Recap of PromoTeam AMA session with Co-founder of HydraDX & Basilisk — Jakub Gregus.
Time has come! On July 8, Jakub Gregus a.k.a Kubis, co-founder of HydraDX visited the biggest HydraDX community, russian Hydraheads. Many interesting questions were on the table, so without any further delay let’s take a deep dive into the transcript of the voice chat covering HydraDX, Basilisk, life, universe and everything with Kubis and Vlady from Promoteam.
Special credits to Denis and Dalt for the translation.
Vlady Limes: Good afternoon ladies and gentlemen, I am glad to welcome you to our ama session with a very interesting guest. Today we will have a conversation with the Co-founder of HydraDX & Basilisk — Jakub Gregus.
I’m glad to see you Jakub, thank you for your time, it’s a hot time now, there is an incredible fight for the 4th and 5th slot in the future, what are your plans?
Hi.! The slot is going pretty nice. We were a little bit surpsised by nice traction, but one moment we want to keep the momentum to catch up a Bifrost, like Acala as a winner of first slot. We could be there earlier. But there some issues with connection with best end and uploading the same amount of Kusama which supposed to be a parachain. Becasuse no one want to be staked in chain after becoming a parachain. I just want to say. So far so good we are happy that after this we outcompete most of the competition and then before us just the most serious ones.
Vlady Limes: We know about the strengths of Hydra. Can you please tell us about the potential difficulties that hydra may encounter in the process and directly in the process of working after launch? What are the options for solving them?
Jakub Gregus: Yeah.. like.. Obviously that could be many things mostly on Polkadot and Kusama side we expect them the cross-chain protocol or networking between the parachain and validators. How we can overcome them? There is no silver bullet for it. We conducting the security audit, we had some code review from developers from Parity. We want to make a community incentivized testnet, cross-chain incentivized testnet with other teams where we will test at least a basic function like cross-chain transfer and liquidity mining, cross-chain smart contract calls and all available stuff with community. Where will be at stake some incentivize, not all your holdings. So this will simulate how it will work in the wild, production ready, deployment. This will be much better to extensive testing like transactions, DDOS all system and similar cases. There is only way how to be sure there is no difficulties after launch. That will be progressive launch. It will be unlocked one feature after another like Polkadot was released and Kusama released. Not like all functionalities immediately after the launch, but progressively started with smaller validators, then open it, unlocked to transfer and other features.
Vlady Limes: Having all the liquidity in 1 field can be dangerous due to the threat of hacking. You can hack one pool and take out all the liquidity. How is burglary protection carried out? One big pool — huge lending opportunities. Are there plans to add lending capabilities?
Jakub Gregus: This is very great question, very appointed. We are very worried about this question, applies with what’s I’m askening before, but there is interesting idea how utilize Statemine and Statemint for a higher network fee. Also it could be a condition within our parachain to have something like you can see, as for example a centralized exchange inmost traditional finance. It’s called CirciutBreaker. It’s applied to prices of assets of stocks, when for example some stock failed more then 70% or 7% for day stock trading with it, stock is haunted. This something could be with withdrawals having some time for investigation why someone immediately pooling out like too much liquidity from a pool, from various addresses so it’s not even. This could be some red flag for some security breach. And then there is interesting idea about making Statemine and Statemint something like decentralized custody of your funds. There is some withdrawal period so your assets will be locked on Statemine and Statemint. It’s some withdrawals period for example 48 hours. And HydraDX, maybe not just Hydra maybe Acala and other network you will be using not like real tokens, but like claims or IOU use of this assets, which are locked in the Statemine. So Statemine, Statemint would be use like your deposit which is locked for some period of time. So community will have some time to prove that protocol was hacked and someone is trying to steal funds.
Vlady Limes: What will commissions depend on in Omnipool Hdx?
Jakub Gregus: This is other great question. This is main point of community open research initiative, because we have this idea before like dynamic fees not the static one, because in economy anything static is not the right solution. This how we implementing dynamic fees, it will be possible changes in fees based on the weighted volatility per day, volatility of some asset like low or very low. The fees will automatically adjustment to much lower and for example when volatility were super high, what we see in May, when market is crashing, everybody wants to dump as fast as possible. Than traders or people like very high time preferences, they okay to pay much higher fee to have executed swap as soon as possible, it’s the same like network fees. That’s also a reason why network fees in Ethereum is skyrocketing in this period. The same could be applied in opposite when you like the strong price action in like up direction. Then people wants to buy some assets which kindly attractive as fast as possible, they also accepting higher fee. So the fee will be most probably dynamic by this way, but for the like specific implementation will be created over this course with other people who wants turned proper mechanism design and then turning this proposal for mechanism to Capcat implementation which is framework for testing various game theory properties any protocol and governance mechanism and then it will be tested and implemented and managed to go.
