Projects
![]()
No projects found
Investors
New
DAO Treasuries
DATs
Lend / Borrow APRs
Chains
Categories
Spaces
NEUTRON NATION
Recorded: April 16, 2025 Duration: 1:10:39Space Recording
Short Summary
Neutron is making waves in the crypto space with its Mercury upgrade, enhancing its DeFi capabilities and positioning itself as a leading app layer in the Cosmos ecosystem. The project is set to launch innovative yield-generating products, attract strategic partnerships, and foster community governance, all while aiming for significant growth in user engagement and token adoption.
Full Transcription
Thank you. Thank you. Thank you. Thank you. Thank you. Hello, hello, good morning, good night.
Can you guys all hear me?
Hey, hey.
Yep, loud and clear.
Welcome, welcome.
Welcome, Pantera.
Welcome, Joe.
Welcome, Spade and Clyde.
Media, Barrett. Wow. Everyone is a champion in the audience right now.
Thanks, everyone, for coming.
The talent density is insane.
This is true.
Barrett, shout out to Barrett. He just made a Fuzz Neutron logo tonight.
So he's keeping up with the vibes on Twitter. Thank you.
So this evening, we will be having a special Neutron Nation because Joe is going to be
asking us all about the Mercury upgrade, and we're going to try and answer him as best as we can.
So let's get into it. Joe, you are invited as a speaker, so maybe you can get up and say a
few words about yourself. Sure. I appreciate you guys accommodating my schedule. It seems like I
happen to be free all day today, and I'm glad we were able to squeeze this in so soon after the
upgrade. But for people who don't know me not familiar with what I do
I'm a content creator I do YouTube videos sometimes live streams sometimes appear on
other people's channels and of course I love hosting spaces because I don't have a tech
background I'm very curious about how all this stuff works how it's made who's going to use it
and basically what the future of it will look like. Neutron
is a chain that I've been following at times from launch until now, as I watch so many other
Cosmos chains just fizzle out, or maybe just turns out the idea didn't pan out the way that
the founders thought, they move on to something else.
Neutron is one of those chains where if Cosmos really does have the best tech
and Cosmos really is the center
of the internet of blockchains,
there's no reason why Neutron isn't going to succeed.
So really happy to cover this
and really happy to be part of the Neutron creator program.
So that was newly announced the last
couple of weeks. So thanks for having this space with me. That's awesome. Yeah. Welcome. And thank
you for being a creator and doing some great work over there too. Yeah. I mean, we're not going
anywhere. We're here to accomplish our vision, which I'm sure will come out when you start asking your questions.
Yeah. So maybe let me just start by giving like a really brief summary of like how we got to this point. And then you guys can fill in the gaps with whatever I missed, but something that got me. Yeah,
this will be the best way if someone's listening and we don't lose them from the jump so
cosmos is kind of an og proof of stake blockchain that had basically exclusive interoperability tech you know for years before all these bridges were were commonplace one of the things that this
allowed cosmos to do was to have tokens be transferred through Cosmos.
You know, Atom is the token of Cosmos to all these different chains.
And something else that was possible was this idea of interchain security where you could build a blockchain and borrow security from Cosmos.
Use their validator set as you kind of develop your chain from scratch. And I think this was a better way of launching than simply launching your chain in isolation
from scratch with no interoperability and basically no users, right?
You have to almost bribe users with an airdrop or something similar to jumpstart the chain.
That's not what Neutron did.
Neutron was kind of the guinea pig.
They started off sharing security or borrowing security from Cosmos. And now with this Mercury
upgrade, they've basically graduated and become that sovereign chain, but still leveraging all
the interoperability that the Cosmos ecosystem offers. They've had roughly two years. Is it two years since you guys became the,
or I should say that since Neutron became,
since it was launched, something like two years?
Launched in May 2023, I guess.
Okay, so we're close.
We're close to two years.
Right, so, and one of the things that I see and my thesis on neutron is since you guys went through that slow maturation process without shooting your expenses through the roof by launching your own chain and possibly launching into nobody.
If you were going to try the traditional route, you guys had two years to develop apps, to try different things,
to build kind of a seasoned team of developers, but also the on-chain economy got to develop
with real users versus having an airdrop and not even knowing who's going to be there on day two.
So the token is distributed quite nicely. I would like to talk about what that's going to look like or how that might be a positive
for governance versus launching a new chain and manually distributing tokens.
But overall, I think Neutron sits in a really good spot in the Cosmos ecosystem.
So that's where I want to start.
And anything that I missed, of course, you guys feel free to fill it in.
But as a user, that's kind of how I see the last two years of Neutron.
Yeah, I think a lot of that is on point. And I share your excitement about the future.
I actually think, so like, one quick correction I would do is like, I think it's less about the position in the cosmos ecosystem.
It's more about the position in the industry. And we'll get to that.
But first, I want to try and feedback to you the story, perhaps from a slightly different perspective, because I think that might provide valuable context.
Does that work with you?
Yeah, sure.
Yeah, sure.
All right.
All right.
So you started with the story of Cosmos, and I think you're right,
and especially about how unique the tech and the view of where the space of blockchain as a whole was headed.
The idea that, one, if you're serious about your stack and about the products that you're building,
you want to be able to have very fine-grained control,
you want to be able to have very fine-grained control.
and two, that because of this,
there would be a lot of talented developers
that would build really great products
and would need that customizability
and therefore have their own blockchain,
and hence the need for a way for these blockchains
to communicate together, right?
But I actually think that that idea,
that vision preceded sort of like the chain of the Cosmos Hub.
In other words, very talented people came together.
They saw the future of blockchain and they were like, okay, we're going to build technologies
that enable anyone to build highly customized blockchains.
And we're going to enable these blockchains to communicate with one another right and then the hub was launched as kind of like the first um like as a way to fundraise to
fund this idea as the first demonstration of the stacks capabilities e.g the ability to communicate
and such but the problem was because the hub was retrofitted onto the vision it didn't initially
have a business plan right and so replicated security was proposed as one of these potential initiatives, right?
