Stan explained the design philosophy of Initia, emphasizing that their initial idea was to consider the liquidity of users between different applications.

Organized & Compiled by: Deep Tide TechFlow

Guests: Stan Liu, Co-founder of Initia; Ezaan Mangalji, Co-founder of Initia

Host: DeFi Dave, dinero_xyz Chain Manager from thecoreloop

Podcast Source: Flywheel DeFi

Original Title: Everything You Need To Know About Initia w/ Zon & Stan - Flywheel #120

Broadcast Date: September 11, 2024

Background Information

• In this episode of the podcast, hosts Dave and Capital K invited Zon and Stan, the co-founders of Initia, to discuss their innovative work in the multi-chain world and modularization. Zon expressed his continuous support for the show and mentioned his encounters with Dave at multiple conferences.

Personal Background

• Zon shared his background as a developer from Vancouver, Canada, with degrees in computer science and business. During the pandemic, he completed his studies at home while being engrossed in DeFi projects and developing a strong interest in app chain theory. Zon previously worked as a smart contract developer at Terra, contributing to the development of multiple ecosystem projects. However, due to Terra's collapse, he and Stan started over and eventually founded Initia.

• Stan introduced his background, coming from China and South Korea, and completing a degree in mathematics in the United States. After graduation, he entered the field of quantitative trading and served as a market maker in the crypto market. During this time, he developed an interest in DeFi and connected with Do Kuan through a college classmate, eventually joining Terra as a research engineer.

Initia's Philosophy

Founding Background

• Zon reviewed the founding process of Initia. They realized that continuing with their previous projects after the FTX collapse was not a wise decision. Zon decided to re-examine the Ethereum ecosystem, while Stan returned to the field of quantitative finance but quickly found himself unable to adapt to traditional finance.

Observation and Reflection

• Both of them noticed the development of Cosmos. Although they had experience in building on Cosmos, they also realized that the DeFi experience on Ethereum was superior. Zon pointed out that despite the flexible building tools provided by the Cosmos SDK, the complexity of building Cosmos chains was daunting, including the need to run a Layer 1, manage a set of validators, and handle IBC relays.

Multi-Chain Solution

• In contrast, Rollups on Ethereum began to gain popularity, even though these solutions were not initially designed to scale Ethereum. Zon believed that with the emergence of various interoperability solutions and decentralized layers, the problem of decentralized liquidity and choice overload would only worsen. They believed that the future expansion of blockchain should take a multi-chain approach. Therefore, they decided to leverage their expertise in Cosmos and Ethereum to build a complete Layer 1+ and Layer 2 system to address these pain points and achieve an ideal multi-chain ecosystem.

Building a Permissionless Interwoven Ecosystem

Design Philosophy

• Stan explained Initia's design philosophy, emphasizing that their initial idea was to consider the liquidity of users between different applications. While many heavy Ethereum users can easily move assets on the main chain, the situation becomes more complex when using Layer 2 solutions.

User Experience Challenges

• For ordinary DeFi users, cross-chain operations may not be too difficult, but for those who are not familiar with the ecosystem, the situation is quite different. Stan pointed out that many users may not know the specific location of each bridge and may even need to consult tools like Defi Lama to obtain information. The bridging process, although seemingly a minor issue, is actually very challenging, especially when it involves different token standards and bridging methods, such as using different bridging protocols (such as Optimistic Bridge or CCTP), users may face confusion with various token standards.

Foundation of the Solution

• These user experience pain points led them to decide to build Initia's ecosystem to simplify cross-chain operations and enhance the overall user experience. They hope to make it easier for users to interact with different DeFi applications by providing a permissionless interwoven ecosystem.

Apple-Inspired Design of Initia

Design Philosophy

• Zon discussed Initia's design philosophy, mentioning that they were influenced by Apple's design principles. He likened Rollups on Ethereum to Android, pointing out that this architecture provides infrastructure but users face many choices in selecting service providers, bridging, and oracles. In contrast, Initia takes a more firm stance in its design, clearly defining the system's evolution direction.

