We are joined by the founders of Stride - Cosmos' liquid staking zone - to discuss how LSTs will catalyze Cosmos' DeFi Summer. We discuss how Stride staking works, competition with Lido, Interchain Security, the Hub's Liquid Staking Module, Stride's upcoming features and more!

And as usual, we start the episode with our analyst bullpen to discuss the SEC's crackdown on Binance, the McHenry-Thompson crypto bill, dYdX bullishness and the Apple Vision Pro.
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Timestamps:
(00:00) Introduction
(00:49) Hot Seat/Cool Throne
(30:21) Interview Start: Cosmos' Moment
(35:43) Will LSTs Ignite Cosmos DeFi?
(38:49) The Competition
(42:07) Stride’s User Flow, Interchain Accounts & Token Design
(49:23) Interchain Security
(57:06) Trading at Peg and Instant Redemptions
(1:02:41) Sourcing Liquidity and POL
(1:06:30) Staked ATOM as Cosmos’ Gas Token
(1:08:08) Allocating Stake to Validators
(1:11:30) The Liquid Staking Module
(1:14:26) Stride’s Research and Roadmap
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Follow Aidan: https://twitter.com/aidan0x
Follow Riley: https://twitter.com/interchainriley
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Today’s episode is brought to you by the Atom Accelerator, now offering grants to build out the ATOM economic zone! It's the perfect time to build with Cosmos and join the thriving ATOM ecosystem. With Interchain Security live, and the power of IBC connecting the interchain, builders are flocking to Cosmos. Join the ranks of Neutron, Lido, Astroport, Gitcoin, Mars and numerous other projects harnessing Cosmos’ leading infrastructure. Discover how to secure a grant from the Atom Accelerator by visiting https://www.atomaccelerator.com/ today! 
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Resources:
Matt Hougan Binance tweet
https://twitter.com/Matt_Hougan/status/1665779583759843329

Stride
https://stride.zone/
https://twitter.com/stride_zone
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Check out Blockworks Research today! Research, data, governance, tokenomics, and models – now, all in one place

Blockworks Research: https://www.blockworksresearch.com/
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Disclaimer: Nothing said on 0xResearch is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Dan, Sam, and our guests may hold positions in the companies, funds, or projects discussed.

There were lots of teams that thought about building DeFi in Cosmos and just never launched because the hurdle rate was so high.

Lots of DeFi applications in Cosmos just don't make sense if you don't have Liquid Seiken tokens.

Welcome back to another episode of ZeroX Research.

This show is made possible Thanks to our fantastic sponsor, the Adam accelerator.

It has literally never been a more exciting time to build in the cosmos.

So if you're a contributor looking for grants between $10, 000 and $1 million, be sure to check out Adam accelerator.com, or you can check out the link in the show notes.

Today is June 5th, and we have an awesome interview lined up with the 2 co-founders of Stride.

Actually, there's 3 co-founders, but we get Aiden and Riley on today.

Liquid staking is obviously a prominent industry in the Ethereum ecosystem, so we're expecting the same thing in the Cosmos as well.

But before we get into the interview, as always, we're joined by 2 Blockworks research analysts, Effort Capital and ZeroX Pibbles, for a little bit of a hot seat, cool throne to discuss the latest market happenings.

Dan, how about I kick it over to you this week to start out?

Well, unfortunately, the talk of the town today has been the SEC's entrance back into the crypto space.

This time, bringing the Binance cartel, CZ, and all of the entities into their purview, essentially.

So the SEC has kind of joined the fun here and alleged Binance, BAM Trading, which is the operator of Binance US and CZ, the 3 of them are those groups and individual are in violation of the US securities law.

So among the charges was essentially the idea that Binance and BAM Trading sold unregistered securities, Binance commingled customer funds, similar to what we saw with the FTX debacle, Binance operated as an unregistered exchange, And there was wash trading on Binance US.

And lastly, Binance and CZ solicited US customers, which is kind of if you're soliciting the US customers, then you know, breaking securities law, that kind of compounds compounds the dilemmas that they're facing.

So for the people in the space, you know, this has kind of been rumored to be happening for quite some time now, it's almost like it feels like 2 months ago, the first talks of whispers of, oh, you know, like, CZ is in trouble.

