WEBVTT 1 00:00:02.363 --> 00:00:05.306 Bankless Nation, I'm here with Lucas Sherman and Justin Brown. 2 00:00:05.326 --> 00:00:08.269 Lucas is the co-founder and CEO of Variational. 3 00:00:08.329 --> 00:00:10.672 Justin, head of product at Variational. 4 00:00:10.752 --> 00:00:12.013 Lucas, Justin, welcome to the show. 5 00:00:12.273 --> 00:00:13.054 Thanks so much for having us. 6 00:00:13.494 --> 00:00:13.975 Yeah, thank you. 7 00:00:14.215 --> 00:00:23.545 Variational has certainly been crescendoing on the timeline in terms of just excitement and hype, especially with a recent announcement of your guys' incoming airdrop, the TGE announcement. 8 00:00:24.325 --> 00:00:28.690 This is really the first time we've done a deep dive on variational on the podcast. 9 00:00:28.710 --> 00:00:30.171 We've covered it in the newsletter on the website. 10 00:00:30.211 --> 00:00:32.633 So I think we kind of need to just start with some basics. 11 00:00:33.334 --> 00:00:39.960 The way that I start explaining variational to people is like you start talking about the PERC platforms, lighter, hyper liquid. 12 00:00:40.400 --> 00:00:44.885 And then I feel like we're like 75% of the way there to explain what variational is. 13 00:00:44.925 --> 00:00:46.246 But the last 25% is kind of hard. 14 00:00:47.527 --> 00:00:49.808 So maybe you guys can pick up the thread from there. 15 00:00:49.908 --> 00:00:54.109 Lucas, how do you explain what's unique and special and different about variational? 16 00:00:54.269 --> 00:00:55.510 Yeah, you're right, David. 17 00:00:55.530 --> 00:00:58.591 The 75% of it is it's a platform to trade derivatives like perps. 18 00:00:58.891 --> 00:01:03.513 And we do compete in the on-chain trading space like Hyperliquid, Lightlight, or like a lot of other great teams. 19 00:01:03.593 --> 00:01:03.773 But... 20 00:01:04.213 --> 00:01:06.434 The last 25% there is doing some pretty heavy lifting. 21 00:01:07.034 --> 00:01:11.075 The biggest difference between variational and other platforms is we're a broker-like model, not an exchange. 22 00:01:11.395 --> 00:01:13.775 We don't have order books on our platform. 23 00:01:13.935 --> 00:01:17.476 We take the other side of the trade and hedge it against aggregated global liquidity. 24 00:01:17.996 --> 00:01:22.577 This allows some really unique things like zero fee trading, like hundreds of listings and crypto perps. 25 00:01:22.977 --> 00:01:28.279 But most importantly, and most recently, it allows our dominance in the RWA space on two key fronts. 26 00:01:28.299 --> 00:01:31.679 Number one is that we're not rebuilding liquidity on chain and thin order books. 27 00:01:31.959 --> 00:01:33.900 We hedge directly onto TradFi Rails. 28 00:01:34.420 --> 00:01:40.785 So our liquidity for our RWA listings is proximal to, or we like to call it is equal to, on ChadFi on chain. 29 00:01:40.985 --> 00:01:42.286 And that's a really fantastic thing. 30 00:01:42.687 --> 00:01:44.748 The second biggest difference is this with this brokerage model. 31 00:01:44.768 --> 00:01:51.274 I want to actually double down on the brokerage because that's, I think it's a really important point that I want to say more than just once. 32 00:01:51.554 --> 00:01:52.535 Let's just double click on it. 33 00:01:52.615 --> 00:01:55.617 So a traditional exchange has an order book. 34 00:01:55.917 --> 00:01:57.218 People come in and place trades. 35 00:01:57.238 --> 00:01:59.120 That's not what a brokerage model is. 36 00:01:59.420 --> 00:02:03.203 Can you really just like, let's really zoom in on the brokerage idea and how that's different. 37 00:02:03.424 --> 00:02:12.752 Yeah, so in an exchange, as you said, you have external market makers providing levels in an order book and then retail traders come in, trade on the top of the book and get filled against an external party. 38 00:02:13.333 --> 00:02:20.239 On a broker-like model, there's two different ways of doing it where what we'd best describe as a principal brokerage, which means our goal is to aggregate liquidity. 39 00:02:20.579 --> 00:02:23.662 When you trade on variational, variational system takes the other side of the trade. 40 00:02:23.862 --> 00:02:26.965 The user is always what we call then the taker and our system is what we call the maker. 41 00:02:27.565 --> 00:02:36.517 And we're aggregating global liquidity from crypto exchanges, from decentralized exchanges, and most importantly for RWAs, as I was saying, from off-chain sources, from traditional finance itself. 42 00:02:37.057 --> 00:02:38.739 And that becomes our hedging likes, right? 43 00:02:38.759 --> 00:02:44.267 So in other words, we aggregate and port this liquidity into our own trading system and show that to the user. 44 00:02:44.767 --> 00:02:47.628 So most platforms are constrained by the depths of their books, right? 45 00:02:47.848 --> 00:02:50.750 How many market makers they can incentivize to rebuild that liquidity. 46 00:02:50.770 --> 00:02:57.412 And that's important, especially for RWAs, where you have trillions and trillions of dollars of daily volume and liquidity depth in traditional markets. 47 00:02:57.833 --> 00:03:00.294 But the on-chain order books are still quite thin, right? 48 00:03:00.334 --> 00:03:01.934 For us, it's not a problem, right? 49 00:03:01.954 --> 00:03:10.938 We're aggregating routing directly to TradFi, which means that in RWAs, we're able to show order of magnitude better spreads and execution costs than competing platforms, right? 50 00:03:10.938 --> 00:03:16.500 And not just that, but also you'll very quickly see us list not just six swaps, but hundreds, right? 51 00:03:16.600 --> 00:03:22.663 And really bring that TradFi liquidity on chain for a wide variety of instruments since we can aggregate directly. 52 00:03:23.103 --> 00:03:29.005 So with an order book, a traditional exchange, you have people trading against people any to any, right? 53 00:03:29.125 --> 00:03:32.827 And with variational, it's anyone to variational. 54 00:03:32.847 --> 00:03:34.928 So variational is the counterparty. 55 00:03:35.408 --> 00:03:38.350 And usually in the exchange context, that's actually like a boogeyman. 56 00:03:38.470 --> 00:03:44.615 Like you don't want to be trading against somebody in the order books who's actually like Alameda with FTX. 57 00:03:44.955 --> 00:03:49.899 But you guys are doing the inverse of this where it's like that's actually the product that you guys are offering. 58 00:03:50.079 --> 00:03:55.143 And the value of the product is the ability to source liquidity from everywhere else in the world. 59 00:03:55.183 --> 00:03:57.565 And so you're competing with Coinbase's. 60 00:03:57.585 --> 00:03:59.066 You're competing with Hyperliquids. 61 00:03:59.546 --> 00:04:01.247 And the way that you're doing that is you're just... 62 00:04:02.128 --> 00:04:05.210 offering better execution because you're aggregating liquidity elsewhere. 63 00:04:05.591 --> 00:04:06.351 Exactly correct. 64 00:04:06.431 --> 00:04:08.873 With one or two things I want to clarify around the edges. 65 00:04:08.933 --> 00:04:15.097 Number one, we see ourselves competing longer term actually against Robinhood, interactive brokers, and these other broker-like platforms. 66 00:04:15.557 --> 00:04:18.119 Exchanges are still a key piece of financial infrastructure, right? 67 00:04:18.139 --> 00:04:20.581 For example, I like to say we don't compete directly with hyperliquid. 68 00:04:20.601 --> 00:04:22.863 In many cases, we've historically traded and hedged there. 69 00:04:23.323 --> 00:04:24.724 We're not a price discovery venue. 70 00:04:24.924 --> 00:04:36.877 The key piece that we left out when we were describing these order books and these high-frequency traders on those levels is that that's an important part of financial ecosystem where those institutions are trading at each other really, really fast, figuring out what the fair value of something is. 71 00:04:37.412 --> 00:04:41.535 But just like Robinhood or Interactive Brokers and others, those are liquidity aggregators, right? 72 00:04:41.555 --> 00:04:46.258 When you're trading on Robinhood, your order is getting routed to other dealers and eventually to other exchanges downstream. 73 00:04:46.718 --> 00:04:47.999 Ours works quite the same way. 74 00:04:48.379 --> 00:04:54.844 But again, we're able to offer the benefits of liquidity aggregation, the benefits of TradFi liquidity on chain, zero free trading and beyond. 75 00:04:54.884 --> 00:04:56.885 So this makes a lot more sense for retail traders. 76 00:04:57.265 --> 00:05:00.267 But I just want to point out that exchanges are still an important part of this ecosystem. 77 00:05:00.307 --> 00:05:06.852 And we see ourselves more long term competing on the brokerage side, which I actually do think is the best model for retail trading in particular. 78 00:05:07.172 --> 00:05:11.133 So why is this model better or when is this model better? 79 00:05:11.353 --> 00:05:20.236 As in when would it make more sense for somebody to go straight to hyperliquid and when would it make sense for somebody to come to variational and trade on variational? 80 00:05:20.416 --> 00:05:28.338 I think the institutions that should be trading on exchanges are high frequency traders, are individuals who need that order book liquidity, right? 81 00:05:28.378 --> 00:05:34.040 So that's market making firms, that's much larger institutions that are running maker style strategies and beyond. 82 00:05:34.080 --> 00:05:34.360 And again, 83 00:05:34.840 --> 00:05:35.781 Let's use this comparable. 84 00:05:35.821 --> 00:05:39.023 Who's trading on NYSE and NASDAQ and CME Group and CBOE? 85 00:05:39.324 --> 00:05:42.146 You have your, you know, jumps and Janes and HRTs of the world. 86 00:05:42.166 --> 00:05:45.789 And then you have, you know, maybe some bank trading firms or prime brokerages and so on. 87 00:05:46.209 --> 00:05:47.931 But for retail traders, where are they trading? 88 00:05:48.051 --> 00:05:55.697 Well, they're trading for, you know, the best execution and also the ease of use of a broker-like platform like an Interactive Brokers or Schwab or Robinhood and so on. 89 00:05:56.077 --> 00:05:57.519 And I see it quite similarly, right? 