How Decentralized Exchanges Benefit Everyone? - Sunny Aggarwal | ATC #510

In this episode of the Around The Coin podcast, host Stephen Sargeant engages in a comprehensive conversation with Sunny Aggarwal, co-founder of Osmosis the core team responsible for developing Osmosis, an appchain that serves as the DeFi hub for the Cosmos ecosystem. To date, the Osmosis DEX has facilitated over $28 Billion in trading volume, and more than 50 separate blockchains have connected to the Osmosis appchain. At Tendermint, Sunny served as a Core Developer of the Cosmos SDK and Gaia blockchain, and contributed to the development and launch of Cosmos and IBC. Sunny then decided to build on top of the core infrastructure he had developed at Tendermint, and co-founded Osmosis with the goal of developing an appchain and DEX that rivals even the most robust centralized exchanges.

Host: Stephen Sargeant

Guest: Sunny Aggarwal

We are also available via:

BuzzsproutYouTubeQuoraMediumXFacebookLinkedInSoundcloudApple PodcastSpotify Player FM

Check out on DeepCast to delve into episode transcripts, key insights, discussed topics, and more!

Episode Transcript

Stephen: Hey everybody, welcome to another episode of Around The Coin with your host, Stephen Sargeant. Today we have Sunny Aggarwal, who's the Co-founder of Osmosis Labs. We talk about his early days working in the Cosmos ecosystem and how he built out this deck. That is actually transacting over 28 billion worth of volume on the Osmosis Labs and Cosmos ecosystem.

We talk about App Chains, Side Chains, Block Chains, both Layer 1 and Layer 2. I think he even threw in a couple questions about 2 Chains. That's how great this conversation was. And we even talk about the recent discussion around Mesh Security and how this plays out to real world examples like NATO. This is a must listen to technical episode where we go deep into Cosmos and what they're doing at Osmosis Labs.

Stay tuned and reach out to me if you have any questions or you absolutely love these episodes and want to leave an amazing review.

Stephen: Welcome to another edition of the Around The Coin podcast, your host Stephen Sargeant here with Sunny from Osmosis Labs.

Sunny, tell us a little bit about who you are and then we'll jump right into your background and what you're building there in the decentralized space.

Sunny: Yeah, thanks for having me on. I'm really excited. Hey everyone, my name is Sunny, Sunny Aggarwal. I am the co founder of a project called Osmosis.

But yeah, some of my background, I've been in crypt work, I've been working full time in crypto since 2017 been involved with the space since 2015 originally was, I just as a student just at Berkeley, I was like getting interested in Bitcoin.

I helped Teach a course there at Berkeley. That's kind of how I, for me, the best way to learn anything is to teach it, which is, I assume for you, why you do a podcast as well. Cause it's like just, you know, just like such a good learning opportunity. Right. And so, yeah, so, you know, learned a lot of crypto by teaching that course.

Then kind of went full time into crypto 2017. I dropped out of college too. I found I was just like learning way more by, I was interning over the summer. Originally at Consensys. Then I thought the Ethereum stuff was cool, but I was like, Oh, what is this? You know, it wasn't what I was looking for.

So I kind of like switched to working on Cosmos halfway through that summer and I just loved it and dropped out of school, worked and I've been working on Cosmos since it's been like six and a half, almost seven years now at this point.

Stephen: What were your plans when you went to school? You know, you studied for it to become an electrical engineer.

It looks like computer science, which makes sense why you got into the blockchain. Yeah. But what kind of were your plans when you're like, Hey, I'm going to school. You weren't like, Hey, let me jump into Ethereum full time. And this is why I'm going to Berkeley. Tell us about like your thought process at that time.

What did you think you were going to become? And what did you, you know, envision your life being at that point?

Sunny: Yeah, I was originally my plan was to go into like robotics. I was like, You know, in high school I was, I loved robotics and that's kind of why I was doing like electrical engineering and computer science.

I see you have some cool circuits behind your head over there. Yeah, so I really love like that kind of stuff. And so, but you know, making plans, life hits you. I, I was, I, I'm also just

and so when I was at Berkeley, I was, my major was like the electrical engineering and computer science, but I had, I was doing a minor in political economy just because I love like economics and history and politics and stuff like that.

And so at basically freshman year, I. Learned about Bitcoin and I'm like, Oh, okay. This is the perfect combination of these, my two interests, right? It's I'm literally using computer science to do like political economic change. And yeah, as soon as I learned about it, then, you know, my whole life trajectory just changed, I guess.

Stephen: And how did you learn about Bitcoin? Was it the ecosystem there? You know, a lot of people, you know, studying different things and into you know, the, the DJ forums back at that time, the Bitcoin forums, how did you first learn about it?

Sunny: So the first time I ever heard about Bitcoin was this was like, when I was still in high school, so some, one of my friends, or maybe I overheard something.

I forgot what it was, but I heard the sentence Dogecoin just sponsored the Jamaican bobsled team. And I was like, what does that even mean? That sentence, I don't even know what any of those things mean. And so I go home that evening, I look up Dogecoin, and I'm like, oh, that's interesting.

And I look up, obviously, it talks about Bitcoin. And so I look up Bitcoin, and I'm like, oh, that's really interesting. And so that, that was like the initial seed of what I learned about Bitcoin. Then, you know, fast forward, you know, six months later, I'm in college. There's a small, small Bitcoin club there.

Like I'm talking like six guys, basically. It was just like, we would just hang out, get dinner and talk about Bitcoin. And I just, you know, as a freshman in college, you know, you, you join all these different clubs. You're trying to find your, your people, you know? And so I joined a lot of different clubs, joined some robotics clubs and the Bitcoin one, despite it being so small, I just felt like those guys who I met there were like, So smart.

And I was like, they were just talking about stuff that was just like way over my head. And I was like, I don't know what you guys are talking about, but you sound really smart. And I think I'm just gonna keep hanging out with you and hopefully I'll get smarter through the process.

Stephen: I feel like that's like what's talking, like anyone that's deep into the space is they're, they're just level of thought process.

It's funny that you make that statement. I think if there wasn't for the movie Cool Runnings the Jamaicans having a bobsled team would probably have been the thing that you went home and started googling versus Dogecoin. I think at that time.

