Yesterday morning, Lighter founder and CEO Vladimir Novakovski held an in-depth Q&A session on Twitter Space.
In line with the previous commitment that "TGE will be completed this year," Lighter will complete the TGE during the final 3 days of the countdown. Meanwhile, the recent witch account cleanup conducted by Lighter has caused some users to lose their earned points, sparking intense discussions on Discord and Twitter.
This AMA came at the right time. During this hour-long conversation, Vlad personally addressed rumors about "Justin Sun having special point rules," the witch identification algorithm, and the appeal process. He also shared updates on his regulatory dialogues in Washington, the collaborative potential with Robinhood, and Lighter's next steps.
TL;DR:
Regarding the point reduction from a few days ago, Vlad explained that the team used a lot of data science methods (including cluster detection) to identify wash trading accounts, and the quant team worked on this for weeks. Users who were mistakenly judged can appeal through the Discord appeal form, but the number of appeals has been surprisingly low;
There is no special point system for large holders in Lighter's algorithm;
The mobile app will be released in a few weeks, offering both a professional mode and a light mode experience, with plans for seamless deposits. Universal full-account margin will start with stablecoins and gradually expand to ETH, BTC, and native tokens;
Vlad revealed that the team has had regulatory dialogues in Washington, and the government’s understanding of DeFi and ZK technology is deeper than expected. Lighter is exploring collaboration with Robinhood on tokenized stocks and plans to launch on-chain fixed-income products in the future;
All investors and the team agree on the concept that "Lighter's value accumulation is in tokens rather than equity," and there will be no dual structure of tokens and equity existing simultaneously.
Rhythm BlockBeats has translated, organized, and polished all the questions from this Twitter Space; here is the complete content:
Jez (Host): This is my first time hosting a Twitter Space, so please bear with me if there are any technical issues. Alright, today I have invited Lighter's founder and CEO Vladimir Novakovski. We will ask him some questions, some from Discord, some from Twitter, and some from trader group chats. Before we officially start, Vlad, do you have anything to say?
Vlad (Lighter Founder and CEO): No, I think we have a lot to discuss, right?
Jez: Yes, that's right. Okay, the first question is an easy one, just to break the ice. When will the token be released?
Vlad: Well, you know, we mentioned before that the holidays will be exciting, right? So the community can interpret that in different ways. However, we see a very enthusiastic response from the community, and I think that expectation is justified.
Jez: Alright, the next question. I want to ask about the roadmap; where do you plan to take Lighter in the coming months and years? But first, I want to ask, is there really a "Justin Sun ZK dedicated algorithm"?
BlockBeats Note: Since Justin Sun is one of Lighter's large holders, there has been much discussion in the community about this. So this question subtly asks whether Lighter has opened a backdoor for Sun and created a special point rule for him, even though Lighter claims to ensure fairness using ZK technology?
Vlad: Yes, regarding this, there have been some doubts online, but that’s actually a joke.
We actually released the "ZK circuit" algorithm code this week. I know many people are studying that part of the code, and I guess part of the question is that the point system does not go through that part of the code. So when someone earns a lot of points and gets LLP (Liquidity Provider Program) shares, that part is actually unverifiable. But in the future, when native tokens can be used, such as staking tokens to gain access to LLP and other products, that will be verifiable.
So what I want to say is that while the existing point system hasn't reached that point yet, the claims about large holder privileges or point systems in the algorithm are just jokes.
Jez: Okay, every time I hear the term "ZK circuit," my brain crashes; let's assume we know nothing about ZK and will never understand it. Can you explain what the practical significance of Lighter using ZK is?
Vlad: Simply put, everything Lighter does is verifiable and will be published on Ethereum. So from a practical perspective, if you are a trader, you don't have to worry about "will my order be executed unfairly in a different order than others," or "was I liquidated at the wrong price," because all of that is guaranteed by the "ZK circuit."