And what was appealing with that
is that the hub as a token was very, very valuable.
So economic security was very, very valuable, right?
Like, well, more so,
like there was a lot of economic security on the hub, right?
And so there's this,
and there's also the Terra context, right?
Which is that around the time where replicated security was coming out,
there really wasn't a place for developers who wanted to have access
to fine-grained control over their infrastructure to launch.
Because one, how do I say this?
More so like, you know, Terra had exploded.
All of the other platforms were either not offering any sort of, like,
value beyond what you would find on Ethereum and other networks.
And so there was the need for this platform, right?
And the hub at the time was trying to create this kind of, like, circle around it.
And so it was a great opportunity to achieve everyone's objectives, right?
And this is why, like, Neutron initially launched as a replicated security blockchain, right?
And we tried this, but the technology wasn't perfect.
And there were misalignments in like the hub basically didn't know what business model
they wanted to have and what they wanted to focus on, right?
Now, this has changed, right?
And both of the chains have changed tremendously, right?
The hub itself now has a very, very strong vision
that it wants to be the center and the provider
of a bunch of services on top of this communication channel
between blockchains.
And it wants to do that really, really well.
And so it's basically deprecating every other product
and ideas that it had before in order to be able to focus on this.
And then in the meantime, you're right,
Neutron had about two years to really refine how we
think about DeFi, which was always our focus, how we think about DeFi and what is valuable
to bring here.
And so, you know, the hub is moving to focus on its things.
We want to focus on our things.
And there are some things that we can do better as a sovereign chain as well.
And so, you know, both blockchains are kind of like ending this old security agreements.
And so like going their separate ways in order to be able to focus on what we do best,
which is actually very synergistic in the sense that for communications between blockchains to be valuable,
you want there to be a bunch of valuable blockchains to communicate between, right?
And so the hub is going to likely become a much more valuable blockchain. And Neutron is similarly taking
full control over its destiny in order to accelerate a bunch of these things, right?
Does that make sense?
Yeah, and you're referring to this, what Skip team is now tasked with, or what they're taking on is to push cosmos kind of more forward
to actual users and i guess their first product is what i would call a router right moving
transactions through the hub and of course adam liquidity is valuable and of course adam as a
staking token is valuable but ibc has more intangible value so that maybe a chain like Neutron can
still have alignment and some partnerships with the hub while no longer taking advantage
of the replicated security.
Am I on the right track there?
Oh, looks like Spade got kicked off of Speaker. One second.
...system as a whole.
And so, because like, you know, it's one thing to be able to transfer tokens and data between
blockchains.
Like, if people to use this realistically, right, like humans made of flesh and bones, you also make sure that there's the right sort of like services and sort of like UX around it, right?
And like, this is really what Skip has actually excelled at with like SkipGo and these other products like SkipSolve and such, which provides you the ability to move assets and do this like really, really easily, right?
and such which provides you the ability to absolutely and do this like really really easily
right yeah that that's what's needed especially when you have something that can be as complicated
as a hundred different blockchains interconnected with apps that exist on several blockchains
rather than just one so the front end maybe is one of the biggest pieces that the ecosystem
itself needs i would say, from a
user standpoint, especially if the expectation is to onboard new people all the time.
Yeah, it's definitely a very important piece. What I think is more important than that, though,
is having something to onboard to, right? Like, people want to start using something if there's
no value in it for them, right? And this is really where Neutron comes in, which is the idea that what we've been laser focused on for the last few years is the following.
If you look at the DeFi industry today, there's really exciting vision here in the sense that the promise of DeFi was we're going to enable anyone in the world
to transact with one another in a completely free way that is not subject to any authoritarian
government, any constraint that is imposed by a third party without, you know, like in
an arbitrary manner.
And we're going to level the financial playing field such that everybody in the world has
access to the same opportunities.
There's no longer this gating to you have to be rich to invest in things. There's no longer this gating
to of you have to be rich already if you want to even know that hedge funds that offer like
much better returns than your bank account exists. Like all of this is available to anyone from
anywhere as long as you have a mobile phone and an internet connection. There's something in my
opinion really exciting about this,
like this kind of like resetting of all of the,
like keeps and stuff that exist in the traditional system.
And this is what DeFi promised.
But it hasn't really delivered on this, right?
And why not?
Well, part of this is because the technology today wasn't there, basically.
If you look at the way that we trade tokens, for example, we use AMM, automated market makers.
Why? Not because there are better mechanisms.
We use AMMs because that's the system that we could figure out within the constraints of the gas limitations of Ethereum.
E.g., our computer is so weak, we can't actually run a proper trading venue.
Let's find something that approximates it and just works within the constraint, right?
So that was a constraint before, and that is largely getting sold into the industry, right?
Like, performance was a big blocker before, now it's kind of expected, right?
And Neutron has shown this like in over the last months or so, we've, you know,
gotten the block time from about 2.8 seconds to 1.3 right now.
And we've, you know, multiplied by 11, the throughput of the chain, right?
So you can do, you can do everything faster, cheaper, and you can do more
complex transactions, more interesting transactions as well, right?
So performance is not the bottleneck today, no longer.
It's stable stakes, basically.
It's like you have to provide a great experience and a lot of performance to your users and the applications on the network.
What's lacking, though, is you have these generalized environments that try to be all things to all people,
to do all things decently well.
But as a result of this, they do none of them really, really, really well.
And you also have App Chains on the other side,
which are meant to enable people to do one thing really, really, really well.
But the concept of App Chains goes into
contradiction with the fact that there's tremendous network effects, but they have a ton. The concept of app chains goes into contradiction
with the fact that there's tremendous network effects, especially around money and finance,
and that any interoperability adds some degree of friction, et cetera. And so the idea of Neutron is
let's empower people to actually build the next generation of DeFi by providing them not only
the performance that they need, but the really advanced custom-made infrastructure that serves finance specifically and does it really,
really, really well to build these next-generation applications, bring their benefits to the
people, and do so in a way where they all benefit from the success of the ecosystem
as a whole.