Sunny: Yeah. Yeah, no, Cool Runnings great movie. But yeah, so yeah, that's how, that's how that happened.

So that's how I learned about Bitcoin. And then, yeah, the club.

So basically what happened then was, You know, like I said, there's six guys in this club, you know, we were like, eventually we were like, okay, why is this thing not like bigger? Like, why is like, why is no one else into this thing? It was like so much exciting stuff happening.

Or at the time it was also like bottom of the bear market as well. So it wasn't like, like the, this is like the 2015 bear market basically. And so but we're like, Oh, you know what? Maybe because no one understands this. So me and two other guys, we started this course. So Berkeley has this really nice program where like students can.

teach classes, as long as you get a professor to back you and so that's why the three of us, we started a course and we, the first semester we had 60 people join the course and we kind of, that old Bitcoin club kind of ended up dying almost, and we, we started a new club called Blockchain at Berkeley, and that, that's like a huge, I think it's one of the largest like student clubs, it's still running today, and one of the things I'm proud of is You know, I think there was a period of time for I'd say you know, two years, let's say from like 2016 to 2018, where the best way to learn crypto was our course I think nowadays, it's like, if you want to learn crypto, there's so many educational resources for you to go look up.

But I think there was like a good two year period where anyone's like, how do I like zero to Zero to 75 on crypto, right? And I was like, I think the course and all those YouTube video lectures and stuff are still on YouTube. I still sometimes like direct people there.

Stephen: That's awesome. We'll make sure to include that in the link.

And it's funny, like going through a lot of the interview prep that I do, I do see that Berkeley, you know, Berkeley comes up in a lot of those conversations. So I think you're right. Yeah. That 2016 and 2018 period, there wasn't a lot of, you know, I'd say institutional level, you know, training, right? There's a lot of Hey, grifters and other people in the space saying, giving you the basics, but there was never anything attached, I think, to a university.

So then you go and intern at one of probably the most notable companies in the world, ConsenSys, you know, the creators of Metamask and Fura mid May. Tell me about that experience. Was that like, Hey, you were just kind of getting coffees or was that like, Hey, you're sitting down beside some of the brightest minds that are launching, you know, you know, projects alongside Ethereum.

Sunny: Yeah, no, it, so it, it was really good. So like consensus at the time, it used this thing called the spoke model, where it basically has a bunch of like mini companies or projects within consensus. And so the project that I was working on was called Ethio. I don't know if it's still running or not, but basically it was like, it was like, the proto version of the graph, so we were taking like Ethereum data, putting it into a graph database and making it easy for people to run queries on top of. So, Good idea, probably just a bit too early at the time, you know, right idea, wrong timing. But yeah, so I was working on that and so I think two things, like I enjoyed it.

I think I learned a lot about Ethereum. It was nice because what I got, I basically at part of what I was doing was like going through the Ethereum yellow paper and like taking all the concepts and turning it into like data schemas, which was like really nice. So I learned a lot about how the EVM and how Ethereum works.

But then for me, I think the two things were like one, I think a lot of consensus was very focused at the application level at the time. I wanted to work on more lower level stuff. I got, I got like, I got really interested in proof of stake. Like I got the proof of stake bug and I was like, I spent all my time reading all the proof of stake, white papers and everything And Consensus just wasn't really involved with that at the time.

So I was like, I wanna go figure out how to work on Proof of Stake, because that's kind of how I reached out to the Tender Man team. 'cause out of all the Proof of Stake White Papers, I read the Tender Man one was like, oh, this is like the simplest and like the, you know, makes the most sense to me. So that's why I reached out to them.

But the other thing was honestly like, I'm a little bit of a Bitcoin Maxi. And so at the time I let, so I joined consensus because I was interested in learning more about Ethereum cause I, I, I, I'd followed it a little bit. But I wanted to like, okay, well, I want to understand the thing. And so. I got a lot of understanding of it, but then, for me, in the back of my head, it was like, all this stuff is so cool, but what is this ETH shitcoin?

I thought we were building for Bitcoin. And so that's kind of how I got, why I got really interested in Cosmos as well, was like, I'm like, oh, this is how we build the app layer for Bitcoin. You know, it's Bitcoin isn't, Cosmos is all about ETH. App chains, like application specific chains, and Bitcoin is the original app chain.

It's the, it's the money app chain. And the idea for Bitcoin was always that we're gonna grow the ecosystem via side chains, right? This was block stream's idea. They came, they coined the term side chain, but then never really shipped anything. They never delivered. And I, at the time, I'm like, okay, cosmos is how we build the app layer for Bitcoin.

We're gonna have all. Every app will be on its own blockchain, but Bitcoin, the asset, will flow and be the money of every, every chain. And so, you know, that's the vision I had seven years ago when I started working on it. And I feel it's just now in the last like few months, really actually finally starting to take shape.

Stephen: And can you talk to me about you know, Bitcoin obviously has BTC and its actual native token. But Cosmos has Adam. How does that relate?

If you're kind of using Bitcoin as the ultimate money stream, why, just for the viewers, why does Cosmos have its own cryptocurrency? And maybe that will be helpful to understand the Cosmos ecosystem and how it differs from Bitcoin or Ethereum.

Sunny: So one thing actually, so that's actually a, I guess, common misconception is Atom is not the token of Cosmos. It is a token of a specific chain called Cosmos Hub. The Cosmos Hub is just, unfortunately, it's like a naming, it's a little bit of confusing naming, but, but it's unlike You know, most ecosystems were like, you know, you to use Ethereum, you need to use ETH or to use Solana, you need to use Sol, right?

It's Cosmos is not about that. Like Cosmos is all about self sovereignty. You can, so you know, something, someone like DYDX, like they're built as a Cosmos chain. Basically have almost nothing to do with Atom, right? There's osmosis. So what, what is Atom, right? I think Atom serves a couple of purposes, right?

Well, they're, they're really focused right now on shared security. So. All of these causeless chains they all have their own staking tokens right now, but some of them are just not very high value, right? Some of these tokens, market caps, are like, you know, you know, less than 20 million, let's say.

