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the katana flywheel: vaultbridge
Recorded: June 10, 2025 Duration: 1:06:12Space Recording
Short Summary
Katana's innovative Vault Bridge mechanism is set to revolutionize yield generation in DeFi, enhancing user engagement through strategic partnerships and a focus on productive liquidity. The launch of the Katana Kaito leaderboard further incentivizes participation, marking a significant step in the growth of the Katana ecosystem.
Full Transcription
Thank you. Hello, hello, GMGM, everyone.
If you're here right now, you're here a minute early.
So good on you.
We'll get started in just a few minutes, wait for the rest of our guests to arrive,
and then we'll start talking about one of the core key mechanisms of the Katana Flywheel,
which is Vault Bridge, teleporting not just assets to Katana, but Yield as well.
We'll get started in just a few minutes.
Until then, I hope you can hear this music that's coming out of my phone.
If not, give me thumbs down and I'll panic and try to fix it. Thank you. I guess this means no one can hear the music.
Is that correct?
You know, there's got to be a better way to do this.
I wish that there was.
Alex, we're giving you a co-host invite or a speaker invite.
So as soon as you get it, please accept.
And we'll get you up here on stage and we'll get started very shortly. and
Thank you. E aí um
um um
thank you Thank you. All right, everyone.
All right, everyone.
It's time to get started.
It's time to get started.
Mark from Morpho, I saw you here in the spaces too.
So if you want to join as a speaker, go ahead and join if you want to join in.
Morpho requested you to be a speaker too if you want to join.
And also Will from the Katana core team invited you to hop on here too if you want to.
The more the merrier on stage, especially when it comes to Katana core team invited you to hop on here too. If you want to, the more the merrier on stage,
especially when it comes to Katana core contributors.
So let's go ahead and get started with some intros of our two key speakers
that we have for this AMA, Alex and David, Alex,
let's start with you brief intro, please.
GM GM token mechanism ecosystem designer here at katana um i've been in
crypto d5 for lasted four or five years um and yeah prior to that i was a product manager in
web2 in fintech payments neobanks that kind of thing awesome Awesome. Legend. Thank you, sir. Alex.
And Alex, that's a great looking Katana
badge you have on your profile.
Fresh.
Newly minted today.
Overdue and much
deserved.
And then, David.
David, let's get an intro on you, please, sir.
Yeah, I'll take my...
I'll keep this Polygon badge.
I do like the royal purple color, but I'm David.
I'm the SVP of Product and Strategy here at Polygon Labs
and an advisor to the Katana Foundation,
helping coordinate the core apps and helping them take success
of the amazing flywheel and holder of many crates.
If you haven't gotten a crate yet,
please beat me on the leaderboard.
Awesome. Thank you, David. And we've got Will up here.
So Will, let's do a quick intro on YouTube, please, sir.
For sure. What's going on? I'm Will Button.
I'm the engineering manager for Katana,
responsible for all things engineering and making sure that you have a great user experience on the platform with
great response, super fast response times, and a pleasant experience.
Thank you so much, everyone. And yeah, no secret, today we are talking about VaultBridge. And so
we're going to get into like what VaultBridge does. It's created, or it was, it is a product of the AgLayer team, which Polygon is a core
contributor of. VaultBridge is its own separate protocol that lives on Ethereum that Katana just
happens to be the first chain that's implementing the VaultBridge protocol into its bridge
infrastructure. And there's a lot of different ways that chains can leverage the
Vault Bridge protocol on Ethereum created by AgLayer. But we're going to talk more specifically
today about Katana's implementation of that Vault Bridge. And we'll just kind of start with
just some basics. And for everyone else here, this is where we dive deep, right? So we did announce today
that the Katana Kaito leaderboard is live.
So stop sleeping on your bags.
Start yapping.
I've pinned that tweet to the top here
as well as the Vault Bridge thread
that went out yesterday.
I pinned that as well.
So go ahead and give both of those a retweet.
But the thing with Kaito is that it rewards
new novel content.
Copy-paste is a little
less credited.
If you're looking for the good
alpha in the weeds,
this is the place to get it.
Take the information you get here and start
yapping about it. Matt, I see
you in here too, so we'll get you a request to come on stage as well. Cause like we said, the more the merrier.
So let's just get into what exactly is vault bridge. Um, and how does it differ from a typical
bridge? Right. Cause in this case, um, vault bridge, you know, most bridges are used to basically teleport assets from one chain to another.
But with Vault Bridge, it seems that it teleports yield as well.
So maybe David would be the best to talk about just Vault Bridge in general.
And then maybe like Alex, you can talk about more specifically Katana's implementation of VaultBridge.
Yeah, VaultBridge is a product suite from the AgLayer team, really focused on helping chains take full advantage and build new business models in order to remain sustainable. And how do we do this? When you bridge your assets over,
they are deposited in vaults
run by our great friends over at Morpho,
the underlying tech and yield source,
curated by the risk experts at Gauntlet and Steakhouse,
two of the biggest teams when it comes to risk and curation,
as well as an overseeing board of our consortium
of chains that are using Vault Bridge.
Basically, a portion of the bridge assets go towards backing over collateralized loans,
allowing for whales like uCryptoTex and institutions like GSR and really anyone else in crypto
to put up CBBTC, WST, ETH, or other high, high quality crypto assets
collateral and borrow out some of the stable coins, ETH, WBTC backing the bridge and paying
an interest rate. That interest is periodically distributed to the foundations behind these
chains for them to do what they see fit, ultimately allow them to build better businesses.
I'm seeing some other chains and other builders
on this space who are building with Vault Bridge and we can't wait to name them soon.