They have access to the network effects and effects that help kickstart the flywheels
that these protocols generally represent
and help make them more successful,
if that makes sense.
Oh, yeah, definitely makes sense.
And I think that the fact
that the Cosmos hub never had smart contracts,
this was a huge vacancy, a huge void in the ecosystem.
It seems like you guys are positioned and you almost, with these new tech enhancements, the performance upgrades, you've positioned yourself not only as a possible go-to DeFi hub in Cosmos, but you guys performance-wise can compete with lots of the other chains.
And we see different block times and TPS
and transaction speed and all that.
But off the top of your head,
if you had to estimate,
you're talking about like roughly
one second block times right now.
And I know you're going to aim to get faster.
What percent of chains out there that you've seen
are below like five second block times even?
Cause it seems like under five seconds
seems pretty quick for the end user.
No, it's not.
Like if you take a step back from blockchain and you think about software engineering, right?
There's kind of like these very well adopted kind of like ranges of what kind of latency you want from your system, right?
And in general, like if you're thinking about a one second delay, this is enough time for people to start waiting, right?
They're still focused on the task and stuff,
but like they feel the wait, right?
Progress from this, you need to get into like the hundreds of milliseconds range.
When you're in the hundreds of millisecond range,
people can notice the delay, but they don't mind it.
They don't have the time to start thinking about anything else extra, right?
And then where we want to get to, what we need to get to, yeah,
what we need to get to is basically like 100 milliseconds or less,
where like your brain doesn't even have the time to register that something,
you know, processed in the background, right?
It just happened, right?
That's from the UX perspective.
From the financial performance perspective,
when you look at stock exchanges in the world today,
the latency there is a whole different world.
It's not calculated in milliseconds.
It's calculated in microseconds.
Now, getting that for the blockchain industry
is a whole other topic that
I think will take decades to basically solve. Because at this point, you're basically hitting
the physical constraints of the speed at which light travels, right? I don't think that that's
realistic to aim for right now.
And it's not even required, right? We're not necessarily trying to be a better New York Stock Exchange
than the New York Stock Exchange,
but we are definitely trying to be better than Binance.
And the good news is Binance is 14 milliseconds, right?
14 milliseconds, not microseconds, milliseconds.
And that's actually achievable today.
It will take time. It will take a achievable today. It will take time.
It will take a bunch of engineering.
It will take a lot of changes.
But that's something that like
over the next two, three years,
we could actually deliver.
And you're talking about Binance,
the centralized exchange platform,
not Binance Smart Chain, right?
Yeah, that's right.
Got it.
Okay.
All right.
Any other performance upgrades that this Mercury, I would call it more like a transition than
like a simple upgrade, right?
The Mercury upgrade, what else did it bring about in terms of tech performance that maybe
would not only be interesting to like an end user, but also to an app builder.
I think he got kicked off again.
Oh, man.
I think it's when I turn my mic on
and off fast. It kicks him off.
Why you got to do him like that?
I feel like I did that because it's over here so
yeah yeah i was i was just saying that the mercury upgrade is not just like a simple
upgrade it's more like a transition that has a bunch of upgrades within i was wondering if
besides the the block time if there was another performance upgrade or tech upgrade that you would like to
mention that may be interesting that might be interesting not only to an end user but maybe
someone looking to build apps on uh on neutron yeah i mean there was a bunch right like as you
said mercury is a whole is a whole package kind, you know, like you have block time already 2x faster
is going for 18x fasters by the end of the year,
11x more throughput.
So, you know, things like perps clusters
and other use cases become possible.
You have the Oracle is now much faster
and it's also much more reliable.
Like the uptime has been much better.
It's in the 99% range now,
which means that as a DeFi protocol,
you can start building really advanced,
for example, market making strategy on the order book, right?
Like this is something that synergizes extremely well
with anything that needs an Oracle.
So for example, like Mars and perps and such
that reduces the risk that improves the capital efficiency.
It unlocks like super vaults, basically, because it makes the delta between the time the prices get on chain and the time that they're created on Binance and other centralized exchanges much, much tighter.
And so you can start offering really aggressive, really competitive rates on chain, effectively.
So the Oracle is a big upgrade.
The DEX had a bunch of tweaks and improvements
in how it manages liquidity and deposits
and what we call like behind enemy lines liquidity.
A bunch of very technical details that I won't go into,
but the TLDR is-
Are you talking about duality?
Yeah.
Duality.
Okay, perfect. Yep, sorry. Keep that right. are is um are you talking about duality like the yeah duality or okay perfect yep sorry keep that's
right so duality got a got a pretty massive upgrade as well which together with the oracle
improvements uh unlocks super vaults um so you know we're bringing we're working on like uh
releasing this the consequence of this should be that within the coming weeks, you should be able to get the best prices,
tightest spreads, lowest slippage on most order sizes across most of the large caps like Bitcoin and ETH and Sol potentially and RepState ETH and Atom and TIA and Osmo and
other tokens only transferred from the order book.
And in fact, if you're transacting on skip.ibc.fun today
and you're making swaps, you're probably already routing
through duality without having to think about it.
So that was another major bit.
Yeah, I mean, the Mercury upgrade had a bunch of stuff in it
in the sense that like, you know,
they all deployed liquidity in different places.
And there was like the implementation of a whole new staking model that is uh kind of like custom
for for a neutron so there's a bunch to unpack in there if that makes sense but i don't think
necessarily all of these changes directly touch the the user if that makes sense so happy to
follow your lead in terms of like what you want to deeper into. Okay. Yeah, I've got a couple of things here.
Supervaults is one of them.
You mentioned it.
Is that something that a user is going to be interacting with or is Supervaults something happening under the hood
that enhanced the DEX, the trading experience?
Yeah, that's a great question.
So first, let's level set in terms of context. What are super vaults?
Super vaults are what we call integrated market makers. They're a new way to manage liquidity and enable exchanging assets that is much more capital efficient, much more profitable, much more efficient than any of the existing trading mechanisms on chain today.
