Interview: Jack, BlockBeats

Compiled by: Jaleel, Kaori, BlockBeats

Editor: Jack, BlockBeats

Born in the 2019 hackathon 1inch, and propelled by the DeFi Summer in 2020, it has successfully emerged. Under the guidance of two Russian youths, Sergej Kunz and Anton Bukov, 1inch has steadily climbed to the forefront of the DeFi aggregator track with its efficient and low-cost trading methods.

According to DUNE data, the number of unique wallets using 1inch has exceeded one million since last month, surpassing the peak in 2021. With the recent rise of 1INCH breaking $0.5, the team has also launched its own developer portal test version. This Web3 SaaS (Software as a Service) platform provides APIs for developing new products, including trading, spot prices, token information, etc.

Correspondingly, another unicorn in the DeFi market has made consecutive moves. On June 13th, the Uniswap team announced the launch of the fourth version V4, introducing two new concepts: "Hooks" and "The Singleton". Among them, the former Hooks has attracted particular attention. In the eyes of many, it seems to have become Uniswap's killer move to defeat all DEXs. And at the subsequent ETHCC conference, Uniswap launched UniswapX, launching an attack on the liquidity aggregator field. Under this successive impact, many DeFi entrepreneurs have exclaimed, "Give up DEXs and join Hooks."

Last week, during the ETHCC conference in Paris, BlockBeats interviewed Anton Bukov, co-founder of 1inch, delving into the development process of 1inch, thoughts and reflections on DeFi innovation, and how to deal with Uniswap's attacks, among other topics.

Inch Fist, 1inch's Philosophy of Innovation

1inch is a name that embodies strong Eastern philosophy, originating from Bruce Lee's signature move, the "One Inch Punch," which is a translation of the "inch fist" technique in traditional Chinese martial arts.

Prior to diving into smart contracts, Anton Bukov, co-founder of 1inch, worked as a C++ systems engineer. He then shifted towards iOS development due to his fondness for Apple development tools. However, when he encountered smart contracts, he was immediately captivated by the need to think and write code on a whole new level.

In 2018, Anton Bukov and Sergej Kunz met through a mutual friend and instantly clicked. Then, in a Hackathon in 2019, Sergej and Anton developed a DEX aggregator solution together, which became the foundation of 1inch.

Left: Sergej Kunz, Right: Anton Bukov

"The Importance of Innovative Bookkeeping is greatly underestimated"

BlockBeats: 1inch has made unique contributions in the DeFi field, and we have always wanted to have an in-depth conversation with the founding team of 1inch. I also know that you are exploring some new projects.

Anton Bukov: Absolutely. For example, organizations like =nil; Foundation are working on numerous projects, both large and small, at various conferences and beyond. Some are building new features for existing blockchains and EVM, while others are focused on creating new tools for zero-knowledge proofs in the cryptocurrency space. These projects are not just limited to the existing frameworks of EVM and Ethereum but are more like future-oriented solutions for the mass market of cryptocurrency proofs or protocol-agnostic projects.

I am not interested in projects that don't bring any actual value. I don't believe they can bring any practical value. However, there are some people who are doing interesting things. For example, when I talk to them for 15 to 20 minutes, I find that they are working on solving a real problem. Although the problem may not be big now, it is becoming more and more important, which is very inspiring.

BlockBeats: I had a brief conversation with =nil; Foundation and learned about their attempts in the Proof Market.

Anton Bukov: Yes, it's worth mentioning their proposal for a proof market, which is a cool thing. All participants using zero-knowledge proofs (ZK) need to create proofs, which is a process that consumes a lot of resources, including energy, GPU, and ASIC. There are some specialized devices that can handle this work. Just as Bitcoin mining requires ASIC, creating proofs also requires ASIC.

This specialized hardware is more efficient and cost-effective in creating proofs than general-purpose GPUs. They are trying to create a market where you can post orders, and if you are willing to pay a certain fee, someone else will be interested in and complete your order. Once completed, they will generate the proof and provide it to the smart contract that can verify and pay them.

