Hello there and welcome to the club. I believe we got skip protocol as a speaker. I'm not sure if you're joining from the main account, but I can see you are mute right now. So that's me should be yeah
Yeah, perfect. Super. Hey, Magnus, how are you? I'm doing well. How are you? Thanks for having me. Of course, of course. It doesn't sound like you're in Denver, but I envy you, to be honest.
You should come over. I mean, I'm not in the main conference, but I'm in sort of a side place just drinking a coffee. Just for this space or in general? Just for this space. We thank you for that. The community, thanks you for that.
Yeah, I mean, it's super warm here and I think everything's just getting started so excited and see sort of all the different all the different events shared security and corrupt all those people be exciting. Perfect. I mean, it is East Denver, but I don't know. It seems like customers people are embracing it.
the cosmos is embracing every ecosystem these days, it feels like. Yeah, I think so. We actually have some team members here building something with osmosis for the hacker house or the hackathon. Okay. So it should be fun. Makes sense. But all right, let's just dive right in, Max.
So thank you so much for joining the club where we tweet all things Cosmos. We summarized that in a weekly sort of threat and newsletter and then we invite interesting fascinating, hardworking builders like you guys at Skip Protocol. So thank you so much for joining and let's just dive right in and
hear a little bit about yourself, who is mechness and why did you decide to work on skip protocol? For things, yeah, so my background, I got a decrypto in 2016. I was a co-founder of a very early NFT marketplace called SEMP.
They sold tweets as NFTs. They sold like a jacked old tweet for like 2.8 million at one point. And after that I got more into sitting like finance and quantitative finance and that's sort of what led me to one to found skip with an old college friend of mine in Barry.
We just got really excited about this, basically, maybe, and what it could do for protocols and this idea of value recapture from block space. And that was sort of beginning. Yeah, and obviously we're gonna talk about Mu and all these exciting things.
But before we do all that, perhaps you can just talk to us a little bit about what got you, what did you first hear about Cosmos and why did you get hooked on the IBC, the SDK, the Tenement, whatever got you hooked on Cosmos? Yeah, I mean like many people, I think what got me started was the
interested in Tara and seeing what was going on there. And I think as we looked at Tara and we looked at the stack, we were like, wow, like wow, you know, the stack is extremely generalizable and it seems like extremely cool.
And you know, could be sort of like used to launch multiple blockchains and even after tire collapse and the liquidity was gone and we were still you know interested and seeing sort of like this concept of okay, well, what if you make a block change that's for a specific application, right? Like an app chain and How that was like a different model and
more in line with what we saw as like a scalable future for crypto. I think anyone coming from like the Ethereum space like used to like the gas fees and the clogged block space just like it makes a lot of sense right when they go to that when they come to a place like this where they see sort of like different blockchains for different
Definitely. Was that something also you saw with your previous NFT marketplace? I mean, every time there was a big drop, NFT drop, you saw the spikes in the Ethereum gas fees and congestion and all these things. Was that sort of something that sparked your interest also in Terra and Cosmos in general?
It was, yeah, I think, you know, like, NFT meants are a classic example of just really clogging up block space for a period of time, right? Like, and if you will launch, it will just take over the blockchain and it will really experience for everybody else. So like,
you know, like what wouldn't a better system be okay, well you have a change just for an achievement and then you have other chains for other things so that they don't have to they don't have to share the same resource right and and keep right. Beautiful. And yeah, so let's just get right to it. What is, let's say I'm
I'm a five year old kid and maybe not five, but I'm new to crypto, let's say. And I have no idea what skip protocol is. How do you guys explain that? Because it is on the face of it, on the surface, it does seem a little bit complicated, but yeah, walk me through what is skip protocol.
Yeah, definitely. So, Skip is basically like, it's a company that exists in between when you submit a transaction. So like on your Kepler, when you press send, and when it ends up on the scan, right, when it ends up in a block. We deal with what happens to that transaction in between.
