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Bringing Solutions for Liquidity Fragmentation
Recorded: April 28, 2025 Duration: 1:02:03Space Recording
Short Summary
In a recent discussion, panelists explored the challenges of liquidity fragmentation in Web3, emphasizing the need for innovative solutions and partnerships to enhance interoperability. They highlighted the importance of aggregated liquidity for smaller projects, the potential for growth in decentralized finance, and the ongoing trend towards standardization in blockchain technology.
Full Transcription
Thank you. Hello, hello. Good morning, everybody.
Shoutouts to the new week, shoutouts to the new Monday, and almost shoutouts to the new ones.
That's going to be coming in just a few days.
But guys, hopefully you're having a wonderful day thus far, and hopefully we're about to make it even better for you all.
But before we do that, let's go ahead and proceed with that usual mic check.
Guys and gals in the audience, if you can hear me right me now please let me know with some thumbs ups with some hearts with some kind of indication that
the audio is in fact reaching you all right now i appreciate you timmy thank you so much
thank you emmy thank you bill i think we're good here just wait on one or two more there we go Thank you, Emmy. Thank you, Bill.
I think we're good here.
We can just wait on one or two more.
There we go.
Thank you so much for the mic check, Jason.
Appreciate you.
Thank you, Dom.
Thank you, Andre.
Let's go.
Let's go.
All right, guys.
Mic check is complete, but please just give us a couple of more minutes here to set things up on the back end.
But in the meantime, head on over to the bottom right-hand corner.
Give us a like, comment, and retweet on today's basis, and we'll be starting the show in just a few more minutes.
Let's go.
You never know what it's like.
You plug like a winter freeze.
It's just like ice.
And there's a cold, lonely light that shines from you.
Wind up like a wreck you hide behind that mask you use.
And did you think this thing would never win?
Well, look at me.
I'm coming back again.
I got a taste of love in a simple way.
And you need to know while I'm still standing, you just fade away.
Don't you know I'm still standing better than I ever did.
Looking like a true survivor.
Feeling like a little kid.
I'm still standing after all this time
And I'm still standing after all this time.
I'm picking up the pieces of my life without you on my mind
I'm still standing, yeah, yeah, yeah
I'm still standing, yeah, yeah, yeah
Once I never could have hoped to win
You're starting down the road and leaving me again
The threats you made were meant to cut me down
And if our love was just a circus
You can be a clown by now
Don't you know I'm still standing
Better than I ever get
Looking like a true survivor
I'm feeling like a little kid
I'm still standing
Now I feel all this time
I'm picking up the pieces of my life
Without you on my mind
I'm still standing
Yeah, yeah, yeah
I'm still standing
Yeah, yeah, yeah, I'm still standing, yeah, yeah, yeah
And I know I'm still standing better than I ever did Thank you. To die my life without you on my mind. I'm still standing.
Yeah, yeah, yeah.
I'm still standing.
Yeah, yeah, yeah.
I'm still standing.
Yeah, yeah, yeah.
I'm still standing.
Yeah, yeah, yeah.
Yo, how's it going, everyone? And welcome back to Egg Layer, the cross-chain settlement layer that is aggregating all of Web3.
My name is Ice, and I'll be your host for today's show. Now, ladies and gentlemen, we spend a lot of our time and effort in this space,
making things as simple as possible for newcomers, from optimizing the UI UX to restructuring
educational content to an easily understandable and digestible form. But today, we're actually
going to be shifting that focus ever so slightly, moving the spotlight onto our existing
users and the veterans in our space. Because you see, one of the most prominent obstacles
that Web3 has been trying to combat over the years is the over-diversifying of capital
across multiple chains or exchanges. And while the idea of builders creating additional chains and products
with specific use cases is not necessarily a bad thing, the underlying problem here is, of course,
liquidity fragmentation. And today, we're going to be taking a deep dive to understanding what
exactly is happening and how we can bring solutions to address liquidity fragmentation in Web3.
Let's talk about this, guys. But first, let me check in with my co-host from the AgLayer team.
What's going on, Diana? How are you doing today?
Hey, GMI. It's going well. Happy Monday to everyone and happy to be here on The Space
talking about fragmentation of liquidity. It's going to be a good one.
talking about fragmentation of liquidity.
It's going to be a good one.
Yeah, indeed it is.
I think this is something that you and I, Diana, and Timmy
as well, we've been kind of talking around this subject
for a long time, but we never really
placed this topic in the spotlight
to really dissect what's going down.
So we're really happy to learn and, of course,
to hear more about what experts have to say regarding
this subject matter.
But moreover, how is Agl layer addressing this issue at the core right thank you so
much for joining us diana let's go ahead and check in with the other dear co-host my man
timmy what's going on man how you doing gm i am very good i i just totally dig the uh
the elton john cover intro it was it was great i feel like that's like everyone over the
last three years in the
bear market, like we're still standing, we're still building. It's good. So it's been fun.
Indeed. Indeed. You know, when I kind of think back, uh, when I listened to the song in the
morning, it's like, you know what? The charts might be read not today, of course, but you know,
the charts may be read, but Hey, at least I'm still here. I don't know about everyone else,
but I'm doing all right. I'm doing all right. I'm doing better than I ever did before. At least that's what I tell myself.
But Timmy, always a pleasure to speak to you, my brother. Let's go ahead and check in with some of
the lovely guests that we've invited to today's show to discuss this exact hot topic here. First
off, let me go ahead and say hello to our friend Dom joining us from Layer Zero. What's going on,
Dom? Hello, everyone. Thanks for having me on today.