It's better than concentrated liquidity. It's better than passive concentrated liquidity.
It's better than you need to like, it's just insanely good.
And it's unique. And the reason why that's possible is because Neutron offer infrastructure
that is not available anywhere else. Right. Generally speaking, how it works is the following, right?
Traditional on-chain market makers, the way that they work is they have some balances
of assets and they're trying to keep it, like they're basically calculating price based
on the balance between these assets, right?
So when people trade against them, that changes the balance of assets, the ratio between them,
and so they update their prices, right?
There's a bunch of different mechanisms by which they do this,
but that's kind of like the TLDR, right?
Concentrated liquidity is slightly different.
So like choosing the range of prices where you're happy to trade back and forth,
take any trade within that range, but effectively it achieves the same, right?
Now, the problem with that is that by definition, the prices are set passively, reactively.
Right.
And so what ends up happening is the price moves on another venue, like on a centralized
exchange, for example, that's where price discovery happens for most tokens.
And then the on-chain market makers react to this, right.
They get arbitraged by other traders,
and then they end up kind of like coming in line
with the true price, right?
But in this process, they're constantly losing money, right?
They're constantly leaking money.
And as a result of this, they can't be too aggressive
in terms of how they concentrate and manage their liquidity
because that would sort of would increase their losses tremendously.
SuperVault solves this by changing the way that all of this works.
Instead of looking at the internal balances on chain and what have you
to set the prices, SuperVault literally retrieved the prices,
the latest information from all of the internet,
all of the centralized exchanges. They update that on-chain, and within the same block, they allow the supervolts to be
like, okay, this is the true price of the asset. Let me market make around that price, right?
As a result of this, it's always the freshest price. So the volts can provide liquidity very
aggressively, but not lose money continuously. They don't get arbed, basically. They do the arbing themselves. Can I just ask a question? So you're saying that
the super vaults, they're able to, rather than being reactive and leaving lots of room for
arbitrage, they're able to kind of field prices, I guess, prices from various reliable sources.
And then what is it?
Just kind of average them
and then go with that price?
Something like that?
Or do I have it wrong?
Kind of something of a skis.
In this use case, we don't use averages
because they're manipulatable.
We use mean prices instead.
Let me walk you through the flow. The idea is that every time Neutron produces a block, so every second, all of the validators go and ask Binance and Kraken and Coinbase and all of the
others, as well as Uniswap and Radium and all of the other DEXs, right? They ask them, like, what is the price of this asset, right?
And they take that information, and then they take the mean of the prices across all of these venues.
And they then all participate in consensus, and they all share the prices that they think is true.
And the blockchain itself takes the mean of all of the validators' prices, right?
So we aggregate information from all across the Internet about the price of
these assets in order to understand what is the true price of the asset, right?
And then when we use the block,
we upload this to the chain, right?
Like it's posted as part of the block.
Now SuperVaults, what they do is they have access to
a unique piece of infrastructure on Neutron called the Cron module,
which allows them to execute messages in a guaranteed fashion without having to pay gas
in what is called the begin blocker.
You can think of it as like the system chunks of the block, right?
There's the begin blocker, then there's the public block space, and then there's the end blocker, right?
The Cron module gives specific smart contracts on Neutron
access to the beginning and end blockers,
these system chunks.
And so what they do is
they get the latest prices from the Oracle, right?
The validators just updated the prices.
Now they know what the assets are truly worth, right?
They don't need to guess it based on their balance of assets.
They just know it, right?
And what they do is they take the liquidity that they have
and they deposit limit orders on both sides of the price, right?
To buy and sell on both sides of the order book, right?
And so as a result of this, they're able to provide,
like if, for example, if I want to buy an asset, because there's this limit order, I can just say
like, okay, I want to sell my assets to buy the asset that the vault is providing. And I'm getting,
you know, like, boom, my trade works, right? It's an order book. So as a result of this construct,
right, like the difference is that like here, we're updating the prices, the quotes, at every single block.
And the vaults themselves have a bunch of logic for how they market make, basically.
You can think of it as like, we've effectively brought GSR and Wintermute and whatever, we've automated them and brought them on-chain.
So now, instead of when they make a profit, they take it and that's their profits.
Instead, now it's re-injected, redistributed into the vault and into the ecosystem, if that makes sense.
It sounds like this is something that you'll be able to actually measure on like a pull-by-pull basis in terms of how much more efficient this would be compared to a typical V2 amm or even a v3 amm and i i'm guessing it's
changing all the time but i think if you guys can um come up with like an actual number at the end
of the day people will see this and maybe high frequency traders especially as the block times
get get um faster and faster you'll be able to attract a good amount of kind of hardcore traders
onto the uh onto the platform.
Oh, sorry. I got muted for some reason. Can you hear me?
Yeah, now we can hear you.
I got you now.
All right.
Okay. Yeah.
The consequence of Supervolts is because they're trading so effectively
and because they're capturing all of the arbitrage,
there's very little reason for arbitragers to basically come and trade
because they're already losing out to the protocolized version of the arbitrage, which
has structural advantages.
And so we don't expect necessarily that a lot of arbitragers will onboard.
But for traders, if you're looking to buy or sell a cryptocurrency, this is great because you're now getting the best execution possible, basically.
You're getting Binance prices on-chain with the tightest spreads that can be offered based on the liquidity of the asset, its volume and such.
And as to your point about measurable, yes, it is very, very measurable. In fact, we're working right now on building these kinds of like dashboards and such, and we'll make them available for everybody to see and to compare the performance of these pools versus like other pools in the industry, if that makes sense.
Oh, yeah.
No, for a content creator, we're always looking for these kinds of metrics so we could size up chains and kind of what we do, which is a really coarse way of measuring chains as we go to DeFi Llama.
course way of measuring chains as we go to DeFi Llama.
DeFi Llama is okay for a lot of like, okay, TVL.
