TLDR

In this episode, Maghnus talked about  the major restructuring of the Interchain Foundation and its shift from a $40M+ burn to a lean $10M operation. The team now focuses entirely on boosting $ATOM’s value through real utility and strategic product development. They dive into Eureka, a new IBC design that helps connect Cosmos Hub to any chain at 100x cheaper and 60x faster than existing solutions – with the hopes to accrue >200 mm USD of value to $ATOM itself per annum.

More topics discussed include Cosmos Hub’s transformation into a multi-chain marketplace, the upcoming launch of a permissionless VM, and how new chains are being encouraged to buy and burn ATOM as part of alignment. 

The episode also touches on RWA chains, the acquisition of EVM OS, IBC’s dominance, and how Cosmos aims to become the go-to stack for serious world-building L1s.

Chapters / Timeline

00:00 Introduction to BidCast and Interchain Labs

01:04 The Relationship Between Interchain Foundation and Interchain Labs

03:13 Corporate Restructuring and Leadership Changes

06:04 Transition of ICF Team and Budget Cuts

07:43 ICL's Purpose and Financial Sustainability

09:53 Revenue Generation and Atom Token Strategy

13:00 Interoperability Protocol: IBC and Its Impact

17:49 Eureka: Bridging Cosmos and Ethereum

20:48 Future Integrations and Market Strategy

25:13 Revenue Projections and Atom Deflation Strategy

32:51 Eureka's Financial Impact on Adam

34:41 Transforming the Cosmos Hub into a Marketplace

36:50 Competitive Advantages of Eureka

37:59 Projected Cross-Chain Volume and Revenue

43:06 Aligning New Chains with Atom

46:43 Acquisition of EVM OS and Future Plans

55:26 RWA Chains and Institutional Trust

59:58 Enhancing Atom's Liquidity

Transcript

<Jason Kam (00:21)>: OK, welcome to an episode of BidCast. I'm your host, Jason Kam, aka Mapleleafcap. Today is April 10th, 9 AM Hong Kong time. BidCast is being livestreamed to BidClub members. Questions are from the members and my own. We plan to only cover liquid tokens and web 3 related equities in this podcast, where participants may own the instruments discussed, all opinions on our own, and BidCast is not being compensated for the content produced. Nothing we discuss here is investment advice, nor do we believe there's any material non-public information in the episode. Today I'm speaking with Maghnus, the co-CEO of Interchain Labs. Maghnus, welcome.

<Mag (01:02)>: Nice to be here.

<Jason Kam (01:03)>: Yeah. Why don't you tell us a bit more about the relationship between the Interchain Foundation and Interchain Labs? I think there's a bit of a corporate restructuring that happened historically.

<Mag (01:15)>: Yeah, happy to it. So the ICF or Interchain Labs was the original for all intents and purposes Cosmos Foundation. Though it was funded with a portion of the ICO proceeds of Atom back in 2017. That was diversified into Bitcoin, ETH, also still a lot of Atom. That grew substantially. And the ICF was essentially tasked with being a funding entity for open source development of the Cosmos stack and actually originally it was designed to do the same for Polkadot and that's actually in its charter is to support Cosmos and Polkadot. Obviously Polkadot developed its own foundations. Yeah, and so we haven't performed anything like that. But basically going back six months ago, or I guess nine months ago at this point,

<Jason Kam (01:57)>: Yeah. Yeah, fuck that. Yep.

<Mag (02:13)>: The ICF basically interrupted our series B. We were close to sort of closing a very large series B from investors to basically start our own ecosystem because we as SKIP, that was SKIP, yeah. And we were gonna start a new Cosmos ecosystem sort of in the dial that we thought was exciting because we were still excited about the idea of.

<Jason Kam (02:29)>: That was SKIP.

<Mag (02:42)>: Internet of blockchains, interconnected L1s, but we had no faith in the Cosmos leadership at the time that they would be able to grow the ecosystem themselves. at the time we just threw up our hands. We said, we'll raise that up, one bill evaluation or something like that to basically launch our own. During that process, the ICF came to us and basically said, how about you don't do that and you do that here for Cosmos. drove a pretty hard bargain at the time. We sort of demanded a couple major changes. One of which is that Ethan Buckman, who is the co-founder of Cosmos, stepped down and sort of pass off the reins to new leadership. And the other was that we would have substantial basically like ability to independently execute on how we wanted to grow Cosmos in the way that we wanted to. And yeah, so the legal structure is basically that the ICL or Interchain Labs, which is what Skip turned into, is the labs entity that is fully funded and owned by the ICF.

<Jason Kam (03:59)>: And they acquired it throughout, like, with all cash from the treasury? Or they sort of paid you with Atom also, where you're locked up over time?

<Mag (04:07)>: It was an all cash acquisition.

<Jason Kam (04:09)>: wow, nice. And you guys just took the cash, or do you kind of yourself go out there and bought a bunch of Cosmos? ATOM, yourself. Hard to say. Got it. Got it. And I guess the ICF, your independent entity stat, god. Yikes.

<Mag (04:16)>: I personally went out and purchased a lot of that. Yeah, we all did. And by the way, sorry, I purchased it way higher than $4.50 Yeah. At the time when the acquisition happened, ATOM was like $10 or $11.

<Jason Kam (04:35)>: Got it. Well, bullish. It has to go back there before you can dump your bags. I guess, so acquired for full cash, it's a fully owned subsidiary. And then what happens to the ICF afterwards? Because you guys were shipping and maybe developing code for Cosmos Hub. But what happened to the people that were at ICF before? They were like, it’s a pretty substantial burn, if I’m not mistaken, before this.

<Mag (04:40)>: Yeah, so to answer that question fully requires a little bit of explanation about how the ICF was working. So the ICF roughly had a team of 20-ish folks at the time. It had also council members, so it has council of three members. And for the folks from the ICF, basically the option was to either join the ICL if they passed their interview process, or the ICF let them go, essentially, for the vast majority of people. And so the actual headcount of the ICF reduced some 90 % during that process. very few folks made it into the ICL. Some notable call-outs here, though, that the IBC team, which was inside the ICF, which was excellent and mostly joined, or for a large part joined the ICF, they’re the same folks that are shipping IBC or Eureka, which I’m sure we’re going to chat about today.