But the first one is Katana. Alex, what do you, what is, what is Katana doing with Vault
Bridge? Because I know you guys have added some cool extensions to it as well.
Oh, indeed we have. Yeah. So, so what Katana does is basically the assets that go in the bridge.
So it's actually to the user, it's the exact same as a bridging experience
you would expect from any other chain.
So you take your assets from one chain, bridge them to Katana.
Now under the hood, those assets are, as David mentioned, deployed into Morpho earning yield.
Now we take that yield and then we deploy it
in an opinionated way towards
major and useful pools on Katana.
Meaning that when you bridge your assets to Katana
and as you would in any other chain,
and you then deploy those assets into DeFi, onto Katana,
you can reasonably expect to get about 1.7 times
the yield you would see on any other chain,
because you would get the yield you would get
on any other chain, the real yield rate,
whatever it might be, the prevailing market rate,
plus the L1 rate, which is pretty cool.
It should be the highest yields in the eco.
This is without even doing any emissions.
So, yeah.
That's awesome.
Thank you for those explanations.
And so I've got some questions that we've seen like in Twitter and in the discord and in a Reddit even.
So I'm just going to kind of ask these questions as is I'm someone who knows very little about Vault Bridge. And so, you know, we've talked about, you know, there's low risk strategies that ball bridge assets are deployed into.
And so, um, are these strategies, you know, like, what are these kinds of low risk strategies that ball bridge assets are deployed
into and like, uh, maybe just kind of differentiating, like where these
strategies live, which is on Ethereum and like, are there any plans to diversify
or expand the assets that can be accepted?
Yeah.
So, uh, the strategy is simple.
It's basically purely more quotes,
over collateralized lending.
And so for USDC, this means you can pledge WST ETH,
CBBTC and WBTC and borrow USDC.
I believe we're doing the same collateral mix
for USDT as well.
When it comes to ETH, it's ETH files,
WEETH and WSTSTETH are the initial cohort.
And for WBTC, you can borrow against LBTC, our good friends over at Lombard.
There's also a version used by some of the upcoming chains for USDS, which is our good friends at Yearn.
They just compound that SKY savings rate plus some governance rewards.
Is that the only asset they're going to start?
No, we have the ability to expand out that set.
If you are an asset and you want to create a vault bridge variant,
or you're a chain, there's a particular asset that's not covered.
If there's borrow demand for it, please contact the AgLayer team.
You can DM me, DM AgLayer, or hit up texting on Telegram.
We are more than happy to spin it up and get it started.
We have a few more in the works.
Currently, the asset has to be on Ethereum
because that's kind of where we have our home base
and we reach out from.
But we are looking to expand further soon.
I can't leak too much alpha on this call,
but some other big ecosystems will soon be getting coverage
with some cool assets later this summer oh that's exciting alpha and will alex i don't know if
y'all have anything that i want to add to that as well but i think also like you know let's talk
more specifically about katana's use of the vault bridge like when a user deposits like USDC, for example, like maybe we can go through like the journey of the value of that one USDC dollar token.
And like, where does that go?
Like a user wants to bridge to Katana.
They opt in to use Vault Bridge.
What happens to that USDC and where does the value travel?
Yeah, so okay, let's take it step by step. Let's say you have USDC on Arbitrum, and you want to bridge that to Katana.
Actually, let's say you have it on mainnet actually. So you have this on mainnet and you choose to bridge to Katana. So you deposit that USDC into the Katana bridge.
Now, what happens then is that USDC goes into the vault bridge protocol
and that vault bridge protocol then deploys USDC into those curated vaults
and markets that David described.
At the same time, a receipt for this deposit is minted to the user and bridged to Katana.
So the user has the USDC that they bridged onto Katana as expected.
And while that same USDC, well, same,
while the value of that USDC is earning
on L1 at the same time.
Yeah, and then you would just use Katana
as you would any other chain.
To the user, VultBridge should be
basically sitting in the background
and just boosting yields across the chain.
This isn't the kind of product where you need to even think about it.
It just happens for you.
Um, and then for the, for that guild that the Vobridge is earning, um, you'll
realize that yield, um, whenever you interact with the chain.
So when you, um, deploy that USDC into a stable pair on Sushi when you lend it out on Morpho on Katana,
you will realize that yield.
Yeah, and I think there's been a lot of users who have made comparisons similar to Blast
in the sense of how Katana is using Vault Bridge.
So I'm wondering if you can also just kind of describe
like the differences between Katana's use of Vault Bridge
and what Blast did in the past.
Yes, it's actually very different to what Blast did.
So with Blast, they also took the bridge assets
and they turned their Dime to EstI and ETH into Steith.
That yield was just then passed to the BLAST ETH and DAI equivalents.
Now, this doesn't actually have any meaningful effect on the BLAST DeFi ecosystem
because now you just have users holding these rebasing, I i think there were assets um in their wallet
and that doesn't actually have any effect on the blast ecosystem it might look impressive
to the blast tvl but that tvl has no way of being utilized whereas with kat, that yield is harvested and then deployed in a very opinionated way.
Meaning like we will choose to maybe direct our USDC
and ETH yield in a disproportionate way
through the volatile pair of ETH USDC.
And this is to ensure that, I mean,
this is typically quite expensive liquidity to,
um, to purchase.
Um, and now the chain has the opportunity to, um, incentivize that, um, liquidity,
um, in a sustainable way and in a way which is like very healthy for LPs because
now the LPs are getting, um, like real yields.
Like if you're, if you LP pool, that USDC ETH pool,
you're getting paid not only in trading fees,
but also in Valkyrie yields in ETH and USDC.