90 00:05:57.539 --> 00:06:06.810 So again, exchanges have a place here and for institutional and HFT and some other types of use cases, they're certainly going to remain the best place to trade because that's a natural fit. 91 00:06:07.331 --> 00:06:08.512 But they're an infrastructure play. 92 00:06:08.853 --> 00:06:10.234 We are direct facing to retail. 93 00:06:10.334 --> 00:06:12.737 We want to own the end client and provide the best user experience. 94 00:06:12.757 --> 00:06:12.817 So 95 00:06:13.398 --> 00:06:24.987 I really don't see long-term, if I keep building the product well and we keep working hard at it, why a user might want to trade on one exchange directly rather than use our platform to face aggregated liquidity simultaneously. 96 00:06:25.107 --> 00:06:30.731 And then, as I'm really going to double down on, the benefits of our liquidity model aggregating directly from TradFi. 97 00:06:31.332 --> 00:06:36.175 That's really where we have a zero-to-one moment happening right here with RWA perps and swaps on variational. 98 00:06:36.836 --> 00:06:40.939 We're doing something that no other platform in the space can by bringing that liquidity directly on chain. 99 00:06:41.378 --> 00:06:45.261 I cut you off to really drill down into going into the brokerage model. 100 00:06:45.321 --> 00:06:49.145 Was the second thing exactly what you just said about porting into TradFi liquidity? 101 00:06:49.425 --> 00:06:50.626 Yeah, exactly, exactly. 102 00:06:51.166 --> 00:07:02.075 So this broker model is particularly powerful when it comes to asking that question, you know, how long will it take and to what degree can we even effectively rebuild these levels of liquidity on-chain and these on-chain order books? 103 00:07:02.476 --> 00:07:06.899 There's great teams and frankly, again, very big fan of the hyperliquid team and others who have really paved the way there. 104 00:07:07.820 --> 00:07:09.442 But for us, I think there's... 105 00:07:10.002 --> 00:07:16.745 two, three, five, you know, even beyond trillion dollars of daily liquidity in many of these markets in the U.S. and Korea, Japan and then beyond. 106 00:07:17.325 --> 00:07:23.968 And I just think the right model here, just like traditional finance works, is brokerage and routing to where the liquidity is rather than trying to reinvent the wheel. 107 00:07:24.708 --> 00:07:29.570 So I think this is one of the biggest advantages that Variational has is our dominance in this space. 108 00:07:29.750 --> 00:07:32.852 And I was about to say one other piece, which was PERPs versus swaps. 109 00:07:33.012 --> 00:07:34.332 I'd like to dig into that a little bit. 110 00:07:35.333 --> 00:07:37.314 SWAP is a new type of instrument that we're introducing. 111 00:07:37.654 --> 00:07:41.316 It's a type of bilateral instrument, so it's not possible to be listed on an exchange. 112 00:07:41.796 --> 00:07:45.758 This is how the biggest hedge funds and trading firms in the world trade is through swaps. 113 00:07:46.259 --> 00:07:51.241 And we're opening this type of instrument, which trades very much like a PERP, but better to retail traders. 114 00:07:51.281 --> 00:07:53.923 And that's something we can uniquely do because we're brokerage. 115 00:07:54.203 --> 00:07:56.204 We can issue the other side of that SWAP leg. 116 00:07:56.624 --> 00:08:02.926 But the benefit to the retail user is you can still get the same great leverage and ease of exposure as a part that trades one-to-one with the underlying. 117 00:08:03.446 --> 00:08:05.386 But now it has a flat funding rate, right? 118 00:08:05.447 --> 00:08:07.507 We call it a carry cost and kind of the swaps land. 119 00:08:07.907 --> 00:08:13.769 And we can also list hundreds that hedge exclusively onto traditional finance rails because swaps is how the biggest firms in the world trade. 120 00:08:14.289 --> 00:08:22.234 So this is a really fascinating thing we're doing on the brokerage side as well, is introducing a completely new type of instrument, a new way to trade, which is essentially what we think as a better perp. 121 00:08:22.395 --> 00:08:23.595 Can you break down the swap? 122 00:08:23.615 --> 00:08:28.599 Because when you say the word swap, I'm like, yeah, like Uniswap, I go and I swap my tokens. 123 00:08:28.879 --> 00:08:29.780 That's a trade to me. 124 00:08:29.920 --> 00:08:31.501 I don't think that's what you're talking about. 125 00:08:31.621 --> 00:08:32.301 What is a swap? 126 00:08:32.441 --> 00:08:33.262 Yeah, correct, correct. 127 00:08:33.302 --> 00:08:38.806 So it's funny in crypto, unfortunately, we have this overloading of the term like AMM swaps and spot markets and so on. 128 00:08:39.186 --> 00:08:42.650 But a swap in traditional finance means a derivative quite similar to a PERC, right? 129 00:08:42.670 --> 00:08:44.232 A linear derivative on an underlying. 130 00:08:44.593 --> 00:08:45.734 You can write a swap on anything. 131 00:08:45.754 --> 00:08:55.286 And you might have seen, remember those Wall Street movies like The Big Short and Margin Call and so on, where you have guys trading total return swaps and interest rate swaps and credit default swaps, right? 132 00:08:55.306 --> 00:08:57.589 Swap is just a, it's a type of linear derivative. 133 00:08:58.449 --> 00:09:00.810 But going one step further for us, what does it mean? 134 00:09:01.330 --> 00:09:07.151 Well, it's a PERP-like instrument in that it has leverage and you can long and short and trade linear on any underlying. 135 00:09:07.651 --> 00:09:13.153 But the benefits versus PERPs are, number one, you have a predictable carry cost or predictable funding rate that's much flatter. 136 00:09:13.693 --> 00:09:17.374 Number two is it aligns with the way the largest institutions trade. 137 00:09:17.434 --> 00:09:21.835 So when we're hedging against that tradfire liquidity, we can map it one-to-one and really bring that on-chain. 138 00:09:22.575 --> 00:09:28.198 And number three is, again, for a swap, like it matches the TradFi level execution. 139 00:09:28.238 --> 00:09:33.641 So we can do things like paying dividends and really aligning with what you'd expect holding these things on traditional brokerage. 140 00:09:33.681 --> 00:09:38.224 So I think that's a fantastic kind of innovation that we've brought into the ecosystem. 141 00:09:38.244 --> 00:09:40.705 And our goal, kind of more closely stated is, 142 00:09:41.145 --> 00:09:51.634 to really give these tools to retail that so far have been gatekept for the largest institutions, the largest trading firms facing prime brokers like Goldman Sachs and Morgan Stanley and UBS and so on. 143 00:09:51.994 --> 00:09:55.397 We're bringing that type of trading efficiency and experience to a retail audience. 144 00:09:55.758 --> 00:09:58.380 But for ease of explanation, it's like a perp but better. 145 00:09:58.560 --> 00:10:02.843 Yeah, and I'll add it's not the swap product isn't, you know, a theoretical product that we're working on. 146 00:10:02.863 --> 00:10:07.305 It's actually live today that users can go test out and see what the benefits actually are. 147 00:10:07.385 --> 00:10:23.435 So we post some of these stats pretty regularly, but about one fifth of the cost as your most liquid on-chain venue for getting access to a market like US 100, for example, compared to the perp that would be listed on places like TradeXYZ, maybe Binance, Bybit, etc., 148 00:10:24.115 --> 00:10:31.179 And then funding, to Lucas's point, is bounded at, I think, just sub 5% now for US 100 as the prime example. 149 00:10:31.239 --> 00:10:38.444 So extremely liquid, multi-million dollar order size is totally reasonable with sub one basis point spread. 150 00:10:38.704 --> 00:10:41.966 And then for funding, sub 5%, basically capped. 151 00:10:42.026 --> 00:10:47.109 I want to cut in before we get too deep into technical mumbo jumbo, because I know great audience we have with bankless. 152 00:10:47.470 --> 00:10:48.670 Many guys are really sophisticated. 153 00:10:48.710 --> 00:10:50.732 Many guys are following from the higher level perspective. 154 00:10:50.752 --> 00:10:52.112 We're probably pushing the limits. 155 00:10:52.172 --> 00:10:52.473 So yeah. 156 00:10:52.533 --> 00:10:52.913 Exactly. 157 00:10:52.933 --> 00:10:53.093 Exactly. 158 00:10:53.133 --> 00:10:56.574 And I was going to say, fundamentally, why does spread matter? 159 00:10:56.634 --> 00:11:00.135 Why does these buzzwords like liquidity and bringing trad file chain matter? 160 00:11:00.555 --> 00:11:02.095 This is a cost to users, right? 161 00:11:02.175 --> 00:11:03.856 There's two costs you're paying when you're trading. 162 00:11:04.116 --> 00:11:05.936 One is fees, which we don't have any. 163 00:11:06.356 --> 00:11:07.756 And the other is spread, right? 164 00:11:07.776 --> 00:11:08.857 So the execution cost. 165 00:11:09.357 --> 00:11:15.558 And the more illiquid an order book is or a trading platform is, the more you're crossing that huge cost when you enter an exit of trade. 166 00:11:15.578 --> 00:11:16.438 And that really adds up. 167 00:11:16.879 --> 00:11:22.800 So for us, we want to give that quality of trading experience that you'd expect from an interactive broker and a Schwab and a Robinhood, whereas a retail trader, 168 00:11:23.280 --> 00:11:27.702 I don't even think, I don't even care about the order book and T-wopping and all these complex terms. 169 00:11:28.103 --> 00:11:32.265 I just want to know I'm getting great execution, right, against as much global liquidity as possible. 170 00:11:32.285 --> 00:11:35.066 And that's really what we're doing here is reducing costs for traders. 171 00:11:35.086 --> 00:11:40.829 And it's a meaningful difference, right, even for small trades, as Justin was saying, you know, five to ten times more liquid. 172 00:11:40.890 --> 00:11:43.531 And I think we'll see an even bigger difference as we list more things. 173 00:11:43.751 --> 00:11:49.492 Some of the ways I've heard variational described is as a portal to TradFi liquidity. 174 00:11:49.552 --> 00:11:53.613 You know, it's a crypto, it's a crypto brokerage, an on-chain brokerage. 175 00:11:53.673 --> 00:11:57.154 You can deposit stable coins and that's how you get your account. 176 00:11:57.594 --> 00:12:05.716 And you can do all the things you'd expect in a brokerage, except what you guys are doing is you guys are, you know, a quote portal to TradFi liquidity. 