introduce with this Aqua release is I call them Stop Wallet. You know like you have a wallet, you have maybe like 20k in the wallet but you don't want to risk the full amount of your assets. Right. So and you are okay only to gamble with Gamble. Yeah, with 10K you can create a sub wallet and sub wallet in the form of gnosis safe. Yeah, you can add it if you are already in agnostic safe or you just create one with a beautiful address even you can just mine your beautiful gnosis safe address. It's also kind of thing what I wipe coded in my free time. So yeah and then you can isolate your assets in a sub wallet as gnus multisig and the next like normal wallet on manage. So and then you can you have your different assets, you have maybe like six assets and then you can create among all six assets trade combinations like trading strategies. It's like virtual MM pools but they are only kind of virtual and these are just only allowance for market makers to trade on your assets based on specific conditions. It's like in trading bot what you run on a wallet and the rules are written in smart contract and it works 247 and you don't need even to run a computer for that.
- [10:39]
B
You know, you talk about this from the perspective of how it could potentially or is meant to benefit users and I'm just curious like how do you think this product could affect Ethereum's ecosystem at large?
- [10:53]
A
I think it will affect the web3 space in general. You see the adoption of RWase Robinhood launched on layer 2 based on Arbitrum technology, right? And they have RWAs Binance have RWAs on the X stocks and this kind of a problem of a lack of liquidity. Of course they are market makers who are integrated in 1 inch intent best swaps who are offering to mint on demand Auto Blaze. But there's no kind of secondary market and it's kind of difficult to build it because the small amount of liquidity and this canary market can be built by a user itself. Like I as person can just buy all the auto Blaze. And the beauty of RWS is compared to the blue chips or Ethereum Bitcoin. Blue chips and Ethereum and Bitcoin moving in the same direction at the same time. Sometimes they move maybe slower but they come than back and it's like moving like this. All the prices are same up, down, up down arm layers, they're all different, right? So Nvidia goes up, SpaceX goes up or something goes down. And this energy between this price movements you can catch by by taking this autoblaze putting on your wallet, creating aqua strategies among them and you can earn on the volume what goes through the ecosystem of this blockchain.
- [12:36]
B
Well, I would love it if you could just describe how Aqua actually prices and executes transactions compared to what you see with classic AMMs.
- [12:45]
A
Yeah, so Aqua is not executing anything. Aqua is just intent based protocol for liquidity provisioning. You define what strategy you want to create. For example, you have some Ethereum, you have some USDC and you would like to to create the trading strategy for a specific price range. You are okay to buy Ethereum if it drops up to 15 percentages. And you are okay to sell Ethereum until US$12,000 where you will see Ethereum very soon. So not financial advice of course.
- [13:19]
B
Another component I wanted to ask you about is why was this product designed in a way that prioritized self custody?
- [13:28]
A
Everything what we build is self custody at one inch. So there's no service what is custody at all. And even we try to work with the wallets to introduce clear signing. What we did flutter if you have seen the announcements. So clear signing is when you see when you get to the transaction on your wallet, you exactly understand what will understand what you are doing. For example, you are creating position on Aqua in specific price range on the specific current market rate and a specific fees, what you're charging and the amount you choose.
- [14:08]
B
Do you feel like there's any risks worth highlighting when it comes to Aqua or just the idea of providing liquidity in defi at large?
- [14:17]
A
For sure there are some risks like everywhere. And to address this exactly, we launched under 1inch Aqua1inch.com Aqua Learn. It's a learn page where you can search if you have a question, you can see how what strategies are there? Considerate liquidity, full range liquidity packed formula for stablecoin pairs. So there are some explanation what risk you have as someone who used these strategies. So. So of course everyone should educate themselves, understand really what you're doing, what impact could happen. And of course from the protocol side kind of we did maximal effort as a core contributor team with a lot of security audits. We have eight security audits. It cost huge amount of money. We were lucky that we got funded for the security audits from the dao. So DAO now kind of helped to bootstrap the protocol itself. So we were able to launch it. Awesome.
- [15:34]
B
Shifting gears a little bit. You know, you've seen a lot of innovation in the crypto space when it comes to building applications that are both consumer facing and those meant for institutions, especially regarding ease of use and compliance. Who was Aqua meant for?