Looking forward to chatting all things liquidity fragmentation.
So, cheers.
Cheers, my guy.
Glad to have you here.
And let's go ahead and say hello to our friends.
Joining us from the Turn team.
Is that Matt or Joseph behind the house account today?
Hey, man.
Yeah, hey, everyone.
Crypto Matt K here behind the Turn account. Personal account is up there as well. Pleasure to meet a lot of new faces up here on the stage today. I think I follow Dom. Layer zero. Pleasure. Pleasure to meet all of you. Looking forward to getting into it. And happy Monday. Happy Monday, everyone.
to meet all of you. Looking forward to getting into it.
And happy Monday. Happy Monday, everyone.
Happy Monday, indeed, man.
You know, we don't get to say that very often.
Usually Mondays are the days of turbulence.
It's kind of like a dice roll at this point.
But good to see. Good to see.
We're starting off Monday on a good note.
And also, good to know, we're starting off
Token 2049 on a good note.
Every single year that has preceded these events.
And there's usually some kind of typhoon going on,
natural disasters, people saying,
oh, look, the whales are in town.
They brought the flood with it.
Ha ha ha, that's great.
But you know, hopefully this time around,
things are a little bit different.
Things are looking up.
So let's kick this off, guys.
But before we do that, let's go ahead and say hello
to the rep coming in from Circular Protocol.
Forgive my pronunciation if I get this wrong,
but is that Gianluca behind the house channel?
Oh, my God.
You got it right.
First attempt.
Remarkable.
Well, happy Monday to everybody.
I am Gianluca, founder and CEO at Circular Protocol, a layer one blockchain designed mostly for compliance in healthcare and science.
My guy.
Oh, man.
I love it, man.
I love it when scientific minds come together
and really congregate and form these discussions
here on Web3.
I'm biased, of course,
coming from a science background as well,
but I've always believed, man.
I've always believed when the science folks
get into our space,
when we're really trying to break this down
on a scientific level,
you know we're doing something right.
So Gianluca, absolute pleasure to have you.
And before we begin, I'm not 100% sure if we have a rep behind, that's speaking behind the Polygon account,
but they are here on stage, so I just want to give them the spotlight for just a second here.
Rep behind the Polygon account, are you there with us right now?
I think it's, we put it up here for visibility.
So I don't know if anyone's
actually behind it or they might be, but
they're probably not paying attention.
No worries.
That just means we got to do better.
We got to get them in here with
a very intriguing talk.
But, you know, that's totally fine.
Thank you for pulling up here.
Polygon House Account Intern.
Appreciate your presence. Appreciate the visibility. But guys for pulling up here, Polygon House Account Intern. Appreciate your presence.
Appreciate the visibility.
But guys, that being said, let's go ahead and get into the thick of it.
And of course, I would like to start so by asking you guys, our dear curated panelists,
what do you guys think are some of the biggest concerns or fears that people have surrounding liquidity fragmentation?
And maybe we even dial things back
just a little bit to create context
for everybody else listening right now.
What is liquidity fragmentation?
And why is it a problem?
So please take a minute, think about what you wanna say.
And at any point, if you wanna join in on a conversation,
use the bottom right hand panel,
just like Matt did to raise your hands like so.
And of course, if you have anything to add in direct response
to another speaker, keep those hands raised for me, but also hit me up with one of these
waving hand emotes, and I'll do my best to skip the line and send you the mic ASAP.
And for everybody else listening in on the conversation right now, please do us a favor,
go back to that bottom right-hand corner, give us a like, comment, and retweet on today's
basis as I hand the mic over to Matt to start things off.
Go for it, man.
Hey, yeah.
I think, like, zooming out and giving some folks some context here is definitely the move, right?
The topic today is liquidity fragmentation.
Fragmentation meaning that we have all of these, you know, I think it's like 2000 plus L1 tokens and ecosystems at this point.
And you need to think that they all are their own networks that have their own valuations, money flows, you name it.
And within all of these networks and ecosystems, you can kind of think of it if there's folks
that are listening that aren't, you know, Web3 savvy, it's kind of like countries that
have their own currency, that have their own treasuries, and we need to figure out a way
to get these countries to transact in their native currencies across borders with each
other. And that's kind of how I like to think of all of the networks
and ecosystems that exist in crypto. And we need to kind of figure out how to get this
fragmented kind of reality that we all live in right now, focusing more on, you know,
getting everyone to be able to operate with each other in a seamless way.
So interoperability, cross-chain, insert word here. But I think the goal is to get away from
fragmentation, which is eventually where this conversation will probably go, and lean more into abstraction, which is the idea of making, again, going
back to the country thesis, like the cross-border payments as seamless as possible. Even if
you were to use countries and payment systems like SWIFT as an example in Europe and sending
money to America or anything like that, it
takes anywhere from one to three business days depending on how you go about all of
these financial instruments, whether it's wiring or using a platform like Revolut.
All this stuff takes time and there is a little bit of friction, but with this technology in Web3 that, you know, turn is creating that layer zero is creating and a bunch of other interoperability bridges the plumbing for the user exists in such a way where they don't even realize that they're engaging in these cross-border payment rails. So I think to kind of start, you know, just after setting this context,
I think it'll help folks kind of lean into some answers here. But, you know, fears around
the fragmentation component is like, you know, as it stands, like we are just creating islands
of existing communities, ecosystems, you know, call it civilizations to tie it back to the
real world analogy with no bridges in between. And there's no way for us to talk. You know,
we're on the island of Ethereum, but we want to talk to the folks that are over there on the Solana Island because, you know, they have some cool rock that we want that will help us make more tools.