So it's possible that that transaction will get like executed faster or slower. It's possible that it will get executed at the top of the block or at the end of the block. We deal with sort of the kind of ordering and insertion and rules around inclusion.
that's basically help accrue more value back to the blockchain. So you think of it this way, right? So like, let's say like Osmosis is like a plane, right? And every seat on the plane is a transaction. So it's like a whole block is like basically you have the first class seats and the you know the economy
I just flew a concrete adeners, so I know they're not great seats. And, you know, like right now, Osmosis sells all of its seats for the same price. It sells the first-class seats and the regular seats for the same price. But in a block, the first position in the block, right, the first transaction there,
is actually extremely valuable. So it's like you should be selling it for a different price and a higher price than the slots that are later down. So we sort of create that market, the real-time market for blockchains to sell their transactions for the right price, for the right order.
I see. And yeah, I mean, most people I would assume listening to this is familiar with Kepler or any other wallet where every time you need to approve a transaction, there's this pop-up, and then you choose if it's either low average or high fee.
And most people just choose the default. I'm sure. But what many people don't know is that you can tweak that or edit that and then beef up the gas price. If let's say you're doing a big trade on us Moses to perhaps circumvent someone else.
coming before you, who will see the transactions you're trying to submit. So maybe just let's dive a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little, a little,#
Well, I think the first thing this be to is what you said is actually not true. I think a lot of people think if they add more gas to their transaction that it will go up higher or that it will get executed first. The amount of gas you add to your transaction has no effect in terms of its ordering at all, on any cosmological
which is like something that is kind of unbelievable. So if you add extra gas and Kepler, you're not doing anything with a transaction. It won't get executed faster. And if you add less gas, it will get executed slower. It's all like just the order in which it was received, right? So at a minimum, like you should be creating a gas
gas market so that you can give users the opportunity to get faster execution. But that's like one of the big problems of Cosmos is that we don't have any gas markets at all. And how does Skip Protocol fix that? I guess it's a natural follow-up.
Yeah, so what we do is we let users and traders who want top of block or very fast execution to pay for it essentially. So they can submit a bundle of transactions and they can essentially attach a price
to that and it will be guaranteed to be executed at the top of the block. We also offer something for regular users called SkipsyCure where you can sort of add a special RPC to your Kepler, which will give you like fully private transactions, meaning
Nobody can see your transactions in the numpool and therefore nobody can front-run and back-run you. And that's also a free service for anybody who wants to use it. It's like the pen suite on our site if you ever want to check it out. So we basically create this auction site. This auction market for people who want to
who want to get top of block execution and willing to pay for using the analogy for the first class seats. Right. And then the money that comes from that auction, we give back to the network. We give it to the validator and then we also give it to Stagler. And that just comes in the form of increased staking APR for
For users and for stakers themselves. So like recently for example, I think it was two days ago we recaptured I think it was $6,000 in one day on Juneau and then most of that money like 70 80% of that went back to stakers and you don't see it happening because it's just increasing your staking rewards account
possibly, but then some of that money also went back to validators. Beautiful. Talk me through perhaps the user journey. Like let's say, I'm a regular Cosmos user and I use let's say Keper as my wallet. What do I do? How do I onboard?
Yeah, so it depends how much you care about privacy as a user, right? So if you're a user, you could submit your transaction through the skip secure RPC and nobody could ever front run or back run you, right? They couldn't even see the transaction until it ends up on chain.
If you submit your transaction a regular way, right, like just through the regular setup on Kepler, then it will go into the public mempool where a bunch of searchers can find it. They'll find your transaction and then they'll try to back run it. And in order to do that, they'll create a bundle with your transaction and then theirs right afterwards.
and then send it to skip and say, "Hey, put these two transactions at the top of the block, and here's 50 bucks, as like a payment for that." Right? And then we forward the payment to the validator, and then we also make sure that those two transactions end up at the top of the block. So we don't allow, generally, for like front running or
So like nothing that harms a user, only things that sort of like we view make the blockchain more efficient. And then the question of where those rewards should go is like an active conversation. But we believe it's probably some combination of the user, the validator, and probably also like the LPs who help create that transaction.