And that's not, you know, in a proof of stake system, you want to have high economic security. And ATOM is just a token that happens to have a multi billion dollar market cap. And what they can do with that is they can Lend out security. So some, honestly, like a lot of the stuff you see in IE layer today was ideas that originated from Cosmos of this idea of restaking and shared security and stuff like that.

So that's the purpose of Atom. So it's an opt in thing. That was, that's the big, you know, you know, Polkadot and everything, you know, you have to use the dot shared security. Cosmos is all about. You choose whatever security you want to do. If, you know, and you know, Cosmos Hub will provide you some security if you want it.

Their eigenlayer is providing security to Cosmos via Ethos. There'll be Bitcoin security on Cosmos via Babylon. So the Cosmos has always been this idea of give developers, And builders like all the options and tooling and they can choose what they want to use.

Stephen: And is this the biggest feature why developers come build on Cosmos?

Because I think, you know, with so many chains out there, so many blockchains, you have so many options, whether it's specific blockchains for gambling, You know, ETH is very vast, but there's so many blockchains popping up now especially with the use of AI and being able to kind of like what you're probably doing as Moses Labs is being able to build those app chains or side chains.

Why are people coming to Cosmos versus maybe another chain?

Sunny: Yeah, I think people are coming to Cosmos when they want to have a lot of control over their, the functionality of their chain. So. What all Cosmos is, right, is at the end of the day, maybe that's a good place to start, right, is it's a set of tools that make it very easy for you to build your own custom blockchain.

That's, that's, at the end of the day, that's all it is. Now, they have all these other features as well. We have this thing called IBC, which makes it so you can have these blockchains communicate very easily with each other, but at the end of the day, it's like, it's a toolkit. It's a, it's kind of like Linux, right?

Linux is just this open source toolkit. And I, you know, on top of that, you have a networking stack that allows like Linux computers to talk to each other, but like it's Linux. And so why do people want to use the Cosmos SDK to build their own blockchains? It gives you the most control over, you If you're trying to build a very simple thing, it's probably easiest to deploy it on an EVM chain or just as a smart contract.

If you're trying to do something like DYDX where they wanted to have so much control over how the order book works on their chain, they have their validators like run or like order matching in the mempool, all this kind of stuff, like you can't do that on DeFi. Any of the other stacks right now.

And so, or THORChain, right? THORChain wanted their validators to run bridges to Bitcoin and to Ethereum and to all these other chains. Celestia wanted their validators to, you know, do all this like data availability sampling and stuff, right? So it's If you want your, if you want to do something that goes beyond just like a basic smart contract, what you can do in a basic smart contract, that's what, and, and the thing is, it's like most applications are probably not that but in my opinion, the most important applications, the biggest applications are the ones who do need that level of like control.

Stephen: Are there any other use cases where you can see like an organization building, like a lot of what you're saying is like infrastructure or modular blockchains are building? On top of Cosmos, is there like any business use cases or is this all more infrastructure pieces regards to more technical blockchain usage?

Sunny: Yeah, I mean, so a lot of for example you know, if there's Finsha, so if you know Line, Line is like the, one of the biggest it's like the WhatsApp of East Asia, basically, so, Japan, Korea, all these places and so they built a, a Cosmos SDK blockchain, because they're trying to you know, you know, Some, or even Binance, like Binance chain, right?

It was built using the Cosmos SDK as well. So it's like a lot of these even one thing people don't realize is Polygon is actually built using the Polygon POS chain is built using the Cosmos SDK as well. There's a lot of the things you might be using already are actually Cosmos under the hood. And that's the beauty of it.

You don't, it as an open source toolkit, you can be, you can say I'm Cosmos or you don't have to say you're Cosmos. It's up to you, right? It's like a lot of the things are actually Cosmos under the hood. And so, Yeah, so like someone like LINE, right? They want to build like their own blockchain ecosystem for payments and all this stuff, but they just want to have a little bit more control over it.

They don't want, they want to use their own token for paying fees like, you know, on any other chain you have to use ETH to pay fees or something, right? And so that's why they're building their own chain. Or there's, you know, a bunch of like RWA chains being built on Cosmos. Consortium chains is another like big use case of why you want your own specialized chain.

Stephen: And it makes a lot of sense. If you want to use your own token, you know, ETH could get expensive with gas fees people don't want and it's like not doing exactly what you wanted. So you're almost overpaying for functionality when you're really not using it to its full potential. You just want to use it for one subsector.

And it's kind of like open banking, right? You mentioned open source. It almost feels like open banking where a lot of times you don't really realize you're using open banking. Because the bank that you're going to has this open banking application underneath it that, as you say, you never see, or that's been white labeled.

That's really, really interesting. Talk to me about this idea of IBC. Can you explain what IBC is? Because I believe you mentioned it, and I think it's integral to what you're building at Osmosis as well.

Sunny: Yeah, so basically You know, in a world of app chains, you don't want everything to just be this isolated island, right?

Where, okay, how is money going to get onto this thing? How is capital going to get in, right? Like, how are people going to move between these app chains? And so basically, IBC was, at the end of the day, it's a bridge. That's a fancy, it's a fancy way of saying bridge. But it was a bit, a very Well designed bridge from a security perspective, because most bridges today are like really multi, just multi sigs, right?

There's like a set of people who are a bit like, In Wormhole or Layer0 or anything, it's okay, here's a set of in Wormhole I think it's 29 people, but basically it's here's a set of people and they hold funds on one chain and then they like mint it on the other. And so there's some intermediary there.

The idea behind IBC. was what can we remove, can we build a bridging solution that removes this intermediary altogether and have so there's this concept in blockchains called light clients, which is you know, when you if you want to know that a transaction happened on the chain, you can just get the block headers and then these Merkle proofs to show that hey, this is, this is What happened on this chain?

And it's it's, it's much, it's a way of getting proofs that something happened without having to run a full node.

Stephen: And in this instance, you could say that's how a lot of these apps on your phone are being used, right? It doesn't need to download the whole blockchain, but it's showing you that you have this certain balance based on the transaction headers that it can receive.