177 00:12:05.736 --> 00:12:07.437 That's one of your guys' competitive edges. 178 00:12:08.075 --> 00:12:13.879 we're in this world of tokenized real world assets, tokenized stocks, things are coming on chain. 179 00:12:14.059 --> 00:12:16.380 The industry has been waiting for this for a very long time. 180 00:12:16.740 --> 00:12:18.061 It's finally seemingly here. 181 00:12:18.441 --> 00:12:27.907 Yet still to this day, you can go to like Uniswap or you go down to CoinGecko and you can type in NVIDIA and you'll get like seven different offers. 182 00:12:28.267 --> 00:12:30.329 And not any one of them is dominant. 183 00:12:30.389 --> 00:12:33.831 Like the winner of the liquidity of like a tokenized real world assets is 184 00:12:34.551 --> 00:12:45.455 It's still unclear how we really achieve the vision that we want, where we have very liquid tokenized real world assets because we have, you know, 17 competing standards and not really one has won out. 185 00:12:45.955 --> 00:12:51.237 And I think maybe that's the problem statement that you guys are saying is like, actually, we've got a solution for this. 186 00:12:51.457 --> 00:12:54.979 It's not a competing tokenized real world asset, but it is. 187 00:12:56.299 --> 00:12:58.140 real world assets that are highly liquid. 188 00:12:58.160 --> 00:13:00.521 And isn't that kind of the point that you want anyways? 189 00:13:00.641 --> 00:13:05.343 Talk about your guys' penetration into this market with your guys' different strategy. 190 00:13:05.523 --> 00:13:06.583 Yeah, absolutely. 191 00:13:06.964 --> 00:13:08.484 I totally share your sentiment. 192 00:13:08.684 --> 00:13:12.086 Tokenized real world assets as a spot tokenization has a place. 193 00:13:12.386 --> 00:13:13.826 It's entirely unclear what the winner is. 194 00:13:13.866 --> 00:13:17.288 There's so many different models to get that TradFi liquidity on chain for those. 195 00:13:17.808 --> 00:13:22.270 And none of them are doing too well so far, but we expect greatness and expect more from that ecosystem. 196 00:13:22.750 --> 00:13:27.994 But my thought is I want to add one piece to our description of variational as a bridge from Tradify to on-chain and as a broker. 197 00:13:28.374 --> 00:13:29.295 It's derivatives, right? 198 00:13:29.495 --> 00:13:32.937 We think derivatives are some of the best ways to trade for most traders, right? 199 00:13:32.957 --> 00:13:36.120 When you're looking for that leverage, you're looking for the ability to both long and short. 200 00:13:36.480 --> 00:13:42.824 And to your point, David, you're looking for one place where you can deposit USDC balance and trade hundreds of different assets, soon thousands on variational. 201 00:13:43.265 --> 00:13:44.545 That is the model that we're going for. 202 00:13:44.565 --> 00:13:44.986 And I think 203 00:13:45.426 --> 00:13:50.669 Just like perps have really dominated both in crypto and even RWA so far, led by Hyperliquid, right? 204 00:13:50.729 --> 00:13:54.110 Derivatives are the right solution here for most traders. 205 00:13:54.310 --> 00:14:03.415 So, you know, I think there's a lot of great things happening, even partnerships happening right now with some big firms, the DTCC and others for RWA issuance and these RAP tokens and so on and so forth. 206 00:14:03.435 --> 00:14:04.515 And those will continue to get better. 207 00:14:04.895 --> 00:14:09.858 But for traders, right, traders who want that leverage, who want to build a long and short and want the ease of use of one account. 208 00:14:10.278 --> 00:14:11.759 That's absolutely what we're going for. 209 00:14:12.199 --> 00:14:18.164 We're bringing TradFi liquidity, two swaps, two perps to one platform where you can get exposure to as many things as you want. 210 00:14:18.604 --> 00:14:22.207 Our vision is that, you know, variational is the gateway to global markets, right? 211 00:14:22.287 --> 00:14:28.311 You can put USDC in one platform and you can trade a portfolio, not just of hundreds, not just of thousands, but longer term. 212 00:14:28.331 --> 00:14:31.233 We want, you know, 5,000, 10,000 different global markets. 213 00:14:31.733 --> 00:14:36.357 All with liquidity coming directly from the most liquid sources in the world, ChatFi, so to speak, right? 214 00:14:36.477 --> 00:14:38.658 And all with the ease of use of one platform. 215 00:14:38.718 --> 00:14:43.042 Just in the same way we love platforms like Robinhood and others, where they made it so simple, right? 216 00:14:43.082 --> 00:14:43.842 So easy to use. 217 00:14:43.882 --> 00:14:44.623 Like, that's our vision. 218 00:14:44.643 --> 00:14:48.346 I want to know the kind of the composition of the variational team. 219 00:14:48.466 --> 00:14:50.867 Like, what are you guys uniquely good at? 220 00:14:50.987 --> 00:14:52.929 Because this seems like a hard challenge. 221 00:14:52.949 --> 00:14:57.032 You guys are building a derivatives platform, which is already, now we're talking math. 222 00:14:57.112 --> 00:14:58.813 You're doing it in the on-chain context. 223 00:14:58.853 --> 00:15:03.375 And so there's always the blockchain engineering constraint, which is always kind of dubious. 224 00:15:03.735 --> 00:15:06.476 I'm glad I'm just a podcaster, so I don't have to worry about people's assets. 225 00:15:07.176 --> 00:15:07.776 You guys do. 226 00:15:08.257 --> 00:15:11.738 You guys also have to do quant stuff and port to Tradify Liquidity. 227 00:15:11.758 --> 00:15:15.400 There seems to be a lot of moving parts that require some pretty hefty challenges. 228 00:15:15.920 --> 00:15:19.081 So talk to me about the team composition at Variational. 229 00:15:19.101 --> 00:15:21.202 Like, what are you guys the best at? 230 00:15:21.362 --> 00:15:24.725 Yeah, let me give you a few thoughts and I'll let Justin fill in some more blanks. 231 00:15:25.265 --> 00:15:30.209 We are the best at pretty much the three pillars that you mentioned with one key advantage that I'll get back to. 232 00:15:30.249 --> 00:15:33.671 Number one is Edward and I are co-founders of Variational. 233 00:15:33.691 --> 00:15:38.075 We come from about 10 years in the crypto space, started out in the quant hedge fund area, went for. 234 00:15:38.775 --> 00:15:46.339 FX and moved to crypto, ran that in New York for some time, spent a lot of time pitching Tradify allocators, very traditional type of business model. 235 00:15:46.759 --> 00:15:49.300 That was acquired by one of the largest broker dealers in the space. 236 00:15:49.340 --> 00:16:00.145 Then we ran a $250 billion book of flow, building out their electronic market making system, their single dealer platform, all the types of technology and infrastructure that is quite relevant to what we do today at a very large scale. 237 00:16:00.625 --> 00:16:18.052 And Variational has a very similar founding story to Hyperliquid, actually, where we were a prop trading firm, active on all different eras of DeFi protocols, whether it was like DYDXV34 and Lyra and Zeta and all these up through even Hyperliquid itself was one of our biggest wins when we were integrating early on. 238 00:16:18.072 --> 00:16:22.974 So, you know, this is why I can credibly say we're big fans, you know, big fans and even early supporters of the ecosystem. 239 00:16:23.474 --> 00:16:28.576 But it's also where we saw the kind of lack in the ecosystem of someone trying out this broker-like model. 240 00:16:28.596 --> 00:16:29.777 And that's how we started approaching it. 241 00:16:30.477 --> 00:16:41.500 Our team's backgrounds come from great other TradFi firms like Jane Street, like IMC, like myself and Ed having spent more than 10 years in the space doing pretty much this exact same business, high frequency trading and market making. 242 00:16:42.020 --> 00:16:52.443 And really later, especially with the help of Justin and kind of building out more of a product team and UX team, we also try to expand the org and being experts in building the best retail platform, the best UX for retail to trade. 243 00:16:52.944 --> 00:16:57.345 The final one I want to double down on, David, which you asked very keenly about is the TradFi connectivity. 244 00:16:57.865 --> 00:17:04.993 Look, you know, doing these partnerships with Trad5 players, some of the largest in New York, Chicago and Amsterdam and beyond, it's hard on the commercial side. 245 00:17:05.034 --> 00:17:10.860 It's hard on the what's called onboarding and compliance and regulation side and understanding and speaking their language, how to get these partnerships in place. 246 00:17:11.301 --> 00:17:12.502 But it's also hard on the tech side. 247 00:17:12.743 --> 00:17:16.347 And we came from that, you know, for a long portion of our careers. 248 00:17:16.727 --> 00:17:24.435 What's been facing these bigger dealers and banks and so on, OTC on their antiquated, you know, fixed standards and all the infrastructure you need to face. 249 00:17:24.455 --> 00:17:31.463 So we consider that another big competitive advantage is the fact that we built this and done this for years and years and years, the market making side of the infrastructure in crypto. 250 00:17:31.823 --> 00:17:35.908 We've integrated with as many DeFi platforms as you can name and we take a lot of cues from that. 251 00:17:36.328 --> 00:17:38.049 in terms of how we engineered our own platform. 252 00:17:38.390 --> 00:17:41.692 But the final piece, bringing it all together, is that TradFi background, right? 253 00:17:41.712 --> 00:17:47.416 So the relationships, the connectivity, the knowledge, like that's how we're actually pulling off being the bridge between TradFi and on-chain. 254 00:17:47.937 --> 00:17:49.598 Justin, I'll let you add anything that I missed there. 255 00:17:49.778 --> 00:17:55.202 Yeah, no, I would just say we've also really looked to our user base and our community for talent. 256 00:17:55.502 --> 00:17:57.482 So I actually was an early user, variational. 257 00:17:57.522 --> 00:18:01.543 I met Lucas in Singapore about a year ago now and then since joined the team. 258 00:18:01.963 --> 00:18:11.745 And we've also hired a number of our traders, users, community members, et cetera, which has given us a really interesting perspective on what we can bring to this crypto trader cohort. 