As a baсktab it’s like rather solution were considering splip-based fee something similar what you can see in. Its also a some sort of dynamic fee because the fee is calculated based on the size of the trade. It has some similar functions but we believe dynamic fees based on volatility a better, because it’s basically incentivizing other traders to saw low volatility and start to trade that.
Vlady Limes: Question about OMNIPool Engineering and Simulations. Is it possible to participate without a technical background in IT, mathematics, engineering? And if so, what contribution can be made, approximately what kind of tasks will be for people far from IT
Jakub Gregus: The course is unfortunately more oriented on for people who are a bit familiar with Python or some similar language, but for the first part of the course after the intro, introduction part will be mechanism design as like description of some mechanism step by step. This could be done by people even without IT background, because everything you need is logic, thinking. So you don’t need to know how to code, you need logicality and analytical thought.
Vlady Limes: Bridges with which blockchain are you planning to build in the first place?
Jakub Gregus: We probably don’t want to build bridges by ourselves. The reason why we choose Polkadot is ecosystem where should other bridge be build by other smart teams more specialized and focusing on this usecases. We are talking with Darwinia about using their bridges to various blockchains. We will be using Interlay for bridging Bitcoin for sure. We will be for sure using Snowfork as another alternative for bridging. It depends which bridges will be available within this period and then we will probably use Ren as a bridging solution, but people need to be aware that Ren is still not fully trustless. Actually it’s not much technologies that fully trustless. That’s how it’s going.
Vlady Limes: Anyone will be able to add a token to the site in the future, respectively, scammers will be able to issue a fake token for a known one by changing the name, for example. An inattentive user can fall into the trap and buy a dummy. Will you fight this kind of scammers?
Jakub Gregus: On the Basilisk side that would be possible to create just one kind of pool at once for example Bitcoin-Dot and there is only one Bitcoin-Dotб no one can create fake Bitcoin and fake Dot pool and trying to scum people swapping Dot for Bitcoin. On the Hydra side there will be listing process that will go through the governance fast track. Because economic atomic vector on Hydra basically scenario is when some scummer wants to introduce some scum token, which he can mint infinite amount of token then drain a lot of value from the pool. Actually this is similar conclusion like Bancor governance process for listing new tokens.
Vlady Limes: Do you plan to introduce the functionality of the Options? will there be integration with DEX?
Jakub Gregus: For the integration of Options that might came nice experimentation options for hedging against impermanent loss or calculate of basically creating options for volatility from AMM. Options one of the best usecase which we want to add for the community so we are will support anybody financially or with tokens or whatever for whoever who would build it.
Vlady Limes: - Will HDX Holders have a lower overcollateralization ratio?
Jakub Gregus: - If they will use it as collateral for borrow and lending it’s will be very possible, because it’s the most liquid asset on the platform.
Vlady Limes: - Will there be an opportunity to stake the hdx received for participating in the BSX crowdloan?
Jakub Gregus: - This will come a little bit later. I think somewhere in August, because we need to map all the Kusama participants and they may have similar processes to claiming HDX after LBP. So, it will not be immediate after the crowdloan, but it will be in few weeks after. They will be able to stake HDX based Basilisk contribution.
Vlady Limes: - How will HydraDX and Basilisk interact with each other, or are they two independent projects and they do not need each other?
Jakub Gregus: - This is a great question! We definitely wants to connect them. That will be on Polkadot, that will be a concept of spree which will allowed to have like the same logic on the frame without going through the relay chain. Because on relay chain it will be like the control function or hash it this functions so you can trust all the parachains. Even if they will be somehow float or hacked door. That function from this pallets or from this modules are doing all the computation correctly. It also be bridge between Kusama and Polkadot. So we wants to enable some utilization of liquidity or even leaving on Basilisk, on HydraDX or backing this platform so they can trust each other. It will be looks like, as vampire attack, which Sushiswap did to Uniswap. but won’t be vampire attack, because we will be use part of liquidity from Basilisk to HydraDX or opposite. Because one issue of all AMM, they are not absolutely capital efficient. You have liquidity spred on all course. Of course it fit Uniswap it has different properties, it’s not like AMM anymore. We are working on the system how to the safe way utilize the same liquidity from Basilisk to HydraDX and most probably we will to keep HydraDX as simple and robust as possible. So, most of usecase exciting and advanced use cases will be leaving on Basilisk and HydraDX will be like a ultimate liquidation bot of the collateralized positions for derivatives trading or for borrowing and lending on Basilisk. So on Basilisk it will be like plenty of usecases and HydraDX will be an ultimate liquidity provider for Basilisk and other protocols, wallets and users. I just want to add. We always want to be Basilisk an HydraDX complementate to each other not just release of fork HydraDX on Kusama an see what happened. It’s not our approach. We want Basilisk to be useful for Kusama and to cooperate with HydraDX as much as possible.