It's pretty legit.
And then of course you can put cat emissions,
you can put sushi emissions on top.
LPs are super happy.
They're coming in liquidity is
getting super deep volume comes in volume produces more fees for lps and the flywheel continues
so it's wildly different to what blasted
yeah for me i think like the best way to think about it is that you know blast in a sense um didn't necessarily in encourage uh
people to just sit on their assets uh but they they definitely didn't encourage productive tvl
which is something that we talk about a lot on the katana side is you know you've got different
types of uh tvl that we talked to that we talk about. There's there's chain TVL, which is
just like, you know, the L2 beat TVL number. There's productive TVL, which are assets that
are actively deployed in DeFi and not just sitting idle in wallets. And that really helps to help
provide and create a thriving and robust DeFi ecosystem on Katana. And then there's chain aligned TVL. So, uh, I wondering if, I know David's got a
good answer on this too, but Alex or David, if one of y'all want to talk about just the differences
in how the Katana team or the Katana consortium in general thinks about, uh, these TVL metrics.
Yeah. So, I mean, as I kind of alluded to with the last example, like TVL in itself is like a pretty useless number. It doesn't really do anything besides like produce a marketable metric.
What is more important is how much of that TVL is deployed into DeFi? Like how deep are your liquidity pools?
How much borrowing capacity is there on your chain?
And then on top of that,
it's like how much of that deployed liquidity is utilized?
These metrics are just way, way, way more important.
And this is how we will measure the success of Katana.
We're not looking for any kind of vanity metrics.
That is, it's actually, it doesn't really help anyone besides like produce hype on Twitter.
When it comes to like how the chain itself will support this, there is of course the chain owned liquidity initiative.
There is, of course, the chain-owned liquidity initiative,
meaning that the chain itself will buy LP tokens
to deepen liquidity for these key places in DeFi.
Yeah, I think.
And David, you gave a great talk at Stable Summit at Denver
about the concept of chain- tvl and so i'm just
kind of wondering if there's anything that you want to touch on or elaborate on since
i feel like this term was kind of uh birthed out of your brain specifically
david you're muted if you're if you're talking I'm fighting the bugs on X to get the mic to work.
I think at the end of the day, we look really closely at Chainalign TVL because it's a way to compare to blockchains directly and say, what's the actual metric that matters?
The metric that matters is money being made.
And there's money being made for the blockchain.
That's kind of what I look at that. You know, TBL is great to have. Love to flash big numbers. But ultimately,
TBL is a liability for a chain, right? You have to pay for the security of those assets
through your consensus, through your approver, through your fraud proof, whatever actually
ultimately is the security mechanism.
And the more and more TVL you get, the presumably higher that security cost is because you really
want to make sure that North Korea is not walking away with funds.
And so when you look at it from that perspective, well, what thing can we look at as a benefit
for the chain?
What we look at is inside the economy, is that TVL being put to use?
I would rather have five USD inside of Morpho than 5,000 USDC just sitting idly in a wallet not doing anything.
I would rather have one Bitcoin sitting inside of Sushi in a liquidity pool than one Bitcoin just sitting normally in someone's wallet.
Because when it's sitting in someone's wallet, the chain's not deriving income,
the chain still has to pay for that security.
And so the idea of productive
and eventually chain aligned TVL,
essentially make a metric of, all right,
what TVL is actually beneficial for the chain
as opposed to being a pure liability.
And that's really kind of how we sit and look at it.
And we're seeing lots of different teams build models
around this idea of activated TVL, proactive TVL.
Barachain is a great example, right, through POL. We've seen other teams like Sonic really try to
say, all right, we're going to incentivize activity because that's actually the TVL we
care a lot more about. Katana does it a bit more directly by saying these are the best assets we
want you to hold because we have figured out ways to subsidize our security budget via things like
Vault Bridge and the relationship with the core apps or other ways to ensure some value is being
grabbed and taken in. Yeah, I think that's a great answer. And okay, so let's, let's talk to
some of the flow of the yield and those incentives from Valbridge, right?
Because a user, Bridges to Katana, the asset goes into Valbridge and it goes into a curated strategy on Morpho, on Ethereum.
And then that asset generates yield, which is then routed back to the chain. So I guess some of the questions that we want to touch on in this topic is,
you know, how often is that yield harvested on L1?
What route does it go through to get to Katana?
And then where does that yield go?
What type of pools and which apps are being incentivized?
So I guess start with the first question, like how often is that yield harvested
and what's the process it goes through to get to Katana?
David, I was working this just last week.
I think we ended up on a weekly epochs.
It's going to be on like the size of the yield, but I think we'll land on weekly.chs um it's only on like the size of the yield
um but i think we'll land on weekly david correct me if i'm wrong there
still it is it is it is set to be either weekly or fortnightly uh to start yes in the beginning
the yield might not be like so meaningful so it might not be like if
it's kind of operationally intensive in the in these early days to move that yield because we
want to do it in a secure way um so it might be fortnightly um but the goal would ultimately be
weekly um epochs um and i know david like you have thought quite a lot about how to actually get that yield from mainnet to Katana and all the security systems on the way.
Yeah, it's sent to the Katana Foundation to be distributed out.
So we'll automatically hit L1 or L2 for Katana Focus.
one or l2 for katana folks yeah and i think from there we can kind of talk about the the core app
philosophy a little bit as well where the all the revenue streams that that are generated here not
just fall bridge but you know sequencer fees um yield from ausd yield from uh that's generated
from chain on liquidity all of those as opposed to being spread thin throughout 10 different decentralized exchanges
or 10 different lending and borrowing apps,
it only goes to a select few.
