What’s Actually Working Onchain? | Ali & Cedo

This episode dissects the current on-chain landscape, revealing what’s genuinely gaining traction from DeFi primitives and LSTfi to the turbulent world of token launches and undercollateralized lending, offering key insights for Crypto AI investors and researchers.

Guest Introductions: Cedo of Initia and Ali of Volantis

• The episode features Cedo, who handles the app ecosystem and growth at Initia, a platform focused on an app chain thesis (the idea that individual applications benefit from their own dedicated blockchains) and developing "hyperlids" (likely referring to interconnected, specialized rollups). Cedo, with his experience in fostering app growth, provides insights into ecosystem development.
• Ali, Head of Growth at Volantis, a DeFi protocol building custom infrastructure like DEX pools, shares his perspective on rebuilding interest in DeFi amidst new market narratives. Ali’s role involves navigating the practicalities of launching and scaling DeFi products.
• Both guests are also known for their podcast, "Exit Liquidity," which they describe as a passion project.

Navigating Phased Rollouts: Hyperliquid's and Initia's Launch Experiences

• Hyperliquid's Iterative Development
  • Ali discusses the phased rollout of Hyperliquid, a decentralized exchange platform. He emphasizes that the chain is not yet feature-complete and has undergone significant improvements recently, such as halved block times and the upcoming launch of write precompiles (specialized functions that allow smart contracts to interact with the core exchange logic more efficiently).
  • Ali notes, "it is like a phase rollout. So like the chain is not anywhere near yet complete and it was way shittier like even just like two three months ago." This highlights the iterative nature of cutting-edge crypto infrastructure development.
  • This phased approach means some functionalities are dependent on future updates, like precompiles, which are crucial for certain applications to go live.
• Initia's Multi-App Chain Launch and Bridging Focus
  • Cedo explains Initia's launch strategy, which involved deploying eight app chains simultaneously alongside its Layer 1 (L1, the foundational blockchain). This ambitious launch highlighted early challenges and learnings, particularly around bridging infrastructure and the "interwovenness" between its various rollups.
  • A key focus for Initia is ensuring new applications bring unique value propositions to attract users, moving beyond standard DeFi primitives to foster genuine ecosystem growth.
  • Popular early applications like Kamagotchi demonstrate user engagement, while the next cohort of apps will emphasize uniqueness.

Spotlight on Emerging Projects: Contro and the Prediction Market Landscape

• Cedo highlights Contro, a project developing binary prediction markets (markets where users bet on one of two outcomes) with a unique liquidity mechanism and a focus on user experience (UX).
• The founder, Andreas, aims to create a system where online opinions can be financially backed, offering a novel approach to how information and sentiment are valued and monetized.
• Contro is currently in a private alpha on testnet, with Cedo expressing excitement for its potential to offer a "super unique" solution in the prediction market space.
• Strategic Implication: The rise of sophisticated prediction markets like Contro, potentially leveraging novel liquidity and UX, could offer new avenues for sentiment analysis and information aggregation, areas where AI can play a significant role in strategy development.

DeFi Deep Dive: Beyond the "Revenue Meta"

• Ali's Perspective: Focusing on Core DeFi and Signal Over Noise
  • Ali dismisses the term "revenue meta," stating, "building profitable companies is not a meta. Like, it's just kind of a meme to call it that." He advocates for focusing on fundamental progress rather than fleeting narratives.
  • To maintain focus amidst market noise, Ali either zooms in on promising teams and their consistent development or zooms out to the bigger picture of DeFi's evolution, emphasizing a return to the core reasons for being in crypto.
• Cedo's Journey: Learning Finance Through DeFi and Iterative Primitives
  • Cedo shares that he learned more about finance through DeFi than his formal education. He finds the iterative nature of DeFi fascinating, where experimentation, even if it leads to failures, ultimately contributes to more robust solutions.
  • He points to examples like Morpho's fixed-rate lending, which appears to draw inspiration from NFTfi lending (peer-to-peer lending using NFTs as collateral), as evidence of this evolutionary process.
  • Actionable Insight: The continuous iteration in DeFi primitives, often drawing from diverse crypto sub-sectors, signals ongoing innovation. Researchers can track these patterns to anticipate new financial instruments and market structures.