Sunny: And so what we, what IBC was said was, Hey, this like light client protocol that you usually have on your phone or something. What if we put that into a smart contract? And so as, so basically let's say you have two chains, right? Let's say osmosis and DYDX, and you want to send tokens. From what, USDC from DYDX to Osmosis.

What will happen is you make a transaction on DYDX saying, Hey, set, I'm, I'm, I'm depositing my, blocking my USDC here. And then instead of a like multi sig that's like watching that and then attesting to it on Osmosis, the Osmosis chain is In a smart contract has a light client and can, you know, you can prove to the osmosis chain that, hey, I really did lock my USDC on DYDX.

And then it will give you the USDC on osmosis. So you remove all the intermediaries. And so for us, you know, our take is eventually we need to have all bridging be fully trustless and permissionless. No more, no intermediaries. And that's kind of was the purpose of the building IBC.

Stephen: Does that make bridges, what you're implementing there with IBC, is that more safe and secure?

Because we saw in 2023, like in October alone, I think Chainalysis reported, you know, 700 million worth of hacks that were on DeFi. Most of them had to do with hacks on like things like the Ronin bridge. Does what you're building help the security of that? Because they can do that attestation automatically.

They don't have to almost send the tokens in order, you know, and that's where, you know, criminals are kind of attacking is these bridge protocols.

Sunny: Yeah, so there's basically two you know, there's two types of hacks or that have happened, right? There's one that are smart, like code bugs, and then there's that are like centralization.

bugs, right? Or attacks, right? So some of the wormholes hack that happened two years ago, that was a, that was not a, that was a code bug, right? And there was a bug in the code that was exploited. Another thing is IBC is also just code, you know? We're not going to say that IBC is never going to have a bug or get something, right?

But it's I think it, you know, You know, I think there's a lot of people using it. There's a lot of eyes on it. You know, it's, it's stood the test of time. It's been running for years, right? Now the thing, when centralization bugs, the things like the Ronin one, or the Axie one, or the what was that other chain?

There was, there was The one where like the, the, the farming Dex thing there've been a number of bridge hacks where it's like, Oh, it, the multi sig of that bridge, you know, is it says it's eight people, but it actually turned out that one person had access to four of them. And it's that's the thing that IBC is meant to solve where it's like, Hey, like a lot of these bridges are just like smoke and mirrors.

Like how decentralized they are. That's what IBC is okay, get rid of these intermediaries there. And.

Stephen: Which makes a lot of sense because I believe in the Ronin hack. They didn't find out about it, like 600 million. They didn't know about it until a week later. Whereas you're saying because of the eyes, because of the activity, because of the decentralized nature, someone would have seen that transaction happen almost instantaneously.

Sunny: Yeah, exactly. So I think like actually IBC is probably the most used bridge in all of crypto. In all of crypto because, I mean, let's see, I'm gonna check I think right now we're at the total volume is in 24 hours was, like, no, that, that can't be right. Okay, I'll have to check what that, what that, what that is.

Oh about, about eight, nine, about $90 million bridged in 24 hours, which I think is like probably higher than any other bridge.

Stephen: That's interesting. Now tell me about, you talked a little bit about Osmosis Labs, tell me about the relationship between Osmosis Labs and Cosmos and that ecosystem. And then specifically what is Osmosis Labs doing and why are people using it?

Sunny: Yeah, so, Osmosis so, you know, I was part of, like I mentioned, I was part of the original core dev team of Cosmos built a lot of that tooling and built, helped build the Cosmos SDK, helped build IBC, and then after a while it was like, alright, we built all this tooling, now I wanna You know, like I told you, I, I, I left consensus because I wanted to go build like infrastructure stuff, but then after I spent years doing that and say, all right, I want to go start building like, all right, now that now the infrastructure is at a point that I'm happy with.

Now it's time to go start building apps again. And that's kind of why we started Osmosis in order to build we're like, okay, what are the things we want to do? What does a new ecosystem need? Obviously it needs a DEX. Really our passion was we were trying to figure, you know, to We, we took like a bunch of winding routes until we figured out that we wanna build the decks.

We kind of originally wanted to start with like privacy stuff like building private payments and all this kinda stuff. But then we were like, thought about it. We're like, okay, what is the things that privacy is like not a product in and of itself. It's a feature, right? People don't come to something for privacy.

It's an add on bonus. And so we're like, okay, we have this.

Stephen: When they think they're coming to something because of privacy, they end up seeing that the functionality might not be a hundred percent and they end up giving up some of that privacy for user experience anyway. So we see things like Ironfish.

Same thing, privacy blockchain, but if you want to do certain functions, they'll reduce that amount of privacy for functionality. So you end up being probably right where you end up right now, right?

Sunny: Exactly. Yeah, I remember that I was looking through the Ironfish stocks and they were like, oh, I was like, wow, you figured out how to do this thing that Zcash can't?

How do you do that? It's oh, it's because they've reduced the amount of privacy that you get in order to do those functionalities. But so, yeah, so. We were like, all right, well, we need to build up something that has users and people come for, and then we'll build privacy functionality into it. And that's kind of why we started, we're like, looked on crypto, we're like, okay, exchanges seem to be the thing that like, has product market fit in crypto, right?

So let's build an exchange, let's build a DEX, and then we'll use that as a platform to build all of our privacy vision, or you know, we have a lot of like, takes and so Osmosis is our platform to deliver our crypto takes.

Stephen: And a couple things, was there not already a decentralized exchange platform on the Cosmos, in the Cosmos ecosystem?

Sunny: There were a couple just none of them really nailed it, I guess, I think Osmosis came and kind of just got a lot of Product market fit. We were the, it was well timed as well. Cause we were like, we launched like just a few months after IBC went live. Cause, so what happened was you had Cosmos SDK was live and then it took a year for IBC to come live as well.

And so we launched at a really good time. Part of like our, what we, what happened was Cosmos has. a lot of assets that are like very high value. You know, even if you look today in like the top, look at the top 200 assets by market cap, Cosmos probably has the most, like the second most after EVM ecosystem, like probably more than Solana.

