Compiled & edited by TechFlow
Guests: Stan Liu, Co-founder of Initia; Ezaan Mangalji, Co-founder of Initia
Moderator: DeFi Dave, dinero_xyz on-chain manager; Kiet Fong, thecoreloop
Podcast source: Flywheel DeFi
原标题：Everything You Need To Know About Initia w/ Zon & Stan - Flywheel #120
Air Date: September 11, 2024
Background Information
In this episode of the podcast, hosts Dave and Capital K invited Zon and Stan, two co-founders of Initia, to discuss their innovative work in the multi-chain world and modularity. Zon expressed his continued support for the show and mentioned that he and Dave had met at multiple conferences.
Personal Background
Zon shared his background. He is a developer from Vancouver, Canada, with a degree in computer science and business. During the pandemic, he completed his studies at home, while being obsessed with DeFi projects and developing a keen interest in app chain theory. Zon worked as a smart contract developer at Terra and participated in the construction of multiple ecological projects, but due to the collapse of Terra, he and Stan started over again and eventually founded Initia.
Stan shared his experience. He is from China and South Korea and completed a mathematics degree in the United States. After graduation, he entered the field of quantitative trading and worked as a market maker in the crypto market. During this period, he became interested in DeFi and contacted Do Kuan through a college classmate, and eventually joined Terra as an engineering researcher.
Initia's philosophy
Founding Background
Zon reviewed the creation of Initia. After experiencing the collapse of FTX, they realized that it was not wise to continue to advance the previous project. Zon decided to re-examine the Ethereum ecosystem, and Stan returned to the field of quantitative finance, but soon found that he could no longer adapt to traditional finance.
Observation and thinking
The two noticed the development of Cosmos, and although they had experience in building Cosmos, they also realized that Ethereum's DeFi experience was superior. Zon pointed out that although the Cosmos SDK provides flexible building tools, the complexity of building a Cosmos chain is daunting, including the need to run a Layer 1, manage a validator set, and deal with IBC relays.
Multi-chain solution
In contrast, Rollups on Ethereum have become popular, although these solutions were not originally designed to scale Ethereum. Zon believes that with the emergence of multiple interoperability solutions and decentralized layers, the problems of fragmented liquidity and choice overload will only intensify. They believe that future blockchain expansion should take a multi-chain approach, so they decided to use their expertise in Cosmos and Ethereum to build a complete Layer 1+, Layer 2 system to address these pain points and achieve an ideal multi-chain ecosystem.
Building a permissionless interwoven ecosystem
Design philosophy
Stan explained the design philosophy of Initia, emphasizing that their initial concept was to take into account the mobility of users between different applications. While many heavy Ethereum users are able to easily move assets on the main chain, the situation becomes complicated when using Layer 2 solutions.
User Experience Challenges
For ordinary DeFi users, cross-chain operations may not be too difficult, but for those who are not very familiar with the ecosystem, the situation is completely different. Stan pointed out that many users may not know the specific location of each bridge, and even need to consult tools such as Defi Lama to obtain information. Although the bridging process may seem like a small problem, it is actually very challenging, especially when it comes to different token standards and bridging methods. For example, when using different bridging protocols (such as Optimistic Bridge or CCTP), users may face confusion among various token standards.
The basis of the solution
These user experience pain points prompted them to decide to build Initia's ecosystem to simplify cross-chain operations and improve the overall user experience. They hope to enable users to interact more easily between different DeFi applications by providing a permissionless interwoven ecosystem.
Initia influenced by Apple design
Design philosophy
Zon discussed the design philosophy of Initia, mentioning that they were influenced by Apple's design philosophy. He compared Rollups on Ethereum to Android, pointing out that this architecture provides infrastructure, but users face many choices in choosing service providers, bridges, oracles, etc. In contrast, Initia takes a firmer stance in design and clarifies the direction of the system's evolution.
System Architecture
In Initia's Layer 1 and Layer 2 framework, many components are solidified within the system. For example, bridging only uses IBC and Layer 0, and data availability (DA) relies on Celestia. They designed a local system for oracles and pass their information to all Layer 2s to ensure that the user experience is consistent across all Layer 2s, simplifying user interactions.
Economic Mechanism
Stan further explained the economic mechanisms they considered when building the ecosystem. They hope to eliminate the debate about whether Layer 2 is harmful to Layer 1 by making Layer 1 and Layer 2 applications interrelated. They believe that all applications should develop in a direction consistent with Layer 1 to bring value to users and the ecosystem.
Reflection and Improvement
Kiet agreed with this view and said that Initia has improved many basic systems, absorbed the advantages of existing technologies and made them more advantageous. He looks forward to in-depth discussion of the design and implementation of Initia.
