Building Between Chains w/ twMatt (TapiocaDAO)

**Speaker A:** Over the last few months, the way I've been thinking about Ethereum has been changing. I used to think that the most important, the primary purpose of Ethereum was as a platform for credibly neutral, transparent, decentralized finance. And while I still believe that a new financial system built on a foundation of ETH will become the primary system at some point in the future, I'm becoming more and more convinced that the purpose of Ethereum is trustless computer and not trustless finance. Beginning with Last week's episode Strangewater 16 with 0xtoki, I began and will continue to be exploring, expanding and wrestling with these ideas. The most rewarding part of creating this show has been the privilege of volleying these concepts back and forth with people much smarter than me. And so I hope that you will enjoy the journey as we figure this all out together. So with that being said, let me introduce you to today's guest, TW Matt, Co Founder of Tapioca. Functionally, Tapioca is a simple borrow, lend stablecoin protocol. But what makes Tapioca special is that it is Omnichain. It does not call any one chain home base, rather it is native to all chains. This conversation is packed with so much. So here are a few things to listen for in how layer 0 works and how tapioca leverages layer 0 to be omnichain, how tapioca has customized the standard layer 0 configuration, and how this customization allows Tapioca to to augment on chain protocols with off chain computation. And if you're feeling really ambitious, make sure to keep ZK cryptography on your mind at all times. In particular, think about how a snark can be used to validate arbitrary computation without having to actually run the computation directly. One more thing before we begin, please do not take financial advice from this or any podcast. Ethereum will change the world one day, but you can easily lose all of your money between now and then. Alright, enough with the introduction. Let's bring on Matt. **Speaker B:** Matt, thank you so much for joining me on the Strange Water podcast. **Speaker C:** Oh thank you so much for having me. I'm happy to be here man. **Speaker B:** No, I'm super excited for this conversation because I think that, you know, what attracts me to Tapioca is like is, you know, this alignment with a lot of the new crypto thesis that like I have in my head. So super excited to get like really deep into it. But you know, I'm a huge believer in like the builders behind the projects and like the really only thing that matters is like the people and the stories that brought us here. So with that in mind, Matt, would you just like kind of introduce yourself and like tell us like what brought you to Ethereum and. Yeah, and outside the financial system. **Speaker C:** No, yeah, I mean a great, great way to start this off and I, I, you know, I, I feel like I don't get a chance enough to bring this up. So I, I like, like going back a little bit, but yeah, no, so for people don't know me, I'm Matt, I'm a co founder of Tapioca and basically to kind of go in my, in my history of, of how I kind of ended up in this crazy place. Basically I was a product manager for in, in a lot of gambling technology back like 2015 to 2017 and yeah, the company sold off and I was actually integrating crypto into, into the tech stack and so. **Speaker B:** Sorry to interrupt but when we're talking gambling, are we talking like. I remember that was, I think that was like the fanduel time. Is it that kind of gambling or is it like casino style gambling? Like what are we talking about? **Speaker C:** So specifically Sportsbook and, and like iGaming. So the company I work for is called Open Bet. So it basically was like a, an infrastructure where any like gambling outfit, again mostly like sportsbook gambling and more gaming style stuff, they could use the tech stack to build whatever they want on top of it. So like we didn't actually build the games like other companies would build the games on top of our stacks. Almost think like Unity engine for games and like you know, regular like video games. So like we were kind of like the Unity engine for like gambling type games, if that makes sense. **Speaker B:** Yeah, for sure, for sure. **Speaker C:** But, but yeah, no. So I mean basically I did that, you know, for quite a few years there and I was always super interested in crypto defy and just you know, this like I said, this kind of crazy space here. I mean back then I was heavy into like bit shares, you know, like Dan Larimer's old stuff and you know, all, all types of very wild and wacky experiments. And then yeah, actually bringing us to Ethereum when the Ethereum ICO happened and we started talking more about like smart contracts and things like that. That's when I got like super into everything and I really saw that where this space could go. But you know, I'm still working full time and everything like that. Um, so the company Open bet sold in 2018 and that's when I kind of, you know, I took a step back. I was really heavy into researching it and just, you know, being involved at it in, in kind of like a third party, you know, you know, kind of lurker type thing. And then yeah, when Covid hit and you know, we were all kind of at home, that's what I spent like all of my time on was just kind of, you know, involving myself in the Ethereum ecosystem. Defi. Everything. And yeah, I mean, basically when late 2021 was like, was when I was like, I got what I think is a great idea and I started meeting some developers and I was like, let's, let's do this. And then here I am. **Speaker B:** Yeah. Awesome. And so like, you know, it's like totally makes sense that you're at this gambling place. Like gambling and crypto is like a very perfect fit just because of like, you know, whatever, we don't need to talk about that. But like, it's one thing to like be there and integrating it and thinking about like, okay, how do we use this technology to achieve a goal and another to like, like hear the call of the world computer or I guess at that time of you know, like Satoshi's vision or just to be like hyperbolic about it. Right. But like to hear the call and like to understand that like this isn't, this is something like, you know, big and worth like dedicating a career to. And like, you know, I guess my two part question is like, why did you feel like, what about you allowed you to hear the call? And number two, like when did that happen in this journey? **Speaker C:** I think, I think really what drew me to Ethereum was and just kind of like you said, like this, you know, financial computer of the, of the world, you know, that we're, you know, that we're all kind of collectively building it. It really is just the, the fact of, you know, I, I love the idea of a public ledger that is transparent, that we can hold each other accountable. You know, obviously all of this started from, you know, banking collapses in 2008 and you know, here we are, you know, a decade later, kind of in the same boat. And I think, you know, and, and really it like crypto obviously, like back when, you know, I was getting involved was, was gambling. I mean, 2017, 2018, you had the ICO craze and everything like that. But I really did see more to it. Like I, I saw that there was a lot more that we could potentially do with this to make the world a better place, you know, and really, you know, just put, you know, finance I think is kind of like the base layer of, of like society. And I think putting that onto a public, transparent ledger is a really powerful concept. And I, I think we've