But the problem is that like at the time it was very hard for centralized exchanges to list them because it's not as easy as adding an ERC 20. You have to run and so there was like a lot so you have, you know, a lot of pent up demand for liquidity on a lot of these Cosmos assets, but it wasn't being addressed.

And so with Osmosis via IBC, bridging the To Osmosis dex, we don't have to run a full node or anything. We're just running a light client as a smart contract. And so that's the other thing that like makes like Osmosis is bridging. So, or IBC very nice is it's permission list where in a bridge, wormhole or Axelar or something, right? You have to go ask their team hey, please add my chain to it. With Osmote, with IBC, you don't have to ask anyone. The way to set up a bridge, let's say you launched New chain today, right? Stefan chain. Okay. And you have your own token, Steph, and you want to have it on osmosis.

You don't have to ask us to run a bridge. The way you set up an IBC connection is you make a transaction on osmosis. You make a transaction on your chain and now the bridge exists because you're just deploying the smart contract for. Running the Lite client.

Stephen: Very similar to the actual Lightning Network, right? Where you open up that channel. And once that channel is open, you can kind of now transact back and forth without there being a huge burden. You know, most of the work is done in the first few transactions and everything else runs freely. That's really, really interesting. And now you're part of the core team at Cosmos.

Is this something that they encourage? They want, you know, the builders to go build more things on top of it. Or are they like, Hey. We kind of need you doing the, the core stuff here. How does that work when you're kind of building out from the main ecosystem?

Sunny: Yeah. So, okay. So sorry, I forgot a key event in this story. So that, that, that core team at Cosmos, the company was called All In Bits AIB for short. What happened was The easiest way to put it is the CEO kind of went a little crazy and he kind of, you know, because of that, everyone, like no one wanted to work at that company anymore, and all the engineers sort of like quit basically, but We all like were so mission driven that we wanted to keep working on Cosmos.

And so we all had to figure out different ways of what do we, okay. No, one's part of this like core team anymore. Some people created new companies to do core development. Some people, you know, some people started creating new companies to do new apps. So you know, Celestio was built by one of my ex, you know, ex colleagues at AIB you know, Somali Air was built by an ex colleague, Juno was built by a lot of the Cosmos ecosystem was, like, developed by the people who, you know, Used to work at that AIB company.

Stephen: So because of the tools are there, it's all open source. They take the tools and now they can build on their own infrastructure.

Sunny: Yeah, exactly. So we, that kind of acted like this, like big bang event that like seeded, you know, it, it, it kind of, you know, in retrospect, it kind of worked well where you had a bunch of people spend three years building all these open source tools.

Then you blow up the company and now everyone leaves to create new companies that use those open source tools to build their own products.

Stephen: The CEO probably didn't feel that way, but I'm sure the ecosystem really feels like, and I guess, you know, I think, was it J-Kwon at the time? Or is that, I'm not thinking of two separate scenarios.

Sunny: No, J-Kwon, yeah.

Stephen: Cause I think there was a lot of infighting and actually Adam token forked, if I'm not mistaken, right?

Sunny: Yeah. So, so that, that, that happened more recently. So J like. He like pops up every like now and then like he'll pop up Start some drama and then go and like and go into hiding again for nine months and pop up...

Stephen: kanye West of crypto Right. Yeah, if he's coming out of if he's coming out, you know, it's gonna be there's gonna be fireworks, right?

Sunny: Yeah, I mean, you know the thing with Jay like He's brilliant. I think like from a technical level you know, his Tendermint consensus is like, was just like a brilliant idea. And I just yeah, some of the, you know, I don't think he's necessarily like the best leader of the ecosystem, but I think like his technical ideas were part of why we're all here.

Stephen: Can we talk about that? Not so much about J, but hey, you're dealing with a bunch of technical people. You're still dealing with people. You can deal with the technology and you're dealing with, you know, the infrastructure and SDKs. But at the end of the day, you're leading communities. How tricky is that for even you at Osmos Labs where it's hey, I'm dealing with a bunch of developers.

As you said, some, you know, are more mission driven like yourself where you just believe in the mission. How tricky is that to deal with a bunch of technical people that may not have all the social capacities as maybe your, your regular leaders like the Jeff Bezos

Sunny: Yeah, that's a good question. I don't know. I mean, it's definitely been very interesting to see how some you know, within crypto, like some technical people have just really stepped up to be like, turns out they're like, just really good leaders in general Anatoly from Solana, right? I think he was an engineer, right?

And then I think he just stepped in and has done a really amazing job as just leading the community and stuff. So, I don't know, I think, I think there's different people do different things, right? Some of our engineers, they just want to, Code all day, not be in the limelight or anything.

Right. But then some people that, you know, they want to actually be able to be more you know, Out, outward facing.

So that for me at AIB, that was me. Like I was like, I liked to be more outward facing. And so I ended up doing a lot of DevRel for Cosmos actually. So I started as an engineer, but I was like, Hey, I don't want to like code all the time.

I want to go out and give talks, talk to people. Be the evangelist. And and so that, that's kind of how I like, kind of, my career trajectory where I started as an engineer, then turned more into DevRel. And I love helping people like onboard onto the stack. And then that kind of gave me more, You know, network with the larger, right.

Like community and then when, when it came time, you know, I, when we started Osmosis, I had that like network that I was able to like, you know, tap into...

Stephen: Let me ask you this 'cause I'm in, you know, marketing content creation. I work with a lot of like crypto and blockchain investigations, company analytical companies, the chain analysises of the world.

What's it like for you as a company now? You know, market yourself because are you marketing to more of the tech savvy people? Are you trying to bring in, you know, some people that have a foot in the tech savvy door, but they're still kind of building up huge web two infrastructure and helping them bring, bring them open.

How are like, cause I think a lot of tech people listen to this podcast. How do you approach marketing and business development? Is it just going to be in these hackathons? The Ethembers of the world. Are you trying to bring some more of the, you know, with the Bitcoin ETF, trying to bring some more of the traditional actors into the space to build on top of Osmos labs?

Sunny: Yeah. So I think right now, like we were very focused up till now. We've been very focused on like the Cosmos ecosystem. There was a core community within Cosmos and we were kind of serving that, but our end goal is to, you know, I want to build the decentralized Coinbase. I think Coinbase has done a really good job.