He's been commingling customer funds, kind of started becoming a thing.

You know, there was some sketchy relations with FTX when that all was going down back in November.

And then just honestly, just weird cryptic tweets have been coming out from different individuals in the space.

So this didn't come as like a total surprise.

But it is indeed here, you know, I saw asset prices fall anywhere from like 5%, 5% on the initial pullback to around

So the market definitely wasn't thrilled to see this.

The coin-based stock, coin got absolutely smashed.

I think that wick down to like minus 15% on the day.

So people really just like unsure of what to think of this outside of the fact that it is bad news.

As you know, my initial gut reaction was, again, not too surprised.

Just like, OK, we kind of heard whispers of this, but now it's here.

And I was looking for some copium on Twitter.

And sure enough, Matt Hogan was able to provide me some of that.

Basically saying, you know, the Silk Road got washed out and that ended up being a net positive for crypto.

And we'll put the link in the show notes.

I'm blanking on a couple of those other points, but basically saying, you know, things that are net negative for the space, but exist, getting washed out, ultimately are positive.

So that's kind of the way I'm looking at this.

And maybe some of the, like, if these things are true and there was co-mingling of customer funds and things of that nature, then like, okay, that's, again, we can't avoid, we can't keep having these overhangs kind of fall over us.

But so it's nice to wash these things, these bad pieces and bad actors out of the space, even if that is kind of some short-term pain.

You know, this was, I guess, a FTX in and of itself was similar to that thesis or that idea as well.

But Pibbles, I know you had a couple other things that you wanted to point out on this.

So first, I think it's interesting because we don't know if this is the end of Chokepoint, if this is the last stone to fall or if this is the start of Chokepoint

and then we start seeing even worse things happening for the industry.

Another thing to remember is that Binance converted about a billion dollars of BUSD to different crypto assets, probably mostly majors in March.

And that helped drive a lot of this recovery rally.

But if they have to pay a fat fine, there's a solid chance that maybe they have to liquidate those and now there's way less liquidity.

So I mean they can nuke us back to the shadow realm if they wanted to.

Another thing is the SEC came out and specifically said that Sol, Cardano, Matic, Filecoin, Atom, Sand, Mana, Axie are all securities.

Effort Capital pointed out probably earlier this morning that these are actual assets that Hong Kong whitelisted to go live for trading.

Yeah, I didn't read the entire lawsuit or claims against Binance from the SEC, but just being a Cosmos goal, I did look into seeing like what their take was, like specifically why Adam might be deemed a security.

And it kind of just shows that, I don't know how quickly they put this whole legal document together, but they clearly are poorly researched on, I guess, the history of some of these assets.

So specifically for Adam, just to give you an example, Jake Kwan, who's 1 of the founders of the Cosmos ecosystem and of Tendermint, he recently created a new legal entity called New Tendermint that is supposed to do some core development work for the overall Cosmos ecosystem.

It really spews from this other legal battle that's happening internally in the Cosmos ecosystem.

But long story short, New Tendermint, which is this new development company, has not done any dev contribution work to the Cosmos Hub.

Yet in this paperwork, on their GitHub, New Tendermint hasn't done anything for the Cosmos Hub for core development.

In this legal document, they specifically call out New Tendermint as this new entity under JQuan and said that this new entity has done significant contribution efforts to the Cosmos Hub.

And they also claim a whole host of like other falsehoods about like the atom token how it's distributed to its entities upon the initial allocation for back in

So it just feels like it's like poorly researched That is I'm only speaking about the the atom asset in particular But I mean as we've seen time time again, the SEC is going about this from like a regulation by enforcement.

It's actually coming up with like a good framework.

1 thing that is more on a positive regulatory development point of view is 2 house of representatives, Andrew McHenry and Thompson, who are 2 house reps.

They created this new market structure bill specifically for crypto assets.

It is still in draft stages, but it's kind of making the rounds on crypto Twitter and other legal entities out there, it really comes up with a framework for like how to, even if a crypto asset is a security, like on day 1 when it is initially launched, what is the pathway for a certain asset to actually become a commodity?

And what is the framework required for that asset to kind of make that transition?

I'm not a legal expert, but a lot of legal experts that are on crypto Twitter are saying that, like, it's not perfect.