already started moving way past just, you know, degenerate gambling and we're finally now seeing some fruits of building things that are a lot bigger than us, like, just to name a few, like, lens and you know, just, you know, all these, you know, base layer applications like Uniswap, aave, you know, there's a, there's a lot. You know, it. We really have built like an alternative financial system. And just seeing it mature is incredible in of itself. **Speaker B:** Yeah, well, there's a lot to pick apart there and a lot of it I think that we'll get to throughout this conversation. But just to queue off that insight that you had. Finance is the base layer of society. Like, I, I have come to that same conclusion in kind of like a different way, but you know, like through, you know, for another time, we can talk about like the book and like the why. Like, my views are like, deeply rooted in and like how I understand history. But like, I too believe that like, finance is like the base layer of society. And like, particularly that is because that like, what Money is in 2023 and has been for, you know, hundreds of years now is like how we as a society represent like energy and like, exactly, exactly. Like, it's how we coordinate, like, what's important and how we change the world. And like the despots who have control of it like, really shape the world. And so, yeah, I, you know, I can go off on this thing. Like, I really believe that like, money being like energy means like money has, is like gravity and like, the more that it accumulates, the more it draws like, more and more money. And like, you know, that's why, like, having this like, credibly neutral base layer that is like Ethereum is, you know, so, so powerful. But like, you really need to be down the rabbit hole to like, to even be like, grappling with this conversation. **Speaker C:** No, but I, I, I think, I think it couldn't be more true though. And I mean, like, it's like, you know, you're, you know, when you're like, if you, if we zoom back to like a 2008 or even like right now, what's going on where, you know, people are putting their, their time and effort in to make money, you know, US Dollars or whatever country they live in, and then those dollars are held by banks that are collapsing or failing or misusing their money and everything like that and it's not just theft of the person's dollars, it's. It's a theft of their time and energy, like you just said. And, and why, I think, you know, Ethereum really changes that. And, and this whole system we built is just because, again, you know, like we both said, you know, it's a credibly neutral, you know, public ledger that's transparent, that we can all kind of look at one another and know that everything's an equal playing field. And what you put in is exactly what you should get out, you know, because it, you know, we were able to, you know, audit that at any time. So I think it's. I think it's a lot bigger than what anyone. Like, I think once you realize that, you realize the magnitude of what this can be, and I think that's when you get that spark of excitement to build on it. **Speaker B:** Yeah, well, I think one of, like, the conclusions I've come to in having this podcast is to be clear, I've only really been speaking with Westerners, but like, the conclusion, conclusion I've come to is that, like, that is such a first world and like, American and probably like, Western European privilege to just, like, have to realize the power of like, credible neutrality and like, uncensorability and like, you know, we can talk about like, the things that are going on in South America with like, inflation, like, especially Venezuela, we can talk about how, like, for like 60 years, in my opinion. And like, I've actually been to Iran. Like, so in my opinion, like, it just doesn't make sense. The, like, the economic war we've been waging on them. And like, the people there love us and it's just like, it's so stupid. And then like, for me, like, the, like, you know, my fiance is Russian and so, like, I have like, her whole family still lives in Moscow. And so, you know, I've been experiencing like, these, like, what it's like to be on the receiving end of sanctions, like, as a civilian for, for like, you know, whatever, a year and a half now. And so I just, I think like, in America we come to this from like, tech and from like, gambling or from like, asset whatever, whatever. But, you know, I think one of, like, just the things that I try to do to stay humble is like, to remember that, like, our grand realization, like, that the world computer is. The world computer is kind of like table stakes for, like, most of the people on this planet. **Speaker C:** Yeah, no, I mean, it couldn't be more true as far as it, you know, definitely. I'm coming at it from a. Obviously from a Western perspective, but if you, if you put, you know, this concept into Zimbabwe or Cuba or, you know, different places like that, now you have, like, revolution, actual revolutionary stuff that can honestly change the planet to be so much better. It's, it's just, it's a really broad concept. But I, I think, like I said, the more people who kind of delve down this rabbit hole and see this will then start to understand what this is all really about. And it's, you know, it's not about building stupid meme coins and stuff like that. There is a lot more to Ethereum than meets the eye. And, you know, the blockchain in general. **Speaker B:** Yeah. And, like, we do have problems. Like, the reality is, is, like, because of the economic incentives, like, when people say, like, the majority of crypto is like, scams and Ponzi is, like, it's actually true. **Speaker C:** Yeah, I agree. Yeah. **Speaker B:** And so I, I don't know what to say. I mean, like, honestly, I'm, like, very sympathetic with, like, whatever the, like, current, like, democratic, like, administration is that, like, this is, like, anarchy. And like, we really need to, like, figure out what's going on here because, like, man, like SBF, like the 3ac, like, I mean, even like Gemini and Genesis and like, everything, man, it's a Celsius. **Speaker C:** Well, and, you know, touching on that, I actually just was having a discussion about this funny enough, and someone was saying, like, to me, who, you know, it's always tough when, when people who aren't, like, inside the game and they'll meet me in real life and they'll go, oh, you're in crypto. Like, that's all scams and stuff. And, you know, they'll bring up, you know, those characters. And to me, I, I always kind of. And, and I may be wrong in this analysis, but nonetheless, I'll say it anyway. I think if you would have, if you remove crypto out of the. Out of the equation, an SVF or 3AC, they would have existed in. In, you know, in the regular, you know, traditional finance world. And I think they would have been able to carry on a lot longer and hurt a lot more people, because there's no way to, you know, like, until they would be audited or something, like, they could go on for infinity. Honestly, like, and I think the blockchain allowed us to stop those people to a certain degree and, and call that off. But I think, I think you're always going to have that. Like, in any financial system, you're always going to have scammers and you're always going to have bad people. And I definitely think it's true that a majority of crypto is scams and bad people, but I think it's. I think there's enough good that you can't say, throw away at all just based off, you know, X, Y or Z. Like, I think there's enough good in it to, to not, you know, just, you know, kind of discount the whole