259 00:18:12.225 --> 00:18:22.968 Although now, as we look to next year, we're actually looking at sort of expanding beyond this crypto cosm, you could say, of maybe 30,000 to 100,000 active traders and expanding beyond that. 260 00:18:23.748 --> 00:18:25.068 So one of the things we're looking at is like, 261 00:18:25.348 --> 00:18:29.349 FOMO for inspiration and how they've crossed the chasm here and gotten out of the crypto bubble. 262 00:18:29.369 --> 00:18:34.510 And I think that's going to be the real next chapter of how we approach hiring going forward. 263 00:18:34.590 --> 00:18:38.952 Yeah, Justin, I do want to ask you about a product, but let me tie off this section with Lucas real quick. 264 00:18:39.572 --> 00:18:44.233 Lucas, it sounds like you have exactly the team that you need to produce the product that you want. 265 00:18:44.833 --> 00:18:46.293 But that's also one thing. 266 00:18:46.353 --> 00:18:51.815 The other thing is organization and leadership and operations, which is that's the ball balls in your court. 267 00:18:52.255 --> 00:18:54.297 What history do you have as an entrepreneur? 268 00:18:54.917 --> 00:18:55.678 What's your background? 269 00:18:55.698 --> 00:18:56.198 What's your lore? 270 00:18:56.378 --> 00:19:01.522 Yeah, well, I have some deep lore, which I think we can get into if you want to go on the personal side. 271 00:19:01.542 --> 00:19:03.544 But let's just say I actually come from a research background. 272 00:19:03.944 --> 00:19:09.188 I was a physics researcher and then robotics researcher for the better part of a decade before I got into quant finance. 273 00:19:09.548 --> 00:19:13.932 There's some fun stories about how and why I made the pivot for another time and maybe some beers. 274 00:19:14.853 --> 00:19:20.497 But suffice to say, once we started out in quant, as I was saying, I've run now funds and teams of various sizes 275 00:19:21.157 --> 00:19:24.200 We raised a few rounds in the GP of that first fund in New York that I was mentioning. 276 00:19:24.220 --> 00:19:28.243 That's where I really started my career in finance, working the entire time with Edward, my co-founder. 277 00:19:28.283 --> 00:19:29.865 So we go back more than a decade now. 278 00:19:30.345 --> 00:19:34.889 That was acquired by Digital Currency Group, as I was leading to earlier, ran a very large team at Genesis. 279 00:19:34.929 --> 00:19:39.213 So when we joined, it was probably 50 to 100 people at Genesis and DCG. 280 00:19:39.233 --> 00:19:46.299 By the time we left, it was 250 plus and built out a massive engineering work there as well at the quant research team. 281 00:19:47.159 --> 00:19:49.381 As it relates to variational, we studied lean. 282 00:19:49.421 --> 00:19:50.922 And I think this is one of our driving factors. 283 00:19:50.982 --> 00:20:01.370 One thing that was left unsaid, David, but to give you a direct answer, we're just under 25 people right now and expanding, I like to say fast by our standards, but slow by traditional startup standards. 284 00:20:01.430 --> 00:20:04.812 We hire very senior and very strong backgrounds. 285 00:20:04.852 --> 00:20:08.515 And I think that's part of our ethos that's shared from the prop trading background. 286 00:20:08.535 --> 00:20:11.257 With Hyperliquid, we want a really high performing, tight and lean team. 287 00:20:12.257 --> 00:20:14.439 So, you know, I manage orgs at various sizes. 288 00:20:14.599 --> 00:20:22.464 We've raised many, many, many amounts of capital and run books, frankly, even much larger than Variational is in our career, myself and Ed. 289 00:20:23.045 --> 00:20:25.827 But we're very comfortable kind of scaling out this team in that direction. 290 00:20:26.007 --> 00:20:27.908 I've been trading crypto for almost a decade. 291 00:20:28.048 --> 00:20:31.573 And I've used so many different wallets, exchanges, aggregators, or front ends. 292 00:20:31.673 --> 00:20:43.089 And I'm basically always looking for the same thing, just one interface with a deep liquidity across a bunch of chains and assets where I can access markets like perps, earn yield, trade confidentially, and still control all of my funds. 293 00:20:43.229 --> 00:20:44.190 And I've never really found it. 294 00:20:44.230 --> 00:20:48.233 And I'm just always switching wallets, juggling gas fees, or getting eaten by slippage. 295 00:20:48.433 --> 00:20:51.236 But near.com feels fundamentally different to me. 296 00:20:51.336 --> 00:20:55.660 I can do anything I want from any chain and keep all of my activity confidential. 297 00:20:55.760 --> 00:20:57.862 Crypto, tokenized assets, perps, payments. 298 00:20:58.062 --> 00:21:00.164 I can even earn yield confidentially. 299 00:21:00.324 --> 00:21:03.426 One account, over 30 chains, confidential by default. 300 00:21:03.547 --> 00:21:05.308 It's the way that crypto ought to work. 301 00:21:05.468 --> 00:21:10.993 And it's powered by Near, which has moved over $30 billion cross-chain, uses post-quantum signatures, 302 00:21:11.113 --> 00:21:13.814 And that's run over five years on mainnet with zero downtime. 303 00:21:13.994 --> 00:21:17.315 Near.com is the best way to be on chain and be in control. 304 00:21:17.515 --> 00:21:22.856 Get 20% of your trading fees back on near.com using the bankless link in the show notes, not investment advice. 305 00:21:23.036 --> 00:21:24.656 Bankless Nation, we've built something for you. 306 00:21:24.816 --> 00:21:26.597 Introducing the Bankless MCP. 307 00:21:26.737 --> 00:21:37.720 ChatGPT and Claude are great at a lot of things, but ask them anything beyond the basics of crypto about protocol mechanics, tokenomics, or just what happened last week in crypto, and the gaps will start to show. 308 00:21:37.800 --> 00:21:38.780 The problem is context. 309 00:21:38.940 --> 00:21:43.867 Bankless, on the other hand, has spent almost a decade building one of the deepest archives of crypto data anywhere. 310 00:21:44.007 --> 00:21:50.237 More than 2,000 podcast transcripts, 10,000 articles, and countless conversations with the people actually building this industry. 311 00:21:50.437 --> 00:21:53.702 And now we've structured all of that data into the Bankless MCP. 312 00:21:53.902 --> 00:22:01.405 So you can go and connect it to your cloud or chat GPT and suddenly your AI can answer your crypto queries with the entire Bankless archive behind it. 313 00:22:01.525 --> 00:22:05.387 And every new Bankless article or episode gets added automatically. 314 00:22:05.487 --> 00:22:07.367 So the context keeps staying up to date. 315 00:22:07.628 --> 00:22:11.549 The Bankless MCP is exclusively available to Bankless premium subscribers. 316 00:22:11.769 --> 00:22:15.891 So you can go to Bankless.com, upgrade to premium and connect the MCP in just a few minutes. 317 00:22:15.971 --> 00:22:20.893 And all of a sudden, your crypto queries to your AI, LLM, whatever you use, will get a thousand times better. 318 00:22:21.053 --> 00:22:21.673 So go check it out. 319 00:22:21.774 --> 00:22:22.975 There is a link in the show notes. 320 00:22:23.035 --> 00:22:27.218 And once you become a Bankless Premium member, you can hop into the Bankless Discord and let me know how you like it. 321 00:22:27.298 --> 00:22:27.978 Some exciting news. 322 00:22:28.058 --> 00:22:32.802 We are launching a new podcast to help people figure out the crypto cycle, how to navigate it. 323 00:22:32.882 --> 00:22:35.564 The best crypto cycle investor I know, his name is Michael Nato. 324 00:22:35.664 --> 00:22:36.705 He runs the DeFi Report. 325 00:22:36.765 --> 00:22:41.529 This is the guy that sent me a sell alert before the 1010 price drop happened. 326 00:22:41.729 --> 00:22:44.171 His cycle analysis has been absolutely on point. 327 00:22:44.251 --> 00:22:45.592 I've been following him for years. 328 00:22:45.772 --> 00:22:49.175 And this year we started recording weekly podcast episodes. 329 00:22:49.335 --> 00:22:57.102 Each one, we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether, and where we are in the cycle. 330 00:22:57.202 --> 00:22:59.604 There's new episodes that are released every Wednesday. 331 00:22:59.664 --> 00:23:00.405 They're 30 minutes. 332 00:23:00.465 --> 00:23:00.926 They're short. 333 00:23:00.966 --> 00:23:01.606 They're punchy. 334 00:23:01.726 --> 00:23:04.108 I think this crypto cycle is harder to navigate than most. 335 00:23:04.349 --> 00:23:05.590 So let's do it together. 336 00:23:05.730 --> 00:23:06.931 Go subscribe to this podcast. 337 00:23:06.991 --> 00:23:09.593 Search The DeFi Report wherever you get your podcasts. 338 00:23:09.654 --> 00:23:12.716 YouTube, Apple, Spotify, or find a link in the show notes. 339 00:23:12.856 --> 00:23:14.418 There's a new episode waiting for you now. 340 00:23:14.638 --> 00:23:17.720 Justin, talk to me about product and crypto in 2026. 341 00:23:17.800 --> 00:23:24.625 If there's one thing that crypto goes fast, sometimes it feels like it goes slower, but then you zoom out and it goes quite fast. 342 00:23:24.645 --> 00:23:34.812 I think one of the sectors of crypto that has gone the fastest inside of this already fast industry is product development, product design around trading venues. 343 00:23:34.893 --> 00:23:36.694 That has gone like lightning fast. 344 00:23:37.034 --> 00:23:46.702 So talk to me about just some of the philosophy or sentiments that you have around this sector of crypto, a product around trading venues and how you take that work to variational. 345 00:23:46.782 --> 00:23:47.542 Yeah, absolutely. 346 00:23:47.582 --> 00:23:54.388 So this year has been really interesting for variational because I would say we've really been doing our best just to catch up with the rest of the market. 347 00:23:54.988 --> 00:24:02.054 Our growth at the start of this year and through the last two quarters has been exceptional and honestly a little bit unexpected. 348 00:24:03.095 --> 00:24:08.779 And so as a result of that, we've really been trying to catch up and get feature parity with the other perpetual exchanges. 349 00:24:09.380 --> 00:24:12.222 I do think now we're starting to get to a point where we're almost there. 350 00:24:12.282 --> 00:24:15.445 But through the rest of the year, we're really trying to round out the core features. 351 00:24:15.725 --> 00:24:19.728 So over the next few months, we're actually still in private beta right now. 352 00:24:19.808 --> 00:24:21.810 We'll be going public mainnet very shortly. 