<Jason Kam (06:00)>: Yeah. Yeah.

<Mag (06:02)>: And then our CMO, Nico, came from the ICF. He’s excellent. And some other marketing folks. the vast majority did not transition. Yeah, I was going to say one other thing, which is the actual internal team of the ICF represented a very small percentage of their spend. The vast majority of their spend was to external development teams. And so that included things like informal. It was building Comet.

<Jason Kam (06:13)>: Yeah, then, yeah, go ahead.

<Mag (06:31)>: binary builders who was building Cosmos SDK, not strange love who’s building IBC. They were spending upwards of $35 million a year on all of those teams. And we basically after we came in, what we did was we brought all of that development in-house and had it be run by the SKIP engineers. And so at a high level, the ICF has gone from spending over $40 million a year to spending just a little over 10. So our goal is to cut the, to basically cut the, the budget by, you know, 70 % or more.

<Jason Kam (07:05)>: And then ICF now is basically a box of treasury that has today a treasury value of about $250 million, something like that. OK.

<Mag (07:13)>: Yeah, higher Bitcoin was high. It’s heavily indexed on Bitcoin and ETH and today it’s roughly about $250 billion. That’s right.

<Jason Kam (07:21)>: got it and then the burn of 10 million comes from that as well.

<Mag (07:25)>: Yes. Yeah.

<Jason Kam (07:26)>: OK. And then SKIP. sorry. ICL is its own entity now. Harbors all of the top engineers that you brought on from there. And ICL currently today, what’s the financials there?

<Mag (07:41)>: So the ICL’s purpose is not to generate revenue. That was never the ICF’s purpose. The purpose of the ICL is to essentially build products that further the ICF’s mission of building open and permissionless blockchains and building internet blockchains, which is Cosmos. And then also to ensure and help with the financial sustainability of the ICF. If the ICF survives, the ICL will always survive.

<Mag (08:10)>: because it’s fully funded by the ICF.

<Jason Kam (08:10)>: I see. I see. So that’s what a 10 million burn goes to. It’s like it expenses 10 million. It goes into ICL basically.

<Mag (08:19)>: That’s correct. Exactly. Yeah. We have a budget. Yeah.

<Jason Kam (08:20)>: Got it. And I guess in the future, with all the efforts that you’re building, like Eureka, we’re talking in a second, like the Cosmos SDK, EVMOs, all of those things you monetize, if there’s any revenue generated at all, maybe before we go to those efforts initially, those revenue that’s being generated, how does that flow to eventually ATOM? it? go through ICL first, it go through ICF, does it go through a treasury, how would that flow look like?

<Mag (08:54)>: Yeah, at SKIP we had significant ARR because we would charge for the various services that we offer around SKIP go and around any of these services and around the Oracle that we thought that was used by Celestia and in D Y D X and many others. I think that know the revenue fluctuated between 2 to 8 million ARR or sorry like 5 to 5 to 8 million ARR.

<Mag (09:22)>: at sort of the end. And we have basically made a lot of choices to not pursue revenue generating products, because at end of the day, that amount of revenue is immaterial relative to changes in basically the price of the underlying assets inside the ICF treasury. And there’s only one asset in that treasury that we have the ability to basically build out and provide more utility for, which is atoms. And so the overwhelming strategy for the ICL is to one, accumulate more atom for the ICF or to encourage things that do that. And two, to accrue value to the atom token and to basically create increased amounts of utility and tie the atom token to the growth of the Cosmos ecosystem, which itself is extremely successful. Cosmos is a top three ecosystem by Basically every metric, TVL, it’s a top two by total number. If you added the market caps together and the different chains inside of it, it’s up there in terms of number of developers. It’s a very well-trusted stack. And so in many ways, you’d expect any kind of growth like that to be associated with an extremely powerful top five token. Atom is not that. And so a large part of yet, right? And a large part of what we’re doing is the very basic work of tying ATOM to the success of the wider ecosystem.

<Jason Kam (10:54)>: And so just to summarize, there are a couple of pieces there. So previously, SKIP itself was $8 to $10 million. You’re intentionally reducing it and directing all the effort of revenue generation to ATOM value accrual. That was, in my opinion, huge change because the running joke was you use the Cosmos tech, you never fucking buy ATOM because ATOM will never accrue any value. It would seem like now with the management change, is Really pivoted 180 like the singular focus now is to build good tech, also like accure value if I’m not mistaken.

<Mag (11:29)>: Yeah, I mean, this was the crux of what we convinced the ICF of was that their time is limited, that they were spending way too much and that Cosmos would not just the ICF would not survive without a strong central token, but that the Cosmos would not survive without a strong central token. At the end of the day, every ecosystem has a strong central token that has a story that is symbiotic with the growth of the ecosystem. And there’s a very

<Mag (11:59)>: defined reason for that, right? As the token goes up, basically attracts more developers to the chain or to the ecosystem. Those developers building more things makes the token go up if there’s some kind of value pool mechanism. And that cycle can loop on itself extremely quickly. And part of why you can see things like the meteoric rise of Solana in 2024. We were missing the links on both sides, meaning

<Jason Kam (12:22)>: Yep.

<Mag (12:28)>: When ATOM went up, it did not attract people to build more app chains or building Cosmos. People built those regardless without any thought of ATOM. In fact, probably ATOM was impediment in many ways to that happening. And then the other side is also not true, which is as chains were building that it would drive some value to ATOM. So what we committed to doing in the first 90 days in office, so to speak, or after the acquisition, now that we’re at the ICL,

<Jason Kam (12:41)>: That’s right.

<Mag (12:58)>: is to build a extremely well adopted, highly differentiated, and highly utilized and demanded product that did tie the link directly. So that the growth of that product was linked to the wider ecosystem and also had a valuable mechanism to add. And that’s why we built IBC or Eureka.