I have done a similar project at a Hackathon before, creating a smart contract that allows users to customize personalized Bitcoin addresses using a scheme of separate key generation. Therefore, no one knows the final private key, not even those who use GPU computing power to search for private keys. It is impossible. They only know a part of the private key, which is a number that will be added to a number they don't know.

BlockBeats: Was that your first smart contract you wrote?

Anton Bukov: Yes, that was the first smart contract I wrote at a Hackathon in 2017. Since I couldn't find any libraries in Solidity that helped with elliptic curve cryptography, it was probably one of the highest cryptographic density and most complex smart contracts. I needed to generate private and public keys, add the public key, and then we could calculate the address through the hash of the public key.

I implemented this logic myself, studied how elliptic curves work, wrote the code based on Wikipedia and other documents I found, and it worked. Later, I found a library that provided some kind of intermediate representation in a more efficient way, which was very interesting to me.

BlockBeats: Talking about 2017, many people were focused on speculating on ICOs.

Anton Bukov: Maybe it was before ICOs, or maybe a few months later, around mid-2017, we made some jokes about issuing tokens. 1inch may not be as focused on code quantity as other fields or projects, because we believe that the key to ensuring user security is to simplify the code as much as possible and conduct as many audits as possible within the budget allowed.

If you have a protocol with 5000 lines of code and have gone through one audit, compared to a protocol with only 500 lines of code but has gone through 10 audits, your security will be 100 times higher. Because audits cannot guarantee that your protocol is secure. Even with formal verification, security cannot be guaranteed. It can only guarantee that it may be secure when you understand all possible combinations. But you may overlook certain threats and potential use cases.

Past experience has shown that some projects that have undergone formal verification have also been hacked. When someone discovers that they can manipulate the price of LP tokens in the same block, they will invest Ethereum and other assets into the Uniswap V2 pool, which causes the price of LP tokens to rise. However, if you have two positions, one using LP tokens as collateral and the other using LP tokens as debt, while manipulating the price, if one position is very large and the other position is negative, then you can exit with a large position and abandon the position with debt.

Therefore, if you can manipulate the price of assets and even raise the price within the same block, this poses a risk to the capital market. This is something people are not aware of, and formal verification does not solve this problem. A branch of Aave was attacked because of this issue. Aave shut down these oracle contracts because they were not prepared for this type of attack. This is an example of how formal verification cannot make a project 100% secure.

We believe that each audit increases your security, and the less code and the more audits, the more secure it is. Of course, as engineers with 15-20 years of software development experience, we also spend a lot of time improving efficiency and GAS efficiency. In terms of smart contracts, the only optimization goal is the size of the smart contract code and GAS efficiency, and we try to find a balance between these two parameters.

Balance between code simplicity and functionality compactness

BlockBeats: In many people's imagination, the code of a DeFi aggregator must be very complex.

Anton Bukov: We will find a balance between code simplicity and compactness, which does not mean that we will put everything in one line of code. We only do what is necessary, and do it efficiently. When writing code, we often use data structures and algorithms to help deal with complexity and gas costs, but we have found another clever way to propose new accounting algorithms, which is an underestimated topic in the field of algorithms, namely accounting innovation in algorithms.

A member from Paradigm also mentioned this topic on Twitter, and he also believes that accounting itself is an underestimated field and will bring a lot of innovation in DeFi. This field is... For example, in 2020, my colleagues and I created a farm smart contract. The first smart contract with a farming incentive mechanism was developed by my colleagues and me for the Synthetics protocol, which sends incentives weekly through scripts.

We joined their Discord and proposed, "You provide incentives for Uniswap V2 liquidity, but those providing liquidity have LP tokens. Why don't you create a staking contract for these rewards?" They were all surprised that we raised this suggestion right after joining. I also said that we can write this contract. So we wrote this contract and had it audited by Sigma Prime. This contract is possibly one of the most replicated smart contracts on Ethereum.

You may remember during DeFi Summer, there were many "food tokens" that were primarily based on this smart contract. This is an example of accounting innovation because a key part of this smart contract is that people can join the "farm" and leave the "farm", and this "farm" can have thousands or even millions of users. But how does it work when they join and leave?

