Andrei Duma - Best Price Execution and Heterogeneity

Hi everyone, I'm Andre or as many know me Andre from Lei or ZeroX Cberus as I used to be an add anon a few years back probably like you know most people who started in crypto it was that you know whole anon culture back in the day uh so today we're going to talk about liquidity aggregation how liquidity is very very fragmentated and how you know we're trying to unify this liquidity and how you the actual solutions out there are evolving. So, you know, it's not a big crowd. So, I think that we can make this, you know, more engaging. If you want to like, you know, if you want to interrupt me, I think, you know, it's uh enough people in the room so we can, you know, have a conversation around it. So, I'll start with, you know, when it comes to liquidity and, you know, moving money from one blockchain to the other, what do we want?

So we want for our assets transfers to be as smooth as possible, as reliable as possible, as fast and as cheap as possible. How do we want it? Well, we want it immediate without any sort of research. We want it out of the box. If you're on the dev side, you definitely want an API for this that has done all the heavy lift for you.

If you're on the user side, you just want a front end where you can go ahead and, you know, do the actual swap. However, that's actually pretty pretty hard. And I'll explain this through, you know, by showing you the asset layer and how we got here today on having liquidity so fragmentated as it is. So, first of all, you we probably all know that, you know, first we had, you know, an L1 Ethereum with ERC20 tokens. So, that's the L1 settlement layer.

On top of that, we have the execution layer because at one point those L1s were too clogged and people wanted, you know, faster transactions, cheaper transactions to build more DAPs. But then people realized that well actually I want appsp specific uh uh DAPs that can do for example just lending or you know just swaps or just for gaming. So that's why we have you know the L3s that are scaling those and then we have the message passing bridges. So we have you know first off we have the canonical bridges which communicate you know from the L1 to the L2 and the L3 but besides that we also have different token standards which we probably you know we most of us I I assume you know saw you know the OFTs or the XRC20 tokens which are all from you know different bridge providers that basically want to unify the liquidity that is already fragmentated between the multiple L1s that we have. So you know their value proposition is that use our message passing bridge and you will get unified liquidity.

But the problem is there are five more other providers which are saying the exact same thing. So now you're getting just more and more fragmentated and we you know we have also the assets. So we have the tokens, the NFTs, the RWAS that have to communicate with each other on all those, you know, like settlement layers and the execution layers on, you know, a dozen blockchains. You know, let's just assume that we're talking about the major ones. So now, you know, those message passing bridges have actually built liquidity networks or third party bridges.

So L zero has Stargate uh Wormhole has Mayion which are using those said token standards to help communicate with each other. So the whole point of this slide is that liquidity is so freaking fragmentated that you don't know where to start. So are you starting you know with uh one of with you know a rollup bridge or are you going with uh a intentbased bridge or a liquidity pool bridge you don't know and also trust lies on a trust spectrum. So we actually wrote this piece of research three years ago when uh liquidity was just getting more and more fragmentated because we realized that people need some sort of guidance on what bridges to use. They didn't know like okay like one bridge is faster than the other.

However, why should I go with you know a rollup bridge when I could just go with uh a bridge that works with liquidity pools? Well, that didn't work out pretty well, you know, in some cases because liquidity bridges which were uh uh which were having the design of liquidity pools were getting hacked and it was never the actual user who was bridging getting hacked. It was the LP provider which was uh putting their funds at risk and we're seeing this also for the same chain swaps. So this is what we saw in the past month when it comes to you know samechain swap distribution and by same chain swap I mean ch uh swaps happening within the chain same not you know the crosschain one the crosschain one the the chart is actually very similar to this one in which there is no provider which wins more than 50% of the actual swap volume. However those daxes they are very competitive on certain chains.

So you'll see that you know for example that on Avalanche uh Sushi Swap is more competitive than the others. However on Mento they're not competitive at all. Maybe they're not even deployed there. So all this you know goes to the point that there needs to be a solution which has to be better than you know just going through a lot of bridges and a and a lot of dexes and a lot of DEX aggregators and something that has been you know a term that has been coined two years ago uh it's intent and solver networks and this industry has a huge talent for reinventing the wheel and you know showing or representing things that were actually happening in Treadfi for probably you know 20 years. But to oversimplify you know like what an intent is it would basically be a request for quote.

So instead of going directly from you know blockchain A to blockchain B through a bridge now you have a solver and a solver in between is going to solve for your intention. Your intention is to swap 100 USDC from Ethereum to 100 optimism tokens on optimism. How are they going to do that? Where? Well, they have a lot of options to do that.