At onboarding people into crypto. That's right. And this is something I think most Dexys just don't do. Today, every bull market, a lot of people get into crypto. They enter via Coinbase and Binance. And less than 5 percent of it probably make it on chain. And they all get stuck there.

And so I think it's important for DEXs to move up the funnel and be, like, the way to get into crypto shouldn't be from Coinbase. It should be from a DEX, right? And so that's kind of what, you know, what we're targeting is, like, how do we You know, we're not really as focused on Oh, we want the institutional traders and stuff like that.

Like for us, or our, our vision is more on the, like, how do we get retail people to come? And our, our take is that that's, if you can solve that, everything else fits in where, you know, if the retail traders come, then other, you know, traders will come in order You know, the thing is at the end of the day, if retail is kind of like the fish in you know, in, in poker, you have the fish.

And so it's you know, wherever the retail is trading, that's where other traders are going to want to comment on that and then liquidity is going to follow that. And so it's

Stephen: And they're going to be the ones talking to the, their institutions say, Hey, why don't you offer this? Or why aren't you involved?

But tell me about the challenges of that. What's the biggest challenge of getting the retail? Do you think, you know, many, the average user, you know, decentralized exchanges, it's kind of like you're being your own bank. Do you think the average user is ready to be their own bank, or do you think they should be dabbling should they be fully invested in decentralized exchanges, or should they be in decentralized exchanges, and then utilizing those central points when they feel it necessary, or when they have to, you know, maybe off ramp or cash out?

Sunny: Yeah, so I think the I mean, there's a bunch of, so I actually did this just to experiment where this was like three or four months ago. I, one of my friends who works at, he's a software engineer at Robin Hood. So like technical in fintech, in fact, but has never used crypto. And I gave him a challenge and I've recorded the entire thing.

I told him like, Hey, buy one, But by 100 of Maker Token on Uniswap, figure out how to do it. And it took him like over an hour, like figuring out how do you download, what is a wallet? Do you have to download this MetaMask thing? Oh, why am I saving these words? It was like, it was a great case study.

I had the whole thing and then we documented it and Maybe a nice video out of it, but it's Okay, what are the pain points like, Okay, one, I think wallets are very hard for people to understand and especially saving the words. So we're, we're, that's kind of where we've been spending a lot of time right now.

We've been working on this concept called smart accounts. It's basically like a way of doing account abstraction, but it's like I want to kill the concept of wallets. Like you should not need to have a wallet. There's a lot of you know, you can use the secure enclave of your MacBook or your iPhone or your Android phone or whatever.

phones now have so much like cryptographic, like cryptography cryptographic material storage systems now. We don't need to have these separate wallets to do that anymore. So basically like when crypto started. We kind of started our own, Web3 kind of had its own trajectory of cryptography, but in the meantime, Web2 has actually also been doing a lot of cryptography innovation, and I feel they haven't been, like, merged yet.

And so that's what we've been spending a lot of time looking at going through all the you know, W3C standards, and be like, okay, here's this thing that can actually be, like, very applicable to crypto, and

so that way, the onboarding experience feels more like the Web2 apps people are familiar with.

So that's number one. Fiat on ramps, that's the other one. That's, and that's actually the harder problem. It's that I, is, you know, Binance has actually done a good job on this P2P thing that they've, they've done that. But at the end of the day the fiat on ramp is the thing that's very hard to decentralize.

And I think that's why Coinbase was brilliant with USDC, right? Because my take is everything else that they do is going to be. get Decentralized, but that owning that fiat on ramp and off ramp point, that's that's where Coinbase will be relevant in the long term.

Stephen: And I think the heart, the reason why that's hard and that's going to be my next question is because the lack of, you know, know your customer, anti money laundering, compliance programs that we have now, decentralized exchanges.

How do you solve for that problem? You know, when people are like, Hey, I would, I would use you, but you know, I, I, I need KYC, I need, you know, compliance, I need that checkmark from a compliance standard. I need the tax reform that's going to be provided by the coinbases of the world.

How do you kind of solve for that problem, which seems to be a more everyday problem of the people that you're trying to onboard?

Sunny: Yeah, so, I mean, we're working on Generating tax reports, for example, like on our site for you. But the the compliance stuff, that's where I think this kind of comes to you need like some cryptography, like zero knowledge proofs.

You want to be able to say make a proof that Hey, I'm proving X, Y, Z about myself, but like keeping that information private. So like I mentioned even, you know, Our goal is we want to, our goal was like a privacy platform, right? And so, but we've had to, especially like post Tornado Cash, we've had to rethink a lot about how we design it and architect it, so it allows still compliant maintain levels of compliancy while keeping the privacy without undoing the whole point of the system.

Stephen: And is there any projects that are built on the Osmosis that you're like, Oh, on the Osmosis that you're like, Oh, these are really cool. More people should know about them. Or just even your personal projects that are like, Oh, I just love dabbling in this one because it's something that I had, you know, that I'm really close to.

Sunny: Yeah. I guess a couple of them that I'm excited about You know, there's one that's called StreamSwap. So that's actually a project that we started like internally and then we kind of spun it out into a separate team. But that's basically like a launchpad. It's like a new, a new auction system that we designed because I just didn't like the way that the auction systems today seemed a little bit too gameable and didn't feel fair enough to me.

And so we kind of designed this new mechanism, and now that's been being used for, you know, a lot of the token launches in Cosmos happen via the StreamSwap auctions. And we actually just had, for the first time, had a NFT being launched via the StreamSwap, and it actually ended up being the biggest StreamSwap.

I think there's over Almost like 2. 5 million dollars. I think 2. 5 million dollars like in that, in the, in that auction right now. So that's like pretty exciting to see it be used for more use cases. There's also like a perps platform on Osmosis called Labana, but they do this thing called they call it well funded perps, but basically it's like, it's, it's like a GMX style thing, but it's actually designed to be much more In my opinion safer for LPs because the collateral is still in kind.

So, you know, the problem with most per platform, you're using USDC as collateral. But here you, you're able to like, if, and so that, that, that limits their ability to like, support a lot of things. You know, you can't create a perp on some shit coin, right. But because it's just too risky for...

