The Economics of Collaborative Forking - Panel

Okay, everyone. So, we have a panel coming up for uh the economics of collaborative forking. And with us here, we have Buen from Liquity. Hi, Buen.

Hi there.

Uh we have Token Bryce from Defi Collective and Defi Scan.

Hello. Hello.

And we have uh Joseph.

Joseph.

Mr. Joseph

from Narrate. Mr. Joseph. Hi.

Hi.

Hi.

Uh, I'm gonna leave you to it. You can lead the way. And let's give a round of applause, please.

Thank you.

Thank you. Thank you. So, today we're going to talk about the for economics of liquidity, but I realize maybe not everybody is familiar with uh liquidity or forks. So, I'll just give you a quick rundown of one minute and then hand the balls to my mate so we can get the conversation rolling. So uh as some of you might know liquidity uh the first iteration of the protocol launched four years ago is uh the most decentralized most resilient stable coin we've ever seen on the mainet.

Um and recently they launched uh bold the liquidity version two a new stable coin uh that improved on the scalability of the protocol and one of the core new thing with bold there are a lot but we we're not going to get into the technical of bold here but one of the core new thing of bold is this idea of forconomics so what happened is liquidity first of its name got forked massively but a lot of steam and quite often those teams were irresponsible were careless or clueless uh got hacked got drained essentially the fork landscape of liquidity v1 was a bit of a a nightmare. So acknowledging that there was a big demand for forking liquidity but also wanting to uh make them synerggetic with uh the main instance uh the liquidity team with the introduction of B the version two of the protocol essentially incorporated the forking into the model and that's what we call the forconomics. So that's my quick intro but uh I think it's better to hear it from the man himself. So on my left you have Boyan. Buyan is working with the liquidity team and maybe you can tell us a bit more about uh the forconomics why it came to be and why what is it trying to achieve.

Oh give us a try. I mean you said already a lot um by yourself. Um as pre said the word forconomics is a play on forks forking and economics and kind of tries to encompass the philosophy behind it. Why we went uh down this road is kind of twofold. One was mentioned by breeze uh liquidv1 was among the most forked protocols 40 plus forks we have and out of those I think just two got in touch with us and they said hey we want to fork your code codebase.

Everyone else just took it and ran with it. Did uh changes what kind of changes they want without any approval or or um yeah u um input from our side which is fine because it's open- source um software and you can do with open source software whatever you want. Um theoretically at least there are moral implications and business implications but we won't go into that. Point being liquidity v1 was forked a lot. The other thing is despite liquidity v2 being called v2.

It's not like a or unis swaps uh or other v2s and v3s which are kind of an extension of a protocol. It's really a new product in itself. It's like launching a new product and it would warrant launching a new token, but we already had one. So, we didn't want to dilute our uh shareholders. We didn't want to go into any kind of weird token swaps and that kind of stuff.

So, we thought what we can do and then um to Max, a colleague of mine daunted the idea of doing friendly forks. But this meant that we need to issue liquidity v2 under a business license because only then you can uh give it away, sell it away and force some things and so on. Um and even though the devs were against it quite a lot because they are proponents of open source software etc etc in the end um the business team prevailed for for various reasons but they in the end came on board as well because they really do not want their precious code butchered by various anons and because in the fork agreements you are only allowed to do certain changes to the codebase. And all of those changes need to be audited by approved teams by us. They said okay that's cool with us.

Let's run with the friendly fork initiative. And the last point um the incentives I said there is no new token but because this is a new protocol issuing a new stable coin a highly competitive uh field in itself we needed some kind of uh incentives and this is where forks come in. So every fork needs to commit 4% very cheap, very little 4% of their new token of their governance token to incentivize bold uh use cases. And that's kind of it. That's the that's the backtory bit of it.

Nice. Yeah, that's a good overview. And um maybe just to take a sidetrack but so you all understand the the forking on V1 got really bad to the point that at some point there were some hate forks. there were some people forking the protocol and insulting the liquidity team and the code on Twitter at the same time. So this level of animosity so uh bringing some synergy to it really made sense.

And uh maybe to go into the friendly fork side of thing we actually have a friendly forker with us today in the name of Joseph. So Joseph is building nite the friendly fork of liquidity on arbitr and yeah let's hear from you how is the friendly forking experience like um why did you decide to fork liquidity instead of building your own stable this kind of question.

Uh sure yeah so uh again I'm Joseph from Nearight and we're the first friendly fork uh I think we were the first one to get a license

probably. Yeah,

probably. Okay. So, we're not there's some others that are already live before us. Um, but we're basically liquidity v2 but on arbitrum and we get to do that knowing that we're going to get all of this help from liquidity. So, the liquidity team, the dev team is absolutely cracked.