And we have the wheat that they want,
but we don't have a way to kind of like get over there and,
and send all this stuff over to them. So, you know, these,
the idea of creating these bridges so that there can be kind of smooth
transactions and traffic flows between all
of these islands, so to speak, will create capital efficiency and more efficient markets.
But yeah, that's kind of like the, I'll just leave it at that because I'm sure other people
will want to jump in and kind of put their pieces in here. But really, it's just like
we're so fragmented right now that all these different ecosystems have their own
pools of liquidity and no one's really like i mean we are in the process of you know creating
these bridges and and stuff but yeah it's without this it will just create these like islands of
ecosystems with no one really talking to one another so So yeah, that's my little take here.
You know, I actually had a really fascinating discussion with one of the founders here,
and the way they painted the picture of liquidity fragmentation, and more so chain aggregation,
was very interesting, because they illustrated it in a way that was almost easy
enough for like a fifth grader to understand. And the way that he explained it to me was that
he pictured every single blockchain, major blockchain, kind of as a circle, right? Or
whatever shape that you would like. But if we layer all these circles kind of like overlapping
on top of each other, what do we have? No, it's not the Olympic or Audi symbol. It is actually
what we call a Venn diagram. But while Venn diagrams exist, and it seems like it overlaps, if we actually look at it from a 3D
level, then there's ones that are higher up and ones that are lower, right? But on a 2D plane,
it just seems like these circles are overlapping somewhat equally, sometimes not. But when you view
it from like a 3D perspective, there is a tiered system.
And while bridges do exist, just like you said, Matt, it kind of feels like that the
obstacles that are almost invisible to the average user makes these Venn diagrams feel
like it is actually one way.
And this is something that really struck a chord with me because when I started to think
about that, it really is true, right?
It kind of feels like the ones that are like lower on the tier list, if you would, are kind of funneling that liquidity
higher up. And it gets to a point where eventually the big, the ones that are at the top kind of
survive and the Venn diagram, the circle grows bigger, eventually overwhelming and overlapping
all of the small circles. So when I heard that, I was like, oh man, this is actually really
applicable to the current conversation right now. And I really heard that, I was like, oh man, this is actually really applicable to the
current conversation right now. And I really like that way of explaining. This is probably
where they're going to start teaching people in school when it comes to liquidity. But Gianluca,
my man, you got your hand up. I would love to hear your thoughts on this, my friend.
Yes. So, well, the first thing, just to clarify for whoever is listening and is not very familiar, there are two levels of fragmentation of liquidity. There is the obvious one. There are a million tokens. And for each one of these tokens, if it's being traded on a DEX, there is a liquidity pool. Obviously, more tokens, that means that the same amount of money is going to be spread across multiple tokens. Now, just for the sake of clarity, there are not millions of blockchains.
Right now, we have around 40 to 50 Layer 1 blockchains.
Then there are Layer 2 blockchains, and then there are very, very minor projects that are not even on the radar.
So 40, let's say 50 Layer 1 blockchains, and they are bringing a lot of tokens.
In the past season, we have been up to 4 million tokens that have been minted, new tokens.
And it is like a staggering number.
Right before the previous bear market, we were around 15,000.
So it's been like very, very big.
Then there is anyway, the second level of fragmentation which is on the same token across different liquidity pools obviously
there are a million dexes so if you have to spread everything across different access you end up
having very small liquidity pools and the problem of the liquidity pool is that if it is too small, it's very easy to influence the price. So while in some cases,
the project is small and blah, blah, blah, but then can grow and can get out from a situation
like this, in a situation where the token is tradable and is divided in multiple liquidity,
might even be in some cases a malicious intent to use these
you know many liquidity pools because they are very easy to influence and they offer opportunities
for arbitrage and and you know it's uh it's it's very easy and it's very appealing if you have a
little bit of money to bet toward the little fish that unfortunately don't have that much more.
So now the conversation should go mostly toward what are the possible solutions.
I love that, Gian.
You know, and at the moment you mentioned possible solutions, my guy, Timmy, instantly
raised his hand so i know i know we're going to the right direction man timmy please if you would
raised his hand.
So I know we're going to the right direction, man.
Timmy, please, if you would, go ahead.
go ahead yeah no i think it's the way i think about kind of what we're doing with ag layer and
the words is right now there's a big problem i would say like one thing that attracted me and
i think a lot of people to this space is the democratization of money.
And we have this situation where chains are growing and obviously as an industry we're growing,
but you're going to end up with a Pareto effect
of there will be certain blockchains
that have a whole bunch of liquidity
and are able to give great user experience.
And then if a developer has a novel solution for a blockchain that solved a real problem,
it will be tough to get liquidity on the chain and develop traction because users don't want
to face the high slippage and the high spreads and all of those things that actually make
the blockchain work and attract people.
So really when you have these huge chains that basically they're where people go,
and even I know we were talking about science in general,
where like DeSci is a huge, really emerging industry.
And if there's a blockchain that can be built that is specifically geared towards Desai
to get better results, well, that's going to struggle if it's introduced to the market
without the liquidity and because it's fragmented.
But when we connect them you can all of a sudden
they can tap into all of the different assets in different ecosystems and really um i would say
get it creates a more meritocratic result of blockchains um even if people aren't early but
they build something great later on they can still tap into what already exists.