Stephen: can you describe perp is, you know, a lot of audience members aren't going to be, you know, know about these acronyms.

This kind of gives us a basic understanding of when you say perp.

Sunny: Yeah, so a PERP is basically, it stands for Perpetual Future, where it means that you're tra you know, in, in traditional finance, a future is saying, hey, I'm trading this, this, In, in, in the fu like in the future I'll trade you in instead of selling you one Bitcoin today, I'll, you can buy from me like the one Bitcoin a month from now.

Right. At a certain price. Right. What's the point of this? Hedges? Yeah. What's the point of this? It's because it allows you to do leverage very easily. So instead of being like, Hey, I gimme like one Bitcoin now, it's like, Hey, give me 10 Bitcoin in the future. I'm gonna put up this much money. As like collateral to buy that 10 Bitcoin from you.

Or really what you have to do is you have to buy the difference. So you only have to put up the money. If Bitcoin's at 65K and you know, I want to buy 10 of them a month from now. I only have to, you know, I think it's going to go to 70K. I only have to put up the money to buy that difference in the value.

And so that's kind of, yeah, people, you know, People love trading on leverage, basically. And so, Perp's

Stephen: People love trading with money that's not theirs.

Sunny: Yeah. So, Basically, Lavana has built a, a new design for how to do this sort of leverage trading that is just allows you to trade on leverage with A larger variety of assets because they've reduced the risk to the protocol.

The, the reason why most perp stacks is can't just list like random new coin that just launched is because there's not enough, it's too risky for the platform.

Stephen: Cause the market manipulation is definitely there where if it's not enough volume and not enough transactions, whoever's launching this token has the ability to influence it, which we see with a lot of these new tokens, I think Chainalysis and others have reported like.

50 percent of the new tokens on either Binance Chain or Ethereum are all really easily manipulable and people have to be very wary of because they're pumping them schemes. Yeah.

Quick question. You, you know, I've read up a lot about Mesh Security, which sounds very interesting. You're saying basically it's the NATO maybe the blockchain, maybe this kind of describes what Mesh Security is and how you're embedding this in some of the projects you're working on.

Sunny: Yeah. So Mesh Security, you know, I talked about a little bit earlier about choose what security you want to use, right. And Mesh security is sort of the framework that enables that. It allows you to brings. You know. . Most blockchains today have always been like, Oh, you have to have your own security, or you have to use like only Ethereum for security.

It's like Messenger is no, no, why can't we actually get security from many different places, right? Obviously, you'll use your own token, but you can also get security from other. So as an example,

Stephen: Can you, can you build out the concept of what security, like what security are you talking about?

Especially because we have a lot of finance people, they think you're talking about security in itself. So it might be helpful to just kind of like build up the foundation. What security

Sunny: means here is economic security that's staked protect the network, basically. What that means is most of these blockchains today are proof of stake-base networks. And what that means is we have people have staked, let's say, 500 million of assets on osmosis and our platform custody is 300 million right now, let's say.

What happens is what keeps these assets Like this 300 million from being stolen is that if they try to steal that 300 million, the people that are like, they're going to lose 500 million. So no one would do that. Right. That, that, that'd be ridiculous. So the idea is but let's say the assets under management of our system goes up and up and up.

Right. Let's say it gets to a billion dollars and then, you know, our token price only increases to where it gets to 750 million. Okay. We have the assets under management is higher than the. Economic security that's slashable in case of misbehavior. So how do we solve this? Is let's bring in, let's get, let more, let's not only rely on the Osmo token for, for, for economic security.

We can say, Hey, if you have Bitcoin, you should be able to stake it on our chain, help provide more security. And why you do this is because you get the cut of the revenue from the chain, right? It's a DEX, this trading fees being. So if you are staking your tokens to help, you know, secure the network, you're getting, you're getting revenue.

Stephen: You're profiting as well with the, which is almost like game theory, right? Cause now you're profiting from the success of the network, which is almost like you're double, you're getting paid doubled. The strength of the network, you're a part of it, you're getting paid for it. Why would you, why would you want to try to do something illicit to it?

Because that's where your success lies.

Sunny: Exactly. And so, yeah, that's why it's like for the Osmo, it's so, you know, our Osmosis today, it's only secured by Osmo, but we'll, with Mesh Security, we'll have it be secured by Bitcoin, by ETH, by Atom, by partner project tokens. You know, there's Like Levana, right?

Like I mentioned, Levana is a project built on top of our chain. They have their own token, LVN. Why can't people stake LVN token to secure the chain as well, right? We'll be able to secure Osmosis with LVN. More than just Osmo. That's the guy. Especially people

Stephen: that are already or projects are already in the cosmos ecosystem.

It makes a lot more sense for them than to like maybe pull Ethereum, right? Exactly.

Sunny: Yeah. So I, I have this like concept where it's okay, you're building, you know, a millet, an army to protect your chain, right? The first people, when you build an army, the first thing you do is get You know, you, you staff your army with citizens, right?

That's your own token holders. They're the most value aligned with your chain, right? And so you give most of the revenue to them. But let's say there's a security deficit, right? Who do you rely on next? Is your allies, right? Do you say Oh, okay. Hey, LVN token holders, you can stake as well. You get some revenues because we're trying to increase our security of the chain or, you know,

Stephen: And that protects, would that protect their chain as well? Would that help benefit their chain? Yeah, similar. Allies. Now it's you have more people, more security, and it protects now more of the ecosystem. So it's like the shared values.

Sunny: If even with all your allies, you're not at the security threshold you want, then you finally rely on mercenaries. And that's where the Bitcoin and ETH of the world come in.

Cause you know, the Bitcoin people who are staking on your chain, the ETH that's staking on your chain. They're mercenary, right? They're just doing it for the revenue. They're not

Stephen: that value aligned. They care of support, whether , osmosis or cosmos, osmosis or cosmos makes it. Yeah.

Lemme talk, you know, as we end this conversation, you, you joked about, you know, being kind of like a Bitcoin maxi.