The "farm" evenly distributes all funds over a period of time, such as allocating a certain amount of tokens per week, per second, per minute, or per block. However, these funds are distributed based on users' staking ratios. There are only three operations: deposit, withdraw, and claim rewards. None of these operations involve enumerating wallets, and the complexity of this method is known as constant complexity. This means that regardless of whether we have a thousand users or a million users, the gas cost for executing these three methods is exactly the same.

BlockBeats: What aspect of DeFi attracted your attention? How did you come up with the idea of a DEX aggregator?

Anton Bukov: Because we see that there is still a lot of untapped potential in this field. Our innovative ideas in algorithms and accounting are very innovative. Despite having money markets, AMMs, etc., the accounting aspect of this field is still severely underestimated. Take the cryptocurrency market, for example. Its operation is very interesting. People deposit their assets into a pool, which mixes everyone's money, and then you can borrow other assets.

For example, you deposit Ethereum and borrow Bitcoin. You are actually borrowing money from those who deposited Bitcoin, not from a specific person. So this process is not peer-to-peer, but pool-to-pool interaction. This model means that your debt and collateral are increasing every second.

But how does it work? For example, if half of the USDC collateral is borrowed, the borrowers need to pay 6% interest annually, and their debt increases by 6% annually, but this number is increasing every second. The liquidity providers, who provide half of the liquidity, earn a 3% annualized return, as the 6% is divided according to a 100% deposit ratio, resulting in a 3% annualized return, and this number is also calculated every second.

Why is it calculated every second? Initially, when I thought of this concept as a black box lending system, I thought that when you repay, you would need to pay additional fees, for example, if you borrow $100, you would need to repay $105, and this money would be distributed proportionally to everyone. However, if you only distribute it among the current pool participants, there would be room for manipulation.

Someone could front run and deposit 99% of the liquidity to capture the $5 bonus and immediately withdraw after you. So, you should distribute this $5 bonus to all previous participants in the pool based on their holding ratio over a period of time. What they are doing is making your debt and collateral grow every second. So for the manipulators, front-running makes no sense, as the distribution has already happened. When someone repays their debt, it doesn't mean they will pay a sum that will be distributed; this money has already been distributed, they are simply repaying their own debt. It's a great accounting innovation.

Compound and Aave have different implementations. Compound distributes rewards by continuously increasing the Compound asset price compared to the underlying asset price. This price increases every second based on a formula. When the borrow-to-supply ratio changes, they adjust this ratio. Aave does something similar, but they maintain a 1:1 price ratio, so your balance keeps growing. It's a different approach that can be interchanged.

Anyone can create a token wrapper that behaves like a Compound token. Its balance doesn't grow; instead, its price increases. And you can also create a reverse wrapper token that makes the Compound token wrapper behave like other tokens, one-to-one with the underlying asset, with the balance constantly growing. I believe someone may have already done such a project, like X token or similar, as they often create wrappers that allow similar functionalities such as voting, automatic voting, delegation, etc.

As for why we choose to innovate in the DeFi space, I would say that we are not only focused on DeFi. We are also very interested in Web3 and seeking innovation in that area. Typically, we come up with unique technological innovations and ideas and then try to understand if we can build a useful and successful product based on these innovations and ideas.

I have noticed that some projects first envision a product and then try to implement it. But I believe that 1inch takes the opposite approach. We first propose innovations and then try to understand how to best serve users with these accounting methods or algorithms. That's why most of our products perform well upon launch and are hard to compete with.

What's the big move from the 1inch Developer Portal?

On July 19th, 1inch Labs announced the release of the beta version of its Developer Portal, a Web3 cloud SaaS (Software as a Service) platform that provides state-of-the-art APIs for developing new products.

The 1inch Developer Portal offers SaaS solutions including the Swap API, which provides quotes for the amount of cryptocurrency users can exchange on specific blockchains; the Spot Price API, which provides the current spot price of cryptocurrencies on supported networks based on available liquidity; the Balance API, which provides accurate information on cryptocurrency wallet balances and limits; the Orderbook API, which is based on the 1inch limit order protocol; and the NFT API, which provides information on all NFTs in a user's wallet, among other features.