That is really fascinating to me.
I never thought about it like that.
And Dom, I see your hand up right before I pass it to you, man.
I just got a quick follow-up from my guy here.
And that's to the point.
Certain blockchains will have great utility, right?
And what I loved about your take to me is that it is really about having a novel solution to these problems that we're facing.
And but you mentioned it is tough when we actually have these solutions.
You mentioned that it's actually tough to get liquidity on chain.
And that presents kind of a strange juxtaposition in my mind that I'm really trying to understand better.
And the kind of follow up question I had is, do you feel blockchain development moves at a quicker pace when there's a ton of liquidity?
Or is this one of those rare situations where it's actually a blessing in disguise as it addresses the problems with a sense of urgency?
What are your thoughts on this, man?
I'm sorry. Can you repeat the question?
I think I cut out for a second.
Absolutely. Do you think blockchain development moves at a quicker pace when there's a lot of liquidity on chain?
Or is this one of those situations where having a sense of urgency actually pushes the solution to the problem at a faster pace?
What are your thoughts on this?
I would say, oh God, in my opinion, it's kind of a combination of the two where you can actually get really quick development
when there is that sense of urgency but without the liquidity you stall out so it's like you
people come up with these great solutions and they can do everything and they're really motivated
and then i would say i don't know how long could you go without a salary or earning money or having liquidity or generating revenue?
Like all of these things where it's like all of these great ideas happen, but then they start to putter out and they run out of gas.
So like that's really the way that I see it is you don't necessarily need it to get started, but you certainly need liquidity to continue.
I love that answer, Timmy. You know, I'm kind of a give a different perspective on it. Like,
just like you said, when we get a box out of our employment, like what do we do, right? When we
stall out, what do we do then? And I kind of feel like that you're on the right direction. If not,
you're exactly correct. Because as an employee, if I had a great idea, but I had no platform or
company to like help me make that a reality, I'm still going to retain my dream.
I'm still going to retain that idea. I'm probably going to go to another employer eventually, though.
Right. So I think the idea that you mentioned of stalling out, it's happening in real time in blockchain as well.
Like these smaller chains might have fantastic utility, but if they don't have the liquidity to push those dreams into a reality, they might take those efforts and funnel them onto other existing chains. And I think over
the courses of 2022 till now, we've seen that happen a lot. But man, just thinking about this
is kind of, it's making my brain go, but Dom, you had your hand up. I would love to hear your
thoughts on this, man. Please go for it. Yeah, no, I appreciate it. And I definitely agree with that frame of mind when it comes to actually how you're attracting liquidity and of the bigger points I just wanted to highlight is that at the end of the day,
we are trying to build an evolution of finance
and fintech as a whole.
And so for us to kind of return back
to where we already have issues
in terms of liquidity fragmentation in Web2 as of today,
I think the main concern is that
we are not moving the space
forward and we're just reinventing or like kind of rebranding what we already have today so we don't
we already have liquidity fragmentation between even things like just like venmo and your paypal
accounts not being able to send back and forth and so if we're going to be tracking forward and
we're trying to build this space to what this better version of finance and Internet is today, then we need to be very, very adamant when it comes to making decisions in terms of how architecture is going to be built.
And when it comes to capital efficiency as a whole, I think that if we continue to build in silos, then this space will not move forward into the, I guess, the final idea that we all have in general.
So just want to kind of highlight on that.
Yeah, for sure.
Thank you for that, Dom.
You know, on the idea of we need to make better decisions as a whole.
In your opinion, Dom, what can builders do in our space right now
to help facilitate this decision-making process so it is like without like
it's always becomes like a no-brainer you know what i mean yeah i think uh i mean at the end of
the day like there was this idea for for building with the idea of decentralization, just cypherpunk, I guess, ethos from the earliest days in crypto.
And so not getting complacent
when it comes to building,
building with immutable properties
and these things that actually are important
when it comes to, I guess,
building something that's going to last
the tail of time.
And so when it comes to actually
just builders in this space, I think being very. And so when it comes to actually just builders in
the space, I think being very, very diligent when it comes to how you're going to be positioning
your company, what you're offering, et cetera, is from the day one. And there's not becoming,
I guess, complacent or making trade-offs that will probably not yield you the right future.
I love that, Dom. Thank you for that, man. You know, Diana,
I would love to actually bring this conversation to you for a little bit because we talked about
a lot kind of building up to this, like Matt spoke about bridges. Gian mentioned the fact that
these chains are undergoing such extreme pressures and topped off by what Timmy and Dom said
regarding we need better decision making
because yes, chains are facing the fate of stalling out despite having great ideas. Right, Diana?
So in your mind, like what solutions or positive changes can we introduce with aggregation and with
unified liquidity pools? Yeah. Yeah. Thanks for the question. So i think all of what the speakers said have like
everyone said really good points and i kind of like what dom was just referring back to is like
when when this whole idea of like blockchain first started out it was a proof of concept right and it
was something that no one knew is it really going going to work? Is this going to can we prove this out?
And we've solved that. Yes, it it does. It works. People use it.
I think then where we got to and where we're at right now is, OK, well, how does this scale?
And through this scaling, we've seen this explosion of roll ups and other blockchains, improvements, this and that.
And we're kind of headed towards this future of not only hundreds of chains, but thousands.
And my thesis being that we're going to see very specific use cases for these chains. And so we're now solving for this,
for this multi-chain world. And I think there's so many great teams working to solve for this.