353 00:24:21.830 --> 00:24:21.930 Yeah. 354 00:24:22.451 --> 00:24:24.534 I will be launching our trading API after that. 355 00:24:24.754 --> 00:24:32.385 Right now, actually, it's all manual users click trading in our app directly, whereas most exchanges, most of their volume actually comes through their trading API. 356 00:24:32.826 --> 00:24:37.112 So we expect a big boon in users and also targeting a different user base that way. 357 00:24:37.272 --> 00:24:41.154 And then in addition, we have other things like we're trying to incorporate Privy and Fun. 358 00:24:41.574 --> 00:24:49.137 We want to make it easier to onboard people that don't know how to use a private key, people that aren't familiar with stable coins, people that don't want to manage a wallet. 359 00:24:49.857 --> 00:24:51.918 We think that's probably where this space is headed. 360 00:24:52.098 --> 00:24:54.299 We've seen a lot of pickup with FOMO. 361 00:24:54.319 --> 00:24:57.340 I know you've done a lot of coverage with what's been happening there. 362 00:24:57.881 --> 00:25:01.182 And I think like FOMO, really, there's a lot we can take inspiration from. 363 00:25:01.242 --> 00:25:03.183 Their onboarding process is incredible. 364 00:25:03.703 --> 00:25:16.414 And if we could replicate that in a mobile app for our users, I think we could really expand out of this crypto cohort and start targeting, you know, people that have never traded perps before, people that have never used crypto before, et cetera. 365 00:25:17.134 --> 00:25:19.476 So that'll be a big focus over the next few months for us. 366 00:25:19.716 --> 00:25:28.764 When we talk about feature parity and like a lot of the work Justin's doing, we have, to your question earlier, like amazing technical fundamentals and a completely different business model we're building on, right? 367 00:25:28.784 --> 00:25:32.247 We talked about swaps and we talked about the broker-like model and all the benefits of that. 368 00:25:32.887 --> 00:25:35.770 This is like the core of the protocol and we think we've done that exceptionally well. 369 00:25:36.130 --> 00:25:41.956 So we are building product from a position of strengths, but we're quite upfront with ourselves about like why are the reasons people are using variational? 370 00:25:41.976 --> 00:25:43.798 They're using it for TradFi liquidity on chain. 371 00:25:43.818 --> 00:25:47.501 They're using it for the innovation we've had with the broker-like model with swaps and beyond. 372 00:25:47.762 --> 00:25:50.004 But we want to wrap that in as great of a UX as possible. 373 00:25:50.144 --> 00:25:55.809 I think there's very few people who are using variational as just the most exceptional user experience in terms of place to trade. 374 00:25:55.849 --> 00:26:05.457 So a lot of Justin's job and what he's mentioning there is marrying like an exceptional quality of UX and real differentiation of new ideas, like hoarding some ideas from FOMO and others to variational. 375 00:26:05.717 --> 00:26:12.382 And taking this model that we think from a bare bones, let's call it tech perspective, is far and away better than traditional brokerages, right? 376 00:26:12.402 --> 00:26:16.686 Because they're derivatives, because they're accessing to global markets and with the same liquidity as TradFi. 377 00:26:17.026 --> 00:26:18.287 Like that's the base we're building on. 378 00:26:18.307 --> 00:26:23.649 And with Privy and Fun and beyond, Justin's alluding to, we're building this model not just to compete with Hyperliquid and Lider and others. 379 00:26:23.709 --> 00:26:25.711 And again, we see them in many ways as collaborators. 380 00:26:26.091 --> 00:26:33.254 But we're competing longer term with Puan Indonesia, with Grow in India, with Interactive Brokers, longer term, let's say, with Robinhood in the US. 381 00:26:33.274 --> 00:26:34.475 Like that's the market. 382 00:26:34.495 --> 00:26:42.019 And that's why the UX has to be exceptional and allow for onboarding net users from out of crypto into our platform. 383 00:26:42.119 --> 00:26:46.642 What are the big like user consumer archetypes that you guys are really going after? 384 00:26:46.802 --> 00:26:50.664 I can name a few just to get the conversation rolling, but I don't know if I'm correct or not. 385 00:26:50.704 --> 00:26:57.949 There's, you know, the average crypto trader, crypto consumer who's got like a $10,000 portfolio on variational. 386 00:26:57.969 --> 00:27:01.751 They have plenty of wealth elsewhere, but they have a $10,000 account on variational. 387 00:27:02.031 --> 00:27:02.632 Maybe that's one. 388 00:27:02.972 --> 00:27:10.263 There are maybe the mega whales who have a huge portfolio and they're putting, and they do a ton of volume. 389 00:27:10.423 --> 00:27:11.585 There's maybe a few other people. 390 00:27:11.605 --> 00:27:17.634 What are the archetypes that you guys are really going for to move the needle here, the most proximate archetypes that you guys are going for? 391 00:27:17.834 --> 00:27:22.115 I like to always talk about business models in terms of crawling and walking and running. 392 00:27:22.135 --> 00:27:26.216 And it's funny that Variational is so huge now in our crawling stage, right? 393 00:27:26.336 --> 00:27:31.457 But we're crawling when we call it like taking those first few users that are DeFi native, right? 394 00:27:31.497 --> 00:27:34.798 And to Justin's point, to sign up for Variational right now, you need an invite code. 395 00:27:35.118 --> 00:27:36.098 You need a crypto wallet. 396 00:27:36.418 --> 00:27:38.359 You need Arbitrum USDC, right? 397 00:27:38.399 --> 00:27:41.620 And we're talking to a crypto audience here, Bankless Audience and beyond, of course. 398 00:27:41.780 --> 00:27:44.760 Yeah, everyone who just heard that was like, oh, I know all of those things. 399 00:27:44.780 --> 00:27:46.221 Exactly, exactly. 400 00:27:46.241 --> 00:27:47.201 And that's why that's that, 401 00:27:47.321 --> 00:27:50.843 core set of early adopter users, that first 30,000, 100,000. 402 00:27:50.863 --> 00:28:01.468 But how many daily trading users does Hyperliquid or even Lighter and others and us have versus Robinhood versus Interactive Brokers versus Poulon, Indonesia or Futu in Hong Kong, right? 403 00:28:01.508 --> 00:28:04.489 It's actually infinitesimally small if you compare those DAU numbers. 404 00:28:04.529 --> 00:28:11.773 So the real answer to your question is, yes, you know, there's some whales, there's crypto traders and so on coming from DeFi platforms, coming from centralized exchanges. 405 00:28:12.313 --> 00:28:24.026 But we're building a product that is so fantastic on kind of what we're offering swaps and tradify great execution and derivatives on global markets in one platform that we're building this to be competitive with traditional retail brokers. 406 00:28:24.066 --> 00:28:24.266 Right. 407 00:28:24.726 --> 00:28:29.171 And there's a wide kind of chasm to cross there as we go into our call that walking mode. 408 00:28:29.591 --> 00:28:33.516 And then the running mode is being at full scale, as I said, versus, say, an IB and a Robinhood. 409 00:28:34.236 --> 00:28:39.181 But what I think we've gotten right is the technical underpinnings, is the partnerships, is the ChadFi liquidity on chain. 410 00:28:39.601 --> 00:28:43.105 And the tailwind of this whole ecosystem is it is better to trade on chain. 411 00:28:43.125 --> 00:28:49.751 It is better to trade with one click sign up with instant settlement on USDC with one USDC balance collateralizing your entire portfolio. 412 00:28:49.771 --> 00:28:50.672 Like that's fantastic. 413 00:28:51.612 --> 00:28:53.813 But where we're still working on is a lot of the UX pieces. 414 00:28:53.853 --> 00:28:57.135 So our early users are very much the cohorts you just described. 415 00:28:57.175 --> 00:29:03.277 They're traders that might be in Asia, might be in various parts of Europe, might be some in South America and other growing areas for us. 416 00:29:03.858 --> 00:29:07.940 They're certainly familiar with crypto platforms, whether they're on chain or coming from a centralized exchange. 417 00:29:07.960 --> 00:29:10.481 You know, there's some who are small accounts or some who are big accounts. 418 00:29:10.581 --> 00:29:13.442 I think both see massive benefits in our community. 419 00:29:13.582 --> 00:29:16.224 access to global markets and the quality of execution we have. 420 00:29:17.064 --> 00:29:22.988 Of course, you know, bigger accounts and bigger guys feel this in the spreads and the order sizes more, you know, acutely. 421 00:29:23.728 --> 00:29:26.230 But fundamentally, like our goal is always to broaden that set. 422 00:29:26.510 --> 00:29:30.412 And I think, of course, on-chain trading as an entire industry is growing rapidly. 423 00:29:30.893 --> 00:29:32.814 Crypto exchanges and so on are growing rapidly. 424 00:29:33.254 --> 00:29:40.258 But I really want to eventually be pulling users in, and I shouldn't even say eventually, very near term, pulling users in from traditional brokerage platforms as well. 425 00:29:40.578 --> 00:29:42.920 And that's where we see the next exponential phase of our growth. 426 00:29:43.100 --> 00:29:50.603 Yeah, one thing I'll add there is there is a narrative that we firmly believe in that perps are just better, outright better than options for many reasons. 427 00:29:50.663 --> 00:29:54.024 But one of the core pieces is that they're just easier to understand than options. 428 00:29:54.204 --> 00:29:58.286 And while I think that's true, I don't think that's yet been applied to the fullest level. 429 00:29:58.386 --> 00:30:03.548 If you look at Robinhood's options product in their app, it is very simple, very easy to understand. 430 00:30:03.648 --> 00:30:10.130 But when you compare to that to existing perps offerings, and that includes ours as well, it's really an advanced platform. 431 00:30:10.490 --> 00:30:17.355 platform, I would say you have to manage your liquidation price, you have to know about isolated versus cross margin, you have to know about funding rates, etc. 432 00:30:17.896 --> 00:30:24.881 I think there's a lot of work that we can do to actually deliver on the promise that perps really are better and easier to understand two options. 