As Lighter's business scope expands, everything remains verifiable. This also means that these "ZK circuits" can run in parallel with other things happening on Ethereum and can work in conjunction with the EVM sidechain we are developing.
Jez: Can you give an example?
Vlad: A practical example is that you can use any type of asset; for instance, ETH can actually be used as collateral on Lighter, right? Or assets on Aave or Morpho can also be used as collateral on Lighter.
Focus after TGE
Jez: Got it, so I can integrate existing DeFi protocols on Ethereum L1. How do you generally view integration? Are you planning to integrate the existing L1 ecosystem, or are you going to build your own L2 ecosystem?
Vlad: Yes, I think the purpose of L2 is to build a high-performance exchange on Ethereum, and we have achieved that. I believe Lighter L2 currently has the highest TPS on Ethereum and is the fourth largest L2 by TVL.
But the purpose of L2 is to support high-performance applications, which are necessary for features like perpetual trading, and other forms of trading also require this performance. However, many DeFi applications do not actually need that high performance, right? Many DeFi applications already exist on Ethereum.
So rather than rebuilding everything, we can combine with the existing DeFi ecosystem. We and other developers can introduce other applications that truly require high performance. Moreover, there are many things yet to be built, such as new asset classes, like real-world assets (RWA), options, etc. So I believe there is definitely a lot to build, but there is already a large DeFi ecosystem on Ethereum. Combining with them is a significant breakthrough.
Jez: Understood. You launched spot trading a month ago, which makes me think— you just mentioned that spot can be used as collateral. This leads to the next obvious question. How do you view universal full-account margin? How did you consider it in the design? How are risk limits set?
Vlad: Yes, we will take this step by step. Obviously, this needs to be done in a way that can manage risk, just like the existing stablecoin systems, with liquidation and ADL (Automatic Deleveraging); all of this needs to be carefully considered, including the many discussions in recent weeks about how ADL works, even if the collateral is stablecoins.
But that said, what we want to do is start with different stablecoins, obviously USDC first, and then build native USDC, which is what we are working on with Circle. Then we can integrate other stablecoins to allow them to be interchangeable as collateral. Once that step is completed, we can add other mainstream coins, like ETH, then BTC and other coins, and perhaps our native token as collateral.
The risk model must be adjusted based on these factors. Returning to the question of how the insurance fund operates, liquidation fees on Lighter have always been slightly higher, but because of that, the frequency of ADL is lower. Similarly, I think if higher-risk assets are used as collateral, liquidation fees should also be higher. Figuring out these risk models will take some time, but this is one of our key focuses as we move into next year.
Jez: When considering your risk model, I feel one aspect is the base collateral tokens, and another aspect is the trading tokens you are launching. I want to ask how you view the launch and expansion of new tokens?
Vlad: Yes, I think this is another very interesting application scenario. Native tokens will be very meaningful, as they can be used to create a more permissionless experience. But we are currently communicating with many people, not only to add perpetual contracts on Lighter but also to add spot assets, like the tokenized stocks that Robinhood is doing.
However, I think in the future, you can imagine a situation where when the incentive mechanisms align across the ecosystem, if you hold a certain amount of native tokens, you can add other assets and have a greater influence on the ecosystem.
Jez: Alright, let's move to a topic I care about a lot, which is how do you view mobile?
Vlad: Yes, we have mentioned in the past that we have really spent a lot of time thinking about mobile and have been developing an application, which is currently progressing quite well. I believe some of the early traders in our community have already tested it, and we will have announcements in the coming weeks. So please stay tuned.
But we do believe, and of course, we welcome other developers to build applications; some people are already doing so, like Liquid, but I think for certain types of trading, having a mobile application built by the same team that built the core protocol and core desktop application will provide a very good experience. So we will definitely invest a lot of time in this area and hope it becomes a tool that many traders will use.
Jez: When you talk about mobile applications, I always divide mobile into two categories: one is for those who are already in the crypto space to provide mobile convenience, and the other is for those who may not have used these exchanges yet to provide a mobile entry point. So are you preparing for the CT (Crypto Twitter) natives who are already using the web version, allowing them to close positions anytime and anywhere, or are you planning to do more mainstream promotion?