One, they could have inventory here and here. So, they would basically just frontr run or offer you just in time liquidity with their own inventory. or they could have a very advanced routing algorithm in case they don't want to hold inventory risk and do your swap through different other bridge providers. So the exact same bridge providers that I mentioned here are the ones used by the solvers here. However, they can do it in a faster and more uh cheaper manner because they already have those sort of routing paths to the destination chain.

So, you know, it all sounds like a great idea for the solvers. The solvers, you know, like at the first glance you you could say that, oh, they're a marketplace, you know, because on one side you have them fulfilling the orders and on the other side you have the order flow. So the intents who are offering the order flow and by the applications that are offering the order flow it's any sort of like swapping front end bridging front end lending and borrowing market derivatives and the solvers on the other hand you'd think that you know they would need an inventory list a capability uh list status monitoring execution fee taking optionality however it's not really like that solvers are only focused on one thing and one only which is the execution of the order flow that they're receiving. They are not interested in having you know inventory list on all the chains. Some of them are but most of them actually uh don't care about that because they don't want to hold the inventory risk on their books.

They're probably just a few big names which you know we probably all know like huge market makers that can afford that sort of risk. So now we only we have you know two parts of the flow. So we have the applications which have the order flow the intent order flow and we have the solvers who are offering the execution. But in order to be a proper marketplace you also need these plus a bunch of other features like fee taking or uh offering analytics to your clients. So it's sort of a chicken and the egg problem.

It's exactly like if you want to be a marketplace like Airbnb, Uber or Amazon, you need to force the market from both sides to come because the solvers can say, "Hey, we have the best routing out there, but they don't have anyone to sell it to. And on the other hand, the applications are saying that we have order flow, but we want to see the quotes." And the servers can you know if you got if you're going back like one doesn't work with without the other. So in order to be a marketplace you need first of all the aggregation. So you need all the asset you need the asset list the asset prices the DAX aggregators and the bridges.

That's how we started four years ago. We actually started just by aggregating bridges on a front end because there were a bunch of DAX aggregators like one inch but there was no crosschain aggregator. So an aggregator of bridges and then we realized that you know like we're we're pretty good at aggregating bridges but we need to aggregate DAX aggregators as well. Oh and then we also need asset prices and assets list. So that's how we initially started but we didn't had anyone to sell it to.

So in order to force the market we launched our own uh front end jumper.exchange which was you know trying to we were so we were a bit big company but for us we had to showcase to our clients what the capabilities were. So we basically just built a demo showing people hey you know these are these are our capabilities even though we didn't had any clients. And you know on top of that then our clients are coming to us. you know, we started to get bigger and bigger.

We started to work with MetaMask and they're saying to us that, yeah, but we also need, you know, a proper inventory list and a status monitoring of the transactions because they can't just, you know, come to us every single time there a transaction fails through one of the bridges. So, we started with, you know, bridging, then we went to swapping, and now we're very much focused on arbitrary zaps. What arbitrary zaps are is probably I think it is going to be the biggest unlock in web 3 and web 2 since the old D5 days because it allows for the best of both worlds which is swapping bridging and also doing any sort of action as a destination step in one transaction. So in one step. So a zap is basically think of swap bridge swap deposit swap bridge swap open a lo uh take a loan on a or lp into any sort of pool.

So all you know by having those three together it basically allows you to do any sort any sort of action that you would want in web 3. So with those customers that you know we are very proud to have today from you know like all the big wallets uh hyperlquid etheina they're all using us for for in some way or shape or form for swapping bridging or zapping. I like to give the example that if you ever done a transaction in web 3 it is very likely that you've used Lei under the hood even though you might have might have not have heard of us or seen us or you know you don't even know the logo. If you deposited in Hyperlid, it was us. If you have done a swap in Phantom or a bridge in MetaMask, it was us.

If you're using, you know, Robin Hood wallet, then it was us again. So now, you know, now we have everything. We we we tried to think that we're a marketplace. We have the aggregation. We have the customers.

So we forced both in the same room together. We've built all the capability lists and the requirements that you know those said customers had for us but we were just talking about you know the next big thing which is solvers and crosschain solving and we incorporated that into our own marketplace. So we we just acquired a few months ago catalyst which is a bridge and we're building our own solver pioneer. We're not building those to be more competitive per se. We're building those because we need to move fast.