thing, obviously. **Speaker B:** Yeah, I mean, look, like my, My fundamental thesis of, like, Ethereum and like, how I've, like, oriented my life around is that, like, it doesn't really matter if it's good or bad. It doesn't really matter if people. People think it's good or bad. Like, Ethereum is inevitable. And like, the, the thing that really just like, cemented that in my head was, like, what happened with Russia when the war started? And like, look, I have, like, Ukraine's a victim. Like, it. Things are like, the world's crazy, like, but it's like, civilians are not involved in any of this stuff. And just like, to see the actual impact is like, the people are like, because Ethereum is an option, because Bitcoin's an option, people are going to opt into it, like, both at the, like, individual level and at the government level when, like, they're cut off from the Western system or when they realize, like, the Western system isn't neutral at all. And so I think, like, it's inevitable and like, I, you know, I'm here to like, like, contribute to that and like, shape that and. **Speaker C:** Yeah, I was just gonna say you, you know, I think it's really true with like, the Russia situation or anything. You know, you, you do have to remember there's a lot more innocent people that did nothing to deserve any of this and that are suffering. Like, the people are in Ukraine or vice versa. Maybe not as bad. I mean, it's not an Olympic race of who's, of who's doing worse, but I, I think it's nonetheless, you know, everyone deserves the ability to have the ability to transact with one another. And, you know, it's great that Ethereum is able to be there as a mechanism to allow those people to continue to transact and still have some way of, of, you know, kind of being above board, so to speak, in, In a. In a way to, you know, facilitate transactions with one another and families across the world and things like that. **Speaker B:** Yeah, I mean, I look at it in two ways, right? Like, the Russia story is, like, perfect for me. In two ways. Like one is at the individual level. And like today I keep a major, like a major portion of my net worth on chain, like specifically in mind, like how crazy our country is and like that things could go really like, bad and that like I wouldn't mind need to flee the country and like could like walk away with like my net worth, you know, with on like a piece of paper in my pocket or whatever. And like that is informed by like what's happening in Russia right now and watching my like, in laws go through it. And I think like the other side too is like, on the government side is like you Russia is like a like global pillar or, sorry, it's a pillar of the global economy. You can't just like, cut them out, you know, like, you can't just like, wish away 100 million people and like, they are gonna like, look for alternatives. And so again, I just like, I, I, what I say all the time is like, I really believe it's possible that like our government does something stupid like make like even like holding Ethereum illegal in the US and like all I have to say to that is like, I'll see you guys in Dubai or Singapore because like in 10 years, I'm like 1 billion percent sure they're gonna undo that mistake. But like much to the chagrin of the American people, much to like the detriment of the American people. And like, man, I'm not, I'm not, I'm not falling for that. **Speaker C:** Yeah, no, and you, and you already see that happening to some degree with all the, all the lawsuits that are going on, stuff like that. And I think it's a major problem that the United States hasn't allowed. Like, I, I, it's just, it just kind of bewilders me that, and I guess it doesn't at the same time, but at a political level that the United States doesn't see what this technology offers. It just creates a, you know, some type of framework that is, you know, workable for, you know, the United States to participate in it that, you know, you don't see all of like, kind of, you know, crypto people just moving to those countries, like Singapore, you know, wherever, Dubai or whatever. You know, it's just, but nonetheless, just, just one of those things. **Speaker B:** Yeah. Anyway, well, that's the place of all this in the world. Let's bring it back to stuff that's actually manageable or at least affectable. But anyway, why don't you just fast forward us through Covid hits. You've realized that Ethereum has really interesting stuff going on. Take us from that moment to basically the start of Tapioca or I guess where we are today. Yeah, how do we get from here to there? **Speaker C:** Yeah, no, and this is the good part of the story, I promise. So basically, you know, when you know, obviously 2020 hits, you know, euphoria hits on, on crypto, you know, halfway through the year or whatever, and what we saw pretty quickly was, you know, Ethereum gas fees get really high, things like that. You know, BNB chain launches. A lot of retail users move from Ethereum to BNB chain to kind of still be able to transact. And since then we've seen like more and more layer ones pop up and then also scaling, like layer two scaling solutions, you know, optimistic roll ups. Now there's like, you know, all the zero knowledge roll ups have popped up. So what I kind of fundamentally saw was, and, and everyone else did was, you know, number one, it's hard to move your money between these different networks, you know, number two, you're, you're fractured anyway between all these networks and the problem has become worse and worse. As far as now there's hundreds of chains. And also the other thing as well is the bridges that allowed us to move between those chains have all been exploited, hacked, you know, are very slow, are costly, etc. Etc. So basically as we kind of went through that whole, you know, exodus to BNB chain, then we saw the scaling solutions and different L1s pop up. That's when I got the fundamental idea for Tapioca. As far as, you know, a, we need a way to kind of move from a, you know, at a user level. I have kind of a thesis that users should be more interacting at an app level instead of a chain level. Meaning like, you know, you're just utilizing the assets that you have and you don't even know if you're using Ethereum or what chain you're on. You're just interacting with your assets. And that really makes the UX a lot better for an end user that they're not having to bridge, swap, deposit and then bridge swap, you know, like all these multiple functions and also just having to interact with a wallet which already has enough stop gaps for people to get involved. And I kind of looked at like, okay, well what is the base kind of principle of what defy is? And that's generally gaining yield on assets. So that's where I kind of came up with the core fundamental idea that to move D5 forward, what would be most appropriate would Be a lend borrow market that is cross chain compatible and that can, you know, people can transact with their assets on any chain and be able to gain yields on them. And that's basically where like I said, where Tapioca kind of first blossomed. And yeah, and that's, you know, basically after that I met the guys at Layer zero and we started building on Layer zero. We were one of the first protocols to do so. And yeah, and I've basically since then been championing, you know, that we need to kind of like I said, move users to more of an app level, you know, in interaction and also move things to composability that users can don't need to, you know, bridge around and have all these headaches of how to interact with their assets. **Speaker B:** Yeah, no, for