So I think this could be a good idea to talk about
the core app philosophy and how concentrating
those real yield-boosted liquidity mining rewards
benefits the chain and the users?
Yeah, so this is like a pretty key design difference that Katana has relative to other blockchains.
Like you'll see like most chains have multiple DEXs.
They might even like give grants to multiple DEXs with the agreement that the grant would be distributed to the
chain's users.
Now, this is inherently like just wasteful, right?
Like, why would you have two DEXs that have the exact same pools that are emitting the
same tokens?
This is like worse for the users because now you have to have an aggregator on top to find
like the best execution, splitting up the swap across Dexes, between pools.
It's worse for the chain because now the token is being dumped twice as hard,
which is of course reduces ability to spend sustainably.
And the same applies for lending, right?
Like why would you want to have like, are they Euler, and Morphe with three different places with like fragmented liquidity to borrow
when you could just have one with like super deep liquidity?
Now, when you go with the latter, just one with super deep liquidity,
you're then able to service much larger trades with less slippage
and you're able to sustain much larger trades with less slippage, and you're able to sustain
much larger borrows at a stable rate.
And so the core apps essentially provide this.
And this philosophy is also manifest when we distribute the Vault Bridge rewards, because
they will go just to these protocols and just to pools which are
net beneficial to the defy ecosystem yeah that's a that's a great way to explain it um and then
i think you know maybe this might be a question for for dav, but another thing that we've seen in the Discord is questions around the risks and trade-offs of using Vault Bridge.
So maybe, David, you can touch on what kind of risks does Vault Bridge introduce and why are they worth taking?
Yeah, there's risks. There's also benefits.
The risks primarily are one.
There's not a smart contract risk. There's a smart contract in addition to the standard bridge worried about your funds being rugged. Nope. Like there's no governance key. Those loans are transparent,
easy to see. It was great for our team when it came to auditing. You know, I know Will and the
engineering team did a great deep dive into the Morpho code base, ensuring everything was safe,
ensuring they felt good, formal verification, all of that to try to minimize that risk.
But it's there. Don't want to minimize it's there. Number two, market risk.
If you some massive black swan event, the costs about liquidations,
we've worked with various insurance providers to help minimize that as much as
possible, but the risk is still there. I don't want to minimize that risk.
Isn't there. And three, I mean, standard bridging risk.
We've seen bridges fail in the past before.
I could name a lot of them in terms of like, you know,
multi-chain and, you know, the original wormhole and Nomad and others.
And so anytime you bridge, it's always risk.
Why do you think it's worth it?
I mean, most people are already, most users in Web3
are already taking up smart contract risk of lending markets.
Most DEXs, especially now that we're in the UNIV4 hook era
or Fluid are all doing lending behind the scenes.
So if you're already gonna be accepting that risk,
you might as well concentrate that risk
and get benefits twice.
Two, we're doing the most conservative form of this risk.
This is lending in its most original intent.
It is isolated markets.
There's no cross margin. Every pool is against high, high quality assets, CBBTC, WBTC, WSDE, things that we well know how to manage economic risk.
And we're doing so in a way that is even far more conservative than most other loans, meaning liquidations will be processed first on Vault Bridge prior to anyone else's positions.
Those are the big situations to look at from a risk perspective.
I'd also say that you're already taking a risk by being on chain. Obviously,
you're already taking a risk if you're holding USDC or USDT. Obviously, their risks are going
down as regulation and the legal structure kind of becomes more clear for the stable coins and
what they can and what they can't do with either like a full reserve or a fractional reserve kind of model um and then
once you're taking the usdc onto different l2s depending on if there's native or not or non-native
deployments that's like another layer of risk if you're going and depositing that usdc into
a lending protocol you're taking on that risk and so what katana is doing is like yes it has all of those
risks that you'd also be kind of you uh i guess be vulnerable to on like any other l2 lending
protocol but it's only kind of like just like generalizing that across like the the whole
ecosystem if you're holding these bb assets yeah that's. Thank you. Thank y'all for that. And another question that
we kind of want to dig into a little bit is the concept of VB tokens, which is short for
VaultBridge tokens, because when a user does bridge over to Katana, you will get VB USDC on Katana.
And users can still bridge stock USDC to Katana.
But I'm wondering if one of y'all can just kind of talk about
why a different token is needed for Vault Bridge
and with the trade-offs there for someone
wanting to use usdc on katana why they should use vb usdc versus like stock usdc.e ultimately a token
is derived by tishore in this case the issuer is vault bridge and so we have to actually keep a
separate token uh the vb prefix is in the contract to let folks know. Now, just as a warning, some
of the Katana apps may remove that VB prefix because it's going to be the dominant token
in the ecosystem. And while you're more than welcome to bring your stock USDC over, its
utility is going to be definitely muted as right through all the incentive flywheels and
everything else, the VB assets are probably primary. If you don't want to take the vault bridge risk, it's a great stable coin called AUSD from our friends at Agora,
just like USDC. It is fully backed by high quality T-bills and all sorts of
audited accounting procedures that we expect in a modern stable coin. But it happens to do revenue
sharing back with its various chains, meaning you'll get rewarded for even not taking bridge risk.
So, as much as I can say,
you definitely can bring over non-volved bridge assets
for every asset.
There's LBTC if you don't want to take the bridge risk
on WBTC, VBWBTC.
There's WEETH if you don't want to take
the bridge risk of VBE. There is AUSD if you don't want to take the bridge risk of VBE.
There is AUSD if you don't want to take the bridge risk of the staples.
And so we recommend taking those.
Those are going to be highly, we talk about chain-aligned assets and chain-aligned TVL.