<Jason Kam (13:19)>: Yeah, and tell us more about IBC, Eureka

<Mag (13:23)>: Yeah. So for folks who don’t know, IBC is the interoperability protocol of Cosmos. It was created a while ago. It is, I think, widely regarded as one of the most groundbreaking innovations in crypto. It’s done more volume than any other bridge ever. And it has never been hacked. And it regularly does now like two to three billion dollars a volume a month. And it basically is, it’s not really a bridge. It’s basically a way of connecting two blockchains that both have light client security and fast finality, which basically means that the validators of one set can quickly attest to the fact that the validators of the other chain have done something. For example, lock a token so that you can mint it like a normal bridge would. It also can do message passing and all this really good stuff. It could never scale to a Ethereum was the problem. and it can never scale beyond Cosmos. And the reason for that is because chains were too slow, right? Ethereum was too slow. And then also to have the light client security model, which I believe is behind the fact that it’s just like such a bulletproof bridging protocol. It’s never been hacked and so much money has gone through it and powered all of Terras, for example, bridging. To have that, you would have to basically spend an inordinate amount of gas to basically prove the Protobuf encoded as signatures from the light client on the Cosmos side. And so we all thought that was impossible, right? Wherever IBC was in Cosmos, it dominated, you know, even for,

<Jason Kam (15:03)>: Yep. And sorry, and just for the audience, like $2 to $3 billion, where does that mostly go to? Is Atom from Atom Hub to Osmosis? What is it exactly?

<Mag (15:14)>: Yeah, a lot of it is Atom. Atom is still probably the most liquid, or it is the most liquid token in the ecosystem. A lot of it is USDC transfer. For example, there’s a lot of USDC that goes to and from DYDX which is the Cosmos chain. There’s a lot of USDC that goes into Noble and then into the SEI ecosystem. And yeah, and there’s many other things too.

<Jason Kam (15:29)>: And I guess, does anybody charge anything for it, or is it just free?

<Mag (15:49)>: Yeah, be charged. So I think like, or our partners do it and we do alongside them. So the primary way that, and part of the reason we got acquired is that the primary way that people interact with IBC is over a product that we built called SkipGo. Yeah, which is basically a, know, bridges don’t run themselves, right? And neither does IBC.

<Jason Kam (15:51)>: Okay. I see, okay, makes sense.

<Mag (16:19)>: correctly run IBC with high reliability, you need relayers, you need really good routing products. And we basically built a product that provided an easy to use API for developers to basically call IBC and perform cross-chain actions that I truly believe was 10x better than the existing experience and quickly sort of dominated the market to the point that we now process over like between 50 to 80 % of all the IBC volume in Cosmos.

<Jason Kam (16:33)>: Got it. that’s where the $5 to $8 million comes from. So you’re charging like 25 to 50 bips, almost like that, maybe a little higher.

<Mag (16:56)>: We don’t charge on the transfers. We charge on the swaps. So what I mean by that is the way that a lot of people use SKIP go, and you can try it now if you want to. It’s domain is ibc.fun. We have a front end. They oftentimes want to end on a different token than they started with. So for example, they may want to start with Osmosis on the Cosmos up, and they want to end with Ethereum on ETH. They don’t want to think about having to bridge and then swap. We do all of that in one transaction. And so when we find the best liquidity for them across all the different routes, and then we take a fee on that if our affiliate takes a fee.

<Jason Kam (17:28)>: okay. OK, sorry to cut you off. so that was the history that you couldn’t bridge to Solana Ethereum. And what now?

<Mag (17:47)>: Now we can. So basically, ZK technology got good enough and we had, Eureka was basically the result of banging our heads against the wall for two and a half years to build basically a truly incredible, in my opinion, light client security model that works with Ethereum and works with Solana and works with any EVM. And that is unbelievably affordable. So just for reference, right? And we have the transactions. posted to prove this and tomorrow when it goes live, you’ll be able to try this yourself. The best bridge right now to go between Cosmos and Ethereum costs about $30 to $60 per transfer, usually $50 to $60, $30 only on very good days. Eureka costs about $0.45. It’s what, 60 times improvement or more in terms of the costs. And the speed because of the fast transfer network that we built on top of it is less than 15 seconds versus 15 minutes. So it literally makes it as cheap as an Ethereum transaction to go to bridge between Cosmos and Ethereum. And we’re gonna extend that to anywhere. And so, yeah, when we sort of came on board and we started working on this, it made a lot of sense to build it because one, It’s an incredible UX that we think we’ll get and we’ll get, you know, watch the news tomorrow, an incredible adoption. Two, it is something that fits with our product suite that we already had since we already did have the front end distribution and the rails to use IBC. It fit perfectly into that product. And then three, it was a perfect opportunity to leverage the Cosmos Hub and Atom as a participant. in the pipeline for all those transactions in a way that actually made the product better. So most of the time when chains look for use cases, they insert themselves in something that could have been a centralized process easily. That’s not the case for Eureka. The reason for that is because Cosmos Hub is able to accumulate all of the requested proofs because it’s a CK bridge. That’s how it’s so cheap. And then lower the cost by an additional 40%.

<Mag (20:14)>: on top of the reduced cost, as well as providing sort of a common denominator inflow and outflow into the Cosmos ecosystem so you don’t end up with like 50 versions of ETH. So it captures atom fees per transaction and does so in a way that actually saves money for the user.

<Jason Kam (20:36)>: Only when there’s a swap or when there’s actually just a bridge. OK. And this is only to Ethereum now. What about the L2s and Solana and all the other chains?

<Mag (20:47)>: Yeah, we’re adding those relatively soon. Ethereum was the primary target because our initial launch customers needed Ethereum mainnet since it’s still where the most TVL is and a lot of that’s getting moved through Eureka. And eventually, think our next step is going to be to add Solana and the major Ethereum L2s like base.

<Jason Kam (20:49)>: Okay. OK, so for example, when I bridge from base to Ethereum, there is an official bridge. Or when I bridge from base to Solana, usually it’s like layer zero wormhole. There are services that do that. I usually look them up. And sometimes you would use things like Bungie. You use things like if the front end is linked up with Lifi, you use that. Sometimes you get charger fees. Sometimes you don’t. I guess once you hook once you hook Eureka up with, let’s say, base or Solana, let’s say in a couple of months from now, you can do that. Should I think of it such that maybe there are bridge aggregators that would also have Eureka as an option when they execute the bridge and they will automatically route the orders to you? Is that the right way to think about it?