I think what the EU is doing with MICA is It's coming out with like a whole new regulatory body just to focus on crypto assets.

Whereas this bill would kind of say like, where do crypto assets fall in the current regulatory framework of the United States between like the CFTC and SEC.

So it kind of does a little different spin than what like Mike and the EU is doing.

But overall, like a lot of crypto forward legal and legal experts are actually saying that this is a potential big win for crypto in the United States, assuming it passes.

But, you know, in lieu of what we're seeing today with the SEC cracking down on Binance, there are potentially like a light at the end of the tunnel to look forward to in the coming quarters, assuming this eventually makes its way to the House floor and ultimately the Senate.

And on that note, it feels like this has been the first time where we have a moment that we can kind of step back and be like, okay, like, this is actually this is kind of a win for crypto when it comes to regulation.

So that's kind of my view of on on that bill, you're mentioning effort.

And I love to see that I saw Lex Node on Twitter, Gabriel Shapiro, I believe his name is did a great analysis of this.

And there's still of course, a couple unworkable things in there, just in but again, this just feels like the 1 of the first moments that we actually have something that we can like use as a positive tailwind when we look at things from the regulatory lens.

So that's at least a positive development.

I just wonder how many, how much like legs it actually has.

Cause obviously our timelines are filled with crypto focused people.

Like I wonder if people who pay no attention that are active in politics, like if they support the bill, like I have no idea, but the best we can do is cross our fingers, I guess.

It just, yeah, I mean the regulatory landscape just doesn't look great right now.

Obviously Canada, I think Australia has had a lot of pushback.

I think they're even, I think Canada made it like illegal to buy or trade crypto at all.

So I hope that's not a path that we embark on.

But at the end of the day, like I always say this, I think it's kind of inevitable.

Like it's, you can't put the genie back in the bottle at this point.

It just, you know, it's, it's all about timeline.

It depends if the U S wants to remain kind of the hub or if we want to push that overseas and eventually flip flop later on down the line.

And it, it ends up being the former, But yeah, that's all I've got on that.

Does it feel like it's like when I think about this, it feels like this just makes things for a longer, a longer, colder winter.

But to your point, Sam, like, you know, you can't really put the genie back in the bottle.

But like, is this something you guys think, maybe I'll throw this to you, Effort.

Like, do you think this will just blow over or is it something that's, well, probably have to be, you know, another thing to be battled out in court.

I saw that Binance actually already tried to settle, allegedly with the SEC.

I think they put out a statement saying like, Hey, we tried to even settle before this got to this point, but basically no cigar.

So I don't know what are your takes on the impact to the industry for the next say, 6 to 12 months?

I mean, people said it already, but like liquidity is already like, terrible.

We're at the lowest lowest trade volumes that we've seen in years.

And I think over the past few months, Binance's market dominance has actually been slowly chipping away, which I think is good regardless of this, because I think we need more diversity in exchanges.

It's for like a healthy ecosystem, especially a sector that prides itself on decentralization.

When 1 entity has 90% market share, that's not good.

They're probably the only crypto entity that has more money than Coinbase.

And I think Coinbase has relatively good actors in the space,

least probably the best actors in the space compared to most other entities out there.

I'm not sure about the security standpoint, about what assets or securities or not.

I think if some of these things that are being said in this lawsuit, like them commingling funds, potentially buying a yacht with some of these commingled funds, if that's true, like financing to get the book thrown at them either way.

I also think that like the Ripple lawsuit that's going on right now, the Coinbase lawsuit, you know that they're going to be fighting for that over the coming years.

Like you brought it up earlier, Dan, like we kind of saw this coming.

The SEC was obviously, if they're going to go after Coinbase, they're absolutely going to go after Binance.

It doesn't really like change the market dynamics that much.

The only concern I have is if like the DOJ comes in and goes after specifically CZ and goes after Binance and looks to extradite them to the United States and potentially jail them, that could be a really big issue because now EU and other areas where Binance is legally allowed to operate in might decide to kind of side with the United States and really throw their own book at Binance, which I think could have like huge issues, like impacts from like a liquidity perspective.

If anything, it's going to just force more users to go on chain because Sam, like you said, the genie is already out of the bottle.