Okay, we got some TVL per app, but to actually start seeing these types of metrics, it might
mean the difference between onboarding a user for a minute and onboarding a user for several
months or a year.
So I think that that would be a great,
just kind of great use of resources just to get these types of metrics
right on the apps site,
whether you call it analytics or dashboard or whatever.
People do look to those things
to inform their decisions
on how they behave on chain, I think.
Yeah, yeah, for sure i mean i fully agree right
like we've been we've onboarded recently a really great analyst that used to work at trading view
specifically for that purpose right we want to be able to provide way more transparency over like
how the chain is doing how performant the the protocols are and such right so fully aligned
with you but i think what may be an interesting sort of like switching of gear here is, you know, we've talked a little bit about Supervolts.
We've talked about some of the, you know, innovations in Neutron itself that we're trying to bring to the industry, right?
I think what's interesting is to potentially take a step back and look at where the industry is at right now and how this positions Neutron and the applications built on top of it very, very nicely.
Because if you look at the industry right now, there has been this year and a half, basically, of momentum building around Babylon and Bitcoin, kind of like yield generation and such.
And you have this increasing concern around the miners' ability to generate income
based on their activities
in order to fund the security budget.
E.g., there's less and less Bitcoin
being put into circulation.
And to maintain the hash rate,
the miners need to make money somehow.
Otherwise, they're running at cost. Oh, yes. a lot of people don't see this as a problem yet but i i
know for a fact that miners showed up to the bitcoin conference in nashville and were specifically
seeking out developers who were basically releasing ordinals because they were like, Hey,
if people keep buying ordinals,
maybe this partially solves that the issue that we face with having cutting our income in half.
So definitely I'm looking forward to hearing where you see it as kind of a
full-time person, insider builder in the space to see like what's going to
happen. Right. This is, this is this is huge for the for the industry
yeah i fully agree um so okay so we've laid the context right like bitcoin issuance is reducing
the hash the hash rate eg the cost of miners is very high and as a result as a result of this
they're looking for additional income, whether that's more activity
on the Bitcoin chain or that's the ability to generate yield on their Bitcoin. And this second
step is what a lot of them are actually focusing pretty heavily on. And it's been very interesting
to see how this has played out over the last year or so, right? The scene is the following, right?
Babylon, like, just like Eigenlayer came in and made the promise of, like, infinite yields
on Ethereum through restaking, Babylon kind of, like, came in and told that same story
to the Bitcoin, like, the Bitcoin holders and miners, right?
And that sold their problem or seemed to solve their problem, like, perfectly, right? And that sold their problem or seemed to solve their problem perfectly, right?
And so as a result of this, you saw
billions of dollars that people previously
thought would never leave the Bitcoin chain because
Bitcoin maxis don't want to be on-chain
and whatever, starting to onboard
to Babylon, to Babylon LSTs,
to other forms of yield products
being built around Bitcoin, right?
You have Babylon
staking itself,
which because it wasn't live before,
it was incentivized through Babylon points.
The Bitcoin LSTs who wrapped around it and more advanced like DeFi strategies,
like point stripping on Pendle, right?
But the whole thing, notice, right?
Like the point stripping is also built on Babylon points, right?
So all of this, all of this construct,
all of this industry,
these $7 billion or something of Babylon LSTs,
they're all relying on the existence of points.
There's no real yield being generated here.
And so it's like, as long as the incentives are going on, this is fine.
But as soon as they run out, everybody's got to find yield again.
So that's the other piece of context, right?
Now, what's exciting is that if you...
What's exciting is that all of these guys are basically looking for yield.
And for the last year or so, we've been working on a product,
which the OGs here will refer to as Voldemort,
which is kind of like the first product to offer real yield on Bitcoin.
And that's launching on Neutron.
It's an off-chain strategy, just like Athena.
It's an off-chain strategy, different strategy, but just like Athena, that is tokenized on-chain and coming to Neutron, right?
And this is the catalyst that Neutron has been waiting for forever, because here's what's going to happen.
And this is the catalyst that Neutron has been waiting for forever, because here's what's going to happen.
When folks get access to high real yield on Bitcoin, they will ape into that, right?
And in fact, the team working on this project is already getting chased by miners and others that want to have access to these yields.
As you'll have a bunch of these yield bearing derivatives on Neutron looking for, you know, looking for additional
yield, basically. And they can get it through the following mechanism. The largest trade in the
industry today is leverage looping. It's a form of rates arbitrage, right? The idea is that you
provide collateral in a yield bearing asset. So you're still occurring these rewards, right,
on your collateral. And you borrow a non-yield-bearing asset like ETH, right? And so,
for example, there is about $6 billion on Aave right now of capital in that trade, which is you
collateralize rep stake ETH, you borrow ETH, you make more rep stake ETH with that ETH,
and you loop it again, right? And in that trade, as you have very low liquidation risks, because these assets are
correlated, and you're able to amplify your rewards through leverage, right? You're looping it. And so
as a result, instead of making 2-3%, you're making 2-3% multiplied by the numbers of loops, right?
Of course, you're paying the borrowing cost. So this only works if the yield of the yield bearing asset is higher than the cost to borrow
the native asset, right?
Now here's the opportunity.
MaxPTC is coming to Neutron.
There are billions of dollars of Bitcoin that are looking for yield and give me getting a call
Neutrons making history sorry about that no say you guys made history this is the first time
a founder stopped an x space to answer a landline phone i know right holy shit we're uh very retro
in that sense sorry about that so the tldr is there's a bunch of real yield coming and everybody
is looking for yield so what's going to happen is that folks who have Max BTC will go and lend their Max BTC as collateral.
And they will look to borrow other versions of Bitcoin, ideally versions that are not yield bearing.
So you can think of it as the Wrapped BTC of the world, the wrappers like Soled BTC and the others.
And they will want to borrow as much of this as possible
and use it to mint more max BTC, right? In doing so, they're multiplying their yields, right?
And they're doing so in a way that is fairly low risk in the sense that these assets are correlated,
right? And so this is going to create tremendous demand for borrowing these assets, right?
