Restaking was just the beginning. Symbiotic's co-founder on building the collateral markets layer that RWAs, credit, and insurance all run o

I'm Ashon Addison from the Crypto Coin Show, and today on Blockchain Interviews, I'm joined by Misha Putiatin, co founder of Symbiotic, backed by Paradigm, Pantera Capital, and Coinbased Ventures. Misha, Welcome to the show and thanks for taking the time. Glad to be here. Thank you for having me excited to dive into these big updates in the industry and with Symbiotic.

I would love to kick off our conversation by first of all hearing a little bit from you directly what you and the team have built at Symbiotic and what it means for the industry, and then we can dive into all the updates. Yeah, Like we've built Symbiotic to be sheriri it infrastructure. So when the multichain kind of vision emoledged as a wail to scale and experiment with the blockchain technology and chander own crypt we kind of like we've been seeing this for a while before that, but it became painfully obvious when the multichain came came to be that like people are reinventing the same will all over again, Right, every protocol tries to create some form of like uniqueness here and like uniqueness in terms of product is really interesting, right Like, that's because like we experiment, we find what works and what doesn't.

Like, but the experimentation in terms of security models and general like capital flow, it's super dangerous if it's especially if it's done not because you're solving a unique problem, but because you're trying to like create the mold or something or just like it doesn't don't have access to read it to use solutions that are flexible enough for your protocol, right like the yeah, the idea was quite simple, right like, just let's build the infrastructure anyone can use. Uh huh, yeah, I know.

It's great to have a lot of different blockchain protocols experimenting with things. But there's also a lot of repeating going on. And then there's the communication problem between chains, and then there's moving the capital securely and that's been a major issue in D five recently as well. Can you elaborate a little bit on what are the good things with this multi chain ecosystem we have and what are the bad things?

Well, good things as I mentioned there, Well we can try stuff right like for ifeum say main net to implement some like groundbreaking changes. It takes like years, right, right, But for a roll up to implement it or for it like side chain or something like that, and experiment, Uh that that's easier, way easier, right, And the capital is opening only, right, So I'm only opting in if I'm interested in experimenting this portion of mine. Right. If youerium may net or Salana or any major changes upgrade, this wears like an enormous risk maybe like industry almost killing the right.

So the benefit is that you can experiment. The speed of innovation can like can be increase without like actually increasing the risk profile too much. But the draw works again, like blockchains are things of things, like they're thing of in old right, so it's it can do enormous things. It can like be really sure about the state of things.

It can synchronize between like millions of devices at the same time and provide like a protection against the most most important things, right, like most harmful things are double spent or like just the state, the state corruption and everything like that. So but like if blockchain needs to take information from somewhere outside of its state, outside of itself, right, you you have problems. So that's why we like it still takes like it's still we're still not there when the bridges are like super safe, right, We're still just just experience the biggest like the fact of this year at least, right that that was basically subject to to bridge.

And it's really like really hard to create a bridge that's secured oracles as well, that you need atomic transactions providers, right, it's really hard to tell. Like if I want to, like I say, I would say swap right between different chains, Like how do I know that the other leg actually happened to another blockchain? Right? I need to like either leader like have a verification system that's really complex and really like hard to implement and hard to maintain, or like I'll need to trust someone, right, And truck systems is kind of what we're trying to build here as well as like the financial state of drawback over that of like liquidity fragmentation, right, Like you have multiple sources, like I'm gonna go like find some like interesting opportunity on plasma, but I'm not going to be available as likely quity source for other one, right, and vice versa.

So there are there are benefits and drawbacks as. Well, definitely, and on those drawbacks and Securing capital, of course is the most important. It's great to have a yield, but if your capital is at risk the principle, then none of it's worth it. And we've seen that in DeFi.

What's the what's the technological solution to securing capital safely? Yeah, like we have symbiotic work with multiple applications that I would say on a front tier of s tragify DeFi right like, and so yeah, the recent events they don't help a lot, like with us like trying to push for people to integrate and encrypt them to use cryptoils in general. So this is like the paramount thing that we are trying to help with, right. So we have we have our partners on the next site providing insurance.

They've been providing insurance for I don't know, like I'm not gonna lie, but like for three years at least, so they are og sure like growing with the industry and increase in their value proposition. But like the insurance is kind of like I would say, a side effect a little bit, because like if you have a bust framework, you can price it right, Like you can price the risk, and if you can prye the risk, you can get insurance. Right, So it's kind of like if you give your homework, you can get insured.

It's gonna be an indication that we actually grow because currently you like you have like four percent, right, like three percent on landing markets. Is it like sufficient or not to cover a smart contract risk and the risk of the entire stack? Like I would say that so far the question that the answer is probably not right because like it's comparable to treasure is like what's like what do you think is more like probable that you have government is going to default or like ave is gonna lock my funds?