<Mag (22:00)>: Yeah, so the bold case for Eureka’s adoption in non-Cosmos use cases entirely, so for example, Solana to base or base to Arbitrum or whatever, is that as time goes on, more people are going to use bridge aggregators instead of bridges directly. And people are going to use solver networks instead of bridges at all, because it’s so much faster, like a cross, for example.

<Jason Kam (22:12)>: Arbitrum, yeah. Yep. Yep.

<Mag (22:30)>: That’s the bull case. If you believe that people are going to be stuck on the layers or front end, then it’s bearish for Eureka. The reason why that’s the bull case is because Eureka is just astoundingly cheaper than those other options by a factor that’s going to take years for other folks to catch up with. because of that, when folks do something like a solver-made transfer, the solvers don’t care what they’re using underneath. They just want the cheapest settlement.

<Jason Kam (22:36)>: Yeah, I don’t. Yep.

<Mag (23:00)>: because their margin is between the margin that they charge the user and ultimately what they need to pay to settle. And so they will choose the cheapest option. It doesn’t matter how fast it is because they were the fast transfer. And the same thing for the bridge aggregators. So I personally see the world going in that direction. And so it’s definitely our intention to hook it up into as many bridging aggregators and solver networks as possible.

<Jason Kam (23:00)>: That’s right. And this has started or would they only have a conversation with you once you have enabled most of the L2s?

<Mag (23:34)>: We haven’t started it yet. I mean, we’re just launching the first integration now. And most folks that are going to be using Eureka in the beginning are going to be over our front end, which does more traffic than a lot of those folks anyway.

<Jason Kam (23:49)>: How do you mean? It’s the SKIP front end, I’m guessing. OK, understood. Got it. Got it. OK.

<Mag (23:53)>: Yeah, yeah, the SKIP front end and the SKIP API. So for example, we’re partnering with a decent number of five to seven issuers of Bitcoin. They’re integrating the SKIP API directly into their frontend.

<Jason Kam (24:07)>: Yep. I mean, would seem like you’re sort of capturing the initial group that is within COSMOS, right? Like, people want to play and participate in the wealth effect that is within your COSMOS ecosystem, this seems to be the... You just reduce the cost for them to do so very, very quickly. But before you turn on all the L2s and Solana and the rest of the world, it is still a very siloed sort of business development effort. It would seem like the value accrual to ATOM will only have a step function up after you have done all the integration and have this Eureka hooked everywhere. And then slowly or rapidly have the solvers sort of directly route the orders through you. Because at that point, the fee accrual was just that function up, unless there is significant ATOM development. if I’m thinking by the right way.

<Mag (25:12)>: I think we should revisit this question around this same time tomorrow. And I think that you will have a different perspective.

<Jason Kam (25:21)>: And just to say, OK. How soon do you think, like there’s Ethereum, there’s internal. How soon do you think the Solanas at the base, like the most sort of chains would be integrated with you in the future?

<Mag (25:36)>: Well, I can only speak to Ethereum for now. Basically, hooking something up does not mean you’re going to get any volume over it. Creating a new connection between two chains doesn’t drive anything in and of itself. It is, you have the basically committed massive amount of day one and month one liquidity? that needs that bridge and is exclusively using that bridge to do something that they have to do. They have to transfer a huge amount of volume over it. That is how you get volume on a bridge. And that is how you get the added value cruel in this case. And so we would never, and we haven’t before, shipped a product that we didn’t believe had, or we didn’t know would have a massive demand very quickly.

<Jason Kam (26:09)>: Yeah.

<Mag (26:33)>: with pre-built use cases for assets on both sides.

<Jason Kam (26:38)>: understood. Can you share a bit more about what those might look like? Is it like new product launches like Babylon farming and people dumped a bunch of Bitcoin to there? Is that is that something along the lines of what you’re thinking about?

<Mag (26:56)>: So generally, one thing I can speak to in general, can’t talk about specific things here. You’re going find out literally in less than 12 hours.

<Jason Kam (27:07)>: Okay, okay fine.

<Mag (27:11)>: So one thing that we’ve seen is a very common trend is that chains are launching their tokens in places that are not their chain. This is quite common. Or they are doing some kind of large distribution event to a place where it is not their chain. So for example, a million, which is a blind privacy based on one that is built on Cosmos.

<Mag (27:36)>: is launching their token as deep liquidity for their token on Ethereum. Because at end of the day, Ethereum liquidity trumps all the L2s, even combined. And we’ve seen things like this quite common. And so the need for a very fast, very easy bridge between Ethereum and between Cosmos chains happened to be way more apparent than we ever thought it would be by this point, but it seems to be a big trend among a lot of the newer chains that are very exciting that are launching basically around this time. Allora, Nelion, Ondo, another great example there, which announced their Cosmos chain. Celestia, obviously Babylon. Yeah.

<Jason Kam (28:16)>: I see. So the asset creation happens on both chains. But I guess since it’s both on Cosmos EVM standards, like the bridge from the ETH-based wraps asset to the Cosmos chain that they launched would be native and seamless. OK. Interesting.

<Mag (28:42)>: Yeah, exactly. The desire for native interoperability between the two places in a way that feels extremely cheap and does not introduce any kind of noticeable like UX hurdle is very high right now.

<Jason Kam (28:58)>: And how much revenue would that mean for, let’s say this launch goes as planned and you maintain that $2 billion $3 billion per week or is it per month? Per month. you step forward and maybe increase that. What would that mean for ATOM?

<Mag (29:18)>: So it’s hard to know exactly what it would mean. But what it does mean in terms of what we plan to do and what will be implemented is that the fees generated by Eureka as a product will go towards deflating Atom. So essentially towards burning the token supply in large quantities. And like the first real deflationary

<Jason Kam (29:24)>: Yep.

<Mag (29:48)>: pressure on the token itself. The problem though is that most of our fees will probably be generated in non-ATOM assets. And so what we are evaluating doing now and what our preferred option is now is taking the many millions of dollars in those fees and just swapping that into ATOM and then burning it automatically.

<Jason Kam (30:11)>: Yeah, and for the heuristics, let’s say I bridge $100 of Nillion from Ethereum to their mainnet on Cosmos. How should I think about the size of that fee if they sort of go through Eureka?