Just completely just they're awesome. It's insane what they've built and I don't want to I don't want to compete with them. I don't want to build that from scratch and if I'm forking their code because I want to build my own stable coin, I don't uh I'm going to have questions, right? So, just the dev support alone that we have gotten from being able to ask their team, hey, you know, how does this contract relate to this one? You know what?

How does this part work? Um, we want to upgrade this. Do you think it will have any downstream effects that we have to come up with or that we should consider? Just being able to go to the liquidity team whenever we want and say, "Hey, we have this dev question and they're just instantly there, always available to support." That has just that alone makes being a friendly fork worth it and paying uh paying, you know, a small amount of our governance token uh to them to do that.

that that part's basically free. Then we get all the incredible intros like to Bryce uh to be able to get customers, right? Because liquidity went from zero to four and a half billion in TVL in like a month, right? So people uh people with money no liquidity. people who deposit in these type of protocols know liquidity and now I don't have to build that brand and that trust around the security of liquidity and uh just the confidence that the mechanism works.

I don't have to build that from scratch. I get to be a little leech and latch on to Bojan and uh and benefit from that, right? uh but we also get to support back and uh and you know add our own additions and our own things that make it unique and bring our own new people in from the arbitum community from the superfluid community that we're integrating with uh into liquidity. So it kind of grows the pie uh and has been a really good deal for us. So I definitely recommend it.

That that was the first question. Was there another part to that? I think

let me just add something to to add to Joseph what he said. So we have right now 20 signed contracts. So 20 forks are already committed more are coming in continuously and it was really great to see once we announced that uh via an article that very quickly teams started getting on board like I want base, I want optimism, I want arbitum and whatever. So we have 20 signed and the great thing about that is that so all forks have exclusivity only one arbitration fork only one optimism fork etc etc the idea being that we get native builders who are committed to that L2 to that network to see it grow to use the network's governance token be it ARP be it OP be it BSC to then create a native stable coin the idea is that we have native uh very resilient decentralized stable coins all over and into all of those V2 and our own stable coin bolt can then kind of feed into and create a symbiotic uh mind share a mess so to say something new

right like we're taking arbitrum ARB tokens as a collateral type liquidity would never do that because they're only doing ETH lido ETH and rocket pool ETH they're very you know Ethereum centric and decentralized and they don't want to have tons of different collateral but we can add these other ones and other features too. So all the ARB that is uh deposited inite and borrowed against we also delegate it. So we're gonna become one of the largest delegates on arbitum dowo uh if people start using it

and there's a huge TVL in in our I think 15 billion there is no native stable coin right

I think it's it's a lot of up for grabs there if you if you pull it off right and I'm sure that Joseph will kill it

yep every L2 needs to have its uh its own ball for so just to recap quickly so you're still with us essentially liquidity v1 was its own little planet on mainet And that's it. The vision of forconomics is to transform this into a galaxy and that's V2 bold where you have I want to say almost the sun the main net bald and then you have all those planet or beating around. So nite on arbitum and nite is doing some things with bald on arbitum and then you have a fork on optimism and they're doing joint liquidity with bald and the stablecoin and so on and so on. So every fork is kind of growing the whole pie and adding to the main at the same time. Um maybe also I think Joseph mentioned it but to to make it more explicit an average project gives about 20 to 30% of the supply to VCs.

Okay. Uh a fork of liquidity pays four five% of 4%.

So you can see the difference right because you get the license and then depending of how much change you do but pretty much the only thing you have to do is audits. So essentially you need let's say 200k for audits and you need to give 4% of your governance token supply to either the liquidity community and a share of it to the uh liquidity team directly. So essentially economically it makes tons of sense even for the forker because uh they can have um a cap table even completely without V vc like what Joseph is doing. And I wanted to highlight this because it's it's pretty cool, you know. Um, so

bigger ad drops,

bigger edops, but also no no VC involved. So a fairer playing field. You want to you want to touch on that? Why you made that choice?

No, I mean we could build this from scratch ourselves and it would take a year uh and a lot of money and then you have to fund raise and blah blah blah uh and work with VCs and I don't want to do that anymore. uh or you can just use liquidity and it's already written uh and go extend it yourself. So the cost of auditing something that has already been audited is less because they know what to look for and the codebase is very familiar. There's a lot of people I think several hundred people participated in liquidity's last audit contest, right?

Uh 900. Yeah. The most ever on canina. most ever on cantina uh auditors

didn't find anything really

and they didn't find anything. So that's the codebase I want to use and we're able to spin that up very quickly. Yeah.