And so what the, what the next step and where I see sort of this like aggregation of chains going and why it's important is one just going back to
what everyone else has mentioned putting the users first having a seamless user experience
I liked the the example that Dom gave of even in web2 there are examples that really it's not
super seamless like it could be if somebody wants wants to pay me, I have to ask them,
which application do you have this?
Send me your link.
All the names are different.
You know, how can we optimize for the best solution moving forward?
And it's going to take a lot of teams working together.
But I think, you know,
ensuring that we can get to a place where users can transact
as if it's all one chain and eliminate that pain of bridging and hopping and the safety concerns that a lot of folks have with traditional bridging is going to be really positive changes moving forward.
And then, of course, the aspect of deeper liquidity. So, you know, right now,
all the liquidity is siloed on each of their respective chains. And so aggregating this
liquidity across chains means that users and developers and applications can tap into much
larger pools of liquidity. And this is really important for developers who are building something
and need to bootstrap, right? They can focus on building and less focus on how am I going to get
users? How am I going to hack our way into, you know, finding the next 10 users or getting people
to bridge their assets over to this new chain, you know, that's
not going to be a worry anymore, which is going to be great. And I think that's, that's a massive
unlock for some of the smaller dev teams and even smaller chains that maybe don't have the sort of
like funding and backing or accolades that some of the bigger new hype-y chains have.
So I think that's going to be a really big, massive unlock.
And that's essentially what Agler is aiming to solve for,
is just that aggregated liquidity across all connected chains.
Yeah, so that's my two cents.
Indeed. Thank you for that, Diana.
And yeah, I think you're right.
Just chain aggregation in general, I feel, would embolden the foundational support for these specific use cases on smaller chains.
But earlier on, you mentioned something.
Before we pass it to the next speaker, I would love to actually follow up on this real fast.
Instead, you mentioned safety concerns associated with traditional bridging. Can you actually go into a little bit more depth about what kind of concerns that we might be experiencing in the present right now?
emerging, emergence of just multiple chains, like we've seen many solutions come to the fold,
a lot are really great solutions. But there are naturally some safety concerns for users,
whether that be, you know, they they're not sure they can trust the code. We've obviously seen really massive bridge hacks previously.
They're, you know, when you're using some of these third-party bridges that maybe swap
cross, like, let's say Solana and Polygon, for example, they're kind of using their own,
you know, feature sets in order to, you know, transfer those assets. And as a user, like some people
aren't thinking, let me dig into their, you know, repos and the code before I do all this.
And so I think there's a little bit of, you know, you can obviously say that many users care about this. A lot don't as well.
But of course, if it's kind of a third party team that's building out a solution and maybe
not something completely backed by like math or something, then there are additional safety
concerns and risks that you're taking.
So that's why, you know, DYOR, do your own research,
kind of proceed with caution.
That's everything in the industry,
but that's kind of more what I was referring to.
Got it.
Thank you for that deeper dive on that, Diana,
because I'll be honest, compared to that,
my level of due diligence kind of lacks massively in comparison because I i'll be honest the way that i go about it
is um okay i need a bridge from here to there first of all what did my friends do let's let's
go into the dms and go through that rabbit hole first right and then secondly have they been
drained in the past and thirdly what does grok recommend honestly that is my that is my entire
bridge flow is that even a word bridge flow i'm not even sure at this point. But Dom,
during that convo, you had your hand up. I don't see it anymore, but I do want to check in with
you real fast. Did you want to add something to that? Yeah. No, I completely agree with what
Diana said. And I think that, I mean, shout out to the whole industry for getting to this point
today, because I can guarantee you if you were around three, four years ago, the bridging landscape was an absolute mess.
And people were sending funds
and hoping for the absolute best.
And we have passed that point.
So in terms of like general bridging risk,
I think that there was a couple of things
that we at Layer Zero are very conscious about.
So one, we are in favor of not like using,
having wrapped assets or some sort of central entity that's going to be verifying a cross chain message.
Additionally, you know, there's always going to be smart contract risks, etc.
when it comes to building in Web3 and for us to have the stance of building with immutable rails.
So all the actual core architecture for layer zero is immutable, that we allow for append-only libraries.
So if we are going to have an upgrade
or some sort of new feature that will be only
via an append-only library where every application
and ecosystem can choose whether to opt in for that.
So if they want to give it some time,
make sure that it's battle-tested, et cetera,
they can do so.
But at the end of the day, I think
that in terms of where we've come to in the bridging landscape
so far is great.
And don't get me wrong. I completely agree. You got to ask your friend where they bridge, what they to in the bridging landscape so far is great and don't get me wrong
i completely agree you got to ask your friend where they bridge just what they use for their
bridging as well but just wanted to kind of highlight how we think about it at layer zero
and what we've done to make sure that um we don't face these issues just because obviously as you
guys know there has been plenty of exploits in the past and we are very very happy to say that we are
now part of that cohort so So anyways, that's all.
Yeah, thank you, Dom.
And right before we pass it to Matt, just making sure I understand it.
Maybe everybody on the panel and or the audience understands it, but I don't.
And that is, you mentioned your team, Layer Zero.
You guys don't want to have to deal with wrapped assets, right?
Could you just elaborate that a little bit more?
What are the intricacies that is involved with the wrapping of a token? And why is Layer Zero choosing not to deal with that?