Initia's three core pillars
Architecture Layer
Zon introduced the architectural layers of Initia, emphasizing that it consists of three main pillars: architecture, product, and economics.
Layer 1: Initia’s Layer 1 is a chain based on the Cosmos SDK, using the Move virtual machine (VM). Its features include:
Access to the coordination layer, which handles all Layer 2 security rewards, interoperability, and routing.
Solidified liquidity: Building a decentralized exchange (DEX) on the chain, users can directly stake XLP tokens with validators to ensure network security and provide liquidity.
As a multi-chain router, it supports token swaps between different Rollups.
Interleaved Stack
Optimistic Rollup Framework: Initia’s Interweaving Stack is a complete Optimistic Rollup solution with Optimistic bridges, fraud proofs, rollbacks, and challenge mechanisms, similar in functionality to Optimism’s Bedrock, but built on the Cosmos SDK.
Layer 2 Stack
Fully functional Cosmos SDK base chain: Each Layer 2 is an independent Cosmos SDK base chain, allowing users to customize transaction ordering, fee types, and transaction processing methods.
Virtual machine independence: Supports EVM, Move VM, and WASM VM, allowing users to choose the smart contract environment that best suits their application.
Data Availability: Each Layer 2 publishes Data Availability (DA) to Celestia by default and submits the proof data to Initia’s Layer 1.
Settlement Layer
Zon further explained that Initia’s Layer 1 is the settlement layer, where all fund withdrawals through the Optimistic bridge are processed. Initia also implements a state synchronization function that can read data from Celestia and create a forked instance of the chain when a fraud proof challenge occurs.
Built-in liquidity, initUSDC pool, and fees
Kiet asked how Initia’s enshrined liquidity can act as both a router and a bridge.
Stan explained that when users transfer USDC between different Initia, they do not need to go through cumbersome steps. Specifically:
The USDC that users have on Minisia A is the same as the USDC on Minisia B, both are native USDC, which avoids the problem of liquidity fragmentation.
All token transfers must be performed through Layer 1 (L1), which ensures that the USDC standards remain consistent between different Minisias.
User Experience
Kiet further clarified the process for users after they obtain USDC:
Users enter the Initia ecosystem through L1 and use decentralized exchanges (DEX) to obtain USDC.
Users move USDC from L1 to the desired Layer 2 (L2), such as Minisia A.
After completing the transaction, if the user wants to return, he needs to transfer USDC from Minisia A to Minisia B via L1 bridge.
Throughout the process, the user's operations are abstracted, the system automatically handles the transfer of tokens, and the user only needs to choose to move from one L2 to another.
Fee Structure
Regarding Initia’s fee strategy in the USDC pool, Zon said:
Initia plans to set lower fees to attract users to its USDC pool.
Part of the transaction fees will be returned to stakers to incentivize user participation.
The main source of income comes from staking rewards similar to traditional Layer 1.
This design is intended to ensure that Initia's liquidity pool has an advantage over the competition and becomes the user's first choice.
Rollback mechanism and fraud proof
The concept of fraud proof
Zon explained how Optimistic Rollup’s rollback mechanism and fraud proofs work:
Fraud Proofs: In Optimistic Rollup, the system assumes that all operations are normal and all sequencers are honest. However, if a sequencer submits a malicious transaction (for example, front-end transactions or improperly adjust balances), there is a 7-day challenge window when a user attempts to withdraw funds to Layer 1 (L1).
Within this challenge window, any honest participant can submit a fraud proof pointing out the malicious behavior of the sequence processor and preventing the withdrawal operation.
The role of the rollback mechanism
Rollback: If a fraud proof is successfully submitted within the challenge window, the system will need to roll back the state of the chain to reset it to a safe state. The rollback mechanism serves as the ultimate safety guarantee, ensuring that the system can be restored to a normal state when malicious behavior occurs.
Zon emphasized that fraud proofs and rollback mechanisms complement each other. Fraud proofs provide a mechanism to identify and prevent malicious behavior, while rollbacks ensure that the system can be restored to a safe state when problems occur. This design enhances the security and reliability of Optimistic Rollup.
Using MinitiaSwap to achieve instant cross-chain
The concept of MinitiaSwap
Zon introduced the design concept of MinitiaSwap, which aims to solve the time problem required for cross-chain transfers. He emphasized that the traditional bridging process usually takes 7 days, which is contrary to the goal of creating a connected world. Therefore, MinitiaSwap allows users to instantly bridge between Optimistic Rollup tokens, and although there may be some losses, such losses are limited.