433 00:30:24.961 --> 00:30:35.409 Right now, it really is a product that caters to, I would say, a very knowledgeable audience base, this, you know, crypto cohort of 100,000 or so 200,000 or so daily perps users. 434 00:30:35.649 --> 00:30:39.352 I want to learn about how variational actually uses the chain. 435 00:30:39.672 --> 00:30:44.693 My intuition tells me that you guys are pretty on-chain light, as in you don't have a huge footprint. 436 00:30:44.713 --> 00:30:46.234 There's not a lot of state there. 437 00:30:46.874 --> 00:30:51.295 What are the actual blockchain components that go into the variation of the product? 438 00:30:51.475 --> 00:30:52.896 Yeah, so we're currently built on Arbitrum. 439 00:30:53.736 --> 00:30:56.777 But the answer to your question is we're strong believers that 440 00:30:57.337 --> 00:31:04.839 for safety, for the isolation of funds, and even for the observability of the protocol, everything that moves value around has to take place on chain, right? 441 00:31:04.899 --> 00:31:11.561 So settlement and clearing and liquidations, movement of realized and unrealized P&L and collateral, like that's all happening on chain. 442 00:31:11.921 --> 00:31:13.302 That's all happening on Arbitrum One. 443 00:31:13.702 --> 00:31:16.643 We do a huge amount of transactions to support that, right? 444 00:31:16.683 --> 00:31:17.143 It's not a... 445 00:31:17.543 --> 00:31:20.565 You know, the vast majority is off-chain and we move things around occasionally. 446 00:31:20.585 --> 00:31:22.566 We're one of the largest gas spenders in Arbitrum 1. 447 00:31:22.686 --> 00:31:27.449 I'd say we're probably in the top five, just DeFi protocols overall in terms of usage of the chain directly. 448 00:31:27.509 --> 00:31:30.471 So if that gives you a mental model, we're heavy users of on-chain. 449 00:31:31.251 --> 00:31:38.376 But by nature of OLP's operations, right, for example, as I think you're aware, we talked about directly facing TradFi liquidity and hedging, right, right? 450 00:31:38.776 --> 00:31:43.858 We talked about even our ability to hedge on centralized exchanges, which in many cases will have interesting liquidity. 451 00:31:43.898 --> 00:31:47.980 We do want to help aggregate for our users when they're trading, say, crypto perps on chain. 452 00:31:48.400 --> 00:31:50.161 Like these necessarily have to happen off chain. 453 00:31:50.481 --> 00:31:54.002 So we see variational as like a foot in the foot that's really important. 454 00:31:54.102 --> 00:31:58.224 And the kind of design principle is capital and segregation and smart contracts. 455 00:31:58.284 --> 00:32:00.345 All the stuff that touches value exists on chain. 456 00:32:00.785 --> 00:32:04.667 But a lot of our hedging systems and pricing systems and some of the OLP pieces are. 457 00:32:05.407 --> 00:32:06.468 They have a foot in both, right? 458 00:32:06.488 --> 00:32:08.729 And that's a feature, not a bug, of the platform. 459 00:32:08.769 --> 00:32:12.991 It's what light lets us face, try to find liquidity and aggregate from off-exchange sources. 460 00:32:13.591 --> 00:32:15.612 So that's the mental model of how we think about it. 461 00:32:15.832 --> 00:32:22.136 If I went and checked the chain, I would only see USDC going in and out of variational, right? 462 00:32:22.176 --> 00:32:28.279 Like not if I was buying Ether or Uniswap token or Arbitrum token on variational, 463 00:32:28.839 --> 00:32:32.383 I do that in like a derivative fashion, not an actual spot market. 464 00:32:32.403 --> 00:32:38.229 And so like it's just USDC and USDC based exchange logic that's being manipulated. 465 00:32:38.289 --> 00:32:40.852 So that's really the bulk of the activity that happens on Arbitrum. 466 00:32:40.892 --> 00:32:41.733 That's absolutely correct. 467 00:32:41.853 --> 00:32:47.580 In the future, of course, we're looking at adding multiple different collateral types, just like you can imagine for any derivatives platform. 468 00:32:47.600 --> 00:32:47.720 But 469 00:32:48.020 --> 00:32:55.603 We started with USDC and again, this design principle of using Arbitrim, using USDC and beyond because they're great, high quality products and we want our traders to be protected. 470 00:32:56.063 --> 00:32:59.004 We went through as a prop trading firm, FTX, collapse and beyond. 471 00:32:59.385 --> 00:33:04.727 We've seen the, you know, hairy things that can happen when you don't have great risk segmentation. 472 00:33:05.167 --> 00:33:10.189 I want to point out with this opportunity, one thing about our protocol design, which is that on our platform, 473 00:33:10.769 --> 00:33:17.033 David, if you open an account and sign up with a wallet and Justin and I have our own accounts, all of our capital balances are completely segregated. 474 00:33:17.213 --> 00:33:19.095 They're not moving into one hot wallet pool. 475 00:33:19.115 --> 00:33:21.656 They're not moving into one agglomerated kind of risk system. 476 00:33:21.676 --> 00:33:26.059 This is a benefit of this broker-like model is that capital stays on-chain, observable. 477 00:33:26.199 --> 00:33:28.161 There's plenty of tools that track it on Arbitrum. 478 00:33:28.541 --> 00:33:33.404 And it's USDC there, right, which we consider one of the best and safest stable coins holding the peg to the dollar. 479 00:33:33.704 --> 00:33:35.706 So that is a really strong set of guarantees. 480 00:33:35.726 --> 00:33:37.247 When we talk about the off-chain pieces, 481 00:33:37.767 --> 00:33:42.489 OLP and kind of the systems that collateralize and shig out that smart routing for hedges and so on. 482 00:33:42.989 --> 00:33:44.730 That's using OLP's own capital base. 483 00:33:44.870 --> 00:33:47.291 That's using some of our own capital that we've raised. 484 00:33:47.731 --> 00:33:50.092 This does not expose the users directly to that risk. 485 00:33:50.152 --> 00:34:00.516 And we think that's a really important thing to emphasize in also terms of how we segregate risk and give a great guarantee to those users that the pieces that touch their capital are happening on chain in an observable way. 486 00:34:00.556 --> 00:34:02.017 You've brought up OLP. 487 00:34:02.037 --> 00:34:05.798 Can we go into what OLP is and how it functions inside of variational? 488 00:34:05.958 --> 00:34:06.078 Yep. 489 00:34:06.218 --> 00:34:09.139 The simple answer is OLP is the omni liquidity provider. 490 00:34:10.000 --> 00:34:15.182 This is the system that, as we were describing earlier in our broker-like model, takes the other side of the trade from the user. 491 00:34:15.382 --> 00:34:17.163 The user is always the taker, accepting a quote. 492 00:34:17.363 --> 00:34:19.844 OLP is always the maker offering that liquidity. 493 00:34:20.684 --> 00:34:26.187 And then it goes and aggregates liquidity from all of our hedging sources intelligently to offer the best price and the best execution. 494 00:34:27.028 --> 00:34:29.829 OLP doesn't necessarily just do pass through hedging, right? 495 00:34:30.029 --> 00:34:31.690 That would be relatively inefficient. 496 00:34:31.951 --> 00:34:34.512 Let's say, David, you place an order for 100 BTC long. 497 00:34:35.032 --> 00:34:38.814 We can give you a price on that and fill it quite efficiently, right, just in one click. 498 00:34:39.215 --> 00:34:44.678 But that doesn't necessarily mean that we're passing through 100 BTC market order onto the order books of, say, a Binance. 499 00:34:45.238 --> 00:34:48.142 But we're aggregating liquidity much like an intelligent market maker would. 500 00:34:48.302 --> 00:34:48.482 Right. 501 00:34:48.503 --> 00:34:53.149 So we like to joke to a crypto audience, we call it like an in-house wrench meter, an in-house Oros or an in-house Selene. 502 00:34:54.250 --> 00:35:01.520 And then to, you know, for example, TradFi audience, we'd say we're doing the same job as these big liquidity aggregators, dealers and banks internally. 503 00:35:02.341 --> 00:35:03.623 We do this intelligently, right? 504 00:35:03.643 --> 00:35:08.870 Our goal is at any given time just to aggregate liquidity and provide the best execution, the best price that we can to our users. 505 00:35:09.992 --> 00:35:11.714 But OLP is a real linchpin of that. 506 00:35:11.734 --> 00:35:14.138 That's why we highlight so much of our quant trading backgrounds. 507 00:35:14.218 --> 00:35:15.900 This is how we aggregate. 508 00:35:16.301 --> 00:35:17.743 It's the intermediary that's doing that work. 509 00:35:17.963 --> 00:35:23.447 What are the yields that have been on OLP in the last, like, can you give me a sample size of the typical yields? 510 00:35:23.707 --> 00:35:26.189 Yeah, so I'll frame the question slightly differently. 511 00:35:26.209 --> 00:35:29.071 OLP is one of the main sources of revenue for variational. 512 00:35:30.052 --> 00:35:31.673 We have three sources of revenue going forward. 513 00:35:31.913 --> 00:35:33.795 We have this flow trading, right? 514 00:35:33.855 --> 00:35:37.677 The intermediation of the flow is how OLP monetizes. 515 00:35:38.258 --> 00:35:42.241 We have the ability to generate essentially net interest income on balances, right? 516 00:35:42.261 --> 00:35:46.484 And that can take two farms, one on the open interest and then one on the USDC on the platform. 517 00:35:47.136 --> 00:35:55.341 But suffice to say, that's the lion's share of our revenue that we're monetizing in a little bit of a similar way to how big trading firms monetize in general, right? 518 00:35:55.701 --> 00:35:57.142 We're providing the service of liquidity. 519 00:35:57.222 --> 00:35:59.524 We're able to capture some of that spread. 520 00:35:59.984 --> 00:36:05.908 Fundamentally, right, we disclose this in our biweekly updates amongst many other dashboards that track public stats about Coriational. 521 00:36:06.388 --> 00:36:09.170 This is very, very profitable for the system. 522 00:36:09.430 --> 00:36:16.675 And that's a great thing for the health of the protocol and sustainability of the business models that we're not offering zero few trading while generating trivial revenue. 523 00:36:17.035 --> 00:36:21.078 We're capturing the part of the revenue that normally would be captured by those huge market makers. 