<Mag (30:28)>: So if it’s just a transfer, the fee will be very low. The fees that you would be charged right now on day zero would be the gas fees on the Cosmos hub for that transaction scaled by a little bit, which is why it’s so competitive, right? The thing that is possible is that we charge a volume-based fee, meaning it’s something that it’s proportional to the size of the swap in the future.

<Jason Kam (30:40)>: Yep.

<Mag (30:57)>: This would make sense for lot of reasons and, you know, it’s something that we can do. But it is not something that we are going to do on day zero, mostly because we haven’t figured out what we want those to be and we just want to see the adoption flow. But that is absolutely something that we could add.

<Jason Kam (31:17)>: Sorry, and this is from Nillion to USDC on Cosmos. That you would charge your phone.

<Mag (31:21)>: okay. Well, yeah, and then it’s a different story. In that case, we would charge a fee. And no matter what decks that goes through, right, it doesn’t matter if it goes through Osmosis or the Hub decks that will be launched in the future. Although it most likely will go through the Hub decks because it’s built around Eureka assets. And then there would be a fee to the decks. The decks itself will actually take a large portion of their fees and use it to buy and burn Atom .

<Jason Kam (31:31)>: Okay.

<Mag (31:50)>: And then on top of that, there’s this, there is a Eureka fee, which is a percentage of the total amount swapped like any DEX is, which would also go towards added value equals.

<Jason Kam (32:00)>: Got it. Got it. So then the fees to Eureka would be twofold. Well, if it’s a small amount, one off, it’s tiny, inconsequential. But if you do sizeable volume, amount to be determined, you have a volume-based addition. And then if there’s a swap at all in your enshrined hub decks, you also take a part of it from the hub decks. Is that right, we think about this?

<Mag (32:21)>: Yeah, so to give you a statistic, 90 % of the IBC transactions are sub $200. So it’s a quantity game. It’s not a size game unless you’re swapping in size, in which case it is.

<Jason Kam (32:38)>: Yeah. And we’ve skipped today, there is also significant volume that is not swapped, but it is kind of just transferred over. Is that correct?

<Mag (32:47)>: That’s correct, yes. And we do charge fees on that by essentially upcharging on the gas, which we need to do, especially for Ethereum to Cosmos because gas prices are very variable.

<Jason Kam (32:49)>: Got it. And then because of the $2 to $3 billion of transactional volume that is on per month basis, 50 to 80 % of it is SKIP, and it is making like $5 to $8 million, is it roughly the right heuristic that we should think about what Eureka could bring to ATOM?

<Mag (33:17)>: So first of all, the five to eight million was done. That was a while ago. Skip has grown significantly since then, though we don’t charge fees like we used to right now on the front end itself. the second thing is the amount of money that the SkipGo and Eureka product generates on

<Jason Kam (33:18)>: Okay.

<Mag (33:45)>: cosmos to Ethereum transactions is like a massive multiple on the amount that is generated for cosmos to cosmos chains, which essentially have zero gas, these simple signs. It’s sort of why the Bay sequencer makes so much money. And so we are anticipating it being significantly larger. I wanted to essentially invest time and focus into a product that I thought that

<Jason Kam (33:56)>: I see.

<Mag (34:12)>: very realistically could eclipse the entire inflation of ATOM over time, like within a two year timeframe. And that’s something that like I personally think is like very doable if we scale this correctly.

<Jason Kam (34:17)>: Yeah. Yeah. Yeah, and just for the audience, inflation is 10 % per annum. Staking yield of 15%, so about $200 million per annum. Is that right?

<Mag (34:33)>: Yeah, that’s that’s probably correct.

<Jason Kam (34:35)>: and just from Eureka alone. Nothing else.

<Mag (34:39)>: Eureka and the products that are building around it, right? Because Eureka is not the end at all. It’s actually the very beginning. And the real story, right, and what we’re actually trying to build towards is turning the hub, the Cosmos hub, into a place that is a two-sided marketplace between app chains that we service in Cosmos and elsewhere and applications that are built on the hub for multi-chain distribution. The hub sits at the center. And Eureka is a programmable way for any future applications built on the Cosmos Hub directly to basically access natively any state and distribute fully and cheap basically for free to every other ecosystem over Eureka and call those natively from their smart contracts. So for example, you can have a, like we’re actually designing and building right now, not ourselves with a really good team, folks from MakerDAO.

<Mag (35:37)>: Basically a next generation lending protocol that can get like 20 % higher LTVs on the amount that you collateralize with because it can access the native liquidity on any ecosystem to do liquidations, right? Not just local liquidity. Like these things like we’ve talked about these things, but like they’re literally now possible with Eureka because it’s that good. It’s that fast. It’s that cheap and you can program it in.

<Jason Kam (35:51)>: Interesting.

<Mag (36:07)>: And so that’s really the focus. It’s like Eureka is like the distribution rails and a lot of the flow and a lot of the value capture is going to be built around the products that are going to basically sit in the middle of all this flow going through the hub from Ethereum to Solana to base to, you know, Cosmos and basically create these like incredible high distribution applications to leverage that.

<Jason Kam (36:21)>: And anybody else can, can anybody else fork the code and do exactly the same thing? Or they can’t because your validators are of ATOM is being compensated by ATOM inflation and no one will be able to pay them enough to execute this kind of service.

<Mag (36:48)>: Yeah, I guess like anyone could fork layer zero, right? I think the tricky thing about bridges for competition and the reason why they’re so sticky is that when a bridge issues an asset, it’s the bridges asset, right? It is non-fungible with versions from other assets. And so there is a massive liquidity advantage that entrenched bridges have over new bridges.

<Jason Kam (36:51)>: Fair enough.

<Mag (37:17)>: And to basically unentrench competitors, you have to be 10x better. Eureka is, in terms of dollars, 100x better, like literally, in terms of pure gas costs. And so we believe they will switch. But as we do that, there will be a significant amount of liquidity built up in Eureka, bridged assets, that other folks would have to replicate with their own capital to unentrench.

<Jason Kam (37:23)>: Yeah, fair enough. for you to achieve actually $200 million of atom bought and burned, how much cross-chain volume do you have to achieve to get that number?