Bridging mechanism
Stan further explained the specific process of bridging:
Optimistic bridge: When a user transfers tokens from L1 to L2, they are actually sending tokens through the Optimistic bridge. At this time, the tokens on L1 are still locked, and the corresponding tokens are re-minted on L2.
Withdrawal process: Under normal circumstances, the withdrawal operation needs to wait for 7 days. During this period, if someone submits a fraud proof, the system will roll back the status.
Instant bridge: To solve the 7-day waiting time, MinitiaSwap uses two bridge solutions: Cosmos native IBC and Optimistic bridge. Users can transfer tokens to L2 through Optimistic bridge, and then quickly transfer them back to L1 through IBC.
Token handling
After transferring tokens through the Optimistic bridge, users receive a token that is different from the original token (e.g., wrapped USDC).
To achieve efficient liquidity, MinitiaSwap created a trading pair that enables users to exchange between different tokens.
Liquidity Management
Stan also mentioned that MinitiaSwap has a time or quantity limit to ensure that the losses of liquidity providers are controllable. Specifically:
There is a limit to the amount of USDC swaps allowed at a given time.
If a large number of users attempt to swap back to native USDC, the exchange rate may drop.
Conversely, if users are willing to wait 7 days, they may get a better exchange rate.
Kiet thanked MinitiaSwap for the explanation, noting that different tokens, while technically different, are treated the same in the exchange pool because they all need to go through the same 7-day withdrawal process.
Stan added that liquidity providers play an important role in this process, ensuring the feasibility of fast swaps while keeping losses manageable.
Building on L1 and L2
Dave raised the question about the possibility of building on L1, asking Zon if developers are expected to build on L1. Zon responded that while it is possible to build smart contracts on L1, they encourage teams to build independently on L2. The benefits of this approach include:
Optimized experience: Building on L2 can optimize the user experience and ensure there is no congestion.
System scalability: Pushing execution to separate L2s can effectively scale the system.
Thoughts on SVM
Dave also mentioned that they support EVM, Move, and Wasm, but did not mention SVM, and asked Zon why. Zon expressed his opinion:
Market demand: If the market demand for SVM increases, they will consider supporting it.
Solana’s appeal: Developers typically choose SVM because they like the Solana ecosystem, not because SVM is a next-generation smart contract framework.
Integration with Cosmos SDK
Zon further explained the importance of building different virtual machines (VMs), emphasizing good integration with the Cosmos SDK:
Historical issues: In the past, Ethermint and other EVM implementations on Cosmos had issues, mainly with the bridging between ERC20 tokens and Cosmos native tokens not being smooth enough, leading to a poor user experience.
Seamless interaction: When building a new VM, they ensured that tokens can be seamlessly converted. For example, users can transfer ERC20 tokens through IBC and convert them naturally into Cosmos tokens; if they are sent to Move layer 2, they will be converted into Move tradable assets; similarly, if Move tokens are sent to the Cosmosm chain, they will also be automatically converted into Cosmosm 20 tokens.
Attract and incubate application chains
Dave was curious about the application chain being built and its incubation process. Zon answered questions about how they incubate projects and emphasized some of their beliefs in application chains:
Avoid duplication of projects: Zon pointed out that in the past, some L1s often claimed to have a large number of projects (such as 50) when they were launched, but many of them were just forks of UNV2 or small hacker projects that ultimately did not continue to develop. This approach is considered a failure.
Support local projects: He mentioned that bringing in projects from existing ecosystems and “normalizing” them often leads to “cannibalization” of the local ecosystem. For example, projects like PancakeSwap and SushiSwap, while bringing in users and TVL, did not bring success to local projects. Therefore, Zon believes that it is crucial to support local application projects.
Finding unique projects: Zon emphasized that their goal is to find teams that want to build unique, novel and interesting projects and provide them with resource support, including marketing, financial incentives and product development.
Specific project cases
Zon introduced some of the projects they are incubating:
Blackwing: This project allows permanent trading of any token on any chain. Users can trade between different liquidity pairs, simplifying the complexity of cross-chain transactions.
Milky Way: This is a first LST project based on Tia and Celestia, and is building a re-staking center to enhance economic security.
Sevisha: A chain-based "monopoly" game where players can buy land and strategically cooperate or compete with other players.
Kamagachi: A cute idle RPG game that's now available on Tesla.
Contro: This project has developed a mechanism called "Gradual Limit Order Book" that aims to solve the front-end problem in the prediction market. By slowing down the time element in the market, it ensures that bets in the right direction can get positive results.
Innovation in prediction markets
Zon detailed how Contro works, highlighting how the project avoids front-running issues through a slow-motion order book mechanism, which he noted allows multiple users to place bets at similar times, ensuring they can share part of the profits without having to worry about being front-loaded.