Vlady Limes: - How do you come to a consensus in your team in cases of disagreement?
Jakub Gregus: - It depends in which question we have disagreement. Usually we trying to trust to expertise of team member. So when, our CTO is pushing much some like technical solution, we can’t have super strong arguments like not or yes, we trying to get expertise or feed from the outside of the team. We always trying convince each other with much more arguments as possible. If this not working out, there’s like democratic voting, which majority will out vote the minority vote.
Vlady Limes: - Can you tell us about the motivation and benefits for investors to keep HDX tokens in the long run? What plans do you have to help drive the demand and scarcity of the token?
Jakub Gregus: - This will have some deflationary mechanism basically, burning mechanism and HDX protocol side will earning fees from providing liquidity, not just HDX, but also in the other assets which will protocol basically exchanges for them. The HDX stakers will have possibly share of this protocols profit. This is not set in the stone, but will be like this case looks the most strong one. We don’t want to fail to the security tokens, so before this protocol should be like provable, decentralized or at least decentralized more then other protocols. Because it looks like a more higher regulation coming of deflation of the protocol, coming through the law of promotions.
Vlady Limes: - What kind of partnerships with different projects / platforms / protocols can we expect from HydraDX in the future? Could you give us some examples of how other projects can use your protocol? Do you consider Acala your competitor? If so, how are you going to deal with them and what is your advantage over them?
Jakub Gregus: - We don’t see Acala as a competitor. We have friends relationships and we are integrity them very closely. They are more focusing on stablecoin functionality and stablecoin derivatives, right now. We are also working with Laminar, which will supposed to be synthetic assets and leveraged trading, but I don’t hear it for a while. So I assume they have ton of work with Acala and Karura. This just proving no team in Polkadot which can’t do all the usecases. Because the tech is very complex and if you want to do it good, reliable and secure you have to at first be sure that your primary usecase is safe and battle tested enough. For other partnerships with, for example, protocols like money markets, protocols for lending and borrowing assets then there derivatives protocols that there talking with us for the same case as I mentioned before for the Basilisk. Because they need strong and reliable DEX under them, because when you are doing something like. basically all derivatives trading are based on some borrowing and lending some collateral and use it for derivative position. When you need to close this position, you need liquidate, you need basically exchange this collateral very fast and very reliable for the best price. We have a lot of inbound contacts from this kind of protocols to help them with liquidations. They can have much higher capacity for derivatives trading, for the borrowing and lending. And then we have also for the other protocols rather than just DeFi we have nice pallets of more use that we can bring them and they users to pay on their platform in any tokens which they users want. Imagine that you have in wallet, for example, USDT, Bitcoin, Dot or something else and you wants to do some smart contract calls on Plasm and you obviously need some PLM tokens to pay the network fees. If the wallet or platform has integrated our SDK or our API, basically HydraDX or Basilisk will check how much do you need to pay on the targeted chain in they native tokens and will calculate the proper fee and you will pay for example in USDT. Because you want to pay fees in stablecoins, because you want a predictable prices and don’t want to pay in more scarce resources, which was kept like Bitcoin for example that you will assuming increase price, so that doesn’t make a sense. We hope this features will improve crypto UX a lot. There upcoming integrations of oracles, because we don’t want to rely only on one, just one oracle providers and most probably aggregating at least few or several oracle solutions for the usecases which need oracles, so , this partners will see in future.
Vlady Limes: Will the top100 (or maybe this figure be different?) Be awarded to validators based on the testnet results, as planned earlier? The existing bounty program on the testnet, for now, encourages to do everything except the most important thing in testing decentralization and network security
Jakub Gregus: - As on the mainnet, when it will become Polkadot parachain we don’t need as much validators as right now or as Polkadot. You need collators, but you have much less collators, because your consensus is secured by Kusama or Polkadot validators. Collators are only proposing and creating new blocks, but they validated by Kusama and Polkadot validators, but we wants to lead that collators node for the 50 most active and most helpful validators or groups of people within the community like Promoteam, of course There is a bit more like exclusive position and much more scarce. It’s more like service provider, it will be like a few percents of all supply both of the Basilisk and Polkadot dedicated to pay this nodes, because this nodes doesn’t worry, for example, they stake isn’t in danger. There is no slashing for collators. They have lesser risk and less coss, but still you need yo have them to substantially distributed and secured, because without them your chain will be secured, but will not producing blocks, so it will be useless. On the other hand you don’t need them as much, because the main proposition of Polkadot and Kusama that you have shared security and this shared security coming through Polkadot and Kusama validators. You don’t need to bootstrapped your own validators and have a higher inflation to cover their costs plus some profits.