<Mag (37:58)>: I did all the calculations for a different liquid fund that I think I was probably listening on right now. But I don’t know if Cody’s OK. yeah, I mean, do you want me to pull up the numbers or?

<Jason Kam (38:05)>: Possibly. Very likely.

<Mag (38:24)>: yeah. Well, I was actually just going to try to find it. And then let me see if I can find it. If it takes too long, I’ll just give you my best guess or my best. Yeah, so

<Jason Kam (38:39)>: Yeah.

<Mag (38:45)>: 20 to 30 billion dollars of volume per year. So actually current levels. If basically all of the current levels of IBC volume went through the hub without any expansion, we believe that

<Jason Kam (38:59)>: You’ll be charged. You’ve charged a 1 % if that’s the case. That’s a lot.

<Mag (39:06)>: So first of all, that’s not actually extremely high for cross-chain swaps. And the amount on the actual transfers is significantly lower. And that also doesn’t take into account any of the fact that probably the majority of that volume is going to go through multiple hub applications, which will themselves add additional fees on top of that that will accrue to add them.

<Jason Kam (39:31)>: I mean, I see your point. At the same time, there’s absolutely no way me as a fund would transfer anything at 1%.

<Mag (39:41)>: You wouldn’t be charged 1%. Would you swap for 1 %? If you ever use Uniswap, you probably have.

<Jason Kam (39:49)>: I think the most we would pay in fees is 15 bips to 50 bips, unless it’s a meme coin. And even then we haggle. I think it’s just untenable to be paying 1 % for transactions. I think that’s right. I think that’s right. I suppose to use case there, they will be happy to pay 1%. A, they don’t know about it.

<Mag (40:01)>: That’s fair, but also you’re not the audience we’re going for. I’m talking about volume that is not yours, that already exists, that is from retail.

<Jason Kam (40:17)>: Or two, they just have to get it bridged over there. Or three, because something is pumping, they got to get the money on. Then this is fast.

<Mag (40:26)>: I don’t think it’s that. I actually think they’ll pay 1 % because it’s 10x cheaper than any other option to do the same flow. That is literally what I’m saying. If you wanted to swap Ethereum into Atom today, you’re going to be paying a minimum 10x more on any other solution with the best liquidity, the best anything, if you want to do it on chain. What I’m saying is it is going to be significantly cheaper than every option out there.

<Jason Kam (40:41)>: For sure.

<Mag (40:55)>: it already will be on day zero, which is why people I think will want to pay that because it will be the cheapest option by a massive margin.

<Jason Kam (41:04)>: I think this becomes very interesting if the bridge from Solana to BSC becomes incredibly cheap. I doubt you can charge 1 % for it. I think the most likely case is what people would do is they swap into a native asset, USDC or something, that has almost no bridging fees. then they do the bridge. That’s important.

<Mag (41:19)>: Yeah, but, you’re thinking of us like a bridge, right? You’re, you’re thinking we’re a bridge. We’re not a bridge. We’re not, we’re, we’re not like use IBC fund right now. Right. We’re not bridging. We’re swapping, right? It’s, it’s a token a to token B on a different destination. People pay for a swap and a cross chain, multiple cross chain route, because you have to pay for the relays. The bridges today costs, you know, 20 X more than Eureka will cost.

<Jason Kam (41:31)>: I see. Yep. Yep.

<Mag (41:49)>: And then you have to pay the DEX costs on top of that in some place. And that is what people pay for. People don’t think, I’m paying 1 % to bridge funds from a place to place. Of course they don’t do that. And they won’t on Eureka either.

<Jason Kam (41:49)>: That’s very important distinction. Then I think the heuristic would become the swap plus bridge volume across different chains. And that’s a little harder number to go to, but your market share there is quite small today, if I run the math that way. It could seem like it would ramp meaningfully. That’s very interesting. That’s very helpful. I guess, so that’s one line of, yeah.

<Mag (42:31)>: Wait, hold on, hold on, hold hold on, hold on. We have multiple billions of dollars of Swap volume, go over, SKIP, go, in the depths of the bear of Cosmos. We are going to be expanding this all to other ecosystems in a way that is going to be massively more cheap and deeply integrating it with live five, with front ends. I don’t think there’s any reason to believe that this would not be like a serious competitor on the market.

<Mag (43:04)>: in a way that accrues value to ATOM at the same time. I don’t really see an argument that you can make it. At the same time, we have $250 million of liquidity that we are going to be using to seed the liquidity for these assets ourselves. No funds are necessary. 0 % interest on that liquidity. It’s ours, right? There is a very strong possibility, in my opinion, which is why we built it, that this could be a significant source of swap. flow throughout the Ethereum ecosystem and between different ecosystems.

<Jason Kam (43:40)>: Very helpful. Aside from the 200 million that could come from this, is there any other source of atom veil accrual that you can think of that could be really meaningful?

<Mag (43:52)>: Yeah, so Eureka was an asset that was a product that was designed to align what we viewed as the largest chains in Cosmos, the Ondo’s, Mantra’s top 25 token projects. For chains that are not that large, that don’t have, for example, all their own distribution, and oftentimes who left other ecosystems like like Ondo, for example, like leaving the Ethereum ecosystem. For other folks, we actually have a much more direct revenue capture story. So for a large number of new chains, a large number of the smaller chains, the desire to be close to ATOM right now at this point in time and Cosmos is so great that most of them are basically doing something where they are committing, and we’re encouraging them to do this, committing 15 to 20%. of all of their protocol revenue and using that to structurally purchase Atom off the open market and to basically store that inside their protocol. So for example, Ellis Sentinel Protocol is going to be a couple more announced side protocols discuss this. Folks are basically encoding Atom alignment themselves and it’s actually a very good deal because in turn what they get is basically

<Mag (45:19)>: One, they get our support and they get sort of the alignment and the closeness with the ATOM community, which is still the last, it’s one of the greatest retail communities. It was built in 2017. It’s held by every single liquid fund or in some kind of like vintage thing that they have, that goes way back into the early days of crypto. Some of my family offices, it’s something that has a huge community and getting access to that community, which is now sort of waking up for the first time in a long time.