Vlad: Yes, so we will have two modes in the mobile application. One is a more professional mode, designed for traders who are already actively trading on the desktop but happen to need to use it while on the go. Then there will be a lighter mode, designed for those who are encountering this for the first time.
Jez: Will there be its own deposit and withdrawal channels? Or will you still need to go through Arbitrum to achieve that?
Vlad: These are some details we are working on, but I think the goal is definitely to provide a seamless deposit and withdrawal service.
We are communicating with some people in this business who will make it easier, so there are still some decisions to be made, but that is definitely the goal. I think being able to achieve this is similar to how Robinhood does it very well, right? The time from when you first hear about the app to completing your first trade should be very quick if you've never done it before. This is definitely one of our goals.
Vlad's Trip to Washington
Jez: That makes sense. This reminds me of a question from community member Skelly123, who asked: How do you view tokenized stocks and other real-world assets, like Pokémon cards and medals? Specifically, considering the regulatory environment, how do you see the path to achieving mass adoption?
Vlad: Yes, I think this is a huge opportunity in the coming years. We have finally reached a stage where DeFi and traditional finance can not only coexist peacefully but can actually combine. We have obviously had conversations with Robinhood, but we have also communicated with others in traditional finance, including traditional exchanges and large hedge funds, and everyone is exploring what this will look like.
We also spent some time in Washington, and there are now serious discussions about what reasonable regulation should look like. So I think there is a lot to be done in this area. The first step might be tokenized stock products similar to what Robinhood is already doing, but there will be more to come after that.
Jez: From a higher-level strategic perspective, how do you consider this issue? Will you stay on the decentralized side? You mentioned Washington; will you go to Washington to engage in dialogue with regulators? How do you view maneuvering in this environment?
Vlad: This is interesting, right? Just like some of the conversations we had a few weeks ago, people’s thinking about DeFi has deepened a lot; they understand what verifiability means, and even ZK is no longer a foreign concept to some government departments we talked to.
So I think the market structure bill being drafted now is such that the question is how much will be retained? How much will be directly written into the bill, and how much will be left for the SEC and CFTC to review, and how will they handle it? Because one thing is clear: the rules that apply to traditional finance do not fully apply to DeFi, but does it make sense for some things? If we codify some industry standards, I think there will be some very interesting discussions.
For example, to allow institutions to trade on DeFi platforms, could there be some form of on-chain KYC, which you could actually do using zero-knowledge proofs? All of this is now part of the discussion, unlike three, four, or five years ago when the conversation was still "What is all this? This is terrible," and now it has turned into "Well, there are actually ways to do this; you can really understand the role of technology and how to use it while maintaining the spirit of DeFi," but at the same time, I think some large institutions do want certain safeguards.
Jez: Yes, I think that makes a lot of sense. Building on that, another question from community member Skelly is, if you had complete regulatory clarity, or a magic wand that could make all issues disappear, what initiative would you most want to implement?
Vlad: Yes, I think besides what we are already doing, like tokenized stocks, I think one very cool thing would be fixed-income products. Fixed income is actually a huge field, and I believe many things can work very well in a DeFi environment. Imagine being able to have on-chain government bonds, or imagine you could actually have a complete yield curve managed by smart contracts. I think that would be very exciting for me, and it hasn't been discussed much yet, but I believe it would become possible with regulatory clarity.
Jez: So far, regulation seems to have shut down everything that has yield, like savings account-like businesses.
Vlad: Yes, I think the first step is stablecoin legislation, but I think going further, like launching yield businesses, imagine doing basis trading on-chain; that would really bring a lot of efficiency to the financial system.
What Robinhood Has Taught Us
Jez: I'm glad you mentioned them because I was just about to ask: What have you learned from your friendship with Robinhood founder Vlad Tenev? Do you see any synergies between Lighter and Robinhood in the future?