According to official statements, the 1inch Developer Portal has been successfully tested in 1inch Wallet and 1inch dApp. Projects that have integrated the 1inch API include MetaMask, Trust Wallet, and Ledger. The 1inch Developer Portal offers a 99% uptime service level agreement for verified solutions. The 1inch API provides users with extremely short response times and has the lowest latency in the market. Additionally, the 1inch Swap API has access to multiple sources of liquidity on various blockchains. The user-friendly interface allows users to access the latest documentation, advanced request statistics, and all major updates about the 1inch protocol.

How should a team approach industry innovation?

BlockBeats: Let's talk about products. What is the difference between the latest developer portal and the previous API provided by 1inch?

Anton Bukov: Many developers in the Web3 field have participated in or are still participating in Hackathons. I think rapid delivery is crucial in Hackathons. There is a Pareto law which states that you can achieve 80% of the results with 20% effort, and that's the goal to pursue and achieve in Hackathons. However, delivering products to real users requires completing the remaining 20%, which requires 80% effort from you. This is the problem that our new developer portal (DevPortal) aims to solve.

We have spent a lot of time building all these services for ourselves, our wallets, and our products. Then we decided that if we could allow other developers to access all these high-quality APIs, they would be able to advance their own products faster, validate their assumptions against market demand more quickly, and achieve 20% functionality without investing 80% effort.

BlockBeats: What types of applications can developers build or implement using these APIs?

Anton Bukov: The possibilities are endless, it can be wallets or dApps. If you plan to create a wallet, then the 20% effort you invest and the 80% result you get might be the user interface, it could be a mobile app or a web app. However, the greater work lies in developing the backend to fetch all the tokens of the wallet, their prices, historical changes, and records, and that's on the blockchain. But if someone wants to run a new wallet and test if people like it, they cannot achieve that without a backend. Now, they can simply use our API to try it out, and it's free for most people.

BlockBeats: What role will the 1inch wallet play within the entire 1inch ecosystem?

Anton Bukov: We believe our mission is to improve this field and accelerate the development of singularity. Therefore, we believe the only way for the company to survive is through innovation. We not only want to survive but also want to continue innovating. This is what drives us forward. Of course, there are times when we feel like we're competing with other projects, but that's a good thing because it challenges us. We started from Hackathons, and in 2019, we participated in 15-20 Hackathons. Competition is always beneficial for end users.

In every field of blockchain, there is competition. There is competition between wallets, between aggregators, and in almost every market offered by Web3, blockchain, and DeFi technologies. However, the biggest winners of these competitions are usually the users, which is really great. This industry is still young, and there may be significant changes in the next ten years. But everything we do now contributes to building a bright future.

We have released these APIs not only for our internal use but also for everyone to utilize. We believe this will drive the industry to build more applications. We are not afraid of competition because we believe there is enormous room for development in this field. Even if we only have a 10% or 15% market share in the wallet market, it doesn't matter to us. We still handle over half of the aggregated transactions and continuously strive to increase our market share.

Of course, we compete for our share. But overall, we prefer to see these markets develop faster. Our goal is not to compete in a small market but to accelerate the development of the entire market. Having more diverse wallets may attract more people to participate in DeFi, and we hope to see the entire market grow faster than it is now.

Balancing between product innovation and market growth

BlockBeats: Can you disclose what is currently the most profitable feature or product of 1inch?

Anton Bukov: In fact, we do not generate revenue from swaps because we have sufficient funding right now, and making money is not our priority. We believe that growth is more important at the moment. There are many ways for us to obtain more funds if needed. But in 2023, I think we still have a long way to go before we stop growing. The entire industry may grow tenfold in the next 3-5 years, so growth is more important.

Many projects and companies prioritize growth over making money by investing all their income and investments into growth. For example, Uber operates in a similar way. Sometimes, these companies may struggle to survive due to high leverage since they try to spend more money to earn more money and invest more. But the problem is when investors see where all the money is going, they realize it is being invested in growth, not just in the DeFi field but also in growing markets and emerging markets. Therefore, the largest companies in the market are highly focused on the overall market growth and their own growth within the market.

BlockBeats: After Fusion, what do you think will be the next major update for 1inch?