<Jason Kam (45:33)>: Yeah.

<Mag (45:48)>: is really exciting to them. And then also, we’ve been supporting them with liquidity and things like that for protocols that are deeply atom-aligned in that way. this is sort of a, I was going to say, this is a little bit of a holdover until basically we have a permissionless VM on the Cosmos Hub, which is coming very soon. It’s sort of the focus of this next quarter.

<Jason Kam (45:50)>: it. it’s it yeah go ahead sorry. Yeah.

<Mag (46:16)>: And then we can actually build truly very understandably atom-aligned products that are built on the Cosmos Hubs VM that have all the traditional ways of aligning value between an L1 and smart contracts like priority fees, gas fees, all those things.

<Jason Kam (46:34)>: Tell us more about that because that seems quite exciting. You acquired EVM OS, is that right?

<Mag (46:41)>: Yes, so yeah, basically at most, know, rest in peace, what was not super successful. And the one thing that they did build up that I give them huge props for is they built this incredible code base for basically launching a equivalent EVM on top of the Cosmos SDK. And we purchased that from them as they were closing down. And so what we did was we, was, Business source license before it was licensed by the ripple to build their Cosmos chain, which is their official side chain. At build violet pierces and they licensed a bunch of other folks and we basically cancel those licenses made it fully open source and now we maintain it as a core part of the stack. People asked why I think for two reasons. The first one is because everyone wanted EVM and at the of the day, no one really wanted to cause him awesome and. We just didn’t see the reason why we would fight that fight and give the people sort of what they wanted. And the second thing is we want to have more options for what we choose as the VM for the Cosmos Hub.

<Jason Kam (47:57)>: Got it. And just so I understand, on the two things you mentioned, one is effectively the ecosystem projects that are building a chain using Cosmos SDK would voluntarily purchase Atom in the open market in hopes for your community going to them, and two, having your, I’m guessing, technical support and your liquidity, your war chest going into their ecosystem. Is that a handshake agreement, or do you have something that’s written down that they have to purchase that amount? And do they use that atom to do anything?

<Mag (48:33)>: It’s not a legal agreement. is usually people come to us and say, hey, for example, like Shade Protocol, which is the largest DEX on Secret Network and basically built out their whole DeFi. I think they use their entire or basically their entire revenue to just purchase Atom on the open market. We never even talked about this. Now they have, I think it’s like 1 % of the entire atom supply on their protocol. That’s how effective that was as a marketing strategy and as a strategy to attract more liquidity and to also get our attention. And we’re now big supporters of them, obviously, they’re going to have a big story to play over the next 90 days. So usually it’s actually organic in this situation.

<Jason Kam (49:21)>: I see. Got it. it’s in there. Go ahead, sorry.

<Mag (49:31)>: I was going say quickly, I think in some cases people come to us and say, hey, we want to align with you. We want to align with the hub. We don’t know how. Should we do PSS, ICS? we launch on the hub VM in the future? What is the way? And usually in those situations is where we say, hey, why don’t you just start accumulating ATOM ? And because that’s ultimately the best marketing to the community. we view that as very aligned with what we’re trying to do.

<Mag (50:01)>: which is basically create value capture stories for ATOM throughout the ecosystem. And they sort of do those organically.

<Jason Kam (50:05)>: Got it. I guess in their mind, because you’re working on it, it’s likely there’s no downside to the Atom coin versus all the other coins they could be holding, or they could just hold USDC. And the benefit, it could go up in value, and they get your help. So I could see that being a good business decision.

<Mag (50:27)>: Yeah.

<Jason Kam (50:29)>: Would you have a chance to monetize the EVM OS or Cosmos SDK at all? I’m guessing it’s just offer free and you know it helps the ecosystem, but nobody pays you for those two products.

<Mag (50:42)>: We could, but we generally have a policy that we build open source software. So I think actually this is a very short-sighted thing that I’ve seen other ecosystems do. So Avalanche, after they renamed the subnets to L1s, they have their hyper SDK. That is not open source. And we get so many customers from that. uh, you know, for folks who are like, we were looking around, you have the only, the of the best only open source stack. And we’re able to, to, to leverage that relationship for basically some kind of financial outcome for the ecosystem. Uh, versus like, just like having people say, I was stopping at the door and saying, I’m not signing a legal contract with you or I have to build on your ecosystem. And I have to give you some kind of value for all not because I don’t want to, and I don’t want to get value cruel, but because we’re in crypto and. Why the hell am I talking to a lawyer right now versus a developer? And so we get a lot of flow from all these folks who try to monetize their stacks. So don’t tell anyone that, because we enjoy it. It’s the same thing with the OP stack.

<Jason Kam (51:45)>: And in the end, if a programmer does use the Cosmos SDK, in the world of Eureka, basically it’s hooked up immediately once they use the stack. They don’t have to do anything additional. Is that the right way to think about this? OK. So they immediately get a bridge. Well, not a bridge, sorry, like an atomic swap on a very basic level, because it’s

<Mag (52:15)>: Yeah, that is the right way to think about it.

<Jason Kam (52:24)>: natively enabled. And because they use it to get, they not only get the free will from you, they’ll get the liquidity from you. And they’ll make their business development hopefully a little easier. Because right now, if other chains that don’t use Cosmos SDK, it would seem like they will have to work at the circle relationship, USDT relationship, bridging relationship, and everything. And if they work with you, then it’s immediately enabled. Is that right? OK.

<Mag (52:52)>: Yeah, so Eureka gives them superpowers because it gives them access to all of these assets in every ecosystem, basically for free in terms of like, they don’t pay anything, it’s their users, right? And it’s still cheaper than any other alternative. And it comes with our market makers, it comes with SkipGo and SkipGo Fast and the full front-end integration. So they just don’t even have to think about Interop and all that it takes from them.

<Jason Kam (53:05)>: Yeah.

<Mag (53:20)>: is a single normal IBC connection to the Cosmos Hub, over which flow all the Eureka assets in and out. And so it’s a very easy pitch, is the reality. And over time, we can add more things to that IBC connection. That is the conduit through which we can add or provide access to things like Oracle feeds, or access to things like cross-chain user flows, where people on the Hub can initiate things on their

<Mag (53:49)>: on a foreign chain over IBC without even leaving the hub, or where we can have cross-chain session keys, where you can stay logged in between any different chain and your session can pass around. There’s many exciting things that we plan to do with that connection.