The Quest for Undercollateralized Lending: Innovations and Risks

• Learning from Past Attempts
  • The discussion touches upon the "holy grail" of undercollateralized lending (lending without requiring collateral that exceeds the loan value), a concept crucial for expanding credit in crypto.
  • Past attempts like Goldfinch and Maple Finance, which involved lending to real-world businesses and faced defaults, are mentioned as cautionary tales.
• Emerging Models: 3Chain and Wildcat
  • Cedo mentions 3Chain (referred to as 3J) and Wildcat as current projects tackling undercollateralized lending.
  • 3Chain's model reportedly uses Stripe integrations, ZK proofs (Zero-Knowledge proofs, cryptographic methods allowing one party to prove to another that a statement is true, without revealing any information beyond the validity of the statement itself), off-chain data like Coinbase balances and credit scores, and AI-driven analysis of DeFi wallet activity to assess creditworthiness. This use of ZK-TLS (ZK for Transport Layer Security) allows verifiable access to off-chain data.
  • Wildcat focuses on lending to institutions, such as Split Capital. Lawrence from Wildcat is noted for his transparency about the inherent risks.
  • Crypto AI Relevance: 3Chain's model explicitly incorporates AI for wallet analysis and leverages ZK proofs for private data verification. This is a direct intersection of Crypto and AI, offering a rich area for research into decentralized identity, reputation, and AI-driven credit scoring. Investors should monitor the scalability and risk management of these models.

The Evolving Perp DEX Arena: Order Books, AMMs, and Points Programs

• Current Perp DEX Landscape
  • Ali mentions trying numerous new Perp DEXes (Decentralized Exchanges for perpetual futures contracts), such as Aevo. He observes that many suffer from poor liquidity and high slippage, often primarily functioning as "perp DEXes with points programs" to attract users.
• Debating AMMs vs. Order Books for Perpetuals
  • Ali believes that traditional AMMs (Automated Market Makers, which use liquidity pools and algorithms to price assets) cannot scale to meet the demands of perpetuals trading in the way that order books (traditional trading systems that match buy and sell orders) used by platforms like Hyperliquid or centralized exchanges (CEXs) can.
  • However, he is interested in hybrid models (like Vertex and Drift) and cautions against prematurely writing off AMMs, especially for spot assets, as they are still a relatively new and evolving technology. He states, "if you hold that opinion [writing off AMMs] then that is like an anti-DeFi opinion."

Hyperliquid's Ecosystem: Spot Markets, AMMs, and LSTfi

• The Role of AMMs on Order Book-Centric Chains
  • The conversation highlights that while Hyperliquid's order book excels for high-volume assets, AMMs remain crucial for long-tail assets (less frequently traded, smaller market cap) and stable pairs (e.g., LSTs, USDC/USDT) on platforms like the Hyperliquid EVM (Ethereum Virtual Machine compatible execution layer on Hyperliquid).
  • Spot volumes for non-major assets on Hyperliquid are still developing, indicating a need for AMM-based liquidity.
• Volantis's Approach to LSTfi on Hyperliquid
  • Ali explains Volantis is developing AMMs specifically for LSTs (Liquid Staking Tokens – tokens representing staked assets that remain liquid and usable in DeFi).
  • Volantis's design moves beyond simple bonding curves, interacting directly with staking contracts, pricing based on underlying staked assets, and capable of issuing new stakes or unstaking to rebalance pools. This makes it more an "extension of the LST itself."
  • Kinetic is mentioned as a significant upcoming LST on Hyperliquid.
• The Impact of Write Precompiles on Cross-Component Composability
  • The upcoming write precompiles on Hyperliquid are expected to be a game-changer. Ali explains they effectively allow "wrapping an exchange API directly within a smart contract."
  • This will enable applications on the Hyperliquid EVM to interact seamlessly with Hyperliquid Core (the central limit order book), facilitating features like aggregators that route trades to the optimal venue (EVM AMM or Core order book) for best price execution without breaking composability.
  • Strategic Implication: The enhanced composability between Hyperliquid EVM and Core via write precompiles could unlock sophisticated, AI-driven trading strategies, arbitrage bots, and liquidity management solutions that leverage both execution environments.