So it could be bullish for like on-chain DeFi primitives in general.

But I think in general, like the United States, it doesn't really change much.

Like they're going to be combative with crypto regardless.

If what they say is true, Binance doesn't look like they're the greatest actors in the space.

They've always been on the shadier side, at least that's my personal take.

The bullish spin zone pulls liquidity back on chain to its home where it belongs.

And then I suppose watching bad actors out of the space is a net positive over the longterm.

We do have 2 pro crypto candidates running for presidency in just 1 year, right after the Bitcoin halving, right after DASDC, a lot of catalysts coming up here.

So I'll at least keep my fingers crossed for that.

But I actually, in the same vein, I've got a Purpse on the cool throne for the exact reason you just mentioned effort.

I think we saw this exactly happen and play out when FTX collapsed, not saying Binance is gonna collapse, but ultimately, Perp's platform saw a huge increase in just underlying fundamentals in terms of users, volume traded, fee revenue generated.

So I think that that could potentially be an outcome.

I know finance is a regularly used exchange to obtain leverage.

So if there's any question around that, I think a lot of users do flow on chain because once you get bit by the leverage bug, I think that's just something that it's a lifestyle, honestly.

So yeah, I specifically want to point out DYDX because, you know, we're already starting to see Dex volumes start to surpass sex spot volumes.

So I think towards the tail end of this year, even next year, I don't know how long it takes to play out, but I think that we'll start to see that in the leverage trading space as well.

And we see that through like the GMX token, DOIDX, GNS, et cetera.

That's my favorite play going into the end of the year.

So I've got them on the cool throne this week.

You've got LSTs ready to just be proliferated.

I'm pretty sure they're focusing on a mobile app.

There's just a ton to be excited about over there.

Like if you ask a hundred people in crypto, what's your favorite crypto UX experience you've ever had?

If they're not located in the United States, I guarantee a lot of them are going to say do IDX.

So I'm just kind of bullish Antonio, their team and their ability to ship a good product.

Everyone keeps talking about the giant unlocks in December.

But the way I see it is if they really do build a product that is better than any centralized exchange offering, which is exactly what Antonio told us he is seeking to do on 0 X research, like a couple months back.

I think that they're going to want to stake those tokens and earn that revenue into perpetuity.

Like I don't see, I get it would be tempting to take that immediate payout, but I do think there's a serious case to be made for that to be the go-to leverage trading venue in the cosmos.

And if you can own a large portion of those revenues every single week, and it's truly decentralized, which is the reason they moved from Starkex app-specific chain in the first place, I really like the play.

You even saw quite a bit of strength out of the token today when everything was nuking.

So that's usually a good sign when things are nuking and something else is holding up strong.

So I think it's something to pay attention to.

I think the timeline effort you told me before the call was September sometime.

So I just like all the catalysts for DYDX going forward.

Yeah, even when we spoke to Antonio, gosh, that must have been like the third or fourth episode, which is pretty crazy to think now we're on 40 some odd episode numbers, episode counts in.

So bringing it back to the early days, but, you know, I think 1 of our major takeaways from that call was, if they can pull this off, it is really going to prove the use case of an app chain.

So still really excited from that standpoint.

I think they're doing a lot of really cool things on the tech level tech layer, like decentralizing the indexer and things of that nature and using asking the validators to do more in their system and decentralize their order book.

So a ton of really cool pieces that they are custom building out.

So super excited to see this come in the next couple of months.

But yeah, to your point, Sam, it's hard not to be bullish on somebody like Antonio, who is just so product focused and all he wants to do is make the best product.

Yeah, I would also say outside of DYDX, you have something like Quenta on Optimism as well.

We haven't had infrastructure this good for on-chain perps or just on-chain activities in general.

We just need to go more than 2 days without having an exploit somewhere.

Going back to like DUIDX and them kind of trying to decentralize their entire stack, it's arguably a regulatory loophole, right?

Especially now with the SEC cracking down, or not now, they have been.

But if they are sufficiently decentralized, there's really no 1 point of failure.

If the SEC keeps cracking down on crypto projects, obviously it's bearish the asset class.

But if the DOIDXV4 product is really good, it's incredibly bullish for AppChains, Dan, just to your point, just from like a regulatory perspective.