sure. I mean I again I've come to like the same conclusion but in a different angle, which is like I very, very much believe that Ethereum again like part of my inevitable Ethereum thesis is that it is just like the next stage of development of the Internet, right? It's the property layer of the Internet, the Internet native property layer. And I think that like if you like can buy into that analogy or even if you can't, like if you just understand how the Internet works, it's like you and I right now are exchanging like literally billions of TPS packet or like UDP packets like back and forth and then like that is going through like all these different protocol layers with like SSL and then like you know like video like codecs and like all this stuff. But like how do we experience this? Like I sent you a link and then I hit record and like now we're talking, you know, and I like, I really, really believe that like I say all these things twice. Like I really, really believe that Ethereum will be like HTTP one day. Where like Yahweh kind of like vaguely understand it as like eth. These letters mean something and like they'll be there. But all of the stuff that like we are messing around with today, private keys, bridges, like layer zero, any of this stuff, like the whole point of technology is to abstract it away to create like experiences and magic for people. **Speaker C:** Yeah, and to add on that too. A lot of people when they first find out Tapioca's cross chain, they start talking to me. They generally think like I'm going to be a big supporter of a lot of the all L1s and I'm actually not. But I think you know, with scaling solutions, with Ethereum, like optimism, arbitrum you know, sidechain stuff like that. I think we're going to see more and more of them. For more specialized things like you're talking about like, you know, there's udp, ssl, HTTP, you know, like basically that blockchains would act like that, like different, different kind of translation layers almost and different execution execution layers as far as different layer twos and things like that. And I think the only kind of real push forward we've seen to kind of abstracting all that stuff away is like uni swap with their mobile application. Like a user just has their mobile app, it's a wallet and they can swap between two assets and that and that's it. It's a very simple, it's a very simple use case to, to move things forward. But I think that's where things need to go and not users, you know, figuring out what's layer 0 and what's axel are and what's cosmos and what does this do and this do. I think it's really just like an application that sits in front of you. Just like you sent that link to me. Like, you know, Tapioca just being an application, there's you know, any asset that you have in your wallet, there's the yields you can get on it, that's it. And there's no, you know, all these, all these kind of minutias involved as far as like, you know, bridging or you know, swapping between two different assets or you know, needing to move between multiple wallets or something like that. And I still think we got a lot of things to go there, especially in like account abstraction and just making the wallet UX better and things like that. But I think we're slowly but surely getting there to abstracting all this stuff away and just having an app just like from the app store that the user opens up and then they can immediately use it without you know, going through all this other stuff. **Speaker B:** Yeah. So I guess just to put this bluntly, right like my. I think like what it basically comes down to for me is like understanding why Tapioca is like this vision can, can happen is like you have to have this like unshakable faith that layer zero is, is providing this infrastructure that allows you to like credibly call yourself existing like between chains or like chain agnostic or however you phrase it. So can you talk a little bit about like one, if you take. Take issue with any way I just phrase that. But to like like before we like really talk about like the interesting things that are going on at the application layer. Like why I think everyone who's, who is heard from me or is listening to this podcast can agree that it makes sense to build on Ethereum. That's the credibility neutral thing. That's why we're here. But why does Layer zero move, if not up to that level, right below it for you? **Speaker C:** I totally agree with what you just said. And the reason why is I think the problem with Bridges is in general is just the fact that they're shared security models where everyone's kind of building on the, this, the same, you know, the, the same monolithic security. And that security is generally really weak. And you know, you're, you're like we just saw with the multi chain hacker. Even if we go back to like Wormhole or Nomad or any of those know they all kind of were exploited in the same regard. And why I got so excited with Layer zero and why we set out to build this was that Layer zero is a lot more like Ethereum in that we can define our own. You know, everything's isolated to the app level. So it's just kind of like the app defines its security model, it defines its configuration. Everything is customizable, just like smart contracts are on Ethereum. So it makes, it makes Layer zero a lot more just like a simple generalized messaging infrastructure than being like a, you know, this, this monolithic, you know, provider that you need to build a top to offer these different functionalities, usually at the cost of centralization and you know, obviously security issues. So I mean the, the, the great thing is even at the, even at the infrastructure level of like node providers and things like that, we're able to isolate it completely to Tapioca and basically use nothing of layer zeros besides like their endpoints, which are kind of like mailboxes on each chain. And the great thing with layer zero is, is those are immutable. So basically we don't have to worry about like those being modified or, or changed or anything like that. So I think it gets pretty damn close to being a fully immutable way to send messages between these different blockchains and scaling solutions and really offer users at the app level a way to just transact without even knowing what chain they're using. **Speaker B:** So is the idea here that not necessarily that you are eliminating all of the risks associated with bridging like at a certain level? Right. Like there has to be pooled USDC that is like the collateral that people deposited on some chain somewhere that like could be a honeypot. Right. But like the idea is that like because of how layer zero works you're able to like internalize that and configure it to like Tapioca standards and therefore like you know, basically layer zero is just providing like templates for you. **Speaker C:** So pretty close. So basically layer zero doesn't pool anything. How it actually works is, is there's a, there's, it's basically like a two party consent config. So basically how it works is if say you want to send a message from Ethereum to like optimism, what actually happens is, is the user sends a message to their endpoint which is immutable and that message is picked up by a relayer which layer 0 allows for you to build your own relayers. Like we have pearl layer and then there's the default layer 0 relayer. So that relayer pulls it, generates a proof and then that proof is basically matched up to an Oracle's proof which you can use any Oracle you want. With us we use chain links. So basically that proof that our relayer generates has to be matched by