And just shout out to your team. You have this beautiful sort of page dashboard overview on your website, skip up money, where you can sort of follow different validators, see who has adopted using skip protocol. We can see the network, profits, generated.
from using skip protocol, I assume, the validated profit, the mu percentage back to the network. So really just being able to follow the results, which is super nice. And yeah, really creates immediate trust for someone outside of skip. I can imagine.
Thank you. Yes, we put a lot of effort into trying to be transparent on that page. It's fun to watch the activity page because sometimes there's really big bundles. A validator got a $3,000 bundle in just one block the other day.
And I think they donated it all to a to Rhino preservation as it was rhino steak But it's interesting to see what validators do with with the revenue that they get Yeah, I can imagine and we're gonna talk about validators soon enough. I'm sure
But just let's take a little bit of focus a little bit on the mu part because I think a lot of people they've heard of mu and front running and all these things, they might not be aware how big of a problem it is. Essentially,
works like a tax on the user or a negative externality to the network, the chain that you're using, but how big is the problem in Cosmos? I think a lot of people is completely unaware really. Is there like a number or yeah?
Yeah, so how big is MEV in Cosmos? So it's bigger on some chains than others, right? So osmosis has it pretty bad in terms of there's a lot of enemy that is extracted and then other chains have it much less bad, right? So like for example, there's no MEV on a cauch. There's very little enemy
and then there's like a medium amount, I would say. I think the other thing is like not like any year, it comes in different forms, right? So there is front running, right? So this is like you say that you want to buy, you know, Adam, and then I see that you want to do that. So I buy Adam the first time.
for you to pump up the price first and then I sell it back to you at the higher price. So it's like it just ruins your execution price. And then there's also background, which is we let your transaction go first, nobody touches it. And then afterwards if there's any arbitrage left over, then we take that.
Right, which generally we do is like it's not bad for the network. It's like it's gonna happen anyway like with or without skip And like we just want to create a better market so that the network can share and the rewards of that background But in terms of numbers on as most as we just surpassed $7 million
of MEV that was captured via back running. You can check it out at satellite.skip.money. And then on Juno and Tara, there was really no MEV until we came around. That was being captured that we saw. And now it's like, I don't know, somewhere in the 10,000 range. So a lot smaller than Osmosis.
But also very early, but that also depends on trading volume. I'm sure right. I mean, no, it's not. It's dominant. Totally. Yeah, completely. Yeah, it's pretty big. I mean, $7 million in taxes that nobody is aware about. Very few people at least. It's pretty big.
It's pretty big. Yeah. It's meaningful for sure. And then the, you know, with osmosis, we have like, we have these like two products, right? So like, one is this auction that I talked about, where like validators have to sign up one by one. You can see that the actual year, the validators page. And then the other one is protorev.
which is specifically for osmosis, where it's like built into the chain. So like validators don't have to integrate or do anything specific. It's just like part of the chain execution itself that it's like an automatic backgrounder. And that's going to be live in, I think, you know, two weeks. So in the next upgrade with osmosis. So,
will all that money is coming back to the network. Yeah, so let's stay a bit on the auction system that you just mentioned, right? So you have this sealed bit closed auction, which is the standard form of auction system to prevent mu. And then there's the osmosis version that you just explained. Is that correctly understood?
Yeah, that's right. And how it walk us through the seal bit closed auction system that you normally would adopt to chain a customer's chain. So like breaking down what it means to be sealed bit and close. So seal bit means you can't see what
anyone else is hitting it. So the comparison is like let's say let's take eBay when you don't know what anyone else is bit is. So everyone just puts in their bitch and it's closed meaning well that sort of seems to mean the same thing but the other thing that is it's
It's first pay and first price which means that like let's say somebody bids 100 and then somebody bids 120. The 120 person of course will win but they will pay 120. They won't pay 100 right there's another design for auctions called second price where you
you pay the second highest one if you went. So it's first priced and then sealed bit. And the reason why it's good is sealed bit is important because if you can see another person's bit, then everyone just bits like a little bit higher than each other. So I bid 100, I bid 100.