What are your thoughts about the Bitcoin spot, ETF? Is that getting us further away from obviously your ethos of more people being onboarded in the decentralized nature? Or do you think it's good for the industry that hey. Eventually, if there's enough players in the game, right, if there's enough people at the stadium, you as a decentralized network might be able to sell them more hot dogs versus Hey, there's not that many people.

Even if we had the hot dogs, there's not a lot of people to buy them in the first place. What are your thoughts on that?

Sunny: Yeah. I mean, At the end of the day, I think it brings in more people and like more attention, right? I think people are, you know, I, my, my, I think Bitcoin will replace gold. That's just always been my thesis.

And I think that gold, like you need, you need to make it, it, gold works as everyone in the world has the ability to like access it. And some people, a lot of it comes from the gold ETF, but also people just, you know, Buy gold directly. If you go to India, like so many people you know, they take the excess salary and they, they put it into buy, buy like bricks of gold basically.

And so, you know, I think the ETF just increases the options for how people can hold Bitcoin, right? There'll be the people who want to hold it in like self custody, but then, you know, not everyone's going to do that. And I think, I think your analogy with the stadium is just like spot on.

Stephen: I just thought of that now. So. Yeah, I'll make sure to clip it.

Sunny: Give more people access to Bitcoin. That's the, that's that's the goal.

Stephen: Yeah. If they're sitting there, if they're talking about it now, it's at least so you can introduce it in the conversation. They even understand what the underlying asset is. Whereas before they probably didn't, they just know it 'cause it comes up on the ticker on C Nnn or, yeah.

Or, or BNN any advice, you know, for anyone that's looking like they listen to this podcast, they're like, Hey, you know, I have a concept. I would love to try and build on osmosis, or, you know, in the Cosmos ecosystem using the tools. What advice do you have for new developers that are looking for a little bit more similar to you, right?

You're looking for a little bit of a different application or to actually create applications. What advice do you have to anyone that's looking to enter your ecosystem?

Sunny: Yeah, I guess my advice would be learn Rust. Rust is probably like the, like smart, the main smart contracting environment of Cosmos is in Rust and, and for Solana as well.

So basically like today, if you're learning, if you want to do smart contracting on EVM, it's Solidity. But I think that's you know, Solidity feels like it's like the thing that's going to you know, but I feel it's like very similar to Java, right? For a long time, people thought Java was just like, You know, it, it won, right?

But eventually new programming languages come out and I think most smart contracting systems are going to be moving towards rust based things. So, you know, Cosmos, we have this thing called CosmWasm, Solana, Move, these are all rust based. So if you want to like have a development skill set that I think is long, more long term, rust based smart contracting is probably what to invest your time in learning.

Stephen: That's, that's really interesting.

And, you know, any other insights that you have about what you're building on Sponsus Labs, like the thrill of the shill right now, as I got from the MFM podcast what do you want to talk about that you're looking forward to in 2024?

Sunny: Yeah, I think what I'm looking forward to is, I mean, I think the three big focuses are things I kind of touched on throughout our course of our conversation, but just to recap them is like Bitcoin renaissance is happening.

Right. Bitcoin for a long time was just. Pet rock and now, you know, very valuable pet rock, but like it's now there's a whole ecosystem of development growing around Bitcoin and osmosis is intends to be a big part of that. You know, we want to be the decks for Bitcoin. So that's, that's number one. Number two is Account UX, right?

Like fixing onboarding. Onboarding is really broken today. And you know, we are, we have a roadmap of steps that we're taking to do that. And then number three is privacy.

Stephen: Do you think people really care about privacy? You know, I always think about we always say we care about privacy, but we'll give out 10 pieces of personal information to save 10 percent on Bed, Bath and Beyond.

So like, where do you feel that people really sit on the privacy scale?

Sunny: So I think that so I think actually people do care about privacy, but there's certain things people care about, right? So for example, for us you know, you have this, like all this, like front running and MEV that happens in crypto, right?

That's a privacy problem. That's because the mempool, the, the, you know, before your transactions make it on chain, anyone can read your transaction. That's a privacy issue. So that's solving that is number one.

Stephen: And what front running is, is that they can now spend more on transaction fees. To either offset whatever you're trying to do or to see Hey, everyone's trying to buy this NFT.

It must be very popular. I'll just double the transaction fees. I'll get the NFT. But I know because there's so much pent up demand that they'll be coming to me when I go to sell them on the secondary market. Is that? If

Sunny: you want to buy an NFT, right? You can, someone can see that that's what you're trying to do.

They can buy it and then turn around and try to sell it to you. Oh no, no, you pay me more. Pay me 50 percent more. Right. That's not cool. Yeah. The other one is like on chain privacy for traders. So a lot of traders I know don't trade on decentralized exchanges because everyone can see every, they're leaking their trading strategies, right?

Everyone can see every single trade that someone is making. That's, you know, a lot of these companies spend like a lot, like a lot of money developing these proprietary trading strategies that are private. If you go on the stock market or even on centralized exchanges, you can't see Which account made which trade.

Right, right. That's today. That's that's just a no go this, this is table stakes here. Right.

Stephen: Are able to figure out your whole strategy in a matter of seconds running algorithms.

Sunny: Exactly.

Stephen: Awesome. Where's the best place? Do you like to talk to people? Is it Twitter? Can you stand crypto? Twitter? Like where's the best place for people to get in touch with you?

And we'll share it in the show notes.

Sunny: Yeah, Twitter, definitely. So my Twitter handle is @sunnya97. And you can follow Osmosis @osmosiszone.

Stephen: I love it. I love it. Sunny, this was such a great conversation. I learned a touch, a ton about decentralized exchanges, but more importantly, the ethos of why you're building it.

I think people just think decentralized exchanges, we're trying to avoid compliance, but you're a lot more thoughtful as Hey, we're trying to build on top of something that most people should get involved in, which is Bitcoin. And this is the best way that we can think that you can interact with multiple chains.

Without there being that centralized authority that we started from trying to get away from in the first place. So, it was great hearing your thought process. And I think that will help more people understand about what decentralized networks really are about.

Sunny: Yeah. Thank you for having me on. This was uh, really fun.

Stephen: Thanks, Sunny