System Architecture

• In Initia's Layer 1 and Layer 2 framework, many components are solidified within the system. For example, bridging only uses IBC and Layer 0, and data availability (DA) relies on Celestia. They designed a local system for oracles and transmit its information to all Layer 2 to ensure consistent user experience across all Layer 2, simplifying user interactions.

Economic Mechanism

• Stan further explained the economic mechanism they considered when building the ecosystem. They aim to eliminate the debate about whether Layer 2 is harmful to Layer 1 by interconnecting Layer 1 and Layer 2 applications. They believe that all applications should evolve in line with Layer 1, bringing value to users and the ecosystem.

Reflection and Improvement

• Kiet agreed with this viewpoint and mentioned that Initia has made improvements in many fundamental systems, drawing on the strengths of existing technologies to make them more advantageous. He looks forward to a deeper exploration of Initia's design and implementation.

Initia's Three Core Pillars

Architecture Layer

Zon introduced Initia's architecture layer, emphasizing its three main pillars: architecture, product, and economics.

• Layer 1: Initia's Layer 1 is a chain based on the Cosmos SDK, using the Move virtual machine (VM). Its features include:

  • Access coordination layer, handling security rewards, interoperability, and routing for all Layer 2.

  • Enshrined Liquidity: Building a decentralized exchange (DEX) on the chain, where users can directly stake XLP tokens with validators to ensure network security and provide liquidity.

  • Acting as a multi-chain router, supporting token exchange between different Rollups.

Interwoven Stack

• Optimistic Rollup Framework: Initia's interwoven stack is a complete Optimistic Rollup solution, with Optimistic bridging, fraud proofs, rollbacks, and challenge mechanisms, similar to Optimism's Bedrock but built on the Cosmos SDK.

Layer 2 Stack

• Full-Featured Cosmos SDK Base Chain: Each Layer 2 is an independent Cosmos SDK base chain, allowing users to customize transaction ordering, fee types, and transaction processing methods.

• VM Agnosticism: Supports EVM, Move VM, and WASM VM, allowing users to choose the smart contract environment that best suits their application.

• Data Availability: Each Layer 2 defaults to publishing data availability (DA) to Celestia and submitting proof data to Initia's Layer 1.

Settlement Layer

• Zon further explained that Initia's Layer 1 is the settlement layer, where all funds extracted through Optimistic bridging are processed. Initia also implements a state synchronization feature, which can read data from Celestia and create a fork instance of the chain when a fraud proof challenge occurs.

Enshrined Liquidity, initUSDC Pool, and Fees

Kiet inquired about how Initia's enshrined liquidity can simultaneously act as a router and bridger.

• Stan explained that when users transfer USDC between different Initia instances, they do not need to go through cumbersome steps. Specifically:

  • The USDC on Minisia A and Minisia B is the same, both are native USDC, avoiding the problem of fragmented liquidity.

  • All token transfers must go through Layer 1 (L1), ensuring consistent standards for USDC between different Minisia instances.

User Experience

Kiet further clarified the process for users to obtain USDC:

1. Users enter the Initia ecosystem through L1 and acquire USDC using a decentralized exchange (DEX).

2. Users move USDC from L1 to the desired Layer 2 (L2), such as Minisia A.

3. After completing the transaction, if users want to return, they need to bridge USDC from Minisia A to Minisia B through L1.

4. Throughout the process, user operations are abstracted, and the system automatically handles token transfers, with users only needing to select from one L2 to another.

Fee Structure

• Regarding Initia's fee strategy in the USDC pool, Zon stated:

  • Initia plans to set lower fees to attract users to use its USDC pool.

  • Part of the transaction fees will be rewarded to stakers to incentivize user participation.

  • The main source of revenue is similar to traditional Layer 1 staking rewards.

• This design aims to ensure that Initia's liquidity pool has a competitive advantage in the market and becomes the preferred choice for users.