Anton Bukov: We are currently exploring the next possible products to focus on, and we have designed some unreleased products. Initially, we had over 10 ideas and then brainstormed them. We sorted these ideas and three of them seemed particularly good. We will continue this process until deciding which one aligns best with the current market and needs. So there is no specific decision yet. This is also why we have never published a roadmap.

The market changes very quickly, and six months later, the market may be completely different, and we may develop different products. We also cannot be certain about what we will do in the next six months. If we have a long-term roadmap but then change our minds, many people may be dissatisfied because they thought the original roadmap was good and the new one is not. Our goal is always to exceed expectations, so we do not publish roadmaps as there will always be people who think they know better, and they will always be dissatisfied.

BlockBeats: When discussing creating new products or innovations, it is necessary to consider the issue of product delivery. The market is changing rapidly, especially in the DeFi field. How do you adjust the development direction of your products and adapt to the market?

Anton Bukov: We don't spend more than half a year developing a product or the next version of a product. Usually, we need much less time, around two to three months, perhaps slightly more. Some development work may start with Solidity smart contracts, and then during the audit period, we have frontend, backend, and other tasks. Normally, it takes about two to three months, maybe slightly longer in some cases. If our product cycle is one year, we will be eliminated by the market. When you release it, no one may use it, and it may become useless.

For example, the Uniswap team, as far as I know, takes an average of about a year to deliver a product. They talked about Uniswap X and the V3 version, and I believe they even started promoting it more than a year ago, but they have been studying the AMM field, such as V3 being an AMM innovation, and this market has been relatively stable in the past one or two years. However, when we are building in different directions and different DeFi areas, we cannot accept this situation.

Uniswap Strikes Again, How Does 1inch Respond?

Previously, the founder of Uniswap announced at ETHCC that a new cross-AMM, Dutch auction-based aggregation protocol called UniswapX is going to be launched. The community and the market have mixed reviews for this upcoming product. Dan Robinson, a researcher at Paradigm, highly praised the changes brought by UniswapX on social media, saying, "I believe that UniswapX changes the rules of decentralized exchange, MEV, and interoperability," and listed five reasons in detail.

However, the official account of Curve Finance gave a different evaluation, with a unique flavor: "Forgive me for saying this. The game rules have been changed a long time ago: when 1inch first conducted high-quality aggregation, when CoWSwap launched the Solvers model. UniswapX is good, but it is not the innovator, not even the second player." Undoubtedly, Curve Finance believes that Uniswap copied their concept. Some members of the community also expressed their doubts, saying, "UniswapX = CoWSwap + 1inch?"

Pink Shadows

BlockBeats: You mentioned Uniswap, which recently released its important V4 version along with UniswapX. Although other protocols have proposed similar innovations, Uniswap's adoption of these innovations for the second time still outshines other protocols. I'd like to hear your thoughts on this issue. As a DEX team competing against Uniswap, how should you develop in the DeFi space?

Anton Bukov: When I first heard about UniswapX, my immediate reaction was to wonder why it looks so similar to 1inch Fusion. After we delved into their whitepaper, we found that 1inch Fusion is one of their major references. I see this as a positive thing, which once again proves that we and other participants doing similar things in the market are moving in the right direction. This also reinforces the fact that we are always one step ahead. I firmly believe that our solution will continue to lead the industry.

BlockBeats: Many different DeFi protocols have made a lot of innovations, but the market has not given them enough attention. But when Uniswap implemented similar innovations, the whole market suddenly felt like a revolution.

Anton Bukov: Yes, I think some projects already have unfair advantages. Here, unfair advantages refer to having auditors that serve as a kind of pass to access their services due to the brand effect. However, this situation is gradually being resolved as the market adjusts itself. People are starting to realize the existence of aggregators, and when they see DEX aggregators, they can almost immediately understand that while DEXs are good, DEX aggregators are always one step ahead. Inequality and unfairness are almost everywhere in the market, and in free markets with less rigid regulations, this situation is improving. Unregulated markets are growing much faster than regulated ones, and their inequalities are gradually improving over time.

BlockBeats: I also want to talk about the issue of business licenses. After Fusion was launched, you announced the MIT license, which is quite different from the BSL license adopted by Uniswap. The MIT license is more open. What is your view on Uniswap's licensing approach and why did you choose the MIT license?