Key Players in the Hyperliquid EVM Ecosystem

• Ali identifies promising projects within the Hyperliquid EVM ecosystem:
  • Felix: Praised for being "most forward thinking about leveraging Hyperliquid Core."
  • Hyperlend and Hyperloot (Hyperloot was mentioned as Hyperbeat in transcript, likely a typo for Hyperloot, a known Hyperliquid project) are also seen as moving in the right direction.
  • Laminar: Ali believes Laminar could eventually become Hyperliquid EVM's leading general-purpose DEX due to their quieter, long-term approach.
• Cedo also expresses appreciation for Felix, particularly their proactive team initiative.

The "ICM" Meta: Permissionless Bootstrapping and Token Launch Mechanics

• Critiquing the "ICM" Label
  • Bukacio expresses skepticism about the current "ICM" (Initial Coin Market, a term for new token launch trends) meta but sees long-term potential for on-chain capital formation.
  • Ali prefers the term "permissionless bootstrapping," viewing recent trends (Jelly Jelly, Cled, Dupe, Launchcoin, Pump.fun) as part of an ongoing evolution in how capital is formed on-chain efficiently.
• Key Elements: Distribution and Mechanics
  • Ali identifies two critical factors for successful permissionless bootstrapping:
    1. Distribution: How tokens reach users (e.g., Launchcoin's model for app-focused projects, Pump.fun's speculative retail-driven model).
    2. Mechanics: The structure of the launch (e.g., anti-snipe measures, bonding curves, buyback mechanisms). Projects like Doppler, Flaunch, and Dizzy/Vertigo are innovating here.
• The Equity Question and Future Frameworks
  • The discussion touches on whether tokens need to represent equity to have sustainable value. Bukacio argues that if a token captures all protocol cash flows, it de facto acts as equity.
  • Cedo believes robust legal frameworks are needed, mentioning Metaplex's exploration of on-chain SAFTS (Simple Agreements for Future Tokens) and Salutary's work on M&A frameworks. He anticipates that "people need to lose a bunch of money within ICM for something nice to come out the other side."
  • Actionable Insight: The evolution of token launch mechanisms and on-chain capital formation is critical for Crypto AI projects seeking funding. Researchers should study the game theory of these launch mechanics, while investors must discern between hype-driven launches and those with sound tokenomics and genuine utility, potentially tied to protocol revenue or governance.

Current On-Chain Explorations and Emerging L2s

• Bukacio shares he is not heavily active on-chain beyond holding Hyperliquid's HLP, BTC, and cash, and exploring Kamagotchi on Initia.
• Ali introduces Inc. (Kraken's upcoming L2) as an ecosystem to watch. He describes its potential as "Base, but like without the feds," suggesting its team is more crypto-native and attuned to DeFi community needs compared to Coinbase's Base.
• This contrasts with Base, which Ali feels sometimes tries to "put a square peg into a round hole," citing the "friend.tech" meta as an example.
• Strategic Consideration: The emergence of exchange-backed L2s like Inc. could create new ecosystems with distinct characteristics and user bases. Crypto AI projects should evaluate these platforms based on their technical capabilities, community engagement, and alignment with strategic goals.

Final Thoughts and Where to Follow

• Cedo encourages listeners to explore Initia, try its applications, and earn ESINIT tokens. He also humorously suggests following Ali on Twitter for alpha.
• Ali invites users holding HLP (Hyperliquid's liquidity provider token) to deposit it on Volantis to earn yield and points, with more pools and rewards planned.

This episode underscores the dynamic iteration in DeFi and on-chain capital formation. Investors and researchers should monitor innovations in undercollateralized lending, LSTfi, and token launch mechanics, particularly where AI and ZK-proofs offer new efficiencies and trust models.