Revelo Roundtable #7 - Cosmos Ecosystem

In Revelo Intel’s Twitter Spaces which took place on March 29, 2024, Kirk hosted Aaron from Osmosis, Mr Refractor from Pryzm, and Composable Intern from Picasso to discuss Cosmos Ecosystem, blockchain innovation, yield optimization, interoperability strategies, and more! Read our notes below to learn more.

Background

Kirk (Host) – Head of Business Development at Revelo Intel

Aaron (Guest) – Contributor at Osmosis

Mr Refractor (Guest) – Contributor at Refracted Labs, Pryzm, and Forwards

Composable Intern (Guest) – Contributor at Picasso and Composable Finance

Osmosis – The Interchain AMM DEX

Pryzm – The layer 1 blockchain for yield

Picasso – Interoperability & Restaking Hub powered by IBC

Osmosis, Pryzm, and Picasso’s Innovations

Aaron shares his journey into crypto, starting with his passion for World of Warcraft, where he had a top rank and interacted with Vitalik Buterin. His fascination with digital economies led him to Bitcoin and eventually to Osmosis, where he began as a volunteer before joining the team to work on growth.
Aaron provides an overview of Osmosis, describing it as the DeFi center for the Cosmos ecosystem. He outlines Osmosis’s role in liquidity management, swaps, yield earning, and its suite of DeFi applications. He highlights the technical contributions of the Osmosis team to the Cosmos ecosystem, including the implementation of EIP-1559.
MrRefractor introduces Pryzm as a blockchain specializing in yield, allowing users to customize their exposure by splitting yield-bearing tokens into core elements for optimized exposure to yield, price, or governance.
He explains Pryzm‘s features, including yield tokenization, fixed yields, liquid governance, liquid staking derivatives, a specialized AMM for yield trading, limit orders, DCA functionality, and the re-staking of liquid staking tokens.
MrRefractor shares that Pryzm’s development was influenced by lessons learned from a previous project on the Terra blockchain, underscoring the importance of being masters of their destiny and the limitations of smart contracts.
MrRefractor acknowledges Pendle‘s success in yield tokenization across various EVM chains, allowing for the tokenization of rights to yield from assets like stablecoins and liquid staking derivatives.
He differentiates Pryzm by emphasizing its capability to integrate any asset from any chain due to its layer 1 blockchain status and built-in Oracle module, which reports yield payouts.
This vertical integration strategy aims for scalability and revenue generation across different streams, including MEV and network fees, while maintaining a permissionless platform for asset tokenization.
Composable_Intern shares his journey into crypto in 2020, influenced by a Bitcoin enthusiast. He discusses his involvement with Composable since 2021, highlighting Picasso‘s focus on implementing Inter-Blockchain Communication (IBC) beyond the Cosmos ecosystem.
He says Picasso has successfully integrated IBC with Polkadot and aims to extend it to Ethereum and Solana. Picasso is exploring generalized restaking for liquid staking tokens (LSTs) from various chains, ensuring asset security through IBC.

Unlocking DeFi Potential: IBC Integration and Customization in Cosmos Ecosystem

Kirk says that IBC is likely the most significant driver for the future of the Cosmos technology stack, despite the challenge of achieving the same adoption levels as EVM platforms. He asks about the potential for Cosmos to gain widespread user adoption.
Aaron highlights that a key solution for integrating the fragmented liquidity across the industry is to utilize IBC rather than developing custom bridges, which he considers inferior. He says that the customization capabilities of the Cosmos tech stack were decisive for dYdX‘s migration from Ethereum, highlighting the advantages of both IBC and the tech stack’s flexibility.
Kirk expresses concern over the proliferation of alternative bridges and suggests that a unified standard for bridges would facilitate greater adoption of decentralized finance (DeFi), despite the current competitive landscape that encourages fragmentation.
MrRefractor reflects on his team’s strategic decisions in 2022, including their choice to develop their blockchain within the Cosmos ecosystem. He explains the benefits of building with Cosmos, such as control over accounts on various chains and the ability to implement liquid staking derivatives or claim yields across chains. He says this approach offers more control and customization than solely using smart contracts on platforms like Osmosis.
MrRefractor explains the advantages of developing core modules over smart contracts for their blockchain, citing the greater power and customization capabilities.
He anticipates that Pryzm leveraging core modules, will be among the most complex in the Cosmos ecosystem. He highlights the potential to tap into existing liquidity pools without direct competition, by integrating with IBC-connected zones like Osmosis..
MrRefractor explains that users will be able to swap assets between their chain and Osmosis, use Osmosis to secure their blockchain, and participate in liquid governance with $OSMO tokens.
He mentions they are currently on Testnet, aiming for a mainnet launch in Q2, and highlights the upcoming availability of features like staking, yield tokenization, and liquid voting on Testnet.
Kirk asks about the integration of the IBC with Solana and Ethereum, emphasizing its importance for unifying DeFi and fostering Cosmos adoption.
Composable_Intern says that the Solana integration is pending audits but is close to launching, expected next month, and discusses the simultaneous readiness of the Ethereum connection.
He explains the technical aspects of the Ethereum integration, mentioning the use of the sync committee and a ZK circuit for efficient validator signature verification, and explains the innovative state-proof mechanism developed for Solana, suggesting its potential application to other chains.