Yeah, so I think when you look at the space and the thesis of hundreds or thousands of chains,
when you have wrapped assets, going in and out of EVM
to non-EVM, et cetera, can be very, very tricky.
And then you don't have complete point-to-point communication
across an entire mesh of different chains.
So what we have done is that when a new ecosystem or a new chain
pops up, Layer 0 will deploy an endpoint
and allow for it to have all of its assets completely interoperable within the Layer 0 mesh of 125 different chains.
So there is no need for you to go and have to spend gas and wrap your assets and then move it here.
And then if you want to go back to a different chain, you have to go and return back to that source chain before moving towards a new destination.
You have complete one-to-one transfers across
all of the space. So that's kind of like the general idea of when it comes to wrapped assets
and how we want to make sure that native assets are always going to be king and you know exactly
what you own when you buy it. I love that, Dom. Making the bridging experience even more seamless
with no gas and at least just making it so when newcomers come along, they don't have to understand that.
Because I know I've experienced this. I know many of you guys in the audience have experienced this as well.
But going from a familiar chain, a familiar EVM chain to a brand new one, one of the first things that's on our mind is, okay, is there a faucet?
Do I have friends that's willing to airdrop me a 0.01
to get my life going without that hurdle?
That is always such a pain point.
And I'll be honest, guys, there have been times
where when faced in a situation that I need to do that,
sometimes complacency sets in, right?
Sometimes laziness gets the better of me.
And I just said, you know what?
Screw it.
I'm not doing this anymore because the lack of the faucet or the fact that i need to get gas onto this onto this wallet in
order to make any transaction that is just one step too much for me and if it's one step too
much for me then i'm pretty sure it's going to apply to a lot of other people in the world as
well but matt you got your hand up love to hear your thoughts on this man please go for it yeah
ice i hear you man like that's
kind of like what whatever user goes through it's you know it's a slog to get to where you want to
be sometimes and you know whether you're driven by money or not you know whatever the reason is
why you're you're you're trying you're engaging in one of the activities to get the gas onto the
new network or whatever it may be.
I mean, a lot of us are, you know, succumb to the golden carrot being dangled in front of our faces to try out a new test net or whatever it may be.
And, I mean, it's scary.
But I do want to highlight, like Dom pointed out, last cycle, even before that, we've come a really long way from just putting a Solana
into a brand new bridge and hoping it comes out on the other side with whatever network
you're trying to get into. I still have one Solana that's just floating around in the
ethos somewhere and RIP my one soul. But, and now we're at a point now
where you don't have to rely on the bridges
of the native chain.
Chains are great, but they're not professionals
in making bridges.
And I think that's why things like you know layer zero wormhole
d bridge insert you know protocol name here but have have really been able to kind of like come
out of the woodwork throughout all this because clearly there's a demand for it and with the
demand in the healthy market you know we now have a couple dozen I would say you know very healthy
We now have a couple dozen, I would say, very healthy bridging ecosystems that have their own unique fee structures and incentives to keep their community activated and engaged and to onboard new users to make the swaps.
Granted, you know, majority of swaps that people do is anywhere between like, you know, a hundred to a thousand bucks.
Like the big, big swaps are, you know, for the institutions.
They're not really, you know, using these products for that.
The healthy market helps prevent centralization of these bridges, which helps prevent one focal point of failure, I think is important to mention here.
And then also it helps prevent liquidity kind of singularity, call it.
of singularity call it. What do I mean by that? I mean, like the concentration of liquidity on a
What do I mean by that?
particular chain, when you have that happening at scale, it will really cause a lot of problems
downwind for folks that are trying to get off of one chain onto another. Let's say everyone has
all of the validators have all of their liquidity on Ethereum, but there's a lot of demand for Solana at the moment,
it becomes very difficult to be able to validate
and ensure those transactions go through,
which inevitably brings me to, I think, a fantastic point.
Layer Zero had very good points about the code offering that they have.
And we're beta testing something at turn right now, which is we call it AI executors, which are effectively automated balancers for validators. for folks that are validating networks is, I mean, literally just sitting there clicking through,
making sure that their portfolios are balanced towards whatever network needs funding at the
moment. And so you can imagine if it's a very manual process that involves a lot of clicking
and math, but if you have an agent, we are in the world of agents and AI, you know, kind of making your job, your life more efficient and making, doing the job for you effectively. But, you know, you set up your validator agent to whatever parameters you want. Let's say you don't want it to go under a certain amount of Ethereum for whatever reason,
the incentives don't align
or you just want to have that certain amount,
you set it up so that it doesn't go below that parameter.
And so, yeah, we're beta testing that at turn right now.
And I think it's another one of those, you know,
interesting use cases that will kind of help us revolutionize the future as an industry, as a niche kind of bridge operator, kind of stepping into this world where, you know, I mean, validators are giving back their time and that's the most important thing I think that we all have these days. So yeah,
just kind of like taking the conversation a step further there, but you know, concentration,
liquidity concentration is a concern I think that we should consider when talking about
a well-balanced ecosystem as well as, you know, concerns around centralization.
I really do believe that as AI becomes more streamlined, I mean, as if it's not already,
but as open sources, as AI agents, like we were mentioning before, as more of this becomes
more abundantly accessible and available, it's absolutely going to find their way
into all avenues of life,
not just Web3, right?
We're already starting to see that manifest in certain ways
in different industries within our, like just within Web3.
Like there's the gaming side of things.
There's the DeFi side of things.
There's the content creation side of things.
That's most of the utility kind of lies within that.