Um yeah, I wanted to go back on the the licensing part. I'm sorry but I have to. So uh maybe some context here but um you know Defi used to be very idealist everybody building full open source and yala yala. That was like 2019 2020. But then the party kind of ended and you had Uniswap releasing the V3 under BSL license.

I was gonna I was going to bring that up. UniS swap like what's the difference?

You know, you've got you've got Uniswap BSL. Just quick show of hands. Who remembers when UniS swap V3 launched?

Who is there? Oh wow, almost everybody. You're all paying attention. I love that. Uh who was really mad?

Remember that? Yeah. Yeah. Why Why was everybody pissed off as soon as UniS swap V3 launched? Shout it out.

Open source.

It wasn't truly open source, right? They were like, "Here's a license." Everyone kept forking Uniswap and instead of saying, "Wow, that's awesome. Everyone wants to use our really good code, which was created after, you know, Vitalic did all the math for you already. instead of instead of uh open sourcing it, they said, "Okay, we're going to close source so that only we're allowed to benefit from this, right?"

And everyone was really mad. And that hasn't happened to Liquidity. Everyone said, "Oh, you're doing closed source business license, but pretty much anyone in the audience, anyone in the world can get one, can go and just ask and say, "I want a license." And if they're cool and you know what you're doing and you have the ability to to launch it and no one else has the license for that particular chain, I mean, you know, correct me if I'm wrong, Bojam, but you can pretty much get it

pretty much.

Pretty much.

Yeah. And another important element is uh it's not exactly closed source, right? Is source available.

Exactly. Yeah.

So, uh for those not too familiar, the main difference means anyone can read the code. So this aspect of DeFi where you can fully audit the protocol you're using is still there. But if you want to use that code and not be an illegal little pirate, you need to have a license from the liquidity guys. So that's that's the nuance with this source available. I think it's important because it maintain this transparency this if I'm a big geek and I'm willing to spend the whole day reading all the contracts, I can understand the whole protocol from A to Zed and know exactly how it behaves in any situation.

And that's an important part of DeFi. Um so maybe for next topic is um as you might have understood you have this stable coin infrastructure that is available easy to fork makes economic sense to fork and you're going to see more and more forks. We were talking about how it makes a lot of sense for the L2 for instance to have their native stable coins with things on fork also centered around communities or specific assets. uh for instance you have asymmetry on mainet focusing on the ample for sport ecosystem and you might have more of these um and essentially where I want to take the discussion a bit is uh we're going in a world of thousands of stable coins of uh every single community will have their stable coin will mean their own currency and so on so uh how do you guys see this articulating um what are your thoughts on it is the good thing a bad thing because you know we hear about ohh the UIX disaster I have nine variant of USDC. When I go on jumper, I don't know which one to take.

It's not norm friendly. And you guys, I'm going to add me another $100 variant to that jumper and confuse even more the normies. I'm

okay.

We're going to confuse everybody. It's going to be really it's going to be a nightmare. There's going to be a 10,000 different stable coins and then you say, "Oh, can I can I pay you in euro?" say, "Oh, do you have uh do you have Bojan Euro or do you have Joseph Euro or do you have Belgrade euro or do you have euro backed by US dollars in a treasury account, you know, and then none of them are going to work together and it's just going to be a a complete nightmare and they're all going to be on different chains that say they work together but they don't." And uh yeah, it's going to be going to be really fun for uh Curve to earn fees,

a lot of stable pools. Yeah. And I mean, if you take a step back and think about this, it's um it's quite a logical evolution. You know, the situation we are in with a worldwide recognized currency is a a historical aberration at the the the size of the whole history of earth and trade. uh trade used to be very community based essentially and you know even if you go far enough back within a community it wasn't trade it was exchange of of service directly without using a currency trade was towards external communities to you know exchange with other tribes and so on and so I think we're kind of going back to those roots a bit with this model of everybody ming their own currency and then the question is okay what's the correspondence between my currency and your currency are we trusting each other are we establishing a report there.

Are we agreeing that okay, I will take your Joseph coin at 1:1 to my brace coin kind of and this is a new handshake. Um I don't know. Boyan, what are your thoughts on this? Millions of stable coins.

Millions of stable coins at the minimum. So I I read about this idea that there will be many micro stable coins, thousands. That person said then a couple of years ago, but it seems it's going to be hundreds of thousands by by the looks of it. And then a few kind of settlement stable coins which will um be used for payments or to to keep funds in wealth in however you want to call it. Uh it seems that everything will have to be yield bearing and um I don't think it's necessarily bad.

I think it's going to be a scale between the really huge ones and a lot in between and the small ones, the micro ones. Uh but yeah, we're going to see what happens. But we want to with liquidity we want to distinguish ourselves. I think it's important that you distinguish ourselves from the competition by our uh resilience by the token the stable coin always being redeemable fully mutable code. So you have no changes from day one.