The chain has an opinion and it's going to be expressing it.
Yeah. And just, you know, the standard USDC, USDT on Katana is most likely to see the significantly less amount of boosted rewards in chain owned liquidity. Right. And right. Because the majority of that is going to go to incentivizing those VB tokens and boosting that with real yield.
and boosting that with real yield.
And something that people have been saying
about Vault Bridge and the Katana flywheel in general
from a yield boosting point of view
is that this is essentially what this is,
is like a perpetually funded real yield liquidity mining program
that is taking place on katana uh separate from that of you know
some some liquidity mining campaigns that might only be using like uh governance token based
emissions to further boost the yield um so i'm wondering if y'all can kind of talk about the
differences there and why that's just better in in general for users of defi on katana i mean it's like so it's so much better like you know i'm assuming everyone in here
is quite familiar with yield farming and what goes into it as a from a farmer so just like
imagine that you know you're going around your farming activities, but instead of receiving governance
tokens, you're receiving USDC and ETH and Bitcoin as your farming rewards.
It's like it is day and night.
It also means that you don't need to worry about like, oh, okay, I'm getting paid in
these like three random governance tokens.
I'm going to go find an auto compounded, auto dump them for me so I can roll it back
into a position and take on that extra smart contract risk.
Don't even think about it.
Now you can just like, oh, okay, I'm earning USDC and ETH and Bitcoin just for my farming.
Yeah. Yeah.
Amazing. Yeah. David had to hop off here for a second, but we'll get back. I think someone got into his, yeah, he'll be back on in just a second. So yeah. So I'm wondering too, like, you know,
we've also talked about, about chain on liquidity. I'm wondering if you can share, you know, how does chain on liquidity and VaultBridge like interact with each other?
Right. I think the main thing we've been talking about is how sequencer fees are what are funding chain on liquidity and then VaultBridge is funding boosted yield.
Is there any wiggle room there or, you? Or how do they interact with each other
to help create this compounding effect on the ecosystem?
Yeah, so this is a pretty cool one too.
So yes, sequence of fees go to buy chain and liquidity,
but that chain and liquidity is in Voltbridge assets.
So for example, let's say we receive like 100K in sequencer fees, and then we choose to buy a LP token on Sushi for ETH and USDC.
So yes, we're deepening liquidity, but we're also now locking in assets into the Valkbridge.
So this does a few things.
One, I mentioned deep in liquidity.
Two, it means that we can actually forego the yield
that we would have gotten,
and thus boosting the yield for any other person
in that liquidity pool.
And three, it actually provides a backstop on the, on the vault bridge.
Right.
So one of the things about the vault bridge is like, yes, the assets are
rehypothecated into Morpho on L1.
That means that there is a vulnerability where if a user on Katana or if many
users on Katana want to bridge out of the chain,
there is a chance that all that liquidity is utilized in Morpho
and they can't get out.
And this is like a worst case scenario.
In reality, it's very unlikely
because of a few things we have in place.
One of those things is not deploying all the bridge liquidity.
Another one is, of course, like Morpho markets,
lending markets to DeFi, they never had a hundred percent utilization.
Um, unless it seemed like a pretty catastrophic event or an unforeseen,
um, unforeseen circumstances.
And even then it wouldn't really maintain for very long because the borrower
rates become so high, people pay down their loans.
But the third is the chain of liquidity.
So since the chain of liquidity so since the channel liquidity that we
buy with sequence fees actually stays on chain it means that it's it means there's always going to
be like however whatever the percentage of channel liquidity is relative to the total
vault bridge um tvl that's like a permanent buffer where people are always going to be able to come
in and out um and so the more channel liquidity we have, the more robust the whole VortBridge
mechanism is and makes it way more safer for users on chain while boosting their yields.
Awesome. That's perfect. And, you know, if you have any questions in the space talking to you audience, I went ahead and pinned the spaces tweet here.
And if you just want to comment underneath that, your questions will be sure to get them answered in the space directly.
And also, if you want to hop up here and ask your questions directly, we're going to start doing that as well.
So, you know, send your request to hop on stage or ask your questions in on Twitter
underneath the link that I've shared up top, and then we'll get that, we'll get that going.
So, yeah. And so I just kind of want to see, you know, we're trying to keep these around 45
minutes now. We're starting to run up on time a little bit. So, you know, I'm just going to kind
of kick it around to Alex, Matt, and Will.
If you have anything we haven't really touched on quite yet that you want to make sure that we're addressing. And we've got two requests to speak here. So Alex, while you're kind of
touching on anything that maybe we haven't touched on that you think is important, I'll get some of
and I'll get some of these people up here to ask their questions.
these people up here to ask their questions.
I guess one thing that comes to mind is if there's any builders here,
please reach out. If you think of something which you can build on top of VultBridge assets,
let's chat. Happy to co-create there as well um we've got like a lot of teams reaching out doing
like quite novel things or modifications to existing apps and other ecosystems that make them
um vault bridge powered um yeah i would call out uh i would call it mizu is one project on katana
to look out for doing some interesting stuff. M-I-Z-U.
Yeah, one of many.
So, yeah, any builders here that's feeling inspired,
please do reach out.
Awesome.
And we've got CYP up here right now.
So, CYP, if you want to unmute yourself and ask your question for the Katana core team,
go for it.
Sure.
Hey, guys.
Yeah, quick question.
So, if I understood well the documentation, basically bridging doesn't bring any yield
or access to yield or rewards.
It's actually on the L2 depositing into like a LP or like borrow mechanisms or anything
like that.
Is it how it's going to work?