As a result of this, these assets are now also getting real yield in the
sense that people are paying to borrow them, right? So they're making real lending yields,
right? And so through this construct, what happens is that there's an opportunity here to rally the
entire Bitcoin sphere and ecosystem around this very, very profitable trade, right? And to generate
opportunities for kind of like everybody, right?
The other thing that's cool about this is that all this happens through Mars, right?
Mars is kind of like the preferred venue for this and it's built from the ground up to
enable these kinds of things, right?
Like it has credit accounts and HLS and a bunch of other features that make it particularly
suitable for it.
The other interesting thing is that Mars is unique in another way that is very
synergistic with this entire scenery. So the first largest trade in the industry is leverage looping.
We just talked about that, like $6 billion on Aave, and it's also happening on Morpho and on
Spark and on others. The second largest trade is today still mostly off-chain,
but Athena can like show us a glimpse of that pie, right?
And the second largest trade is basis trading.
Now, basis trading today doesn't happen on-chain almost at all for two reasons.
The first one is, well, I mean, basically for one reason,
which is it's not possible to do on-chain
because all of the perpetual exchanges
only accept USDC as collateral, right?
But Mars is different. Mars is the only cross-margin perpetual protocol in the industry,
which means you can do basis trading entirely on-chain with yield-bearing collateral, right?
So the idea is this. You go in, you deposit max BTC, you short Bitcoin, you collect the funding rates,
which are generally positive
on Bitcoin at scale and which are very liquid.
And you're collecting the Max BTC yields as well as the funding rates.
This is another trade that I know folks who run hedge funds that do this exact trade,
but without the Max BTC collateral, so they're making less money.
But they're doing this on billions of dollars off-chain.
Now with MARS and with MaxPTC,
we have the opportunity of bringing
a large portion of that trade on-chain.
Of course, there's some scalability constraints in
the sense that you need to
ARB the funding rates and all these things,
but that is the idea.
Over the coming months,
we have a unique opportunity to bring
everything that we've been working on for the
last few years.
And it's just custom products like super volts and Mars to mark in a massive way for the
asset that care the most about in the entire industry, which is Bitcoin.
And so, yeah, Mercury is super bullish and what's coming is even more bullish in my opinion.
Got it. Okay. A couple of things there. So you're basically saying that this type of trade,
you're getting yield on an asset that generally there's no way to get yield. People are hodling
their Bitcoin and all that, but you're going to be able to use a version of bitcoin that is yield bearing to replicate
a similar trade that's already happening in in the trad fi world is is that is that right so far
okay so then i guess it seems like now again so oh
now again so oh
i thought he got booted for a sec but i see you're back um so now it seems like that's one
step closer to actually onboarding some trad fi folks who are now going to be able to replicate
that trade with the online counterpart so long as they as they're able to navigate,
I should, online, on-chain counterpart,
so long as they're able to navigate crypto
in the first place,
do you think that's the desired outcome?
Or are you thinking the people
that are already here in crypto
are going to be able to replicate
the TradFi yield opportunity
or that yield trade that you were talking about hopefully I phrased
it phrased it right for you to reply so what I think is more exciting is actually making that
available to everyone on the same terms more so than the ability to give that to you you know like
goldman sachs or whatever like i think they're doing okay already and they don't really need
that kind of that kind of thing but i don't mean so much like institutionally done i mean like
people that are in the tradfire world that are now holding bitcoin personally holding eat personally like for those people
i think they might be like target customers for this versus like the bitcoin maxis who still
might be hesitant yeah yeah yeah okay so in that sense uh yeah i'm fully aligned there's actually
two ways in which we're already working on making that happen. The first one is we're partnering with a bunch of companies like Sensible
who are creating these very nice neobank-like experiences
for holding crypto and earning yield on crypto in a non-custodial way
so that they'll be able to offer this product in a way that's really, really seamless
and really, really abstracted from all of the complexities of like on-chain wallets and such.
You know, they have already like, you know, thousands of users from, you know, the United States and other places.
And they've been working with, you know, for example, like with the sort of like Coinbase opportunities and such.
And so I think they're doing a great job and I'm excited to see these kinds of like really seamless way of interacting and benefiting from these products.
The other approach is you can create an ETF for Max BTC and or for a structured product around the Max BTC and distribute it in that sense.
Right. So like now it's more convenient to have in, you know, people's like legal vehicles for investments if that makes sense
you know that's gonna happen that's gonna happen with eth probably soon you know I have friends in
trad fi that are saying like the next ETF is gonna be a an ethereum staking a staked ETF where they're
gonna pay out a portion of the um of of the staking yield and that that's going to be, like you said, that's going to be like in a traditional investment vehicle,
almost like a passive investor would just call it a dividend, right?
Even though it's not.
We know on-chain there's something happening.
The goal, I guess, for me would be to offer products,
obviously for crypto-native people, the DGENs,
the leverage traders, nft flippers those
people are like the core of the last two cycles i think in crypto but also in order for this
industry to grow beyond what i would call like fake market caps is to have stuff that's accessible
to people who don't care about crypto don't care about blockchain and even if they did care about
it they wouldn't know how to use it anyway to have products that kind of bridge the
gap between tradify and then on-chain transactions which is i guess what builders care about is how
can i get more transactions on chain how can i get more users on chain so it sounds like this upgrade kind of set the stage for lots of moving parts to happen.
So I guess my question is, what do you prioritize now?
I know you're not a huge Neutron is not a huge team.
It's not like, you know, hundreds and hundreds of employees, like a traditional, you know, finance or tech firm would be.
What do you prioritize now?
And like, which way are you going to go, I guess?
I mean, my priority as somebody who focuses on Neutron
is to make the ecosystem, basically,
at the end of the day, all of these projects,
for them to really succeed, need to be in in a market in an ecosystem that is thriving.
And so what I personally focus on is making that happen.
And I think this catalyst with Bitcoin and that is the most effective way of doing this and enabling the market, the on-chain ecosystem to really grow and scale.