Rollback Mechanism and Fraud Proofs

Concept of Fraud Proofs

• Zon explained the rollback mechanism and how fraud proofs work in Optimistic Rollup:

  • Fraud Proofs: In Optimistic Rollup, the system assumes that all operations are normal, and all sequencers are honest. However, if a sequencer submits malicious transactions (e.g., front-running transactions or improper balance adjustments), there is a 7-day challenge window when users attempt to extract funds to Layer 1 (L1).

  • During this challenge window, any honest participant can submit a fraud proof, pointing out the malicious behavior of the sequencer and preventing the extraction operation.

Role of Rollback Mechanism

• Rollback: If a fraud proof is successfully submitted within the challenge window, the system will need to rollback the chain's state to reset to a secure state. The rollback mechanism serves as the ultimate security guarantee, ensuring that the system can recover to a normal state in the event of malicious behavior.

• Zon emphasized that fraud proofs and the rollback mechanism complement each other. Fraud proofs provide a mechanism to identify and prevent malicious behavior, while rollback ensures that the system can recover to a secure state when issues arise. This design enhances the security and reliability of Optimistic Rollup.

Implementing Instant Cross-Chain with MinitiaSwap

Concept of MinitiaSwap

• Zon introduced the design concept of MinitiaSwap, aimed at addressing the time required for cross-chain transfers. He emphasized that traditional bridging processes typically take 7 days, which contradicts the goal of creating an interconnected world. Therefore, MinitiaSwap allows users to instantly bridge between Optimistic Rollup tokens, although there may be some loss, it is limited.

Bridging Mechanism

• Stan further explained the specific process of bridging:

1. Optimistic Bridging: When users transfer tokens from L1 to L2, they are actually sending tokens through Optimistic bridging. At this point, the tokens on L1 are still locked, and corresponding tokens are re-minted on L2.

2. Extraction Process: Under normal circumstances, the extraction operation requires a 7-day waiting period. During this time, if someone submits a fraud proof, the system will roll back the state.

3. Instant Bridging: To address the 7-day waiting period, MinitiaSwap has adopted two bridging solutions: Cosmos native IBC and Optimistic bridging. Users can transfer tokens to L2 through Optimistic bridging and then quickly transfer them back to L1 through IBC.

Token Handling

• After transferring tokens through Optimistic bridging, users receive tokens that are different from the original tokens (e.g., wrapped USDC).

• To achieve efficient liquidity, MinitiaSwap creates a trading pair, allowing users to exchange between different tokens.

Liquidity Management

• Stan also mentioned that MinitiaSwap has a time or quantity limit to ensure the controllability of liquidity provider losses. Specifically:

  • The amount of USDC exchange allowed within a specific time is limited.

  • If a large number of users attempt to exchange back to native USDC, the exchange rate may decrease.

  • Conversely, if users are willing to wait for 7 days, they may get a better exchange rate.

• Kiet expressed appreciation for the explanation of MinitiaSwap and pointed out that although different tokens are technically different, they are treated as the same in the exchange pool because they all go through the same 7-day extraction process.

• Stan added that liquidity providers play a crucial role in ensuring the feasibility of quick exchanges while maintaining controllable losses.

Building on L1 and L2

• Dave raised a question about the possibility of building on L1 and asked Zon if they expect developers to build on L1. Zon responded that while it is possible to build smart contracts on L1, they encourage teams to build independently on L2. The benefits of this approach include:

  • Optimized Experience: Building on L2 can optimize the user experience and ensure there is no congestion.

  • System Scalability: Pushing execution to independent L2s can effectively scale the system.

View on SVM

• Dave also mentioned their support for EVM, Move, and Wasm, but did not mention SVM, and asked Zon for the reason. Zon expressed his viewpoint:

  • Market Demand: If there is an increased demand for SVM in the market, they will consider supporting it.

  • Appeal of Solana: Developers typically choose SVM because of their fondness for the Solana ecosystem, not because SVM is the next-generation smart contract framework.