To build a marketplace, you need to move very fast. You need a lot of people. Think of, you know, like Amazon in the early days, they just start started by selling books, but they scaled so hard. They're they're now, you know, like thousands of people in the company. We're 80 people right now because chain and bridge aggregation is very hard.

what we do is you know a price discovery of all the blockchains. So whenever we're going to a new blockchain and that's why we needed the solvers we had to knock at 51 uh other you know bridges or at a hundred other DAX aggregators hey are you going to be on bar chain day one please come there okay which one of our partners is going to be there because you know we need at at least two because we say that we're an aggregator so that's why we wanted to have our own solver to basically frontr run liquidity for us and help us be faster on all those new chains. And besides that, you know, the the solver is is is is great, but you also need an intentbased bridge. So, we're gonna plug the solver into the intentbased bridge and allow for any other solver in, you know, web 3 or web 2 or market maker to plug into catalyst to solve for and uh actually receive order flow. uh yeah and you know I I'm getting to a point here but I want to show you you know the whole application layer of how an intent system would work from both sides and you know like this is the matrix of uh of what you know a solver is doing.

So this is like the best part of what a solver could do. So on one hand you know they have access to centralized liquidity. So they have the OTC desks they have they work you know the OTC desk were with different market makers which in most cases they source liquidity from the centralized exchanges. On the other hand the solvers do also have access to DAX aggregators and other solver networks. And all this you know comes back to us because we aggregate you know starting from here we have the best of this part we have the best of this part and then we have the solver plugged into the catalyst bridge which offers us the ability to present this to you know all the customers afra layer thesis that we're trying to solve for is something that has been you know in the debate for many many years in crypto because everyone is fighting for the same customers out there and it's very hard.

It's it's a very competitive landscape and if you are not innovating or if you're not keeping your prices as competitive as possible, you're just going to die because you know one of those clients could at any point go and work directly with a bridge or with a solver. So that's why we want to keep ourselves ahead of the game by you know having the proper technology aggregated uh into this. So I'll you know just share like a few words about the future roadmap for 2025 which includes includes multihopping which by multihopping basically means instead of going from Salana to Ethereum to base you can go directly from Salana to base in a multihop. So we bundle the whole multihop into one. Uh also we're expanding more and more to nonVM chains.

We just added Suie, we added Salana, we added Bitcoin. And multihops also mean the exact same thing which is basically you know you can multihop from sui to bitcoin which you know no one ever thought of that or you know like we don't really have demand of but still a multihop is you have to force the market to offer those said multihops to to your clients and solvers are a great use of that because they can you they you can take your intent and basically solve for it with the centralized liquidity from the OTCEX and the centralized the exchanges. Yeah. So, uh this is it. If you have any questions, I'm, you know, here to answer.

We can also talk more after the presentation. But in short, you know, uh I think that the industry grows more and more and is getting a lot more mature when it comes to the actual liquidity layer and uh how liquidity is getting, you know, less fragmentated day by day. Thank you.

Thanks for that. Do we have any questions?

From what I hear, you're like a central part aggregating everything that's on chain, offchain, whatever. How can I trust you that you're I'm giving you money and I want Bitcoin in return. How can I trust you? You're going to give it to me?

Yeah, sure. Great question. So, we never hold the actual custody of your tokens. Us as an aggregator, we work with the other third parties and they offer you the actual route. Now when we have done the trust spectrum that basically put us in a position of very heavy due diligence on seeing which bridges and which DAX aggregators are actually reliable for us to showcase to our users but we don't actually hold the custody for uh your own tokens.

We just price discover and offer you the best quotes. you know, you get a list of quotes like, you know, this is the fastest one, this is the cheapest one, this is, you know, a bit more expensive, but maybe it's a bit more trustless depending on, you know, what your choice would be. Do we have any more questions?

And what's your business model? How do you make it sustainable?

Yeah, sure. Very good question. And you know like we need to make money and we need to survive. We can't just burn VC money uh year over year. So how we make money is we take a fee per swap from the user.

So whenever we're providing this API to MetaMask or you know like Phantom wallet or one of those big partners, we don't charge the the partner, we charge the user. So when the user is doing a transaction from chain A to chain B or even a same chain transaction, we charge a few basis points out of that transaction and you know uh doing a lot of volume those basis points add up pretty pretty quickly. Any more questions? I have a question about the business model. Why did you decide to charge the user rather than one of your partners?

That's actually uh yeah, it's a smart question because everyone in the industry is charging per API calls and we're charging at the user level. We they started to charge per API call a lot later like all the all all the old DAX aggregators and we wanted to differentiate ourselves between them by telling our customers hey you don't want you don't need to pay anything for us no offront no cost for the SLAs's no cost for the API calls we'll take those on us and we're only going to make money at the user level because we wanted to like Uber in back in the day we wanted to grab and expand and grab and expand as much as possible. So, we needed to, you know, basically force oursel into the market by having a better uh business model than the others. Is it sustainable? We'll see.

I do think it is. You know, you know, like if the volumes are high enough and the basis points will just come, you know, like taking for example 15 basis points out of a few billions, it's millions already. So, the business model makes sense if volumes are heavy. And I have one more question about intense space bridging. What's the role of the the middle part?