And my question would be like,
is it because of like the accounting of being able to know who is bridging
how much that is the issue or just because you decided to reward,
as you mentioned, like very productive liquidity?
as you mentioned, very productive liquidity.
Yeah, it's not an accounting thing.
Yeah, it's not an accounting thing.
It's simply that from a design and philosophy,
chain design philosophy perspective,
we believe that the incentive should go to those
that are making the ecosystem better,
that is, active participants.
And we think a good proxy for, well, it's a direct proxy
for who is an active user is like,
who's deployed the liquidity.
Because if I understood well,
from what we were saying before, the liquidity,
I mean, the TVL is not, it's a cost.
I understood the whole part of saying
it's a cost for the L2,
but actually you're still generating yield from that TVL.
So it's not an ideal TVL, even if you just breached and hold on the L2.
It's a good point.
So I think it is better than any other chain because it is producing yields and it is in fact boosting yields for all of the active participants.
producing yields and it is in fact boosting yields for all of the active participants.
But we believe that that is fundamentally still worse than that liquidity being deployed into
DeFi because deeper liquidity will all things being able to produce a better DeFi ecosystem.
But yes, it is a good point.
Yeah. And I'll kind of add to that too.
You know, we talked about productive TVL being one of the key metrics that we're focusing on for Katana.
And, you know, what that does is encouraging users, you know, by boosting the yield on specific pools, LP positions, borrow mechanisms.
That just further contributes to the flywheel, which creates even further compounding effects here, right? Like if
you, uh, if you bridge over and you're just getting rewarded for just, you know, keeping your assets
idle, um, then that's not really helping to, to build out the, the DeFi ecosystem, right? Uh, and
so if you're deploying into like a Dex LP, right, you're creating deeper liquidity, which attracts more people to swap on Katana.
And it also on the lending side, it encourages more people to borrow because there's deeper liquidity there, which generates more sequencer fees.
Right. As you see more activity, which those sequencer fees are also redirected into the ecosystem as well.
And, you know, it just encourages more activity, you know, on the native protocol yield side that
you get just for, you know, being an LP and the fees generated there. But in addition, you know,
those sequencer fees and it also, you know, the deeper the liquidity and the more attractive it
is for DeFi users that encourages more users to bridge over to Katana.
And through the vault bridge,
you get more yield to boost more pools,
which creates deeper liquidity.
And that's like when the flywheel really kicks in.
All these mechanisms together,
compounding on top of each other.
And I think it's really a philosophical design
that was chosen.
Alex, I don't know if you have anything else to answer that.
Alex Bialikis 1 Yeah, just one little thing to add on that.
Like, deeper liquidity, like as we've discussed, like better execution, you know, better pricing,
more stable borrow rates, but also it's actually a better environment for builders, right?
Like, if you're an app that is solely reliant on underlying liquidity, it's
gotta be deep, right?
Like the size of a business is constrained to that underlying liquidity.
So like the deeper we can make it, like we see this, these like core primitives,
these core apps as infrastructure for builders and the deeper we can make that
liquidity, the more successful your businesses can be built on top of it, essentially.
That's another benefit of that deep liquidity there.
Yeah, and CYP, I'm going to kick it over to some other people that have questions as well.
But really appreciate your question here.
We've got about two plus spaces every
week going coming up to mainnet and even through mainnet so please come back on and ask more
questions that you have or even just like you know ask her your questions publicly on twitter
like we want to be as transparent uh as possible with all of these answers so thank you for that
question it was yeah thank you yeah uh thank you will do. And we've got Moto here at Tony underscore blockchain.
If you want to unmute yourself and ask your question, please go right ahead.
Yes, of course.
Thanks for having me up, gentlemen.
Really excited for what you're building and definitely started to build some hype on the timeline as well.
started to build some hype on the timeline as well.
Just based on something that Alex mentioned before,
in terms of what could builders possibly do on, let's say, the Katana chain?
Because I see it's going to be an L2 that's basically vault-driven and DeFi-driven.
But what would be an app that would we could build or an example because i know like let's say you know you have more full for the
vault and you have sushi for the training and you're gonna have vertex let's say for the perps
so what what what else is something maybe an example of something that we can see being built?
Because we do see like DeFi definitely heating up with, you know, a couple of developments.
We had Paul Atkins say DeFi platforms will be exempt from some regulatory barriers and, you know, eat stakings at an all-time high. So it's definitely like we might be getting like another d5 season which really has
piqued my interest in katana uh and i did do the pre-deposits on day one so i'm kind of happy of
that i'm wondering uh i'm speculating on what that's gonna lead to but uh yeah i just want to
know what were some ideas of things you think could be built on a vault driven chain. Yeah. Yeah. So, um, thinking about this and like, it's really like anything that, um,
is going to, well, okay.
One area is like structured products, right?
Like if you're going to like design like a, um, a strategy on top of
existing, um, liquidity, that could be one.
Another one is like using Vault Bridge assets
or LP tokens as collateral or both.
You know, things that like collateralize Vault Bridge assets
produce some other kind of thing on top.
I mean, I think therein there's quite a lot of options.
Like you could make all sorts of yield-bearing stablecoins
with various mechanisms with different kind of collateral constructions
and ways of handling the yield.
Yeah, we're just talking to someone today.
They're going to make a basket of assets,
which are going to be collateral for another kind of Katanaana native asset or agiline native asset rather um so yeah
but if you want to like jam like please like reach out we can like jam on something yeah
spectra is another uh protocol that's coming that is facilitating yield trading and um I mean, that is facilitating yield trading. And I mean, considering Katana has, I guess, the leading LRT slash LST in each category being Ether5, Lombard, and Gito.