So you get rid of that when you do a sealed bit because you don't know what other people are bidding. So you just bid at the maximum you're willing to pay. And then first price is good because, as
the same reason. Basically, like you are paying your maximum willingness to pay, which gives like the most amount of money back to the network. I see. And this is something that any chain slash validator will talk about validator in a second, but this is something that anyone can adopt in cost most. Is that correct?
Yeah, that's right. So we like support different chains, right? So we're supporting FMOS, Juno, objective, Territu, and convex now. And then once we support the chain, then any validator from Sign-Dare missionlessly, they just get an API key.
everything's free, we don't charge anything for anything. And then they just start making money. It's kind of a simple product, like five minutes and then you know, just basically additional rewards to whatever account you that you want. Beautiful. And the question, this is from the community. I'm still
starting to blend in some community questions here. Maybe you noticed already, but how do you choose a chain? Is that purely based on volume, like training volume on the Smosis, or is it a partnership that you make, or how do you choose a chain basically?
Yeah, so the first thing that we do is we identify chains that we think would be like that would could make use of this right so that usually means DeFi chains that have some volume. And then we go to the like the chain community and we say like hey, we're skipped. We have this product.
like it will recapture me be in a good way. It doesn't do front running like do you want us to launch? And then we usually ask for some kind of like grant and return because I said we don't take fees right now. So, you know, that's really how we survive. And then once all that's passed, then we just set up
the integration and then we let validers decide if they want to join if they don't and then also we let them decide sort of what percentage of the revenue they want to keep for themselves and what percentage to go to scapers. A lot of this is changing now. For example, we're working with a ask reports to
figure out what does it mean for more MME revenue to go back to the users and to the LPs. So there's a big design space here. But that's usually how we operate. Very big design space. And again, one of the questions from the community. I see a lot of people actually at it.
asking this is if you can go beyond cosmos. And what I'm hearing from you is basically yes, you could, but it might take some time, right? You have to be compatible with, I don't know, solidity, EVM, whatever, chain or ecosystem you need to go beyond cosmos.
Yeah, exactly. So like we're super compatible. We're basically fully compatible with any tender mid-based change that uses the Cosmos XTK, right? So that includes like, chronos that includes canto, that is most et cetera, but to be compatible with like, let's say,
or like an Ethereum-based chain or EDM would require like, you know, a new structure or like a new tech technological uplift. And we've just been really enjoying like working in the cosmos and wanting to focus on it for now. But in the future maybe, yeah. I don't think anyone following this
channel would disagree with that. I certainly would. But follow up quick follow up on that because you mentioned that you are compatible with FMOS. Is there any tech there that the compatibility with FMOS that you can sort of reuse to EVM chains?
It's not compatible with all EMTs, but it is compatible with all EtherMint based chains, right? So like, canto, chrono, kava, like it would be compatible with them. I see. Makes sense.
that everybody will follow in the steps of FMOS, Kava, etc. Just getting back on track in terms of the auctioning model and the way it actually works so the objective is
It's getting a lot of attention these days. We actually rode a long threat about them yesterday. I believe it was a completely viable. It went pretty viable on Twitter and they get a lot of attention for the so-called frequent
batch auction model where they claim to also, if not eliminate, then at least limit the mu problem extensively on their protocol. I'm not sure how much you know about their model, but can you speak to the difference between the two approaches that you guys have?
Yeah, absolutely. So very different approaches, but both sort of, you know, geared towards the same thing and their complementary, which is that they're not competitive approaches. So the frequent batch auction model is basically saying, okay, here's all these people that want to buy
And then here's all the people who want to buy asset fee. Instead of like getting them execution price one by one, you sort of batch them all together and give them the average price each. Right. Nobody gets a better or worse price than anyone else.
just like put it all together and then everyone gets the same price at the end of the block, right? Our model is much more atomic. So for example, we can't, because all the transactions get the same price, we can't
There's no arbitrage in the system because everything is even doubt at the end. So our auction wouldn't be able to, let's say, backrun those transactions are created and you would capture anything. But there are a lot of protocols that are launching that effect that don't use the frequent batch option.
because the frequent batch auction is only for their native order book and there's things like astro port, there's things like white whale, there's like a lot of protocols that don't use that and will generate any need. Right. And so the idea with that was okay use the frequent batch auction for the native order book and then you skip for the auction for the
protocols that don't use it. And so therefore you have like maximal and any of the prevention and recapture on both sides. Interesting. Is there any chance that I've been in touch with Injective to adopt something like because your approach is so different?