But I really do feel, yeah, I mean, in one year,
maybe in three or five years,
AI and AI agents will absolutely dominate. And it's going to reshape the way that we think
about a lot of things. But kind of bring things back to the aggregation bit. And I actually want
to pass the mic over to you on this one, Timmy. And it's that earlier on, right, Diana was talking
about the concerns with traditional bridging. And she really broke it down into pieces
for us to understand here.
Playing devil's advocate a little bit,
Timmy, I would like to actually,
I would actually like to shift that same mentality
and perspective,
but let's talk about aggregation a little bit more.
So in your mind, Timmy,
do you think there's any risks or security measures
that we should be more prepared for
when it comes to unified liquidity pools? What should we educate ourselves on in order to prepare for this better?
Yeah, no, there's definitely... What I would say is if the system and aggregation is not
designed properly, there are tremendous risks. um one would be check like if you allow chains
to basically there would be a risk at one chain could rug every single chain um which clearly
would not be good because it would basically destroy everything um one thing that we're doing with AgLayer is implementing pessimistic proofs that will
really make sure that essentially chains can only rug themselves.
And if you're connected from another chain, your assets are safe.
But there's a lot of ZK tech in proving that went into that. But then there's also this risk of, I would say, more hackers are going to try to attack the system when there's larger and larger amounts of money, right? So like, if I am someone who's a sophisticated hacker, am I going to spend
a lot of time trying to hack something where I gain $1,000? Probably not. But if you're talking
about hundreds of millions, if not billions of dollars of liquidity, well, all of a sudden,
all of the bad actors are going to start targeting that. And then there's some other risks like just basic code.
When you're connecting things,
you could have these exploits in crossing messaging.
And that's, I would say one reason why AgLayer
is taking so long to be developed
is because these security risks are very, very high and taken very seriously.
So you like, we need to make sure that it all works, but I would say those are probably the,
the biggest risks that you have basically chains running other chains, which won't be an issue with AgLayer, but could be an issue if just
anyone designed a system. And then you just attract more attention, the more money that
is in a protocol, basically. Got it, got it. So we run the risk of kind of like one chain rugging and then the entire castle falls apart, right? I never actually thought about it that way. My mind was going on to another direction completely, I'll be honest to me. But now that you mentioned this, let's talk about AgLayer and actually our chain aggregation here a little bit. And that's how might AgLayer or chain aggregation overall increase the security and safety and make things easier to protect
going forward?
Yeah, I think the biggest thing is the advancement that's been made in zero knowledge proofs
and zero knowledge technology.
There were, for a long time, kind of the industry in general thought that
optimistic rollups were going to be the way of the future, not because ZK Tech shouldn't have been,
but because the research and development in that, in ZK technology, was seemingly so far behind that it would almost never catch up.
And it's been very, very fun to see that there's actually been huge strides made in ZK tech where now people in a weird way are starting to trust it more and actually seeing the viability there over optimistic roll-ups. So that was something that I think was
really important. And then
the idea is when you use zero-knowledge proofs and pessimistic
proofs, you start with the assumption of
the worst, is how I would put it on layman's terms.
It's not going to work. You can't do this.
And then you, I would say you take a much more of a like classic scientific, uh, approach where
you have this model of like, we are going to try to break it in every single way.
And if it can't be broken, then it's true. Versus what you get with optimistic roll-ups is more, and it's not a perfect analogy, but it's like more of, okay, if this were to happen, how would it happen?
And you start optimistically.
So that could lead to problems. So I think the security of the the default setting being people aren't going to do the right things and this can break is really how it helps with the security across chains.
Classic scientific approach.
You know, I think this is,
if that is not an opportunity
to actually help me segue the mic over
to my man Gianluca,
I don't know what is.
But, you know, let's bring it back to Gianluca
for one question.
And then I would like to pass the mic
back to our dear Diana
for some closing thoughts in just a moment.
But yeah, Gianluca,
what are your thoughts about this, man?
Like with everything that we've kind of discussed
regarding security, chain aggregation,
like the pros and cons, of course, of moving from the approach from one to another.
In your mind, Gianluca, how close are we to being able to truly eliminate the hassles of cross bridging altogether?
I'd say that there are a lot of concepts, but what is missing, in my opinion, is a standardization.
So whenever you want to promote interoperability, the standardization is the real deal.
And this was mentioned from one of the speakers here at the very beginning.
Until we want to keep thinking in siluses, we will never reach a standardization.
Now, standardization can happen for two reasons.
It's because someone has been studying
and then providing guidelines to someone.
But this is a web tree, so it's not that easy.
Then there is another way, which is a de facto standardization,
which is when there is one model that succeeds
more than every other model.
And then everybody starts adopting it,
not because someone
is imposing it, but because it is evidently demonstrating to be the best, safest, secure
system. So I think we are still in an exploration phase also because a lot of new tech is coming
out in layer ones. I mean, we had pretty much four different generation of layer ones.
First generation Bitcoin, second generation Ethereum, smart contract. Third generation
is speed and parallel processing of a smart contract. We need to keep growing and there is
a bit more exploration that needs to be done. If you look at the
technology life cycle curve, you know, that tells you a little bit when a new technology is born,
gets adopted, when plateaus is established and then when it becomes obsolete. We are just at the
end of the probing part of the curve, which is a very, you know, flat slope. And then we are right at the beginning of the mass adoption
where the curves start going up straight.
So this is really, really the beginning,
even if Web3 has been around for a while.