Integration with Cosmos SDK

• Zon further explained the importance of building different virtual machines (VM) and emphasized the good integration with the Cosmos SDK:

  • Historical Issues: In the past, implementations of EVM like Ethermint and other EVMs on Cosmos had issues, mainly due to the lack of smooth bridging between ERC20 tokens and Cosmos native tokens, resulting in a poor user experience.

  • Seamless Interaction: When building a new VM, they ensure seamless token conversion. For example, users can transfer ERC20 tokens through IBC, naturally converting them to Cosmos tokens; if sent to a Move Layer 2, they will be converted to Move fungible assets; similarly, if Move tokens are sent to the Cosmos chain, they will automatically convert to Cosmos 20 tokens.

Attracting and Incubating Application Chains

• Dave expressed curiosity about the ongoing construction of application chains and their incubation process. Zon responded to the question about how they incubate projects, emphasizing some of their beliefs regarding application chains:

1. Avoiding Redundant Projects: Zon pointed out that in the past, some L1 launches often claimed to have a large number of projects (e.g., 50), but many of them were just forks of UNV2 or small hack projects that did not continue to develop. This approach was considered a failure.

2. Supporting Local Projects: He mentioned that bringing projects from existing ecosystems and "standardizing" often leads to "self-cannibalization" of the local ecosystem. For example, projects like PancakeSwap and SushiSwap, while bringing users and TVL, did not bring success to local projects. Therefore, Zon believes that supporting local application projects is crucial.

3. Seeking Unique Projects: Zon emphasized that their goal is to find teams that want to build unique, novel, and interesting projects and provide them with resource support, including marketing, financial incentives, and product development.

Specific Project Examples

• Zon introduced some projects they are incubating:

  • Blackwing: This project allows for permanent trading of any token on any chain. Users can trade between different liquidity pools, simplifying the complexity of cross-chain transactions.

  • Milky Way: The first LST project based on Tia and Celestia, building a re-staking center to enhance economic security.

  • Sevisha: A chain-based "monopoly" game where players can buy land and engage in strategic cooperation or competition with other players.

  • Kamagachi: A cute idle RPG game that has already launched on Tesla.

  • Contro: This project has developed a mechanism called "Gradual Limit Order Book" to address front-running issues in prediction markets. By slowing down the time element in the market, it ensures that bets in the right direction can yield positive results.

Innovation in Prediction Markets

• Zon detailed how Contro works, emphasizing how the project avoids front-running issues through a slow-motion order book mechanism. He pointed out that this mechanism allows multiple users to place bets at similar times, ensuring they can share in some of the profits without worrying about being affected by front-running trades.

Collaborative Interwoven Projects and Users

• Kiet raised the question of whether the initial projects are permissionless, and Stan explained that they are indeed permissionless, allowing users to freely build projects on L1. He pointed out:

  • Freedom to Build: Users can create their own L2 on L1, allowing for high customization.

  • Support for Interesting Projects: They aim to attract interesting projects that can serve as pillars of the ecosystem, rather than simple clones (e.g., Uniswap V2 forks). For example, the early Arbitrum ecosystem flourished due to specific projects like GMX.

Support and Resource Allocation

• Zon further added that while they support any project built on Initia, during the Genesis phase, they aim to attract novel and interesting projects to provide reasons for users to be attracted at the mainnet launch. Their goal is to provide marketing and resource support for these projects to help them grow.

User Attraction Strategies

• Regarding how to attract users, Zon mentioned:

  • Individual Support and Overall Strategy: They work individually with each application chain to provide support to attract users and increase TVL (Total Value Locked).

  • Network Effects: Each new application chain brings network effects, promoting the flow of users and assets. Through this interwoven ecosystem, users can easily collaborate rather than compete with each other.

Ecosystem Collaboration

• Zon emphasized the uniqueness of the Initia ecosystem, where projects care for each other and collectively drive the growth of the entire ecosystem. He believes that unlike past isolated competition, Initia's projects can collaborate more closely to grow together.