But we're also kind of like, I guess there's a delegation of responsibilities, right?
I'm focused 100% on making sure that the Neutron ecosystem grows as much as possible.
We have folks working on Voldemort, on MaxPTC every day,
and those guys are focused on making sure that that product is as successful as possible.
And that can include making it available through traditional legal vehicles like ETFs.
There's another company that is working on basically enabling,
making it much easier to use Roth IRA iras in order to um access crypto uh
crypto positions um i'm not you know full disclaimer i'm not a trained lawyer uh i have zero um zero
expertise and when it comes to the legal realm so i don't know the intricacies of these things but
you know like all these things can happen in parallel by virtue of having dedicated teams
working on their yeah a roth ira is interesting because I don't know where in the world this is
offered, but in the United States, it's kind of like, I would say like an afterthought for a lot
of investors. A lot of people, working people, they're putting money into a 401k from their
paychecks. They're not thinking about it. Roth IRA is a little bit different because you put after-tax income
and you're only allowed to contribute like $7,000 per year. But when you withdraw,
when you get to retirement age, there's no tax. So that's an interesting place because if you
have super volatile investments in there, Bitcoin, crypto related investments you might be you might be setting yourself up for a nice early retirement
because of the the no tax feature so that's interesting you said roth ira that's what i
use by the way and i have super volatile shit in my roth ira so i'm either going to work till i'm
80 or i'm going to check out, you know, like 10 years.
Yeah, I hope the volatile investments like pay out.
Definitely there's an interesting bet to be made here. I think generally speaking, right, like what I'm excited about bringing to the market is like if you want to make very want to make very high risk reward bets like crypto has
plenty of opportunities for you today but i think it has less of is sustainable wealth building kind
of like uh opportunities at scale like that's kind of like what a lot of people like a lot of
players in the industry are chasing all of the time and And I think there's a lot of value in enabling these kinds of long-term, sustainable,
much more profitable than your bank account
type of opportunities that help people
fight off inflation, build wealth over time,
compound their gains over time,
over long periods of time,
rather than trying to make it all back
in one trade, et cetera.
I think there's a lot of value
in having access to the full range
of things on like equal terms and uh without the barriers that you would face in in more traditional
settings but but yeah i think that there's a really exciting opportunity to do this here with
all these new products and like mars's incredible flexibility and max ptc coming online and such
got it all right um i don't know how much more time you guys have but
i could definitely go like a few minutes beyond 2 30 i only have really one more question or i guess
issue that we could uh we could talk about um and that's like the token but not i'm not going to ask
about like token like when price go up the The question here is, or like the,
what I see anyway, I'll let you comment on it. Is that because you started out as an ICS chain,
you've had two years of, of, of actual users playing in the ecosystem, trading, buying,
selling tokens. You've probably also had a lot of quote unquote insiders selling their tokens,
right? Throughout these two two years so you probably have
i wish there was a way i could visualize this but i'm i'm just going to say with 99 certainty
that neutron's token distribution is going to be an asset for the ecosystem um because of this
and i think this gives neutron an opportunity to really have fair governance from the beginning.
So like the token as an actual governance token versus when a network first launches,
you launch the token, you launch the validator set, and then a bunch of people get tokens.
And now those are the governance tokens that were never bought.
They were given.
And then there's a yield because the network is new
that allows them to accumulate more tokens basically for free.
So I see this as an end user
as like a really fair starting point
for now starting governance from scratch
after two years of development.
Don't know if you wanna comment on that
or have any thoughts as to how that might
shake out you know as we start putting proposals and whatnot taking advantage of the sovereignty
of the chain and the control yeah a bunch of a bunch of thoughts on this i think on
um like first a quick clarification like Neutral has had governance since day one
with Interin being the primary governance token
I do think that you have a strong point about
the distribution of the asset has benefited
from having been in the market for a long time
yeah just by virtue of like yeah
that being said I would say there's
I think if you look at like the most decentralized Just by virtue of like, yeah. That being said, I would say there's,
I think if you look at like the most decentralized,
like distributed assets, right?
Like Neutron still has a long way to go.
And I'm excited about that happening over the next few years
as it hopefully garners like way more attention and such.
I think that would benefit the platform tremendously.
I do think that there's very interesting benefits
of like Neutron's path.
For example, something that has affected a lot of blockchains so far
has been that you have a bunch of insider tokens
and these tokens are vested,
but they're also staked while they are.
That was never the case on Neutron.
And in fact, all of the tokens that are still vesting from the seed round that Barion Labs led,
today they're still vesting, but they're not staked.
Like, not even.
And so there's a bunch of things like this that I think are beneficial in terms of fairness,
I think are beneficial from, in terms of like fairness, distribution, and also the realness
or like the trustworthiness of the price in the sense that like Newtron today is decently
liquid and it has a pretty high circulating supply as well, which means that like contrary
to some other projects, like the price that you see on Binance or whatever, you know,
price that you see on Binance or whatever, you know, is real, right?
is real, right?
And so I think that primes basically the ecosystem as a whole for being way more robust when
it comes to governance and staking and such.
And it also potentially creates, and not financial advice everybody like everyone for for their own but as an investor if i was to look at the interim token um i can definitely see a strong story for
why you should be excited about the fact that like the token right now has in my opinion been
beaten down by the market and like the trump tariffs and the micro environment and and whatever
but there's so much exciting stuff that's coming that there's maybe the potential for like a really good trade here basically
uh but once again not financial advice like um you know make your own your own decisions but i
do think that that's interesting yeah and not financial advice from spade but this is financial
advice for me and what i will say is governance has been a net
negative on token price all across Cosmos. And it's because, in my opinion, of the distribution.