- [15:52]
A
Actually for me, for myself. That's why I spend a lot of time to work on that, to improve that. And we're lucky to have this great team where we shipped all everything all together. So there's like no way one man show. It's always a team effort. With all these specialists, we have started to build it for ourselves. Same as with other protocols like cross chains.
- [16:26]
B
False.
- [16:26]
A
For example, it was kind of difficult to bridge. And the security problems if the bridges. I think last week again two more bridges got hacked. And here we use our standard approach. What we are doing at one inch we built everything institutional ready. It's like, you know, this time we are the TV brands started to publish the TVs with HD radio or something. We are institutional radio. So we put a level on top of it and we. And we fulfill also what we. What we promise here it's institutional ready in the form that institutionals who want to provide liquidity in a specific environment, like maybe Robinhood Chain and maybe even place they don't want to mix own funds with other people funds. Right. Because there's also some hackers and maybe sanction people. And your cool house is isolated. You're. You're with own position. And the settlement on Aqua is done by professional market makers who are passing specific compliance checks from 1 inch compliance team and also passing through KYB. So it's clear who is behind the settlements. So even the institutions can say okay, I'm only okay if intermute settles and they can define it by themselves.
- [18:08]
B
At the top of the show you mentioned how Aqua debuted across 13 different networks that are Ethereum compatible. I know you've talked about Robinhood Chain on this show, but which other ones stand out to you?
- [18:21]
A
So we support everything else. They are kind of what's famous and have users base. Of course, one of our institutional partners, we are. We are infrastructure provider as well for Coinbase. So we serve them with our Web3 APIs. And we are moving a little bit into AI direction with AI aggregation and providing all the AI services. Yeah. So of course all the arbitrum optimism, Zksync, Binance, Smart Chain, Polygon kind of. We work with everyone because like it's the. The way what, what where we can benefit altogether.
- [19:13]
B
And aside from capital efficiency, what incentives or rewards programs are you rolling out alongside Aqua to attract that initial liquidity?
- [19:22]
A
Yeah. So for Aqua launch 1 ish foundation introduced incentive program through Merkle Distribution. So people can get some rewards by creating positions and generating volumes on these positions. We have a specific leaderboard in Aqua. So you see yourself and you see other people and you see the positions of other people. So you can look like how they generate actually money and you can just do kind of copy trading. And I personally introduced the 3D visualization as a kind of 3D map in the form of molecules and perhaps what are the positions between the tokens so you can better discover and understand. Oh, I actually forgot to create between these two tokens one more position so I can share the same assets in these two or three positions in the same time. And you can actually tweet on x Com with a small banner of your positions also. Kind of nice thing. So additional program we got from 1 inch DAO as well. 1 inch DAO is distributing 500,000 USDC in the next three months to people who generates volumes on Aqua.
- [20:53]
B
That's interesting.
- [20:53]
A
By creating positions, by being maker, by creating Aqua trading strategies, positions and generative models.
- [21:02]
B
Sure. Is there anything else that we didn't cover during this interview that you feel like is worth highlighting? Potentially some of the technical nuance when it comes to Aqua or anything that you're particularly excited about?
- [21:15]
A
Yeah. In terms of technical topics, look into Aqua learn. We tried our best. We have even tutorials with videos where you can see how to connect the wallet for really new people, how to create position. We have even audio you can just sit and share like a podcast over like what is JIT? Yeah. And why is this a problem in our Web3 space? Yeah. And developer documentation of course for developers. We have built it not just only for 1 inch network itself or the institutionals what we serve and also expand our direction to institutionals to board them as infrastructure provider also for developers. As a developer you can build a vault where you use the shared liquidity Aqua positions so you could generate much more than you can just Compare to other MMs where you isolate liquidity and it's idle for 85 percentages. So it's open for developers and everyone is welcome to build on top of it.
- [22:34]
B
Well, it was nice speaking to you about Defi and Aqua today, Sergey. Thank you so much for joining us. This has been a paid partnership interview sponsored by One Inch. Keep an eye out for future ones and I'll see you the next time.
- [22:48]
C
This video was a paid partnership. Any statements about the featured company or its products are its own and have not been independently verified by Unchained. Nothing in this video is investment, financial, legal or tax advice or a recommendation to buy, sell or use any asset or product discussed. Always do your own research before making any financial decision. Decision.