Anton Bukov: We are not particularly afraid of competition, and most of our smart contract solutions are fully open-source. The MIT license allows anyone to use the code we have written for anything. We believe that not all software engineers, especially anonymous ones, will respect your license. I have seen some forks from unknown teams even before the commercial license of Uniswap V3 expired. A commercial license may prevent some open teams or fair competitors from forking, but it cannot stop random public forks.

We believe that it is a good thing if someone is inspired by our ideas. We developed this product, and even if someone copies or modifies it slightly, we are still ahead. When we release a new version, we usually are already developing the next one, and each new version is more advanced than the previous one. So we usually don't worry too much about being copied, we see it as a contribution to the public interest.

BlockBeats: In the DEX field, Uniswap is reaching the pinnacle and moving towards a monopolistic direction. In the current DeFi field, what other directions still have development space for entrepreneurs?

Anton Bukov: I believe there is still room for innovation, and there are things that can still be invented. However, it might not make sense to build projects or products before inventing something important from a technical perspective. Making minor changes to Uniswap or other projects may not be feasible. This will not effectively expand the market share. But the good side is that if you can find a good design, XS AMM will attract attention because if your protocol can offer better prices compared to other protocols, your protocol will be immediately adopted by aggregators. If it can provide excellent prices and attractive returns for LP, you can succeed.

It is possible that a genius may come up with a brilliant method, release a protocol, and attract hundreds of thousands of liquidity. This new AMM or DEX may be adopted by aggregators, thus gaining its initial trading volume and bringing substantial returns to LP. With more LP joining, the project will gradually grow and it is possible to occupy tens of thousands of shares in the market.

Before aggregators appeared, there would be many competitors between newly established DEXs. A participant in a Hackathon may come up with a very good solution that is put into use and gains market share. It used to be impossible to gain 10% market share with just an idea and a little liquidity. You have to attract users because no one will make exchanges, but now, you can automatically gain trading volume.

So the market positioning of aggregators is different from the current business of Uniswap. After the invention of aggregators, many DEXs appeared, and many DEXs that previously failed due to lack of users were able to survive and succeed and obtain some shares to continue surviving.

BlockBeats: Currently, people mainly perceive 1inch as a DeFi aggregator. How do you define yourself in the DeFi market in the future?

Anton Bukov: Yes, the main business of 1inch is still an aggregator, and we don't think the launch of Uniswap X will bring great changes. We have seen other aggregators in the market, and we have competed quite successfully with them for the past three and a half years. In the first six months, we were almost the only player in the market. I believe things will change, but not as dramatically as some people imagine.

We have some products that are not just aggregators, and we will have more different products. Secondary DeFi may be regulated for different markets, such as secondary DeFi in the United States and Europe, and we should also add secondary DeFi for China because it is a very large market. There may be other markets as well, such as Japan, which is also a large economy, and we can look at it in terms of the economic scale of a country or a group of countries.

BlockBeats: Are you worried that the future liquidity of Uniswap will be too strong and affect the large-scale gathering and use of 1inch?

Anton Bukov: They have always had a lot of unfair trading volume, where "unfair" refers to the aggregator fairly distributing the trading volume based on the prices provided by different DEX. When a user group trades on Uniswap without using other DEX or aggregators, they may have some trading volume. If this trading volume is disproportionately high relative to their liquidity and price, that is what I call unfair trading volume.

Based on our measurements from a year or two ago, this issue was very severe, but it is gradually improving now. This market, like all other markets, is getting better. Many people trade on Uniswap because they have heard about it on TikTok and are unaware of the existence of other DEX or aggregators. However, they will ultimately pay the price for this because this market is just too crazy.

How to view the future of DeFi?

BlockBeats: Some people say they are shifting their strategy to building something on V4 hooks instead of developing new DeFi applications. From your perspective, what is the best strategy?

Anton Bukov: You can introduce some innovations of decentralized trading platforms through V4 hooks, building additional functionalities on existing decentralized trading platforms, such as oracles or something similar. Uniswap has seen their protocol forked many times, but these changes have been minor and haven't actually altered the logic of the swap. They changed other aspects.