So somehow right, like the default didn't happen this year, like as a hint, so in general frameworks, right, Like so this DVM configuration failure like was not noticed, right, but not just not like noticed in a way that and like notice by the community. So we knew about these problems as an industry, but like we didn't have framework robust enough for this to be flagged and like somehow priced. Right. The other thing is that like the really interesting one we're working with a few protocols on that as well, are like circuit breakers, right, Like we've been playing around with this idea for a while if the hack, like if the hack is imminent, you can basically like close your doors for it, right and just prevent it somehow, So preventative medicine basically.

And they were their own risks, and they were like the censorship risks in general, and like false positives, and so there are a lot of problems to be solved, but generally they might alleviate a lot of pains, especially with the I that straight and the sort of attackers a lot recently. Mhm, that's really nice. And how long has your team been working on this and is it already live on many different blockchain protocols? Oh no, I think like again, like we we are talking like we work on this more from the insurance side, right, and the framework site so symbiotic like the R role here at least the ones that we try to solve the first, right, is to help build a capital location framework that is really flexible and really highly auditable, right, and auditable in a way that like, like I just give you an example, right currently the creator volts, they usually are quite well arbitrary in the capital location, right.

That's what we saw for like immed Capital and others when they bayasically can provide capital to something well not not as a risk complix, like not as risk homogeneous as as people think when they deploy to the wold and basically can do a lot of things with the capital that they are they're given. Uh in Symbiotic in our new version of the system, that, like our shared security approach, will be translated to finance as well. Right, So the volts that will have basically limit what creators can do to the applications that are like opting.

Right, So you can't just like go willing nearly do looping in a protocol that nobody heard, right and basically put some money at risk. You have a predetermined set of like flexible actions, but they're within the limits of what is considered like what what is permitted. M hm. You mentioned there the version I was reading about the upcoming core V two and there's supposed to be a lot in there in the near future.

Could you unpack what's coming for Symbiotic in this version two? Yeah, I'm really excited about that. We've been working on this for the last I would say around nine months, and like Symbiotics started as a shared security protocol right and restate in protocol. So what that meant is that we were focusing on infrastructure, so proof of state networks like war or oracles, blockchains, roll ups, and data availability layers write anything that requires coordination of operators basically, and we launched like first finality for a roll up mount, we launch Data Availability Network, a few other networks of note preconfirmation networks.

But the more we went further, the more we identified that, like the actual flow, that we were not prioritizing finance because that kind of like the same right, Like you have a collateral, you can use it to stake for improof of stake networks, or you can use it to safeguard like and colateralize some obligations on chain. And we saw that underwriting segment was actually booming and they didn't have a solution for the same problem that Symbiotic was already solving. They didn't have the common infrastructure that can be used and our system was not designed for that obviously.

So we redeveloped it and improved it and streamlined a lot for the capital formation and capital allocation use cases. So underwriting private credit we already launched, but it's going to be like improved in so many ways. So cap currently uses around three hundred million from symbiotic dollars and like, but it's still using this the GENK system that was designed like little genis like really cool, but it was designed for something else, right, And with this new iteration the insurance use cases liquid laye I like I'll talk about this a little bit, right, so use cases were not available in the one that we're more finance focused are actually like actually becoming available.

So we'll see a huge wave of like stread deployment strategies and protocols launching on top of that. That's very nice. And how integral are stable coins for the collateral versus volatile assets. I feel like with the Genius Act coming in and more institutions coming in, stable coins seem to be part of the foundation of DeFi and lending markets.

Uh. Yes, Like the stable coins are are expensive, like that's that that's the like, they're really useful and it's really easy to use them, right for like for culturalization point because you don't have to have to hatch, you don't have to have all TV, you don't have to like be a risk complicidation, and a lot of other things that are kind of fired to design around, but they're really expensive, right, you need to pay like four five six percent. Right for high risk applications you need to pay even more, which is fine for some applications, but some low low yield applications where you like provide like for sake like smart contract insurance.

Right, stable coins are quite expensive. You can use guild generate in stable coins, but they're not going to be like one percent, well a is for a few for a few bits are not going to be clarity like the Genius actually compliant, right, But for crypt like for bitcoin that like and the ethereum and Salona and other volatile acids. Yeah, that's that's a treasure chest of collateral. So we are working on that as well, because like they're really the cost of capital is really low.

There aren't a lot of applications that can pay, like can you utilize this sort of aid, So I think this would be a huge unlock we we have for like few like basically like for I would say most of the protocols that the applications that are going to be launched on symbiotic bitcoin and if is going to be used, yeah, because like again because of the same like opportunity here right under utilized capital exactly. Yeah, there's a lot of people holding their Bitcoin looking to utilize it.

You stable coins they want to deploy, but ethereum and Bitcoin they're looking for something safe and secure to be able to utilize that. It's just been sitting around in wallets for years. Probably. Yeah, no, like we be coming two decays soon, I think.

