On The Other Side ep 75 - Freedom through Interoperability w/ Jimmy Chang
Primer: Why is interoperability important for a multi-chain future? How does Jimmy conceptualize liquidity? What can we do to protect users who are bridging their funds? Let’s find out in this episode of On The Other Side.
Background
Have been in crypto for a few years
Worked at a bank after graduating. Did research for them and shaped their blockchain strategy
Subsequently joined Ripple as a product manager for 2 years before making his way into Ethereum
Worked at Aave as a product manager
Have been working on Catalyst for over 6 months now
How He Got Into Interoperability
At the end of 2021, during his tenure at Aave, they were about to launch Aave V3
They had something called Portal, which is a framework for cross-chain lending
Was also thinking about the future of scaling
Spoke to a number of companies and realised that it all boils down to cross-chain/bridging problems
Vitalik had a Reddit post that went viral — The future is cross-chain, not multi-chain
It pissed him off and motivated him to tackle the cross-chain liquidity problem
The Conversation On A Multi-Chain Future Thus Far
The best analogy for it would be conversations around governments and nation-states
The conversation starts with Ethereum
The original roadmap was Ethereum being a world computer
We saw the edges of the system as far back as CryptoKitties in 2017, with the conversation of scaling as old as Ethereum itself
People approach the problem in different ways — rollups, different chains, rollups on top of rollups, etc.
Think that the world is going to have a lot of chains
There are many standards and people are trying to find this over-encompassing thing, which is impossible
Scaling Issues
Scaling: Solving Real World Problems Or Incentivizing Others To Build Apps On Your Chain?
Economics is a powerful driver of decision-making such that it’s hard to decouple it from the technical advantages of it
Having years of product management under his belt, it has always come to the point of business versus technical lift trade-off
Some apps generate all the value and they realize that they are disproportionately paying a lot of tax into the blockchain they are operating in (e.g. Uniswap, OpenSea)
If these apps are on their own blockchain and charge their own gas fee, the economics would make sense for them
Another aspect focuses on the technical benefits (e.g. with Ethereum, there are certain rules that need to happen)
The Delta Between Today And The Future
An analogy is to think of every house as a blockchain and the sidewalk being interoperability
When there’s snow on the sidewalk, everyone needs to shovel the snow away to get to each other’s house
Currently, what’s happening is laissez-faire
His perspective is to build a cheap shovel machine and provide it to every house
On Net Inflow
Have spoken to lots of chain teams and rollup teams
Teams want net inflow into their chains/rollups
Teams cannot overtly say that people can bridge in easily but cannot bridge out easily
They could make it harder to leave by providing good staking APRs and locking your liquidity on-chain
Protecting Uninformed Users
Malicious teams could make users hard to get off their chain
The benefit of rollups vs sovereign chains is something called forced inclusion
If the sequencer of the rollup decides not to include your transaction, you could use forced inclusion to get back into the L1
However, in theory, you would have to do everything yourself — do the forced inclusion, self-relay the packet, pay for gas, etc.
In reality, no layperson would be able to do just that
Education and building tooling that abstracts away the complexity would be helpful to lay users
How Well Acquainted End Users Will Be With Infrastructure?
Think it will happen like the open market and evolution
There are things that need to be seen in order for people to understand it
“I don't want to sign 0XABDF34. Like I don't know what that means, but contextualizing it is really helpful, right? And that feels very empowering.”
- Jimmy Chang
The ethos of Web3 is individual empowerment, abstracting away things that can be abstracted that does not lead to abuse
Is There A Feasible World Or Are There Still Missing Pieces?
Think that it’s a feasible world
Liquidity is a weird term that was landed on before crypto
In his opinion, liquidity is trying to accomplish two things:
Security — if this network/protocol has more money, it’s harder for decentralized actors to collude
The execution of financial applications — if a Uniswap pool only has $100,000 in it, you can’t do a $200,000 swap
“If these systems work well, we should never even think about liquidity as a concept because liquidity is just an enabler for I want to do X and I can do X because of liquidity.”
- Chase Chapman
Why Liquidity Matters
In a scenario where there is no liquidity, that choice ends up being removed
Liquidity exists on a spectrum
When there’s not enough liquidity, you have to pay a really large tax. This is less like a choice removal and more like a penalization of choice
In a low liquidity environment, it is predatory to take advantage of people’s willingness to pay
What Does A Utopian Multi-Chain Future Unlock?
It unlocks a lot of expressivity and comfort
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