Vlad: Absolutely. I mentioned tokenized stocks, which is something we are starting to explore with them. I mean, there are obviously other ways; if you think about what they are doing, right? They have centralized products, but they have done a lot in the wallet space, exploring ways to enhance that experience, so I think you can imagine how Lighter could do that, especially since they are also developing L2 within the Ethereum ecosystem, so there could be many interesting combinations. I think once we really have specific products, there will obviously be more to say. But we are definitely keeping an eye on this, as well as tokenized stocks.
As for what we have learned, I think it’s that, while this is not often highlighted in the crypto space, really focusing on customer and user experience is crucial. Then I think another thing is not to be afraid to try new business models; that’s another takeaway.
Jez: Can you elaborate on that?
Vlad: I think Robinhood's zero-commission model in the early days was a crazy idea, right? I remember even people on the team or early customers saying it wouldn't work, and I think it was the same when we started trying things on Lighter. Then sometimes, I think you have to experiment in the space of different strategies until you find it; I think it’s like, "Well, everyone else is doing it this way, so we should use the same fee structure," which can't be optimal.
That doesn’t mean every new idea you try will succeed, but there are so many different innovative ways to do it, and from our perspective, providing the best experience for retail investors will, in turn, attract many trading firms and market makers; that’s how you monetize.
This argument itself is very strong, but I think generally, trying new business forms is also something I learned from Citadel. When Citadel was initially a hedge fund, creating a securities business was considered a crazy idea. Why would a hedge fund have a securities business? That’s the job of an investment bank, but now many large hedge funds have securities divisions.
Jez: Yes, I think that reminds me that besides token economics, the most frequently asked questions are about fee structures, sustainability, and revenue. Many people are asking what will happen when you reopen fees. So I want to ask on a larger scale, how do you view the business model, and where do you really derive your revenue?
Vlad: Yes, fees have been open since October, and overall, we have added premium tiers, and we are also considering adding additional tiers for higher-frequency trading. We have made many improvements to TPS, so now you can operate at higher tiers. Overall, I mean, in the first two months with fees, they have actually been higher than expected, or now it’s been almost three months.
But one interesting thing is that even some trading firms that have been trading on Lighter have a concern: will they reduce trading after fees are introduced? In fact, we have not seen that at all; some feedback we have received from them is that they actually prefer this tiered fee approach based on latency, which makes it easier for them to model different strategies.
So I think so far we are satisfied with the fees, and as we launch new products, we will continue to experiment with different fee models. So far, the argument that free for retail is beneficial for everyone has shown us good data to support that argument.
Jez: Yes, I think that makes a lot of sense. I know I used to work in the securities division of a large bank, and PFOF (Payment for Order Flow) gives retail priority execution because they are generally bad traders, but it can sustain the entire ecosystem. This strategy has been around for 10 to 15 years. Next is a question from GLC Research: he is concerned that once the point subsidies end, the sustainability of market makers may be affected.
Vlad: Yes, right. I mean, I think ultimately, the point system and how it transitions into token economics, the goal of all this is to achieve incentive alignment among different participants. Imagine if an early trader on Robinhood could have equity there, or imagine if you could get shares of Citadel Securities or Jane Street when trading on the New York Stock Exchange. That’s what DeFi can achieve with a token structure, and I think that’s one of the truly exciting things about this space.
So I mean, are there some traders who are not real traders and are just wash trading? The answer is definitely yes; there are indeed some, and we actually reduced points for some of those people this week. But there are many real traders, and in fact, most of them are still on centralized trading platforms. So there will be a transition from CeFi to DeFi. There will still be many market opportunities from the fusion of traditional finance and DeFi. So I think if we have a very strong product in this space, there will be corresponding business activity. I feel the market opportunity is actually much larger than what is currently on Lighter.