524 00:36:21.098 --> 00:36:26.562 We all know how great of a business Jane Street and HRT and Citadel and so on are. 525 00:36:27.582 --> 00:36:33.245 In your mental model, I want you to think about, we're at least taking a bit of that for the protocol level and keeping it verticalized. 526 00:36:33.565 --> 00:36:38.948 One of our earliest ways we described the platform was like Robinhood and Citadel built on top of each other, right? 527 00:36:39.028 --> 00:36:42.350 So instead of leaking that value out of the ecosystem, we keep it within. 528 00:36:42.790 --> 00:36:47.332 And that becomes, indeed, yes, a return on capital for OLPs, liquidity providers. 529 00:36:47.693 --> 00:36:53.075 But more broadly, this is the top line revenue that's also being used towards the token and towards the ecosystem as a whole. 530 00:36:53.736 --> 00:36:55.797 So I think that's an important piece to understand is that... 531 00:36:56.437 --> 00:37:03.022 By not giving that out externally like other platforms do, we're able to really generate some interesting economics at the protocol level. 532 00:37:03.122 --> 00:37:07.506 All of these interesting economics converts into the conversation around the token, which I want to get to. 533 00:37:07.766 --> 00:37:13.230 There's a question I missed back in the Arbitrum section that I first want to rewind and go to before we get to the token section. 534 00:37:13.250 --> 00:37:13.971 Yeah. 535 00:37:14.791 --> 00:37:20.835 You talked about all of the just like block space around Arbitrum that you consume because a lot of the business logic goes on chain. 536 00:37:21.175 --> 00:37:23.537 Is it similar when you guys are doing all of that activity? 537 00:37:24.117 --> 00:37:34.084 Is it similar to the lighter construct in that like lighter is an audible ZK circuit that you can poke at the verifiability of the state of the exchange? 538 00:37:34.164 --> 00:37:37.726 Is that kind of the same properties that variational is using Arbitrum for? 539 00:37:37.846 --> 00:37:42.049 Or like what is what is the all of that block space of Arbitrum getting burned for? 540 00:37:42.229 --> 00:37:43.230 Yeah, not directly, right? 541 00:37:43.270 --> 00:37:50.180 Again, because we're not an order book, we don't have the same types of circuits and complexity on chain that Leiter does. 542 00:37:50.200 --> 00:37:57.650 And I think they've done an excellent job with that design and certainly even with verifiability and the speed of those EK circuits have been fascinating to watch that. 543 00:37:58.050 --> 00:38:04.374 And as I said earlier, like whether it's versus lighter versus hyperliquid and others, we see our business model existing alongside these exchanges. 544 00:38:04.514 --> 00:38:05.674 It's great that they're coming up. 545 00:38:05.734 --> 00:38:13.339 I think as these continue to grow and maybe even take flow away from traditional exchanges and TradFi, like we'll continue to aggregate both of them. 546 00:38:13.739 --> 00:38:22.964 But my thesis is that, you know, in the near to midterm and frankly, even in the long term, longer conversation, you know, trillions and trillions of dollars of liquidity will remain on TradFi rails. 547 00:38:23.004 --> 00:38:23.144 Right. 548 00:38:23.164 --> 00:38:24.365 So we want to be the bridge between the two. 549 00:38:24.665 --> 00:38:31.669 But to answer your question directly, the pieces that's primarily consuming so much gas and so much activity on Arbitrum is constantly rebalancing. 550 00:38:31.689 --> 00:38:35.070 We talked about those settlement pools are completely isolated for our users. 551 00:38:35.110 --> 00:38:51.999 So as, David, your trade goes well and you generate some funding rates, some additional unrealized P&L, maybe some additional positive realized P&L, we're constantly moving that capital around from OLP, from other pools into your pool to balance out and have those exist on chain for your account. 552 00:38:52.379 --> 00:38:53.820 Let's say Justin's trade is going poorly. 553 00:38:53.840 --> 00:38:54.421 Sorry, Justin. 554 00:38:56.122 --> 00:38:58.864 As he has big net outflows in his funding. 555 00:38:59.244 --> 00:38:59.764 Yeah, exactly. 556 00:39:00.065 --> 00:39:08.270 As he has big net outflows in his funding payments, maybe, and as he realizes negative P&L, those are being moved out of his settlement pool, of course, into the OLP system. 557 00:39:08.290 --> 00:39:11.733 So it's the execution of the exchange logic to move... 558 00:39:12.433 --> 00:39:17.340 Sometimes very small, sometimes very large amounts of USCC instantaneously as the state changes. 559 00:39:17.420 --> 00:39:17.701 Correct. 560 00:39:17.781 --> 00:39:20.805 Between all of these different systems as the state changes. 561 00:39:20.825 --> 00:39:27.495 And that's how we say, you know, your capital stays within that pool, including your realized P&L, your funding almost immediately, right? 562 00:39:27.915 --> 00:39:29.516 and even a portion of your unrealized P&L. 563 00:39:29.577 --> 00:39:33.240 So we think this is a very interesting guarantee in the architecture and the safety of the system. 564 00:39:33.660 --> 00:39:40.385 But in order to accomplish that, yeah, we have to be moving huge amounts of funds around at all given times in terms of the number of transactions. 565 00:39:40.445 --> 00:39:44.609 And that's a good problem to have, but that's simply because we have so many of these pools, so many of these users now. 566 00:39:44.889 --> 00:39:51.055 Right before we, this week, on Wednesday, I believe, you guys announced the VAR token, V-A-R token. 567 00:39:51.076 --> 00:40:00.325 Your guys is T-G-E. You guys, a quote says, we plan to finish our points program at the end of Q3 and launch ticker V-A-R shortly thereafter. 568 00:40:00.725 --> 00:40:04.950 So first half or second half of October, would you guys say? 569 00:40:05.110 --> 00:40:08.275 Yeah, let me just clarify that or maybe we can step back. 570 00:40:08.835 --> 00:40:13.823 So we had planned to end points at the end of Q3 and launch the token imminently after. 571 00:40:14.744 --> 00:40:20.152 But because of reasons that will be very clear over the next couple of months, we're extending the points program through Q4. 572 00:40:21.433 --> 00:40:25.055 And as part of this announcement, we wanted to give back to our community. 573 00:40:25.095 --> 00:40:28.657 We've seen the success that Hyperliquid and Leiter have by doing the same. 574 00:40:28.677 --> 00:40:33.219 Hyperliquid, I believe, airdropped about 31%, Leiter about 25%. 575 00:40:34.140 --> 00:40:38.922 We wanted to make sure that our users were getting the biggest airdrop as a percentage, I think, in crypto history. 576 00:40:39.223 --> 00:40:44.385 So we're targeting a 32% airdrop of the total supply proportional to points holders. 577 00:40:45.386 --> 00:40:47.087 And so that'll happen at some point in Q4. 578 00:40:47.627 --> 00:40:48.208 In Q4. 579 00:40:48.248 --> 00:40:53.512 And you guys are extending the points program to go into Q4, probably because I think you guys are getting a ton of attention right now. 580 00:40:53.592 --> 00:40:55.373 And so there's probably a lot of net new people. 581 00:40:55.694 --> 00:40:58.396 So you guys are trying to also distribute points to those people as well. 582 00:40:58.416 --> 00:41:00.438 Is that sort of the philosophy of extending the program? 583 00:41:00.578 --> 00:41:01.338 Yeah, I think that's it. 584 00:41:01.458 --> 00:41:01.939 That's right. 585 00:41:02.840 --> 00:41:07.103 The growth over the last couple of months has been wild, honestly, a little unexpected. 586 00:41:07.463 --> 00:41:09.605 We expect that to continue through Q4. 587 00:41:09.665 --> 00:41:14.089 And yeah, to your point, like as we start onboarding more users, making it easier to use the app, 588 00:41:14.509 --> 00:41:19.272 maybe launching mobile, launching Privy and funds, you don't have to manage a private key and stable coins. 589 00:41:19.953 --> 00:41:27.337 We can now start targeting non-crypto natives and to be able to airdrop to them, I think is going to be something that is really unique if we could pull that off. 590 00:41:27.797 --> 00:41:31.580 Yeah, we definitely want to grow our user base and continue rewarding our existing users. 591 00:41:31.820 --> 00:41:35.082 Yeah, David, I'll cut in with one thing just to double down on two things. 592 00:41:35.362 --> 00:41:40.465 One is that, you know, Hyperliquid showed if you do right by your community, your community will do right by you. 593 00:41:41.085 --> 00:41:47.569 So, you know, I think doing one of the largest airdrops in crypto history and kind of setting that precedent really puts us in the same ballpark. 594 00:41:47.609 --> 00:41:51.211 And, you know, we want to follow that mental model of doing right by our community. 595 00:41:51.931 --> 00:41:55.953 You know, I'll release more information and certainly there's going to be more comms from the teams in the coming week. 596 00:41:56.013 --> 00:42:01.696 As Justin said, it will become abundantly clear that there were some very core motivations to buying a little bit more time here. 597 00:42:02.277 --> 00:42:13.563 But we certainly wanted to, let's just say, have the space to land some amazing partnerships, some amazing features, and a few other things and get this TG really correct. 598 00:42:14.103 --> 00:42:16.064 But it's still very much coming in the near term. 599 00:42:16.505 --> 00:42:18.726 And, you know, points we've extended essentially just to 600 00:42:19.246 --> 00:42:21.670 you know, cover that intervailing period between now and TGE. 601 00:42:22.030 --> 00:42:24.994 But it's been fantastic to see the optimism of the community. 602 00:42:25.595 --> 00:42:29.922 We know that the community knows that we keep them kind of in the highest regard as our number one priority. 603 00:42:29.942 --> 00:42:34.048 And I think that the sizing of the airdrop and how we're approaching that also shows that. 604 00:42:34.248 --> 00:42:38.891 Is there any color you can give me about just the health of the startup? 605 00:42:38.911 --> 00:42:40.492 You guys have raised in the past. 606 00:42:40.713 --> 00:42:42.414 I'm sure you have cash in the bank still. 