So before you make a decision on what to buy and what to sell, I think seeing how governance is
situated should influence your decisions somewhat because bad governance
can absolutely demolish a token and we've seen that how many times like i i don't want to name
names but sometimes the same validators and the same people are involved from chain to chain and
governance is has almost been like the point of failure for a lot of chains they've been over
governed or governed unfairly so i think
what's interesting like you said about the neutron tokens you have this distribution and like the
sense of more fairness it's never going to be 100 fair no one should be asking for that but
the fact that the token has been beaten down i have never bought the token other than to play
around in the ecosystem as an investment so that that's where I'm at with the token.
But for me, governance plays into my decisions, buying or selling.
And I would suggest that if you're researching a token, don't just look at the white paper and look at the FDV.
Governance should, you know, the mechanism of governance and the distribution of tokens should play into that as well.
tokens should play into that as well so another note that is probably like relevant to this i
think is like um you know part of the mercury upgrade was the introduction of this very custom
staking model um if you look at you know if you're accustomed to customers change you're
probably accustomed to the fact that like delegate like staking tokens also delegates your voting power to validators.
I don't think that that has been a really successful experiment in governance.
Like, okay, I want to make two points basically.
First, I don't think that token governance is the ultimate way of making decisions.
I think it is very flawed in many ways.
But the reason why it exists and why it is used is because it is Siebel resistance,
which is an important property that needs to be accounted for when designing any governance system on chain.
And so until that is sold in other ways, token governance will probably remain a common fixture.
But anyway, back to neutron specifically one thing that's interesting is
neutron has a strict separation between validation and infrastructure and governance which means that
when you stake with a validator that validator has more share of the block production process
eg they will sign and propose blocks more frequently, but they do not get to cast
your votes in governance. They don't get any voting power from you in governance. There
may be a separate delegation mechanism for voting power in the future, but we don't have
this kind of aggregation of the two things precisely because at the end of the day, what the infrastructure
should optimize for is performance, reliability, decentralization, resilience. And what the
governance should optimize for is, well, also resilience, but the quality of the decisions
being made. And those two things are not necessarily the same, basically.
No, I agree. I think i i call it leverage voting when the
validators you know they have almost no self-stake but they're like top five on the active set and
they're able to influence decisions up and down the validator set right and and people generally
don't monitor all their validators votes and you probably shouldn't it's just kind of a waste of time so with certain
types of votes maybe it does make sense for the validator to have all the voting power and the
the typical staker like me why am i gonna vote on a tech upgrade it doesn't make any sense
but for lots of other decisions i think the the the leverage voting is um has just produced
the the leverage voting is um has just produced bad practice and i think in general is is very
much responsible for token performance across cosmos as as we've i mean we've seen it we've seen
it so man um i don't even i ran out of things to ask which which usually isn't the case, but lucky for spade, lucky for spade.
I did book your Calendly for Monday. So if you're able to record something great, if not,
maybe we could do like 10, 15 minute follow-up on, on the discussion today so that I could kind
of summarize it out in my own little video. But, um, we did, I don't know if you remember,
but we did have like a recorded
conversation, like maybe like a year and a half ago or so. I remember. And that was the first time
it like hit me. I'm like, Cosmos doesn't have a place for apps. All the apps are scattered
across Cosmos. Neutron can be the de facto app layer of the hub. And that was like what I came away with last time.
And now what I'm coming away with is
this graduation from ICS,
hubs go in a different direction.
I kind of agree with their direction, by the way.
But Neutron still can be this app layer in Cosmos.
And not because there are no apps out there,
but now because the infrastructure is under
local control it's sovereign and they can really focus on performance that's gonna attract the kind
of products that they know have an actual market for right like these these bitcoin products and
and whatnot so um i don't even know how to wrap it up. It's been like really, I've been writing stuff down
and I got all these like sticky notes here.
But yeah, maybe you could wrap it up better than me.
Yeah, I mean, I hope this was useful context
and for everyone listening, like, you know,
I hope I didn't talk everyone's ear off.
I think if there's one thing to take away
from this entire conversation is like,
this isn't about Cosmos. It's much bigger than that basically so i hope that was useful and i'm looking forward to chatting more and recording more perfect sounds good um i'll
let the host take it away i appreciate you guys again setting this up in this manner was able to
get out a lot of my my questions about the upgrade and kind
of paint the picture for what's going to happen over the next month, year, couple years.
Joe, thank you so much for coming and asking those great questions and participating in
this discussion about the mercury upgrade and kind of the next direction for Neutron.
The next direction for Neutron, of course, Spade, thank you for answering all the questions.
And of course, Spade, thank you for answering all the questions.
I do just want to double down on one thing that was mentioned during your conversation before I close it out.
I know we're going a little late, so I'm sorry if anyone else has to leave.
The two kind of the biggest strategies that Spade was just mentioning, the leverage looping and the basis trading.
looping and the basis trading these are already happening all over crypto and um and tradify also
but with different assets and in ways that are not as capital efficient as neutron can deliver
and they're also already happening on neutron and you can go check them out um you can do this with
like tia adam eth and now neutron but not with those assets, with the drop version of those
assets. So your collateral will be earning the staking rewards, like Spade was mentioning,
but the same will happen with Voldemort. And like on Mars, you can go and open these trades right
now. You can do the basis trading, which is a delta neutral strategy. You deposit D-Atom or D-Neutron,
and then you go and you short the asset on perps.
You can go do that right now,
test that with a small amount, whatever,
see how it performs.
And the same thing with the leverage looping,
which has billions of dollars locked on Ethereum,
like what Spade said.
You can go deposit DATOM
and leverage the staking rewards up to seven times.
And so these are exciting strategies,
which are possible on Neutron right now.
And also more assets will be added,
potentially more assets that people are more excited about
in the future.
And so it's not always like what's coming tomorrow,
it's also what we have right now.
And so I encourage you all to go and play around
with these options that we have right now.
Does anyone else, any of the other co-hosts or speakers
want to make any closing statements?
Otherwise, I will close it out.
Awesome.
Well, thank you, everyone, for coming
and sharing your time with us tonight.
And look forward to seeing you next week.
Thank you, everyone.
Thanks, folks.
Take it easy, everyone. Have a great rest of the week. Thank you.