It's everything is no admin rights nothing. It's always redeemable for ETH the stable coin and no one can influence uh the the code not us not anyone else. So we got a few emails from lawyers and we said sorry we can't do anything. So we just want to offer that kind of stable coin to the people who want it who want immutability who want resilience who want total transparency and if you like it cool. If no then there are other thousands of other options out there.

Yeah, it's a it's a cool benefit of of liquidity and one thing that I love from the start is you know everybody keeps asking questions about oh regulation stable coin bill and all of that. Well, there is a simple solution to all those problems. Be mutable that makes you unregulable problem solve. Next interesting question. Uh so I guess uh now we can talk a bit about uh what do you think um especially I guess on top of liquidity and the forks uh what would you like to see in that ecosystem that isn't there yet like um what kinds of integrations or product built on top of liquidity or forks uh do you envision also for you if you can even go first if you have some idea for nite already

uh I mean I have a lot of things that I want to improve in stable coins. That's why I'm making one. It's not just a cash grab. Uh the most unique thing about Nurite is the superfluid integration because you can send money linearly over time. So instead of sending you a payment of $5 on the first of the month, I could send you $5 linearly over a month.

Or you could get your salary streamed to you every second. your balance is just ticking up instead of getting a paycheck every two weeks. And so that's increased capital efficiency and increases the velocity of money which makes society richer. Uh so I think that's cool. That's what I want to do so I'm going to do it.

Uh or rather uh we're already doing it. And in terms of like how do we make all the forks work together or like you know Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bo Bojan said there's 20 forks that means 20 new stable coins. Uh I think we need some kind of OSM module where you can swap all of them one to one without any fees if there's someone on the other side. So maybe there's something that's looks and feels similar to Curve but actually doesn't have an AMM. Somebody should probably build that.

Maybe if you're doing a hackathon project this weekend and you want to make millions of dollars, you should do that. Uh or, you know, I'm sure there's some more infrastructure here that all of these new stable coins are going to need themselves. And there's some pretty big opportunity, but I don't know what that is besides swapping between them yet.

Yeah, you could envision resupply type of structure to uh kind of create leverage opportunity on the yieldbearing version of the stable coins and I think that would work pretty well on on mainet as well. Uh boy, you have anything on this? Give us a peak.

My wish is more of the philosophical kind. I would kind of like to see those communities be it arbitum or whatever come together and embrace a native stable coin on on their chain, take it as their own and stop dumping their tokens and instead start borrowing against it which like now finally the foundation is starting to do seven years too late but we are uh seeing it. So I would like to see communities gather around those stable coins because they are not just some US treasury related I don't know what uh onchain thing. It's a native specific for that chain designed stable coin and it should be used mostly on that chain and do some good to that chain for that chain. two words.

Yeah, I guess one point we haven't touched too much yet, but uh roughly top of my head from the latest time I checked Defy Lama, but we're talking about what 150 billion stable coin on chain out of which you are talking of uh 149 plus are essentially some form of wrapped T bill.

Wrapped Ethereum,

no wrapped T bill. So essentially the treasury bill, US dollar treasury bill and just some form of representation of it on chain. So you know whole USDC is that USDT it's a bit less direct but it's essentially same thing.

So uh and that would be I guess the closing word. Uh so you know it's the big question of the fork choice on Ethereum. It's not the community that will choose if there is ever a big contention. It's USDC and Tesla because we gave them that power because they decide what happened. they pick the focus, you know, the chain they go to will be the most adopted chain and essentially canonical.

There might be the other chain surviving because little punks like me and others will fight for it, but um it's huge the power we gave to those central stable coin issuers. And it's insanity that we haven't reacted before to take back control over Ethereum essentially. It's really like fundamental level question. You know, I don't know about you, but I didn't came here and I didn't invest myself in DeFi over six or seven years to essentially rap work for a more uh fancy technological version of uh the US government and that's kind of like what's happening with so centralized table. So the question is real and I'm glad you all got to hear about uh what the infrastructure for uh decentralized immutable non-dependent on TB stable coins look like and yeah I think we have to cut there.

So thank you all for your time and check liquidity.org if you want details on liquidity neurite.org if you want detail on neurite and yeah that'll be it. Have a good one.

Thanks Bryce.

Thank you.

Are we going to shoot our rocka before we go?

I guess

already started.

You already started

a little bit.

Okay. Hey, you were a bit sleepy.

Do we have time for some questions or are we are we out of the seat?

One question. Okay. Who is the lucky guy?

Who has a question?

Ready?

Dude who asked a question get a free license.

I think we have someone. No. Oh. Oh no. I dreamed of a hand.

That is strong.

Okay, I think that's it.