And between bitcoin and ethereum, you now, the bitcoin ecosystem is sort of separate with the way that smart contracts could potentially work on Bitcoin if you do it in a decentralized nature versus ethereum sort of smart contract first. Is there any difference there or is there a priority to focus on ether? Well, we kind of started with the vidiom because you're just like, you can do way more in bitcoin. If you want to implement more solutions, you need to go through like cryptography because it's not doesn't like it's not a smart channel on its on, right, you need to do like cats always.

You need to do like for NFT, they did it in the inscriptions, right, we were like proof of steake side chain they did below the entire protocol, right, like just to do really simple stuff, so coordinate operators, but in general, yeah, like bitcoin is a source of collateral, is really interesting as an infrastructure and the chain, Yeah, like you can't do a lot, right, That's why we have like protocols like Lombard and others provide provide the bridge right to the smart chain, so basically enable you to do things in the videum and Salana that can cannot be done not bit coin natively.

Yeah, that's really interesting. And to go further with that, a lot of people in the etheroerem ecosystem at least are a bit more excited for tokenization of real world assets and other types of assets. Is there an r w A play as symbiotic moves in the vat you also? Yes, Yeah, one of the hallmarks of launch of V two is going to be liquid Lane.

What that is is it's a liquity solution for our double as. The problem that we see with we have identified with our w as is that they're not liquid, right, and yeah, like that sometimes it takes like up to ninety days and one days sometimes for for you to get out of them, right, and this kind of breaks what we've built in defy, right, because like you can't use them as a collateral anywhere you can't build like you'll bear instable coins. On top of that, you can't use them in landed markets because like if BOO comes to soft, how do you liquidate it?

You'll get to the other ravey situation almost immediately, right if if something happens, Uh, so we try to solve for that. They're they're like and creply created liquid laye. So what liquid lane is a re few engine. So basically you have like collateral providers on one side that's depositing two fool and when there is a need to get out for people right like to to liquidate their position in our wa they match give some discount and the person where the institution can get out like immediately, right, it doesn't have to be liquidational like in somewhere, it might be like just they have a better strategy to deploy something and like and then wait for nineteen one hundred days.

The like sounds super easy, right, like you just you just know you have like requests for quote engine, right like you can connect to people one selling one by super easy. The problem that we have that is why it's not done with like as a now right, why by this problem persists is that like the flow is not that high, right, and for each like each R DOUBLEA, the flow is not going to be sufficient. So we have like protocols raising money raising rounds just to get this litidity below the market price because on market price you will not have the sufficient capital efficiens.

And this work symbiotic corby two comes in. So while these like full weights for the opportunity to get like asets under vision under big discount, it can actually be deployed to multiple applications at the same time. Right, So, like you, you take an application that has really low well yield or not not as high as the market would would ask for, right, and by layering the symbiotic corby two layer in multiple applications on the same dollar, right in the best traditions of mistaken before, you get something that was not possible or at least not efficient.

Yeah, that's really nice because the whole point of rold assets togonization was was to bring more liquidity to real world assets. But you know, we need to work out the kings first, and yeah, you need liquidity otherwise what's the point. Yeah, like you and I like a lot that our industry reacted for this, like really in a way that Trip reacts like like hold up of one hundred to eighty days, Like nope, yeah, we'll need to build, Like we need to build something that's composable on top of it that will help with this, right, Like we're not just accepting this because like traditional finance, Yeah, one hundred eighty days duration, that's it, that's in my contract.

Okay, Like I'm gonna just wait, right, yeah, that's here. We're gonna go yeah like that, that's exactly that. Like I really like how we approach things. We and we can like the composable nature of crypto general, like that's our superpower, right, We're like no, I'm gonna add the protocol on top of this, and like this protocol will fix the underlying problems here.

M hm. Very interesting and with a liquid lane. I would love to learn more about that as it comes out. What's the best way to read into all of the updates with V two if you haven't put it out yet.

When it does come out. I'm not gonna announce the date because like it's subject to change, but soon, really soon. I think when this podcast goes live, we will have like we will have pages about this both in our on our website about the core VI two and both Liquidly they're gonna be launching within like similar timeframe, right because like ORV two is like the paramount condition for the like required condition for liquid late, so yeah, and retal websites. And basically like if you are a builder, so you build capital intensive protocol bit r wa B, it's like delta neutral strategies.

However, like the applications where or you are a capital provider and creator and capital locator that wants to allocate. Right, we can connect you two guys in a way that's really efficient and really pleasant for everyone, very exciting. I will leave the links to the site and the socials and if there are V two updates at the time of release in the show notes below. Appreciate your insights into this.

It's it's it is a huge update for you guys, so congrats on pushing this out and for the industry as well. More liquidity and more security is what is needed, especially to grow blockchain and and organization into the next stage for mainstream adoptions. So thank you for all you're doing, thank you for your time, and would love to follow up again in the near future. Thank you.