chain links proof and then once those two proofs are confirmed basically then the message is executed and then the on chain, whatever the on chain operation is is actually executed. So by what that, by that kind of configuration for something to basically go wrong or an exploit to occur or something like that. What would have to occur is, is a relayer would have to re layer would have to generate a fraudulent proof and then the Oracle and again in our case chain link would have to confirm that fraudulent, that fraudulent proof. So in, in that case being a block header so basically those that allows for a lot of security and that it's very tough to you know, obviously have two parties agree on something that's fraudulent kind of like you know how Ethereum's consensus is derived or any, anything else. And basically the other thing as well that layer zero does, that's really cool is it's called pre crime and what basically it does is is it runs that message on a local blockchain off chain and if that, if that message operation results in breaking any of our rules, like you know, you can't take more liquidity out than you put in or different rules like that, then the message will fail out even if the Oracle and relayer confirm it. So there's a lot more modularity, customizability and more a better security model than like oh here's our multi sig and you know we have a relayer that you know it's just a one party consent and then you Know, whoops, multi chain, we lost the, we lost the private keys. Now anybody can do whatever they want, you know, with that two party consent configuration. **Speaker B:** So yeah, so okay, let me, let me try to sum this up and tell me, you tell me if I've got this. But so the idea with Layer 0 is that they're providing like really like if you want to use layer zero, bare bones, all they're providing is like endpoints on every single chain or at least their support teams or whatever. And what these endpoints do is they confirm that the proof from chainlink. And when we say proof from chainlink, what we're saying is we're just confirming the block and the Ethereum block header, right? Yeah, okay, we're confirming the block header from chainlink with the block header that came from the trusted relayer. And we need to confirm this block header because in that block is an instruction that needs to be replicated on the destination chain. Is that right? **Speaker C:** So far? **Speaker B:** Okay. And so like out of the box you have the option to use the layer 0 like centralized trusted like relay network, which like could just be one node on AWS or they could set it up like a blockchain and like hint, hint, that's probably where like the layer 0 token is going to come into play. **Speaker C:** Is that right? Yeah, yeah. And just to point out one thing real quick too, so if, if people know of like the L2 Beats article where, where they were like, you know, layer zero isolated security is no security. What they were pointing out is that every layer 0 application right now uses the default configuration. So it's defaulting to L Layer 0's Relayer and Layer 0's Oracle. So in that case it's two parties, but both parties are owned by the same entity. And that's where you have a centralization question with it because of course it's a 3 of 5 multi sig. I believe I may be wrong on the size, but it's a multi sig that layer 0 controls on their relayer and on their Oracle. And that's why L2Boots was pointing out like this is hyper centralized and this, this could be, this could be knocked down at any second, you know, because it's just, you know, two multi sigs with the same people that are agreeing on the same thing. And that's why Tapioca is actually the first protocol that's not using the layer 0 relayer and that's not using the layer 0 oracle and we're not using the default configuration. So that'll kind of be the first time layer 0 is being shown of what it actually can do as far as isolating all this stuff down, allowing applications to customize it and change it and maximize the decentralization as far as you can anyway to perform like something as complex as messaging between two blockchains that are don't normally know how to talk to one another. Got it. **Speaker B:** And so obviously like the reason that everyone except for Tapioca is configured like the default way is because like to make both each change incurs a new cost. Right. Like I'm sure you guys, I don't know if you can disclose this or not. I forget how like chainlink works but like I'm sure you guys are paying in some way chainlink to access that header data. And then on the other side like if you're running your own nodes like that's like I mean I wrote an Ethereum nodes like it's a real cost whether like you're running physical computers or cloud servers or whatever. And so yeah what you're saying is that Tapioca is making the like expensive but like forward thinking choice to say that like we just like want to use the endpoints and like we could probably be like decentralized and safe by just changing one of those things like just the chain link Oracle or just the node network. But like we're, we're going maxi on this and by the way hint hint like if there's room for a network that sounds like room for a token. **Speaker C:** Well, well yeah. So b. So basically you're, you're dead on that you could just change the Oracle and then you could say okay these are now two totally different parties and you could make an argument that that's decentralized and I probably agree with you also you can, you can immutably set the messaging libraries that are used. So like even if, and all of the messaging libraries are perpetual so that you know, if you, if you define them then they'll be in service forever and then you can just have them forever. And that's, and that's what we did. So we went like full on you know to do this like at the scale it should be done as far as basically you know how I think layer 0 look at it as is smaller applications that don't want to you know go through all of that because you are right it's costly like our AWS and then our Google Cloud stuff. It's all expensive of course and then paying chain link, you know, is expensive too. So smaller applications could actually piggyback off of our, off of our Relayer and bigger applications like us can define our own. So it, it allows for that, that scale of like if you're just a smaller application and you know you want to use this type of functionality, you could just point to the default configure hours and then for bigger stuff, you know, you can do what we're doing where we're going full you know, full custom, full purist on trying to get as far decentralized as you can. **Speaker B:** Yeah. And by being the first relayer network, like if you guys release a token then you can like tell new projects like hey, instead of paying layer 0 their LZO token to do their relay network, you can pay in tap tokens. But you don't have to answer that. **Speaker C:** Yeah, no, I mean there's something there. Yeah. I've already hinted a few places. Yeah that we will be allowing other protocols to use RE layer in Oracle and there will maybe be a fee structure that uses our token. But yeah. **Speaker B:** Cool. And so final thing and then we can kind of move up to the application layer. But when you send USDC to let's say like the Ethereum layer 0 endpoint, do all. Is that USDC pooled with like Stargate's USDC with all USDC or do like I'm wondering is. I call this like the Sam Kazemian the method of like uncensorability. But like I'm I'm wondering just like how you know your exposure to centralized assets is like mitigated