So from our perspective, we will continue to build and continue to engage with customers. I think incentive alignment is a good thing, not a bad thing. Because that’s DeFi, right? The greatness of DeFi is that it is very composable, without KYC, etc. The downside is that it’s easy to create witch farms, and it takes some effort to distinguish these from real traders. But we know there are many real traders; CeFi is a huge market, and traditional finance is even larger. So as long as we have a product that is very effective for customers, we continue to build and iterate, and we look forward to gaining significant growth from here.
How to Hunt Witches?
Jez: Ultimately, the product is what matters most. That makes a lot of sense to me. I think this easily transitions to the next point, which is congratulations on completing the second season of points. You mentioned the reduction of witch accounts at the end. I think there are many questions surrounding this method, how do you identify witches, what constitutes a violation? Is there an appeal process for users who are wrongly flagged?
Vlad: Yes, there is an appeal process. So far, the number of appeals has surprised us; it’s actually very low. If anyone feels that the algorithm has been unfair to them, please make sure to fill out the appeal form. That form is in Discord. I don’t think I will go into detail about the exact algorithms we use because if we do something similar again, we don’t want people trying to exploit it. But essentially, it involves a lot of data science, looking at clusters.
We have a whole quantitative team whose daily work is responsible for LOP and helping to bring in other market makers, but they have also spent weeks on this matter. So there is a lot of interesting data science work, like cluster detection. We have also communicated with some people who have done this before, including some other protocols and individual witch hunters. So we have talked to many people and done a lot of interesting data science work. We are quite satisfied with the results. Again, if there are any errors, please use the appeal form.
Jez: Obviously, these points will convert to tokens at some point, hopefully soon. Can you share the tokenomics structure and how much supply has been reserved for the points program?
Vlad: Yes, we will announce this in detail soon. We discussed earlier that, from a high-level perspective, 50% will be allocated to the community, a significant portion of which will be allocated to the first and second seasons, and we will have exact breakdowns soon. We have seen quite a few community expectations that align well with the actual situation.
Jez: Can you comment on some of the large on-chain token transfers we have seen, such as those to Coinbase and other platforms?
Vlad: Yes, in fact, many of the transfers are unrelated to airdrops; they are more for other parts, like the investor and team portions. These will be held by custodians, and we are working with two custodians. So those you see are actually unrelated to airdrops.
Jez: Got it. Some people have expressed concerns about VC funding and equity token structures. Can you make a statement on the consistency of equity tokens?
Vlad: Of course. We absolutely belong to the camp that believes value will accumulate to the tokens. All investors are aware of this, and they are investing with this idea in mind. As I mentioned earlier, the whole thing is about alignment among different stakeholders, and the token is the only mechanism that puts early customers, early teams, and investors in the same boat. This is definitely our philosophy. There will not be some sort of dual structure where tokens have one way of accumulating value and equity has another. Everything will focus on the token, and we will announce more details on how it works, but that is the high-level idea. Everyone involved is signing on with this concept.
Jez: Understood, good. So I want to ask, how does value accumulate to the tokens? How are you considering this?
Vlad: Yes, we will have more to say. Earlier we talked about revenue, and we discussed ways to introduce new financial products. I believe the token will become a way to expand the Lighter ecosystem, with all different forms of trading and financial products on Lighter, and as the ecosystem grows, value will accumulate for token holders.
If you think about traditional finance, imagine if every participant in traditional finance had equity in brokerage firms, companies like Citadel, and companies like Bloomberg. Imagine all these incentives being aligned, but now you are doing this on-chain. That’s my big picture view of the token, but obviously, we will roll out specific use cases and concrete ways of value accumulation in the coming months.
Jez: Okay, so we will learn about these. Will you disclose revenue? Will revenue be programmatically tied to the tokens in some way?
Vlad: Yes, we will disclose revenue. I think as we develop specific ways, there will be parameters regarding how to use this revenue, and I believe once these parameters are clear, we will communicate when they are defined. But from a broader perspective, the goal is to let value accumulate to the tokens and be used to develop the ecosystem, thereby increasing the equity of token holders. So our specific approach will depend on the specific products we launch and how they monetize. But it can be emphasized that this is definitely the goal.