Evolution of Chain Security Models in Cosmos: Insights and Perspectives

Kirk discusses chain security, specifically the use of the EigenLayer in Cosmos chains for security, and asks for opinions on the future of such security models.
MrRefractor explains that Osmosis pioneered the concept of staking LP tokens for blockchain security years ago, suggesting that while launching on AVS could bring narrative benefits, there are already multiple solutions within Cosmos for similar purposes.
He mentions Osmosis, interchain security, alliance module, and upcoming mesh security, emphasizing the customizability and suitability of different solutions for different chains within Cosmos.
Aaron adds that adopting such security measures could reduce the inflation of chains by opting for higher security power without excessive payouts.
MrRefractor highlights the yield dynamics within Osmosis, pointing out that despite the nominal inflation rate, the actual yield is higher due to taker fees and other revenue sources, suggesting that the ecosystem generates more real revenue than is commonly displayed.
He questions how much additional yield Osmosis holders would require to secure another blockchain like Pryzm’s and anticipates the market determining a fair yield over time.
MrRefractor discusses the market-driven approach to determining security costs and rates within Cosmos, using Pryzm as an example. He explains that the amount of Pryzm tokens emitted to Osmosis holders for securing their chain would influence the supply into the module, thereby finding the fair market price for security.
This approach could apply across Cosmos, creating competitive dynamics similar to the Curve Wars, where governance token holders influence reward allocations to various staking parties, promoting a competitive environment for securing multiple blockchains. He expresses optimism for the Cosmos model over Ethereum’s staking and reward distribution methods.

Contrarian Views, Security Solutions, and Protocol Previews

Kirk expresses concern about the unanimous bullishness on the EigenLayer, comparing it to the Terra situation, and highlights the lack of contrarian opinions on narratives in the blockchain sector.
Composable_Intern explains that chains lacking internal security may seek it from AI layer services or restaking layers to bootstrap security until the native token can suffice, believing this doesn’t detract from the native token’s value.
Aaron questions Ethos and their integration with EigenLayer and mesh security, indicating his limited understanding of the topic.
MrRefractor admits to being not very knowledgeable about Ethos and prefers not to give an uninformed opinion, referencing a specific discussion related to Cosmos hub and interchange security licensing that Ethos might be using.
Composable_Intern previews the launch of the MANTIS app, a protocol aiming to improve user experience with transfers across IBC connections, and hints at upcoming initiatives related to MANTIS, urging everyone to try it once Ethereum and Solana IBC integration goes live.
Aaron explains that Osmosis Labs is exploring various initiatives, including transmitter V3 pools that could include multiple assets to reduce liquidity fragmentation caused by different versions of assets like Ethereum, Solana, and Tether coming from various blockchains.
He highlights a solution involving a single LP token to address fragmentation, noting the dominance of $USDC in Cosmos and their efforts to integrate with composable structures as a solution.
MrRefractor shares Pryzm’s excitement about its pre-launch activities, including airdrop campaigns reaching 470,000 wallets, and the mainnet launch.
He highlights Pryzm’s aim to offer users new ways to profit from market dynamics and the variety of choices that will be available, such as fixed yield tokens and monetizing voting power, which are expected to enhance user earnings and provide protection against price drops.
MrRefractor notes the success of yield tokenization protocols in the crypto industry, leading to new niches within the sector. He expresses enthusiasm for bringing yield tokenization to Cosmos and integrating with its various chains, highlighting the rapid growth and diversity of the Cosmos ecosystem.

Check out these important links

Show Information

Medium: Twitter (Audio)
Show: Revelo Intel Twitter Space
Show Title: Revelo Roundtable #7 – Cosmos Ecosystem
Show Date: March 29, 2024