through this construction. **Speaker C:** Yeah. So this is really big as far as this is why we built built a stable coin. We have USDO which is Omni chain USD and what's special about it besides it being a pure decentralized stable coin? It's only backed with gas tokens and liquid staking derivatives. No USCC backing or anything like that. Is it is a native oft which is an Omni chain fungible token. And that super standard allows people to teleport USDO chain to chain with no fee instantaneously. So you could, you could say okay, I want my USDO that's on Arbitrum, I want to put it on Ethereum that basically it'll burn on Arbitrum and that the burn, the proof of the burn will will be, you know, grabbed by the relayer in the article. And once that proof has been taken that the tokens have been burned then basically the relayer tells the endpoint which tells the relayer on Ethereum to mint the the applicable amount of USDO on that chain. So it basically allows for a lot of composability that you know, we have our own relay and Oracle setup and we're able to have a truly decentralized stablecoin that also can act as a base layer of value in that it's a stable coin that can, you know, mint and burn any chain and you don't have to use any bridges whatsoever to do it. Stargate works differently in that there is a pool of USDC on like Ethereum and Arbitrum and then basically when you do it, when you, when you transfer using Stargate, you deposit your USDC into the pool on Arbitrum and then it basically unlocks the respective amount of USDC on Ethereum to then be withdrawn by your wallet. So that does incur like you have pools on both sides like a normal bi directional bridge would have. And, and that's basically what we're trying to abstract away from with Tapioca is that all of our assets are ofts so that we're able to have that Mint and Burn functionality with all of them. **Speaker B:** Yeah. So. Okay, so yeah man, like I, I wish we had like six episodes or maybe we can do. But okay, so first like let's, let's like really pick apart why you can like mint and burn. What's it called? Us. Sorry, what is it called? **Speaker C:** Usdo. **Speaker B:** Usdo. But it's like a zero, right? It's not a O. **Speaker C:** So we did that at first that we did USD 0, but then we dropped it for an O just because it, it gets a little annoying on like Twitter and stuff like that. You can't have a number in the cash tag. So we, we just dropped it. We did USD. **Speaker B:** Never forget all you finance bros and computer science nerds. Branding is important. So anyway, it is so like let's like the reason that you can basically mint and burn. Sorry, the reason that you can transfer it instantly and for free is like because it. All this like computation and checking is happening through your relay network, right? And like you, you are like picking up the bill and like probably in perpetuity for like your, you know, homemade applications. Like you will pick up the bill and, and like, and, and then the computation can be super fast because like you don't need to be as like decentralized and as just like methodical and like you know, accessible to Raspberry PIs or whatever as Ethereum. And so like first of all like the, the reason why this is happening essentially is because you are offloading like all the computation into like basically this new like tapioca computational network that is using like layer 0 just as templates or piping or whatever. **Speaker C:** Yeah, and I mean that's, that's basically 100% accurate. Now we will allow for anyone to operate a node on and be an infrastructure provider on our, on our network. And that's going to have on our, not on our network per se, but you know, our Relayer network. I always like to say that because then people think we're, we're building like an L1 or something but, but so anyone could jump in on that. But basically with the Mint and Burn, how it works specifically on the, on the fee side of things again, not that there is one but basically gas cost wise, what actually happens is, is when you pay for the gas to do it from let's say again Arbitrum to Ethereum, what actually happens is, is you pay gas on both sides up front on Arbitrum and basically your gas will be air dropped to Ethereum. So basically you know, again if you're going that direction you, you, you know, you pay your gas on Arbitrum the relayer grabs the gas, brings it to Ethereum and then pays it on that side as well. So that's the only, you know, the only thing that you're basically paying is just normal gas on both networks. But it is both networks. It's not just Arbitrum. But yeah. And then basically a Mint and burn in actual time to confirm it and everything like that that we've tested, it's about 20 seconds total. So it's, it's pretty, you know, basically block time of both the networks combined. And you're all done. You're right there. **Speaker B:** Yeah. 20 to 30 seconds is essentially double Ethereum's block time. So. Yeah, exactly. There we go. Ethereum is always going to be the slow one. Like fun fact, but anyway, so okay, as I mentioned before we started recording like I think that the like defi. Part of this is the least interesting. So like I'm going to ask this question and like just why don't you give like the, the you know like the official answer and then like let's get back to the computation. But it sounds like the whole, this whole thing is basically premised on the idea that like you can put your native tokens or like your lsds which we're treating like native tokens. You can put it on each like source chain and then mint USDO on a destination chain and like the big like what if there or like the big like important piece there is that you need to be able to like sell your USDO or, or maybe use it for more borrowing and lending or something. But USDO needs to be supported and integrated and have like deep liquidity on like really every destination chain. So like how do you think about that? What's the strategy for that? **Speaker C:** Yes, so that gets into a, a long can of worms. But basically we threw out the entire incentive model of a common DEFI protocol with like liquidity mining pool 2 stuff. What we've done is, is we've created an incentive structure that we call DSO or DOW share options. What that does is basically it's call option incentives. And why we went for call options is because every time they're redeemed, we create liquidity from that redemption and then that liquidity's protocol owned liquidity or pol. And then basically we can deploy that POL into being permanent LP for USDO on any chain we want. So that allows us to really build up a lot of liquidity on all these chains so that we can facilitate really seamless trading of USDL on all these, you know, many, many different networks. **Speaker B:** So the idea is basically build up POL so that you can project it onto like the networks that you know, that your users care about and then a combination of that plus like strategic assets like, you know, you didn't say this. I don't know if this is true. This is a question like CRV and CVX and like those kinds of assets. **Speaker C:** So we're primarily targeting Uni V3 with Arrakis. But it's something probably we'll look, we'll look at, you know, as, as we grow and everything like that, of going, going for Curve and everything like that. But basically one of my, one of my thesises was with, with Curve was just that the fact that we looked at, we get a lot better swap execution on uni v3. We get a lot more, we get a lot more for our dollar with LP just because, you know, when you're doing dollar dollar pegged, you