This forked V4 will allow other developers to add their own functionalities on top, charging or not charging fees, or anything else, without forking their code. They will still be able to trade through these pools with some hooks, now not going through SushiSwap or any other platform.

Anton at ETHCC venue

BlockBeats: But will this shrink the market or reduce people's enthusiasm for establishing their own trading platforms and using aggregators to obtain instant liquidity, thereby reducing the technical stack in the market?

Anton Bukov: The focus of the discussion is not to reduce the number of trading platforms, but to reduce the forks of existing trading platforms. You can have your own Hooks, and we would be happy to charge fees or anything else. But if you want to copy Uniswap without any significant innovation, please don't create forks, as it doesn't make any sense. We might see fewer Uniswap forks, but there may be more Hooks.

BlockBeats: Many developers have given up on creating DEXs and are now exploring Hooks.

Anton Bukov: They can still achieve it to some extent through DEXs, but competition has indeed become more difficult compared to Uniswap's V3 and V4 solutions. I believe V4 will be more powerful than V3, and V3 has not completely replaced V2, possibly because V2 has much lower gas fees, which is why V2 still has a lot of liquidity, and Uniswap and its router still support V2 and V3. But it's highly likely that V3 will fully transition to V4 because V4 is better. It doesn't make sense to retain liquidity in V3, but I believe their router will support V3.

We've had some ideas about proprietary oracle and other things, but we always struggle with the need to maintain a completely new AMM and all its liquidity. However, we believe Uniswap has made good strides in improving this market. So, we're exploring what we can actually provide, what Hooks we can develop that can significantly improve certain aspects, enhance oracles, or increase LP profits. We're exploring all of this and may come up with some combinations that could be successful and attract a large amount of liquidity to the Hooks we develop.

BlockBeats: This might be where aggregators come into play, and it doesn't necessarily have to be DEX aggregators, it can be many other things?

Anton Bukov: Yes, there are already aggregators for yield, DEX, and bridging. I think every market is different, and when aggregating DEXs, we're not increasing users' risks. We can add many DEXs from day one, and users won't bear any new risks because our smart contracts handle all the risks. But when we talk about yield aggregation, it brings new risks to users, and fundamentally, it shouldn't be like 1inch. We can hide everything behind one trade, but I think they should still show selectivity to users. Users should decide which bridge to use, which one is faster, whether to get $10 more or complete everything in 2 minutes instead of 20 minutes. You can't make decisions for users.

BlockBeats: I remember you also mentioned the regulatory issues with DeFi at ETH Denver last year, but recently there have been more discussions about regulations, such as those related to RWA. Do you still think DeFi may need to seek its own solutions when it comes to issues like stablecoins?

Anton Bukov: Regarding regulations, what I can say is that different countries and regions have different requirements and ideas regarding regulations. But the problem is that if they try to regulate by forcing protocols or users to comply with rules that are incompatible with non-regulated DeFi, it won't harm DeFi. Instead, it will create a sub-market of regulated DeFi, a kind of sub-DeFi.

DeFi allows subsets of users and protocols to interact in terms of self-restrictions and regulations, so they can't regulate DeFi, they can only create a regulated sub-DeFi in some way. We may see regulated sub-markets for the United States and European regions. We already have a fairly large DeFi market, and if some countries want their economy to integrate with this emerging industry, they need to accept it.

Regulation is possible, but it should be very subtle and shouldn't be something that prevents the acceptance of existing DeFi. For example, a few months ago, we saw that Banque de Paris created a stablecoin, and people mocked it on Twitter. Its token looks like ERC20 but is completely incompatible with ERC20 and will not be used with most existing DeFi protocols. You can try to make it work, but it may disrupt things.

Because existing protocols assume ERC20 tokens work as described in the standard, if your token works differently, it may break things. For example, Uniswap V3 won't work at all because their previous versions assumed transfer happened when the balance change on tracking deposits for trading or providing liquidity relative to the source or smart contract, but in reality, it didn't. So strange things may happen, and their token won't be able to access existing DeFi. They are creating a new market, and I'm curious if at least one protocol will support their solution. It's highly unlikely to happen, they won't succeed.