Origin of the "Interwoven" Concept

• Dave inquired about the origin of the name "interwoven," and Zon explained that the word is a perfect description of their tech stack and ecosystem:

  • Technical Connectivity: Whenever a new chain is launched, they are connected to other chains, whether through Layer 0, IBC, CCPP, or Oracle data. This connectivity allows users to easily access from any chain.

  • Ecosystem Collaboration: Zon emphasized that every project in the ecosystem tends to collaborate, collectively driving overall growth, forming a well "interwoven" environment.

Possibility of Permission Settings

• Regarding the question of whether specific applications can be set with permissions to ensure the security of the chain, Stan replied:

  • Semi-Permissioned or Fully Permissioned: Through the Cosmos SDK, users can achieve semi-permissioned or fully permissioned settings. For example, Osmosis does not allow arbitrary deployment of applications to maintain consistency in on-chain applications.

  • Custom Settings: As the operator of Initia, they can control which tokens can be transferred through bridging, allowing specific tokens (such as USDC or native tokens of the chain) while rejecting others (e.g., Ethereum or Solana).

Project Progress and Funding

• Zon also mentioned that there are currently 12 projects building on the interwoven tech stack, and most of these projects are local, with a total funding of over $13.5 million. Zon believes this reflects the adaptability and demand of the system. He pointed out:

  • Ecosystem Potential: Although Initia's own funding is not high, the successful funding of these projects demonstrates the attractiveness of the ecosystem. Compared to ecosystems with funding amounts reaching hundreds of millions, Initia's investment level is quite competitive.

Community Consistency and Long-Term Success

• Zon stated that the community currently maintains a high level of consistency. He mentioned that in the past year, many overvalued, low-liquidity infrastructure projects performed well at launch but quickly declined.

• Zon emphasized that they hope to be the opposite of these projects and adopt the following strategies:

  • Community Engagement: Allowing community members to participate in projects at prices close to institutional investors, enabling mutual growth.

  • Wealth Effect: Creating a wealth effect as the ecosystem develops, benefiting all participants in the long term.

Key to Long-Term Success

• Dave emphasized the importance of creating a wealth effect, stating that it is the key to achieving long-term success for any ecosystem. He pointed out:

  • Shared Success: Successful chains are those where all participants benefit, rather than a few early beneficiaries selling off, leading to the collapse of the ecosystem.

  • Persistent Vision: Successful projects need to have long-term planning and confidence in the project's success. Zon believes that while high valuation launches have their appeal, they often come with risks.

Opposition to Short-Term Behavior

• Zon expressed dissatisfaction with short-term behavior, pointing out that some projects start with a large amount of funding and incentives but quickly lose value due to mismanagement. He hopes to avoid this situation by adhering to long-term development strategies.

• Zon stated that they are willing to compete in "hard mode," pursuing long-term success rather than seeking short-term quick returns.

Comprehensive Product Suite of Initia

Product Architecture

• Kiet mentioned Zon's previous discussion of architecture, products, and economics, expressing a desire to delve deeper into the economics but also wanting to first discuss products.

• Zon introduced the comprehensive product suite of Initia, especially their block explorer and other features, calling it a "godsend" tool, especially when using Cosmos.

Key Product Features

Zon listed several key product features of Initia:

1. Initia App: This is a "super app" where users can perform all operations related to Initia, including liquidity management and exploring all existing smart contracts.

2. Wallet Widget: Allows users to directly connect any EVM wallet, Cosmos wallet, or in-app wallet to any smart contract, even if they are in different virtual machines. This flexibility allows users to easily use their preferred wallets (e.g., Rabbi).

3. Bridging Widget: Aggregates the flow between all smart contracts and external chains, simplifying the user experience. Users do not need to switch between different front-ends, but can easily bridge through a single interface.

4. Block Explorer: Zon mentioned their recent acquisition of Seller Tone, the best block explorer in Cosmos, supporting multiple block explorers (such as Say, Scan, and Osmosis, among others). It provides powerful functionality, allowing users to easily interact with smart contracts, verify smart contract code, and view transactions and balances.