But there is one more thing that I keep saying in all the spaces.
Here, the bet is on the paradigm shift.
You know, the first people invested in Bitcoin
didn't invest in Bitcoin for a pump and dump.
They invested because they wanted a paradigm shift.
Now, can we replicate this?
Can we do this the right way like it was done like 15 years ago?
So standardization, start working in a,
I hate to say this, probably let's say in a more academic way, which means with a bit more publication, with a bit more documented fashion will help for sure.
than stay here and struggle and lose money and being wrecked until a new standard emerges.
I think that that's going to be pretty much the way to go.
Right now, there are different ways, aggregators, bridges, unified liquidity pools, interoperable
DEXs, cross-exchange.
There are different approaches.
We will need to find good benchmarks to start understanding which one is the most promising
direction.
And my guess is that probably in the next, I don't know, probably three years with the
amount of investments that are heading into this space in the adoption, which is, I don't
know if you look at the numbers, Guy, but what is coming in the next two, three years
is like a dream coming true for most of us.
I am confident that the new solutions
and the standardization is going to come.
Man, you know, I said at the beginning of the space,
I really love it when we really take the scientific mind
and apply it to what we're doing here
with blockchain technology and Web3.
And we got just one super quick follow up and then we'll toss it to our dear Diana for some closing thoughts here.
And that is one more thing is Gianluca, with your experience at Harvard Medical Faculty,
what similarities do you see between the advancement of Web3 and the advancements in medicine progression?
you see between the advancement of Web3 and the advancements in medicine progression?
Well, what I can tell you is that there is a huge need from science and healthcare in
particular for decentralization.
And believe me, when I started Circular, I started because I found out that there was
no compliant layer one for that specific type of application.
no compliant layer one for that specific type of application.
And I thought it was going to be extremely hard to onboard healthcare projects and institutions
on a blockchain.
I promise you, in this moment, in three of the most important jurisdictions around the
world where the healthcare is very important. Everybody's moving in that direction.
So again, we're going to still have to deal with some of the same issues. At the beginning,
we were describing what's the landscape of many layer ones, layer twos, and what's going to happen
next. Well, obviously, it's going to happen. Well, first of all, let's say this. There is not enough infrastructure around.
So we still don't have enough blockchains.
If we really want to go for mass adoption, even if the current blockchains are multiplied by 10, we are not going to have enough infrastructure.
And the other thing is that one way to start making things better is focusing on a specific niche, even for layer ones.
But apparently layer ones are general purpose.
That's true.
There is a certain level of generality.
So you can mint an NFT on any blockchain.
But there are very different other tools that can be developed or part of the protocols that can be developed to streamline a lot of other important aspects of markets and industries and verticals.
And we found out this on our own skin.
I mean, Circular is a very young project and is going very fast.
We are growing, growing very, very fast, like by the day.
That's my take on this. I hope that I answer your question.
Absolutely. Thank you for that, Gian. And the different approach I actually,
I mentioned in my mind, again, it's kind of synonymous with what you said, but I really
like to double down on that kind of mentality, the scientific mentality, right?
Especially in the real world, you know, focusing on a specific niche.
And this is, of course, I'm referring back to having different blockchains for specific use cases.
But in the real world, very, very similar, right?
We often hear this in tech talks, to be honest.
Focus on one specific niche.
Learn one skill.
Be the best or amongst the best in that skill,
and see if you can start solving other people's problems. Because if you do and when you do,
the value provided will absolutely scale. We see that in real life, we see that in medicine,
and of course, we see that in blockchain as well. But that being said, I do want to pass the mic
over to Diana for this last one. And of course, first of all, some closing thoughts regarding today's discussion. And secondly, what are some
upcoming updates coming to Aglier that we should be paying more attention to?
Yeah, thanks, guys. And thanks to all the speakers that joined on. I'm certainly very excited for
the future, especially as it revolves around the users and us all being users as well. I think
we can all be very excited about a more unified and aggregated experience interacting with
blockchains. Updates for AgLayer. Our Eng team is just heads down in deep work, but we do have some exciting stuff coming across the fold next week.
It's a little bit of alpha, but, you know, we talk a lot about how with Aglare, you don't need to conform to a certain stack or level of governance.
Really, the goal with Aglare is just to be as minimal as possible.
We have different kind of pieces of the roadmap that talk about that.
You can check it out at aglaire.dev.
But next week we'll be talking a little bit more about the fact that Aglaire is stack
agnostic, meaning that you do not have to be a Polygon CDK chain to join.
And we're going to dig into that a little bit more next week.
So stay tuned for that.
Follow us on socials and yeah,
excited to kind of push the space along with everyone else alongside us here.
So thanks again,
Ice for hosting.
Thank you,
Diana,
for having me here.
But man,
can't wait to the next discussion.
Absolutely. Make sure you guys are following the AgLayer team, teammates, and all for having me here. But man, can't wait to the next discussion. Absolutely.
Make sure you guys are following the AgLayer team, teammates, and all of their socials. But that being said, ladies and gentlemen, this is going to mark the end of our space for today.
Once again, thank you so much to all of our awesome panelists for joining in on this conversation.
And of course, thank you guys in the audience for all those likes, comments, and retweets.
We really do appreciate each and every single one of you.
And one last time, make sure everybody is following the Ag Layer House account.
And remember to turn on those notifications so you guys don't miss out on any of the latest
updates.
But until then, this is going to be Ice signing off, and we'll see you guys in the next one.
Peace. Thank you.