Yeah, it's actually already live. So you go to the like validators page is to those 10 validators already set up beautiful. So there's a big partnership announcement with objective a couple weeks ago. We've been chatting with Eric and the team there for a while now to get everything set up. Beautiful. That's awesome.
I just didn't notice that's that's on me but the great C-Coss was coming together. Yeah, always nice to collaborate. Speaking of validators we've been circling around it a bit now. I'm just listening to you and rating up of course
on the skip protocol before this space. I sort of thought on me like why wouldn't a validator install or adopt skip protocol. I mean if I was a validator and I wanted to attract users and protect them, etc. be in the best interest of my anyone delegating to my validator
I would certainly make sure that something like skip protocol was implemented if it's available of course on the chain that I'm validating on. So what's sort of the barrier or the pushback or whatever you want to call it that you see from validators if anything is just because I'm lazy that I won't implement something like skip protocol
I wouldn't I basically. So I mean for what it's worth a lot of validators runs get right like over over 175 I think now. So it has been it has been a popular thing for validators to do. And I think the times that we've seen validators
is pushed back, it's because they, so like one thing was they wanted to see skip audit it, right, because it requires changing your validator setup and running slightly patched code. They wanted to make sure that, you know, what, what they were running was safe. So that's why we are sort of at the end of now and audit within formal systems to make sure everything's
the other reason was it's kind of a tricky topic to decide how much to keep and how much to give back to stakers right some validators keep everything some validers give everything back and it's kind of like a it's a little bit of like a PR decision right to like decide how how
to do it and I think a lot of validators are scared of backlash. So it's almost like, okay, well, if I'm going to get in trouble for doing like some kind of distribution, then maybe they don't do it at all. But that's very rare, I think. What could that issue be? Is that legal issue? So what will be the issue? No, I just think it's like, you know, validators
is very competitive because they are competing for stake in a limited number of spots. So if a big validator is giving all of their MEP back to Stakers and then a little validator just struggling to survive is giving nothing back, it's tough because it doesn't look good for them. And then I think the laziness thing is
is potentially real, right? Like it's sometimes really hard to reach out and find the smaller validators and like just to get in contact with them, like I don't know where they are sometimes, and I don't think they know about us. And then it requires a little bit of work to get set up like five minutes and you know a couple like maintenance things
So sometimes it's just like if you're very unsophisticated as a validator, it's like too much work. Right. Is there a way to bring down that barrier? Because I can imagine that's sort of the only barrier you really have if validators are not adopting it, then you have to do a lot of business development and reaching out, etc. So is there a way to bring down that barrier?
I think so. You know, one thing that we're working on is, you know, just different ways to make it a lot easier for you to adopt it. So like creating like forks of the different repositories where it's already pre-compiled or already included.
that you just have to like, it's like a much like many less commands to get it set up. We are like working with some chains to make it like a more default option so that they can just like check out a branch where it's already there. Just things that make it much more available, right? But ultimately,
I think like where we really want to get to is work with chains to the point that they feel comfortable that like the skip skip is part of their ecosystem and so they rely up on MedTentermint, which is our fork of tentermint natively, right? And you know have enough trust in it's that they they
They feel like they can add up to their core build pipeline. I see. Yeah, and let us know, of course, here at the club, we are in touch with a lot of validators. We host sometimes panel discussions with validators like we we talk to them all the time. You probably do as well, but just let us know and we will hook you up.
Awesome, yeah, that would be great. We do too. Also, if anybody is in East Denver, we are also here. Yeah. Perfect. Speaking of validators and skip protocol coming together, what's on the horizon for you guys? How does the roadmap look like?