I think that's another thing to potentially look out for and maybe build on top of.
Cool.
Cool.
Yeah, no, Alex, for sure, if something comes up.
if something comes up because i have some friends that are always looking uh looking to uh
well they're looking to do something particular and so that's why i thought maybe katana could
be a fit i just wanted to know because i know you guys are going to have all the
that like focusing on the deeper liquidity i would imagine on your platform so then you know what
could we use the other platforms for?
For sure.
Yeah, no, that was a great answer. Thank you.
Awesome. Just like, just on the composability aspect, I think like my favorite example on like
a composable app is, it's got to be Alchemix, right? Like it's, they, they were built on top
of the own vault tokens. They played with the, or they became a large participant of the Curve ecosystem.
They minted their own token out of that.
It was all built on top of those things.
And that might have even been one of the layer in there.
But it was like a pretty cool example, I thought.
Pretty cool example, I thought.
And that's the kind of thing we were hoping to see on Katana as well.
Yeah, I think when you already have bootstrapped perpetual high yield
through these revenue streams,
and then you also have this deep, sticky liquidity
through chain-owned liquidity,
I think it makes the potential for innovation
on top of those core apps a little bit more seamless
for a lot of
developers in the sense that they don't have to, you know, bootstrap or emit their own tokens to
get to take advantage of, you know, this high yield opportunity. And it kind of just lets builders,
in my mind, this kind of way I think of it, it lets builders just do what they do best, which is
build and innovate and not have to chase like liquidity and, and, you know, just spend endless amounts of their token on, on yield,
you know, boosting yield specifically.
And we got another question up here. Let's go to Incinzi.
Nice little snoozies NFT there. Compliance at Bitstamp. That's,
that's interesting.
What's your question for the Katana Core team?
Hey Alex, thanks for sharing.
I actually learned a lot more from these spaces than what I could gather from the timeline itself.
Yeah, I think you mentioned the trading yield itself, right?
You get paid out in like Bitcoin, Ethereum, USDC, all this.
So after you saying that, I actually become more curious,
what is the purpose of like the Katana token?
That's my first question.
And then my second question is,
I think you've shared a lot of benefits about the vault breach,
like the assets under the vault breach, and then you have the vb assets like on
katana itself um i'm quite curious why do you think that other l2s haven't thought of this before
like consolidating into like one lending protocol one perp dex and one dex itself i mean it's so
ingenious right yeah so i'm quite curious like why hasn't anyone thought of something
like that even something remotely similar to like yeah so something like this before time in a little
bit or alex you can follow on i mean yeah i think it's uh partially like a function of like where
polygon is one of the people that were doing my headphones died um for example it's really hard
for someone like arbitring to do this
retroactively they have a really strong community of d5 builders they've been there for a while
and because of that uh they've worked with mostly with people that are deployed on arbitring first
like camelot uh like more ogs like sushi and uniswap they have arrow i think ramses is a v33
there too and it's really hard for someone like
that to then turn their back on like the community they've already built um so like i think katana
in like any new chain that launches is just in a more fortunate position to try to set up the
ecosystem like it and it's kind of like hard for anyone to come and do this retroactively and try
to like i guess build an ecosystem around them so i think like one of the reasons that people haven't done it before is just because
it's kind of hard to do that politically and that's like existing chains and then like
new chains i mean honestly i think like most new chains they're not really trying if like it just
seems like there's like they just map the ecosystem
what has worked for other people and they just go ahead and they just like copy the what they call
it as like the playbook you know get like whatever big name dexes lending markets um
without really thinking about like what is the purpose of the chain besides like providing exit
liquidity for the investors and team you know and we really think about it from like a DeFi first principles perspective.
And like, that is what produced that core apps design.
What is best for the user?
What's going to actually produce deep liquidity and sustainable high yields?
Yeah.
And I think too, like there are some chains that have experimented with this and
in some way uh like i think kanto they had their own enshrined decks but i think that they were
the team that that built it actually and i think maybe kanto didn't really they didn't take off for
for maybe other reasons related to this but um and but i wouldn't be surprised to like you know this is like a a
paradigm shift in like the philosophy of how you structure and a chain or an l2 in the sense that
like you are picking core defy apps that are essentially part of your infrastructure which
is kind of what we see with with katana and also they're plugged directly into the flywheel as well.
So, you know, I think we saw as like, you know,
a lot of people talk about fragmentation of liquidity throughout different
layer twos and blockchains,
but I don't think people talk enough about the fragmentation of liquidity
within a specific chains ecosystem, right?
Instead of spreading liquidity and emissions
throughout 10 different Uniswap V2 forks
and giving grants to all those forks
just to see who wins,
why not just pick a team who's been proven
and is well-respected in the space
like Sushi in Morpho and in Vertex for that matter?
Yeah, I guess like- I wouldn't be- Yeah, go ahead. I was going to say, I got to drop in aex for that matter. Yeah, I guess I wouldn't,
I wouldn't be,
yeah,
go ahead.
I was going to say,
I got to drop in a second.
I just want to say one last thing is like,
I think mega ETH is the only other chain that I know of that's doing it.
Like really publicly in terms of allocating and concentrating resources
amongst like a certain amount of builders,
but there are plenty of chains that like want to do it and like,
or kind of do it privately.
It's just a hard to kind of align with like the community, obviously, for a variety of reasons.
But yeah, thanks for everybody for joining. I got to go, but excited to see this many people here.
Yeah, it's really exciting. And also, it's really exciting just to hear all these questions that we're getting to.
So this is going to be like the new format of how we do it.
You know, we'll do like 30, 45 minutes of just like intaking the information.