It was an ascender the solver. That's the one. Um c

can you just elaborate on why is it beneficial to have a solver rather than chain A doing a direct bridge to chain B? And another like of second part of the question is like layer zero Brian has been criticizing the intent in intense base bridging a lot. Um I don't fully understand the technical details behind it. Uh but can you just outline the drawing box of it as well?

Yeah. Well you know you have to look like who's criticizing intentbased bridges and you know what type of bridges they're running which you know for us as an aggregator we don't pick winners. We think that you need bridges like Stargate and message passing layers like layer zero, but you also need bridges like across which are an intentbased bridge with multiple solvers plugged in. And why do you want to or you know what would be the benefits of an intentbased bridge using solver or just by using directly a solver because sometimes solvers they actually have their own front end but remember I talked about you know forcing the marketplace and the fact that it's very hard for them to grab more market share uh directly. Uh the biggest benefit is it depends on what sort of architecture the solver runs off because if they run off an architecture as a market maker and they actually have the ability to source liquidity from centralized exchanges they are going to be that means that they already hold inventory on the destination chain.

So it's a lot faster and it's going to be a lot cheaper because they already have the inventory there. So if you are on chain A and you know you want to do a bridge you they just need one confirmation here and they're going to release your funds there because they already have funds there and they're going to rebalance later. But not all uh solvers work like that. You know only a few of them. Some solvers are actually glorified uh DAX aggregators how I like to call them.

You know, I you know, it's a hot take, but they're glorified DEAX aggregators because they don't directly do one swap through an AMM pool. They basically break down your swap into a dozen other swaps through multiple pools which are a bit more uh which have a better price. And that better price can maybe just be one or two basis points, but still for the user is a better quote. And in our own routing algorithm that will show higher up than a bridge which is not intentbased and the user the users really really care about they're very price sensitive. So even $1, you know it's $1, why should I, you know, give that to another bridge and in most cases solver in intentbased bridges are faster because they have the inventory.

Thanks for that. Do you have any more questions from the public? One more.

You said you're aggregating real world assets. Uh, how can I get a quote on a house or whatever? What kind of real world assets do you aggregate?

So, currently in uh in the DeFi space, real world assets evolve around the bills and Treadfi uh derivatives for the houses. There are actually a lot of protocols that are, you know, putting real world real estate on the blockchain. But for us in in order to be able to aggregate and to pick up this liquidity, we need we need that liquidity to be available through one of the tax aggregators or through one of the DEXes or through one of the solvers. So if the liquidity for whatever real world asset you're looking for is onchain, you will have it through Lei as well. However, uh if it's something that it's a bit more centralized and they're just uh tokenizing something but it's not on the blockchain because you can token like tokenizing something is is not new.

It was called bonds, you know, 20 years ago. Again, we have this talent of reinventing the wheel and new terms for things that were here. If it's just a bond then and if it's not on chain, you don't have any access to it. Do you have any more questions? I have a final question for you that's also very closely tied to your business model.

First of all, do you believe that we will have gasless transactions and gasless bridging? And if so, do you believe the users will prioritize them and then it'll be challenging for you to be selected as one of the aggregators because you have all the clients but then you won't have the demand side which essentially the users. So when it comes to the gasless transactions, this is also another benefit of working with intentbased bridges or with the solvers because it's not that you're not paying for the gas. The gas is baked into the quote already. So you're still paying like the gas co cost is there but you don't have to pay the gas or approve the you only have to do one signature you know which is allow for spending my money up to a certain limit from my wallet so the money you know is being taken out of your wallet and it's already baked into the solver fee.

I meant something like I'm not 100% familiar on how they achieve it but 1 in is essentially covering for the transaction on the behalf of the user and if transaction fees go so low the other protocols are also willing to cover it do you think that your business model won't be as effective then or you don't really worry about it

so how one it's one in fusion that you are talking about which basically works in a similar manner like any sort of intentbased application in which they have different solvers holding inventory already of 1 in or uh their routing algos and they bake in the the the gas fee into the quote. Now by baked by the fee b being baked in it doesn't mean that you know like if gas would be $3 your transaction would be $3 more expensive. They can make money in the long run. So they can go on a loss for you know many months and then at one point you know like kill all the adversar adversaries and then win that order flow back that you know gas fees back. So it's not always going to be baked in you know into the actual quote.

Sometimes it might be actually cheaper or a lot more cheaper to go through a solverbased uh or an intentbased bridge.

Thanks. Thank Thank you so much for that. That was super useful for me.

Yeah, sure. Thank you very much for having me.

Thanks. Thank you so much everyone. Thanks for your presentation. Thank you very