know, concentrated uni v3 positions, it's basically like taking out a ton of leverage on the peg. So you know, if we put down a million dollars in LP on uni V3 that's pegged at a dollar, we can facilitate really large trades versus with curve. And you know, we have like, if we have, you know, you could move the A factor up really high and everything like that and it sort of goes to the same concept. But Uni V3 allows you to really go, you know, balls to the walls on it and really push the, push the, you know, the utilization of the liquidity really high just because we're looking at supporting dozens of networks. So we really need to have the ability to facilitate trades, you know, as you're pointing out, on all these different chains and even big ones and things like that. So. **Speaker B:** Yeah, man, I totally hear you. And I think that like one of like the interesting insights about doing what you're doing is that like you always know how much USDO is going to be minted on each chain and therefore like you know exactly how much liquidity you need to provide. And so like, you can be really aggressive with leverage because you like can basically say like, okay, we know we're super leveraged. We know if we go off peg, then like immediately we're going to be wiped out, but we're just going to make sure there's enough liquidity based on like the amount of outstanding USDO that like we can't get wiped out. **Speaker C:** Exactly, Exactly. Yep. Yep. **Speaker B:** Yeah. Cool. All right, so again, I, I like, the reason that I'm so like interested in like in what Tapioca is building and like living between chains and stuff is because like I really, I. The thesis that like I am developing and like becoming more and more convinced of is that like, like we understand the NFT craze as like something that was like pretty crazy and like yes, like crypto prunks will probably have staying power, like maybe even bored apes. And like NFT technology like matters for sure. But like the, the things that we saw, like I think we can all recognize that like great for gambling, like it'll come in future waves but like it wasn't like what crypto is for, you know. And I, I am like becoming more and more convinced that like the defi that we like know and love today is like the same thing. It's just like the same thing for us, like finance Bros. Instead of for like the Art Bros. Or the Internet Bros. Or whatever, right? And like, I think like, look like my background I came from, you know, I used to do corporate finance for Anheuser Busch. Like I was in charge of like $20 billion a year as like my job to just like get money from like our bank accounts in New York to our bank accounts in Belgium to Brazil. Like that was just my job. And like a huge reason that I believe in Ethereum is just because like you ever tried wiring a billion dollars, like, it sucks man, it doesn't work. And like, like Ethereum is just better, you know? And, and, you know, like, uniswap. Like, I believe in, right? Aave, Like I believe in, but I believe in them as like, technology primitives that like, I fully expect J.P. morgan to like, fork and then like, put all of, like, the Western capital of the world in their own proprietary version. And like, the things that we know and love today, like, might be swept aside. And so I, Yeah, and so, like, I, like, I'm becoming more and more convinced that like, to be, to be focused on, like, the things that were really exciting last year as, like, where the energy is going to be in the next bull cycle, like, just once the money's ready, is just like a misunderstanding of like, what Ethereum's for, you know, and so, like, which brings me to like, my thesis and like, what I think you've already, like, inherently understood is that like, Ethereum is about, like, computation, you know, and it's about like, providing this credibly neutral platform that gives us the ability to express identity and immutability and transparency and all this stuff. But what we're going to figure out is how to project more and more computation into the extremely limited evm. And so I think that's exactly what layer is, sorry, layer zero allows. And like, that's exactly what you're doing with both, like, the Tapioca application, but more specifically the Tapioca relay network. And so I'll pause there, take a breath and like, just. Do you have any thoughts or any response to all that? **Speaker C:** No, yeah, I, I told. I mean, I was gonna say, basically, I, I think when people say, like, oh, we have all these D5 primitives and they'll never go anywhere, and it's so patently absurd. Like, it's, it's such an immature space and we're still kind of learning to walk, so to speak. And you know, Ethereum at the development level is all about experimentation and pushing things forward. And I, I think we've, we saw a little bit of it as, as we went through, you know, 2020 to now, but I still think we're at, like, we're at like the, the really fledgling beginning of it. That, you know, there's no, there's no like, moat of, of anything right now. There's, there's, you know, popular applications that people use right now, but they could change in a month. Like, you know, people could release something that is a hundred times better that people adopt. Or like you were saying, like a J.P. morgan could, you know, make a Uni Swap competitor and have instant adoption tomorrow. You know, it at the end of the day though, it's all. Anything that brings more people to the Ethereum playground, so to speak, is, Is great to me. I mean, I think the whole point of being a developer is to get more people to adopt the, the concept of what this space is and get involved in it. And I think that's something that crypto has succeeded at is, you know. You know, if you look at it from like a user conversion ratio of like someone touching crypto for the first time, do they continue using it? I think a lot of people become really passionate people that stay around long term and it's just really about finding more and more of those people and onboarding more and more of the world into, you know, Ethereum. And I think that's already slowly happening, you know, as the days go on that we're, you know, we're finding more and more adoption but, but we're still at the beginning, you know. **Speaker B:** Yeah, yeah. I mean, you know, with, with every like, good builder that comes in, we also get like, more doans and SPFs and like, it is what it is. But I like again, focusing on like this idea of like, what's next is about computation. Like, like Tafioka, like, you know, what you're doing is like taking the primitives that we learned from last cycle, right? Like borrowing and lending and stablecoins essentially. Right. And, and I guess Uniswap V3, like you're. That's like a core part of your strategy, right? **Speaker C:** And. **Speaker B:** But like, when I hear about what you're building and now after speaking with you for, you know, almost an hour, like really understanding how you're building it, like the real product here is the relay network. And like, I think like, what you'll find is that like, yes, as like you bootstrap users and TVL and like interest through, you know, just like the primitives that we are all comfortable with today, I think you'll find more and more that like, what's interesting is like the ability of this like relay network to like reach in and out of these like, you know, everything from like the perfect pristine, like trustless EVM into other environments and like, you know, project like much more complicated stuff. And I think like earlier you made a comment like, we're not like trying to create an