And then like the last 15, we'll open it up for questions from the community.
And it looks like one of our people who had a question dropped off.
Oh, the DJ, we'll add you on here in a second.
We'll get you back up here.
But we've got ambassador at Uzor365.
Yeah, please unmute yourself and ask your question.
Okay, might be having some trouble there.
So, DJ, I'll go ahead and get you up here too.
And if you get up here in time, go ahead and unmute yourself and ask your question, DJ.
here in time, go ahead and unmute yourself and ask your question, DJ.
Okay, might be having some technical difficulties on our last two people who came up here to ask
questions, but we're kind of running up on time right now. Oh, DJ, you're up here. Yeah,
unmute yourself, ask your question. We've got like three minutes left, so please be brief,
and then we'll get you on the next AMA.
and then we'll get you on the next AMA.
All right, all right.
Yeah, so kudos to the Katana team
and everyone on the space.
It's really been an amazing, amazing space.
So yeah, you know, I got to know about the Katana
and the whole project today
because of your partner is Kaito.
So yeah, I think most of us on, I don't know, but I think most of us in this space right now
get to know about the projects because of the partnership with Kaito.
So as someone who isn't really knowledgeable about all these DeFi stores and all,
so I just wanted to ask, what was the plan?
Like, what was the team?
Like, what was the whole concept behind going on Kaito and the whole stuff?
You understand what I'm trying to say?
Yeah, that's a good question.
And I'll kind of answer that real quickly and i'll also kind of do a plug for uh our katana kaito space that we will be having uh tomorrow so pay attention to
the timeline on the katana handle give the katana handle a follow too if you haven't already uh
because we'll be posting about uh we'll be posting that spaces link later but in general
right i think that you know the in general, the crypto market and crypto Twitter has seen Kaito as a way to get creators to really provide in-depth quality content and help to get the word out in a little bit more of a decentralized, organic grassroots way.
We really felt like that was going to be a huge benefit to Katana specifically, because I think, you know, Katana being a DeFi chain, not everyone on crypto Twitter is necessarily the most DeFi native.
And it kind of and also the way that Katana is built and structured is a very, very novel and unique concept.
And it's a paradigm shift to what you've seen with other chains that have launched.
it's a paradigm shift to what you've seen with other chains that have launched. And we think
that this kind of also encourages users to maybe get into the weeds a little bit. If you're not
like the most DeFi native crypto user, this could be the catalyst for you to really dive deep into
how DeFi works and especially how DeFi works on Katana and so the the way that i was kind of talking about it
internally is like it's it's almost like a learn to earn campaign where we've got these incentives
um for kaito yappers to provide unique novel content about you know their thoughts about Katana in a way that allows them to essentially get paid
for learning and then sharing and educating
your followers on that information.
And then our job on the Katana side,
especially on the marketing side,
is to provide you with resources like blog posts,
Twitter threads, these spaces, spaces amas information in the discord
about those novel concepts and how katana's philosophy was built so you have those resources
at your disposal to kind of create that content so that was kind of the thinking behind kaito
and mark you just unmuted yourself so i'll let you say something yeah i just and i just i mean i totally obviously agree with all that i think i will say i just i just actually tweeted
this like a few minutes ago but i do it's like kaito is like particularly important so a lot of
times kaito is like is just um you have it so that people can be like loud and bullish and bull post a
lot of stuff and and get attention um which I think is a great use case, right?
Nothing wrong with that at all.
I actually think Kaido is particularly important for Katana
because the strategic differences are so massive
from how DeFi has been approached in the past.
I think the different mechanisms that exist
are different than many are familiar with.
I think the way that things play out together and opportunities that exist in the ecosystem are very different.
And so I actually think that like there is a absolute need to incentivize people to create
this content. And like one of the things that I'm hoping for is that people are like really focused
on like actually the differentiating factors and explaining them and people looking at them from different angles and why they care about them.
So an example of this would be like when we think of like the core apps, like the role there that they're playing is really a thing to deepen liquidity.
But one of the things that's been interesting to see over the last couple of weeks is the perspective that people have on the simplification that this
brings. I don't need to decide what decks I'm going to go to. I don't need to decide what
lending protocol I'm going to go to. I don't need to decide what decks aggregator I might go to.
I can just have my choice made for me. And so I think the opportunity to actually talk about like
all of those different things is actually a real value add to bring users to the chain for
the benefits that actually exist there rather than just like a lot of like bull posting. So
yeah, just another like perspective on kind of why I think Kaido is like good. And then the last
thing I'd say is that there's definitely stuff that we're working on in terms of tying Kaido maybe more closely into the Katana experience in some ways that I think could be fun.
And so this is kind of the 0.1 of Kaido and Katana together.
And I think there'll be more to come.
Awesome.
Thanks for that answer, Mark.
And sorry if we didn't get to your questions,
but join us for the next space.
I mean, we got a Kaito Twitter space tomorrow
and we've got the Sushi core app spotlight
Twitter space on Thursday.
I usually run a really, really tight ship
on these Twitter spaces.
So I'm kind of, you know, I'm a little,
I'm three minutes over right now.
So I'm breaking my record,
but this was such a great conversation that happened.
It was well, well worth it.
Dude, I ruin your timing every time I can.
It's okay.
You're welcome.
I think there's nothing I can do or say to you for that.
So joke there.
Okay.
Yeah.
Go pre-deposit.
Pre-deposits are live.
Turtle Club and Katana Crates
will have more prizes being added this week.
That's an alpha drop.
Join us next time, everyone.
Thanks for joining and stay sharp.
Talk to you next time. Bye, everyone. Thank you.