Jez: Understood, understood. So please keep an eye on announcements there. I want to zoom out a bit and take a step back, how do you view the future of the perpetual contract market in the short term, like next year, and in the long term, like the next five to ten years?
Vlad: Yes, I mean, we are starting to see that even now on Lighter, many open contracts are in real-world assets, especially forex, and we are starting to do more stocks.
I believe two things will happen with perpetual contracts: more trading volume will shift from CeFi to DeFi, and perpetual contracts will start to become a focus, especially once there is clarity on regulation. I believe perpetual contracts will actually become an important part of traditional markets. We hope this will happen on-chain, but in five years, markets like five-year treasuries, ten-year treasuries, the S&P 500, and gold will all happen on-chain and will be conducted through perpetual contracts.
Jez: When you consider expanding into these markets and taking on potential regulatory risks, how do you view the choice of staying in the U.S. market versus expanding globally? Are you U.S.-centric? Are you focusing outside the U.S.? How do you view geographical restrictions in the U.S.?
Vlad: Yes, we are very close to having clear rules. As we mentioned earlier, we are part of these conversations about what kind of reasonable regulation really makes sense in the context of DeFi. Once these rules are clear, we will definitely open up to U.S. customers. It’s a great market. The company is headquartered in the U.S., so I think the U.S. market has been lagging behind in this regard, which is indeed unfortunate, but it is now catching up rapidly, and I think we are very close.
Jez: Exciting, I also think this is a long-awaited development. I have a question from Discord regarding support for local languages for Chinese speakers and other non-English, more global communities. What are your plans for local language support?
Vlad: We currently have about ten languages, and the question is about regional community managers like those in WeChat groups; I think more sustained support is needed. We are indeed building a team and will be more localized. We already have a few people in Asia, and we are building more infrastructure and hiring some people there.
Jez: Great, so I think this ties into ecosystem expansion and funding. Do you plan to implement a developer grant program? What kind of builder ecosystem do you have?
Vlad: Yes, there are definitely different parts to this, right? We view all of this as community, but there are some partnerships that make sense in the context of integrating with Lighter. There are some new projects, like the on-chain fixed income I mentioned, that could be new projects that will receive funding.
But I also think it’s about enabling third-party applications to monetize on top of Lighter. As I said, we want to try different business models, and third-party applications should be able to do that as well, so giving them that flexibility is another aspect. But we are very open to different types of partnerships with builders, whether they are new builders or existing protocols on Ethereum, or front-end or other applications.
Jez: Understood, this leads to my last broader question, which is from Lighter's strategic perspective, how do you consider building some very attractive components yourself versus outsourcing them to external developers?
Vlad: Yes, I think that’s a great question. I mean, in some cases, like lending, there are already some very mature protocols that have a lot of TVL and many users, so integration makes more sense, especially since the composability on Ethereum makes this much easier.
I think there are also some other cases, like mobile examples, where we actually believe having our own app will be very important, especially for a truly seamless user experience. So in that case, we would move in that direction. I think there are also some other situations where we need to make interesting decisions, like when we consider the options market; should options be built by the core team?
These are the kinds of decisions we have to make along the way. I think ultimately, it comes down to what can create the most value for customers. If it’s a case like mobile, we believe vertical integration creates a lot of value. In the case of integrating with stablecoins or lending, we see no reason to reinvent the wheel, and for other users, it could really be both scenarios.
Jez: Understood. I think that covers most of the questions people have raised. Thank you very much for your time and the thought you put into your answers. Before we wrap up, is there anything else you would like to say?
Vlad: No, no, thank you very much. It was a pleasure chatting today. I think you can imagine our team is currently working hard, so it feels good to come up for air and answer some questions from you and the community.
Jez: Yes, very enlightening. We will let you get back to work. Looking forward to next week.
Vlad: Okay, thank you very much, guys.
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