And I don't wish this on any teams, especially teams that are trying to push crypto to mainstream and really trying to improve the product market fit.

But I will also say I'm kind of like, I'd be worried if I was L2s right now.

If you have a token today, if you're arbitrary optimism and you're running a centralized sequencer, I don't know.

I hope they make it out alive and I hope that they're able to ultimately decentralize that sequence over time.

But I think in the same vein that you can be bullish D-Wed, DXV4 and this whole like decentralized app chain thesis, if it is correct, if the product is good, you also have to kind of look at like the L2 model and be like, if they don't decentralize their sequencer soon, and they have obviously like a real reason to push this as quickly as possible to get them decentralized and not have any single point of failure.

Like that is the reason to decentralize is strictly what the SEC is doing.

And I'm personally worried that if it doesn't happen soon, they can kind of be part of this, I guess, collateral damage from the SEC's actions.

And just to play devil's advocate a bit, just because you bashed on my Ethereum L2s here.

I do think the stakes are pretty damn high for DYDX in the Cosmos ecosystem.

If I were a betting man, I'd be betting on DYDX, not financial advice, all that jazz.

But I do think if they fail over there, that's gonna really hurt Cosmos, the whole brand.

Yeah, I don't know if it's something they'd be able to recover from, to be quite frank.

1 of the lead core devs of the Cosmos ecosystem, I'm not going to mention names, but has said it.

He said it publicly too, not that it's a big deal, but like, DUIDX literally dragged their market maker participants and USDC into the Cosmos.

I'm sure USDC always plan on launching the cosmos ecosystem eventually.

They're already launched on other chains like our ecosystems like Avalanche and Solana.

But my understanding is like USDC predominantly came to the cosmos specifically to support DYDX and their venture that they're trying to build out there.

So like they kind of kicked, they dragged their, their, I guess, major contributors and core participants, like kicking and screaming into the Cosmos ecosystem.

If this doesn't work out, like there goes really most of my thesis for why I'm bullish to Cosmos ecosystem.

Well, I'm glad that you agree with me there.

It's interesting to hear you talk about the bear case for Cosmos.

It's not something I get to hear too often.

Everett, I do know you've got a pretty fun, cool throne this week.

So it's not crypto specific, maybe crypto like adjacent.

There's like a metaverse play here eventually.

Today, Apple's WWDC worldwide, I think developers conference, I think it stands for.

Obviously there was a lot of hype around their new product launch and it was official.

So they did announce Apple Vision Pro, their new AR VR headset that's really trying to compete with Meta and I think like Sony and a couple of other products out there that are really like the large players in the VR, AR headset space.

They're calling it their spatial computing product.

I'm gonna be honest, it looked sleek as hell.

I really didn't know what to expect from it, but they pretty much have their own like operating system called Vision OS.

That's really just like, to me, it looks like a copy pasta of Mac OS or iOS, but specifically for their headset product.

And I honestly think like that alone, regardless of like additional use cases, I'm sure there's a shit ton over time that'll build out once there's a good developer toolkit or environment for this type of product.

But I think a VR AR headset having its own operating system, a really solid 1, is really what's going to separate the products that have failed in the past, like Google Glass, for example, to this Vision Pro.

So Apple's name of the game is building a solid operating system.

They did it for Mac, they did it for iOS, they did it for their watch.

That sleek user experience is really what I think sets their products apart from the rest, like the Androids and others of the world.

So I think having their own OS that is like very familiar to the average iOS user, I think this is gonna be like, they're gonna knock this thing out of the park.

It's very easy to like make these things look cool on screen until the actual user uses it.

I'm sure there's going to be a lot of bugs the first couple of iterations.

But if it's even somewhat compared in the real life to what they showed Caste at their keynote speech today, I'm incredibly bullish on this product.

Just as an example, if I was wearing the headset right now and I actually thought the headset looked pretty cool, if I was staring at this screen, I can literally lift up my head and then project this entire screen into my physical space and expand the size of the screen.

So eventually you won't even need monitors.

You can literally just duplicate displays in your area and just have a 360 degree view of all your different screens.

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Liquid Staking Will Supercharge Cosmos DeFi | Aidan Salzmann, Riley Edmunds (Stride's Co-Founders)