Yeah, so as I mentioned earlier, we really want to increase the level of say that users have in their enemy, right? So right now the money is split between validators and the network which includes stakers, right? But like there's no ability for us to return
and then back to the user and there's no ability for us to return any feedback to LPs with why we are, I think we've viewed generally at two parties that should be compensated. And so we are going to be creating soon and a lot of updates on this to come. Ways for users to force MEB
recapture for themselves. So if they're originating in the transactions, then they can have a say in terms of what they want to keep or what they can't keep. Right. So it's like a balancing game between all these different parties. There's an argument to be made for each. And ultimately, the reality is like users have the final
Because let's say one wallet says to them, okay, well if you submit your transaction here, I'll give you back 10%. And then another wallet says, okay, well, I will give you back 80%. Like you would expect over time users will use the second one. And so users since they're originating the end of the, we'll have
have a say in this in the future and we're here to create the tools for a lot of them to do that. And that would also sort of solve the issue with validators choosing because right now they are the ones choosing how much to get back to the network and how much to keep. They are. I think we still want to give validators a choice.
So for example, like some validators run relares, right? And so we want for them to be able to choose to keep more so that they can pay for that operation because it's a money losing enterprise, right? But it's good for the network. Some validators, you know, donate to rhinos. Some validators just want to keep everything.
And then other validators really want to give money back. So I think there will be of course always some choice for validators, but then there also needs to be some choice for users, right? In terms of what how they're like they need a voice at the table as well. Right. And you don't want to maybe this is too extreme and perhaps it's a terrible idea.
idea, but you don't want to just decide for everyone as a protocol, like you could, I don't know, you could set off a boat of some source in a town and then say, okay, this is how we do things for any every chain every validator, this is the rules. Is that a bad idea? It has been tried and didn't work for
someone else? Well, yeah, I mean, like it's, you know, our responsibility is to create the software that works and actually does what it says it does and works according to the chain, the validator, the user wishes, right? It's not our responsibility to tell people
people how it should happen because there's so many arguments and so many different sides. Ultimately, these things kind of boil down to, you know, shared ownership. Like there's many participants in a blockchain that deserve to be compensated. And I think you'll see some blockchains where things happen and other blockchains where it's different, right?
I think you'll see some blockchains where the user gets everything. And I think you'll see some blockchains where the LPs get everything. And then somewhere, the value is good, everything. And then I think, you know, it's important for those experiments to work themselves out. And for people to discover like what is the, what is the right ultimate decision there? Yeah, that makes sense.
And that brings me to something that I can see a lot of people in the community also is asking about your biggest obstacle because it sounds like the more I listen to you, it's like the whole choice for both validators and users. It's something that you want to open up for and make easy for people to decide on for themselves.
But is that the biggest obstacle or is it more, is I building for new chains and get the validators unborted? That was the biggest obstacle, basically, for you guys. I think our biggest obstacle is just the fact that the ecosystem is so early and there's not that much
volume. So like if you look at Ethereum, there's, you know, last year there was over a billion dollars in MED recaptured in one year. Whereas like for us, we're in the low million right and it's really concentrated one chain. So it's hard to be an MED company that sells this vision of recapture.
when there's just not that much. So I think we're focused on not only making skips successful, but also making it possible successful. We view MEV as part of that story, but also participating in funding public grants. And we'll be releasing more information on this.
funding the projects that make the ecosystem good and participating in some of the big UX difficulties of onboarding the cosmos. I think the rising tide lifts all boats and metallities really sort of puzzled mine for us right now. Right on, right on. And we thank you for that, by the way, speaking on behalf of the whole community
I mean, you hopefully, and I think you will find yourself in a few years being on the right side of history, on new history, because everyone will adapt cosmos in some shape of form. But that's of course just my opinion, but I think a lot of people share that in here.
- We do. - For sure. - Magnus, thank you so much for joining today or tonight. You are in Denver, so it's probably like afternoon for you right now. And yeah, hope you have a great conference. I mean, kick some ass over there and show the Cosmos flag for everyone in Ethereum,
who is considering jumping over, jumping ship over to Ari, because I did it myself a few years back, and I can only recommend it for anyone else, really. So thank you so much for all your work and awesome to see what you guys are building. - Awesome, thanks so much for having me. - Thanks Magnus, take care man.