<Jason Kam (54:06)>: How do normies use the cosmos enabled chains? do they hop onto... I don’t think they can do it through phantom. Maybe they can’t. I think that might have been one of the barriers for all my friends to use.

<Mag (54:21)>: Yeah, definitely. So historically, it’s been Cosmos specific wallets, the largest of which is Kepler, which you might have heard of. There’s some smaller ones, Leap, et cetera. One of the goals that we had, and this ties a little bit into the EVM OS conversation, is to have native MetaMask support for all Cosmos chains, for not just the EVM transactions, but also the Cosmos transactions. This is something that is

<Jason Kam (54:31)>: Yeah.

<Mag (54:51)>: is going very well and we likely will be able to.

<Jason Kam (54:53)>: How soon? Yeah.

<Mag (54:56)>: very soon.

<Jason Kam (54:57)>: Can’t tell us. OK, great. Very important. That’s very helpful. And then I guess one other question I have, and I think the audience might have some as well, like why do the RWA chains love you so much? Because I look at all of those, like, ondo, and why do you have such success with working with them? I would imagine Avalanche and all these other guys want to get them.

<Mag (55:24)>: Yeah, they’re fun deals to win. I think with RWA specifically, there’s a couple of factors. The first is mantra. Mantra is probably one of the greatest token successes that some folks have heard of, some folks haven’t heard of over the past year. It rocketed from I think a $5 million market cap to what is now an $8 billion market cap in the course of a year and a half. They were an Ethereum project where they had a token that was worth $5 million market cap migrated to a Cosmos all one and now we’re an $8 billion project. And I think a lot of people see that they’re like, my God, right? Like what happened? a lot of actually, this is a really good bull case for app chains. I truly believe that part of the reason for or a big part of the reason for mantra success was becoming a sovereign L1. for two reasons. The first one is when you’re an L1 and it’s only possible on an L1, you can build your own validator set that essentially secures the chain. And what we’ve seen is that the RWA chains use that validator set to basically encode partners that they trust and that want to have some participation in the chain directly as validators. So for example, Ondo plans on making all of its asset issuers, validators on its L1. That’s something that’s uniquely possible on Cosmos. And that basically means when you’re evaluating as an institution, okay, well, should I issue a billion dollars of my asset as tokenized version on this chain? all the validators are one me, Wisdom Tree, Goldman, JP Morgan, Citibank, just folks that I recognize and I trust, not whatever like pump. to something and like all these random suspicious validators that ultimately are securing the Ethereum network and securing, you know, the different mining pools securing Bitcoin. And that’s only really possible on Cosmos where you can customize your validator set to an institutional use case to build institutional trust. That I think is the first reason. And that’s something that I’ve seen used to great effect. It’s also something, by the way, that Hedera does to great effect as well.

<Mag (57:51)>: I think the second reason is there are some really interesting things that you can do with L1s when it comes to encoding off-chain data in a very verifiable and censorship resistant way that you can’t really do with L2s. So for example, there’s a concept called load extensions where basically validators normally vote on blocks, right? Once they achieved a two thirds consensus on a block, they basically progressed to the next one and they finalized the last one. In Cosmos, you have this very unique ability where you can actually encode additional metadata on top of the block data, which you can vote on. So what that means is a bunch of trusted validators can all go query the price of an asset and then all come to consensus, not just on the block, but also the price of that asset.

<Jason Kam (58:26)>: Yep.

<Mag (58:49)>: and then encode it as on-chain state. And because of fast finality, you can do it really quickly. And the really cool thing about that is that you vote on that and it has the same security as the block security itself, because it’s no different from the block data. And so it’s backed by two thirds of the consensus of the state weight of the entire chain. And so you have this amazing security property for basically encoding new on-chain data. And this is something that they were talking about a lot at the Ondo Summit.

<Jason Kam (58:49)>: Yeah, that’s

<Mag (59:18)>: about what they were excited to do with it.

<Jason Kam (59:21)>: I guess for pretty serious financial applications, there’s a flag bearer effect, and there’s that. That could be really helpful for somebody’s films.

<Mag (59:28)>: Yeah, I always say like Cosmos does really well with the, like what we call it the world builders. So these are the projects that, you know, they’re done with a theory of alignment. They’re done with being a smart contract. They developed huge PMF and massive distribution and they’re ready to become their own thing, right? Ready to become their own L1. And at end of the day, there’s only one L1 stack out there in crypto that is trusted and that’s Cosmos.

<Mag (59:56)>: What we’ve seen is everything else ends as an L1 because that’s the biggest thing that you can be. you know, as long as Bitcoin and Ethereum are the top number two things and CoinGecko and they’re both L1s, people are going to want to try to be one. And Cosmos is the place that catches that.

<Jason Kam (1:00:12)>: Very helpful. Last question I have is, it’s still not very easy to buy Atom. We had a TWAP through Falcon X and whatnot. Any thoughts on maybe allowing for wrapped Atom on Ethereum or Solana and all the other assets that would boost liquidity and add your LP and what not? OK, we caught you at the right time. Any other questions for? yeah. OK. OK. It would seem like all of the Cosmos ecosystem tokens to Eureka could also have wrapped assets in places where economic activities is aggressive, like in particular. And I’m guessing you’re.

<Mag (1:00:36)>: Yeah, mean, Eureka is this is is exactly why you would have Eureka, right? I mean, Eureka allows for us to bridge assets basically for free over into Ethereum. second. There’ll be a lot of ATOM coming into Ethereum.

<Jason Kam (1:01:01)>: Very cool. Very helpful. Members, any questions? Give it like three seconds.

<Mag (1:01:11)>: I forgot we’re not alone.

<Jason Kam (1:01:13)>: Yeah, no. Maghnus, really appreciate your time. Thank you for jumping on. This is really helpful.

<Mag (1:01:20)>: Yeah, appreciate it. Thank you.

<Jason Kam (1:01:22)>: Cool, thank you.