• Zon emphasized that Initia's goal is to simplify the user experience as much as possible. For example, the bridging widget not only allows bridging operations but also token exchanges, utilizing liquidity to optimize the trading process.

• Kiet also agreed, praising Initia for having a comprehensive product suite that is very helpful for both developers and end users. He noticed that Initia's documentation also reflects their focus on both aspects.

VIP Program: Rewarding Engagement and Loyalty

Importance of Community Engagement

• Stan introduced Initia's VIP Program (Vested Interest Program), emphasizing that the program aims to enhance the community's sense of participation and support for the ecosystem. He mentioned that in Web 3.0, many things are highly financialized, which actually helps in building the community. Therefore, they hope to introduce this mechanism into the hands of users.

Structure of the VIP Program

The core of the VIP Program is to provide rewards to users using the Initia ecosystem. Specifically:

• Token Allocation: In Layer 1, a portion of Initia's token supply is specifically allocated to users using different applications. For example, users can earn rewards based on key performance indicators (KPIs) set by the Initia operator when they are active on a specific platform (such as a lending protocol).

• Reward Format: These rewards are distributed in the form of "es in it" or "escrow in it," and these tokens are initially non-transferable or sellable. Users need to remain active for 26 weeks to linearly unlock these tokens.

• KPIs and Incentive Mechanisms: User rewards are tied to their activity on specific platforms. For example, if a user remains active on a particular application, they can unlock more tokens. This incentivizes users to continue participating, driving ecosystem growth.

Eliminating Middlemen

• Stan emphasized that the program aims to eliminate middlemen in traditional grant programs, ensuring that all rewards go directly to end users rather than being consumed by the team or treasury. Application developers also benefit from this, as they attract users and create economic value for the ecosystem.

Alignment of Incentives

• Zon added that the VIP Program not only focuses on user participation but also takes into account the contributions of application developers. Applications can receive a certain percentage of rewards, similar to validators (e.g., 5% or 10%), aligning with user incentives. This ensures alignment of interests and promotes the healthy development of the ecosystem.

Token Allocation and Governance

In terms of token allocation, Initia has set 26 periods, with rewards allocated based on the following two factors:

1. Init Balance on Layer 2: This incentivizes users to explore new use cases.

2. Governance Voting: Every two weeks, users holding Init can vote on reward allocation to ensure effective governance.

This mechanism not only incentivizes continuous user participation but also encourages them to pay attention to the dynamics of the ecosystem.

Uniqueness of the Economic System

• Kiet summarized the two main reward pools of the VIP Program: the Balance Pool and the Weight Pool. The Balance Pool allocates rewards based on the Init balance of each application, while the Weight Pool distributes rewards through governance voting. This design avoids the unfairness of traditional POS systems that only reward large stakers, ensuring broader user participation.

Innovation and User Experience

• Dave mentioned that users often look for fresh and interesting features when exploring new applications. Initia makes users more willing to participate by providing diverse applications and a smooth user experience.

• Zon further emphasized that Initia does not intend to rebuild the entire ecosystem but rather integrates existing excellent technologies (such as Cosmos SDK and IBC) to simplify the application development process.

Memes and Communication Strategy

• Dave expressed curiosity about Initia's use of memes on social media, especially their collaboration with the legendary figure Hersh. Stan stated that the use of memes is not just for humor but also to keep the team actively engaged with the community. He believes that regularly posting interesting content can make users feel fresh and not fatigued.

Importance of Community Interaction

• Stan emphasized that community and marketing are crucial in the cryptocurrency field. In addition to providing interesting products, attracting user attention to Initia is also an important part of their daily work. They hope to continuously improve the product by interacting with the community and understanding user feedback to achieve mutual success.

Guest Recommendations

• Before concluding the discussion, Dave quickly asked whom they would like to invite as guests on the show. Stan mentioned that he would like to invite active but less well-known accounts on social media, such as "alignment bros," because their viewpoints are often interesting. Zon expressed a desire to see some building teams in progress, as well as outstanding builders like DCF God, who have performed excellently in both Web 2 and Web 3.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。