L1, but like, you know, the more I think about it, like, the more it's like there we shouldn't like the Ethereum is the backbone. Like Ethereum is the pristine, like the perfect, like nobody can like fuck with it. Like that's the point of it. But like everything after that, like I just like what's the distinction between like an L1 and a like relay network? Especially if you like consider like money and like information to be like analogous. Just like E equals MC squared, you know. **Speaker C:** Yeah, no, there's definitely a strong similarity in what, in how the models are and, and also the, the longer we built Tapioca, the more I've kind of put a lot more importance on you know, the stable coin side of things as far as I, I think it's really important to have like that 2019 die that is a true like decentralized medium of exchange. I definitely think Ethereum works as that as well of course. But just basically saying you know, for people, you know, people still want dollar denominated assets to, to a certain degree like a stable dollar denominated asset. And one of the things I really hate is all the people that are trying to push D5 more into like a, a C D5 type thing where it's like oh, let's bring T bills on chain and let's you know, do this and this. Like I really, one of the things with Tapioca is kind of saying no to that and pushing things back to being more on the decentralized side of things and, and more along the core tenets of what D5 is supposed to be as far as a decentralized financial layer. And I, I, I think that's important in of itself. But I definitely agree the, the, you know, the relayer side of things will unlock a lot of potential value in moving between all these chains as we, we see more and more especially layer twos. Um, I'm really excited about all the new layer two scaling solutions that are coming out and you know, and just being able to transact between them easily I think is extremely important. So. **Speaker B:** Yeah, well, I mean I think like I, I don't ever want to like tell you like you shouldn't be thinking about like the things you're building today and like not here to tell you that like the stablecoin is going to become irrelevant. Like if anything I think you'll find like as the, and again I'm just talking out of my ass here, what do I know? But they'll find like as the stablecoin like grows and you have like more and more like TVL and all these different chains, like your customers will be saying like okay, like it's cool that you know, I can just like take out the USDC on this chain but like you know, why, why don't you like build a product for me that like automatically invests it and then the question is going to become like, why, you know, why do it within the evm, which is like incredibly expensive and slow and like all these things when you can do it in this relay network? **Speaker C:** Well, I will say we already got that. We are, we already do got that. We have Bento Vox V2 we built, which what, what it does is basically apply USCO or actually other assets as well to Omni chain yield strategy. So basically your liquidity can be accessed active and utilized on multiple chains simultaneously. So that is one of our core products I'm really excited about as well. **Speaker B:** No, yeah, and again, building on the primitives that came out of Defi, that's perfect. But I think the next iteration of that is for example, why did we not see perps on Chain until Arbitrum? And even then they're a little bit janky. It's just because the computation was too crazy to do in Ethereum. And so I just. And like the, the secret magic sauce that like kind of ties this whole together and makes me like so confident that like the relay network is going to be like your big product is ZK Cryptography. And because like what ZK Cryptography allows us to do is like do all this incredibly intense computation off chain and then like push it on chain and then confirm that like it was like legitimate and like and, and fair and good. And like all of our like conceptions of like centralization go out the window when like you're running stuff on aws, but you can confirm that it was done fairly on chain. And so like that's the future that I'm excited about. **Speaker C:** Yeah, I totally agree on that side. I think there's a lot of like ZK at a, like as far as like a ZK Sync or like a polygon ZKEVM I'm not as excited about but like stuff like scroll or I think even like Railgun uses ZK as well. I may be wrong on that, but I think there's a lot of use cases for zero knowledge proofs as far as like you're saying like taking specific things to, to validate off chain interactions in different regards. I think it's going to be an extremely big sector. So. **Speaker B:** Yeah, no, for sure. And again, I think just to kind of like close this up and wrap it in a bow, I mean I think like what's so like spot on about what you're doing with Tapioca is like the realization that you know, like Ethereum is like home base and what we all believe in. And like no one is giving up on Ethereum but like as part of being acolytes of Ethereum, it's the recognition that like we don't stop with HTTP, we build layers on top of it so that like we get to a point point where like it's just a part of daily life and it's not like technology anymore. Like our phones aren't really even technology anymore. They're like almost appendages. Right? **Speaker C:** Yeah, I mean it's definitely a thousand percent. I think the future that Ethereum becomes the, the settlement layer of the world and there's all of these execution layers on top of it and even beyond that to do more and more hyper specialized things that they all still settle on. You know the, like you said, the home base of Ethereum, I think that's 100% the future. **Speaker B:** Yeah. And I think like the real Galaxy brain take is like we think of settlement as like financial and about like capital and money. Right. But like in this, you know, like post Internet world in 2020 and beyond, like information really is capital. And so like, like Ethereum being the settlement layer of, of the Internet or of humanity or whatever is like also about like the settlement layer of information and like of truth and like man, like deepfakes and AI and like all this stuff, man, like Ethereum is inevitable. **Speaker C:** Yep, I totally, totally agree. Great, great way to cap, cap this one off, I think. **Speaker B:** So before I let you go away, can you please just like let the audience know like where they can find you, where they can find Tapioca and like if they're interested, interested in getting involved, like what do they do? **Speaker C:** Yeah, no, so if, if you listen to this, much love, definitely, you know, check if you want to come give, give me a holler or follow us. I am @TWMAT with three T's on Twitter. Uh, Tapioca is at Tapioca Underscore Dao. Uh, website's Tapioca xyz. And uh, yeah, we got a discord that's a lot of fun that you should totally join up. We also have a podcast, Tap Talk that you can check out. It's more defi focused but you know, a lot of fun there. A lot of, a lot of joking around and whatnot. So you can always chat with us there as well. But, but yeah, no, it was awesome. It was awesome to come on here and talk Ethereum. **Speaker B:** Yeah, awesome. Well yeah, I've always been Ethereum focused. But, like, my whole center has been in defi, so I've only been on this, like, computation kick for two episodes. So I appreciate you. You coming on this journey, and, man, this is a. This is a special conversation. Thank you so much, Matt. **Speaker C:** Absolutely. Likewise. Much love, everybody.