607 00:42:43.394 --> 00:42:45.176 Like the runway that you have, the burn. 608 00:42:45.556 --> 00:43:01.047 I know these are not typical questions, but since the company is transitioning from being like a typical startup to being a tokenized, a token company with 100% revenue, what sort of color can you give about just like the runway that you guys have? 609 00:43:01.227 --> 00:43:05.128 We have very significant capital has been announced previously. 610 00:43:06.208 --> 00:43:13.731 There'll be better information coming on that in the coming few weeks as well as it relates to things for pre-TGE preparations. 611 00:43:14.091 --> 00:43:25.074 We've been immensely profitable, both as a company operating OLP and variational in the past year, year and a half, as well as our history as a prop trading firm. 612 00:43:25.774 --> 00:43:28.136 So we are very, very well capitalized. 613 00:43:28.496 --> 00:43:39.744 I like to joke, you know, A, we're profitable, but B, just in the general startup sense, it became immaterial to measure our runway in terms of years and decades at this point. 614 00:43:39.764 --> 00:43:40.805 That gives you an indication. 615 00:43:41.105 --> 00:43:44.248 It is the first and last question, to your point, David, of any good investor. 616 00:43:45.468 --> 00:43:46.969 this is a very well-capitalized team. 617 00:43:46.989 --> 00:43:48.890 It's a very well-capitalized product. 618 00:43:49.330 --> 00:43:54.632 For example, we've been the major depositor at OLP for quite some time, and as we know, that has generated substantial revenue. 619 00:43:54.672 --> 00:44:00.115 So we are not at all worried about the health and economic health of the team and the 620 00:44:00.455 --> 00:44:11.764 the lab system and the overall protocol, which is, again, why we can take such a position that says our intention is to move as much of the value we're generating here into the wider ecosystem, such as the token. 621 00:44:11.885 --> 00:44:12.345 Cool, guys. 622 00:44:12.745 --> 00:44:21.833 So beyond the token and TGE event coming in Q4-ish, what does 2027 have in store for variational? 623 00:44:21.853 --> 00:44:24.295 What are your guys' aspirations by the end of next year? 624 00:44:24.535 --> 00:44:26.276 Yeah, so we have big aspirations. 625 00:44:26.296 --> 00:44:28.556 I'll give you a few and then Justin can maybe give you a few. 626 00:44:28.636 --> 00:44:35.119 But, right, like this is a space that's used to exponentials or we should be used to exponentials, right? 627 00:44:35.459 --> 00:44:41.681 How long did it take TradeX, Y, Z to go from, you know, very early deployer on HIP3 to one of the main drivers of hyperliquid growth? 628 00:44:41.741 --> 00:44:43.902 And certainly, you know, in the, you know, 629 00:44:44.322 --> 00:44:48.926 Billions and even on certain days, tens of billions in terms of volume and turnover and open interest and so on. 630 00:44:49.286 --> 00:44:51.048 I mean, a very short amount of time, right? 631 00:44:51.128 --> 00:44:51.568 About a year. 632 00:44:52.289 --> 00:44:55.972 We've seen immense adoption of our swaps product that we talked about earlier. 633 00:44:56.132 --> 00:45:00.896 We think that this is a better way to trade for retail trading RWA derivatives on chain. 634 00:45:01.356 --> 00:45:06.120 And just in general, even variational, as you've seen, has had immense growth in the last year, year and a half. 635 00:45:07.120 --> 00:45:18.587 So we very much expect that to not just continue, but to accelerate, especially as we list not just six, but dozens and then hundreds of different swaps products as we continue to improve all the product pieces that Justin mentioned. 636 00:45:19.087 --> 00:45:26.030 My favorite one, which we haven't had that much time to talk about today, and it probably will have to bookmark for a future Bankless podcast, but it's Variational Pro. 637 00:45:26.411 --> 00:45:26.571 Right. 638 00:45:26.631 --> 00:45:30.213 So I mentioned from our background, we come from institutional trading, OTC trading. 639 00:45:31.333 --> 00:45:33.815 there's still a world out there and all those stockbroker movies, right? 640 00:45:33.976 --> 00:45:40.681 Not of perps and so on, but of options and structured products and block trades and credit default swaps and all these other fun things. 641 00:45:41.101 --> 00:45:50.668 There's a quadrillion dollars of volume in all these OTC derivatives that is still being handled by ops teams offshore, moving, you know, swift wires around and so on. 642 00:45:50.709 --> 00:45:51.909 It's a mess. 643 00:45:52.230 --> 00:45:54.812 So in 2027, our intention is to launch Pro. 644 00:45:55.312 --> 00:46:03.596 which is Variational's answer to the institutional product side, options, structured products, other types of multi-dealer platform trading, essentially. 645 00:46:04.097 --> 00:46:05.697 This is something I'm particularly interested by. 646 00:46:06.198 --> 00:46:13.822 But in the meantime, we'll continue growing Variational and Omni to be the size of some of our large competitors and beyond because I think this whole space is growing. 647 00:46:14.322 --> 00:46:18.104 I think we're going to be bringing net new users on from traditional brokerages, as Justin was saying. 648 00:46:18.124 --> 00:46:21.766 And we'll grow very much alongside, but also in a comparison to, as I said, 649 00:46:22.286 --> 00:46:24.148 Some of our competitors, it's a better product. 650 00:46:24.208 --> 00:46:26.130 This is the best place to trade RWAs. 651 00:46:26.650 --> 00:46:27.751 And that will be our main focus. 652 00:46:28.011 --> 00:46:29.433 So Justin, if I missed anything. 653 00:46:29.593 --> 00:46:33.657 Yeah, just distill it down to really three things I think we're mostly thinking about now. 654 00:46:33.717 --> 00:46:36.660 The first is improving on the swaps product. 655 00:46:36.700 --> 00:46:38.962 We're currently just in the early stages of rolling that out. 656 00:46:39.182 --> 00:46:41.324 It's already a very popular product for us. 657 00:46:41.765 --> 00:46:42.846 And we think that will continue. 658 00:46:43.586 --> 00:46:52.711 So we're actually looking at how we can merge swaps and perps, you know, for an asset like US 100, let's say, or Google stock, we may have a swap and a perp listed. 659 00:46:53.392 --> 00:47:01.657 But there's possible ways that we can merge those two products as a benefit for users and turn swaps fully 24 seven and give the benefits of swaps to perps. 660 00:47:02.617 --> 00:47:09.283 mobile, obviously, as I mentioned before, is a huge focus, seeing how we can onboard normal people, not just your average crypto users. 661 00:47:09.864 --> 00:47:19.592 And then as Lucas gave a little bit more info about this pro, specifically, I think we're mostly excited about options, which are really heating up in our sector, the crypto sector. 662 00:47:19.632 --> 00:47:24.416 So we've seen Derive, I think you've covered on the show, David, as well, has done really well. 663 00:47:24.777 --> 00:47:29.381 And I think there's a lot we can do with options of bringing that TrotFi level of liquidity that we see 664 00:47:30.561 --> 00:47:33.423 In the options market on chain, which has never been done before yet. 665 00:47:33.463 --> 00:47:41.188 And I think our model, which is the broker like model of aggregating from these different liquidity sources is actually really interesting, especially for options. 666 00:47:42.408 --> 00:47:44.590 So those are the main things we're focused on right now. 667 00:47:44.770 --> 00:47:46.411 Guys, this has been fascinating. 668 00:47:46.971 --> 00:47:48.452 I love learning about cool new protocols. 669 00:47:48.752 --> 00:47:50.413 Do you guys consider it a protocol? 670 00:47:50.573 --> 00:47:53.355 Is the protocol the word, the correct word for variational? 671 00:47:53.515 --> 00:47:54.516 It is for the infrastructure. 672 00:47:54.836 --> 00:47:56.077 We call it the variational protocol. 673 00:47:56.517 --> 00:48:03.923 But I think, to be honest, David, the marketing side of me and certainly of Justin and Max and our growth team just calls it variational nowadays, right? 674 00:48:03.943 --> 00:48:10.808 Because one key observation, as Justin was saying, as we move towards onboarding that next few hundred thousand users from TradFi is... 675 00:48:11.328 --> 00:48:12.889 This is just a trading platform, right? 676 00:48:12.909 --> 00:48:16.831 And I say just, right, but crypto is an infrastructure rail. 677 00:48:16.911 --> 00:48:17.932 It's a fantastic one. 678 00:48:18.132 --> 00:48:19.633 On-chain, I think, is going to continue to grow. 679 00:48:19.653 --> 00:48:21.054 Stablecoins are excellent. 680 00:48:21.394 --> 00:48:33.221 But I envision a world where, you know, people coming over from IB and Fuku and Puao and any other brokers that we can name don't necessarily know what Arbitrum USDC is and don't necessarily even know what on-chain is. 681 00:48:33.601 --> 00:48:36.403 But it's just fantastic infrastructure behind a great user experience. 682 00:48:37.203 --> 00:48:38.463 So it's somewhere between the two. 683 00:48:38.503 --> 00:48:45.185 Variational protocol is the tech, but variational is the trading platform, both for retail and in the future for pro and options and beyond. 684 00:48:45.205 --> 00:48:46.265 And that's going to be fantastic. 685 00:48:46.405 --> 00:48:47.005 Amazing, guys. 686 00:48:47.025 --> 00:48:48.885 Well, this is, I am excited. 687 00:48:48.905 --> 00:48:50.046 You guys have gotten me excited. 688 00:48:50.206 --> 00:48:53.126 So I hope the best for you guys and you guys' upcoming TGE. 689 00:48:53.346 --> 00:48:58.947 And also I do hope that the market continues to be the way that it is because I think that the tailwinds behind everyone. 690 00:48:58.987 --> 00:49:01.928 So thanks for coming on today and teaching me and the Bankless Nation about variational. 691 00:49:02.628 --> 00:49:02.848 Awesome. 692 00:49:02.968 --> 00:49:04.749 Thanks so much, David, for having us. 693 00:49:04.909 --> 00:49:06.350 Bankless Nation, y'all know the deal. 694 00:49:06.370 --> 00:49:08.931 Crypto is risky, but not risky enough. 695 00:49:08.951 --> 00:49:11.512 The institutions have landed, so we are going even further west. 696 00:49:11.572 --> 00:49:12.232 This is the frontier. 697 00:49:12.252 --> 00:49:15.134 It's not for everyone, but we are glad you were with us on the Bankless Journey. 698 00:49:15.154 --> 00:49:15.714 Thanks a lot.