Collaborative interweaving of projects and users
Kiet raised the question of whether the initial project is permissionless, and Stan explained that the initial is indeed permissionless, allowing users to freely build projects on L1. He pointed out:
Free to build: Users can create their own L2 on L1 for high customization.
Support interesting projects: They want to attract interesting projects that can serve as pillars of the ecosystem, rather than simply copying projects (like Uniswap’s V2 fork). For example, the early Arbitrum ecosystem thrived due to specific projects such as GMX.
Support and resource allocation
Zon further added that while they support any project built on Initia, during the Genesis phase, they hope to attract new and interesting projects to provide reasons to attract users when the mainnet is launched. Their goal is: marketing and resource support, providing these projects with marketing and other resources to help them grow.
Strategies to attract users
Regarding how to attract users, Zon replied:
Individual support vs. overall strategy: They work with each application chain individually, providing support to attract users and increase TVL (total locked value).
Network effect: Each new application chain can bring network effects and promote the flow of users and assets. Through this interwoven ecosystem, users can easily collaborate with each other instead of competing with each other.
Ecosystem collaboration
Zon emphasized the uniqueness of the Initia ecosystem, where projects care about each other and work together to drive the growth of the entire ecosystem. He believes that unlike the isolated competition in the past, Initia's projects can work more closely together and grow together.
The origin of the concept of “interweaving”
Dave asked about the origin of the name “interwoven” and Zon explained that it was a good word to describe their technology stack and ecosystem:
Technical connectivity: Whenever a new chain is launched, they are connected to other chains, whether through Layer 0, IBC, CCPP, or Oracle data. This connectivity allows users to easily access from any chain.
Ecosystem collaboration: Zon emphasized that each project in the ecosystem tends to cooperate to jointly promote overall growth and form a good "interwoven" environment.
Possibility of setting permissions
Regarding the question of whether it is possible to set permissions for specific applications to ensure the security of the chain. Stan replied:
Semi-authorized or fully authorized: Through the Cosmos SDK, users can implement semi-authorized or fully authorized settings. For example, Osmosis does not allow arbitrary deployment of applications to maintain the consistency of on-chain applications.
Custom settings: As an Initia operator, you can control which tokens can be transferred through the bridge, allowing specific tokens (such as USDC or the native token of this chain) and rejecting other tokens (such as Ethereum or Solana).
Project Progress and Funding
Zon also mentioned that there are currently 12 projects built on the Interweaving technology stack, and most of these projects are local projects, with a cumulative financing of more than US$13.5 million. Zon believes that this reflects the market adaptability and demand for the system. He pointed out:
Ecosystem Potential: While Initia itself has not raised much funding, the successful funding of these projects shows the appeal of the ecosystem and is comparable to other ecosystems that have raised hundreds of millions of dollars.
Community consistency and long-term success
Zon said that the community is currently highly consistent. He said that in the past year, many high-valuation, low-liquidity infrastructure projects performed well at launch but then quickly declined.
Zon stressed that they want to do the opposite of these projects and take the following strategy:
Community participation: Allow community members to participate in the project at prices close to those of institutional investors, thereby achieving common growth.
Wealth effect: As the ecosystem develops, it creates a wealth effect that benefits all participants in the long run.
The key to long-term success
Dave stressed the importance of creating a wealth effect as key to the long-term success of any ecosystem. He noted:
Shared success: A successful chain is one where all participants profit together, rather than a few people making profits early and then selling, causing the ecosystem to collapse.
A lasting vision: Successful projects require long-term planning and confidence in the success of the project. Zon believes that although starting with a high valuation is attractive, it is often accompanied by risks.
Oppose short-term behavior
Zon expressed dissatisfaction with short-term behavior, pointing out that some projects have a lot of money and incentives when they start, but soon lose value due to poor management. He hopes to avoid this by adhering to a long-term development strategy.
Zon said they are willing to compete in "hard mode" and pursue long-term success rather than short-term quick returns.
Initia's Comprehensive Product Suite
Product Architecture
Kiet mentioned Zon’s previous discussion of architecture, product, and economics, emphasizing that he wanted to dive deeper into the economics part, but also wanted to talk about product first.
Zon described Initia’s comprehensive product suite, especially their block explorer and other features, calling it a “god-given” tool, especially when working with Cosmos.
Main Product Features
Zon listed several key product features of Initia:
Initia App: This is a “super app” where users can perform all Initia-related operations, including liquidity management and exploring all existing smart contracts.
Wallet Widget: Allows users to connect any EVM wallet, Cosmos wallet, or in-app wallet directly to any smart contract, even if they are in different virtual machines. This flexibility allows users to conveniently use their favorite wallets (such as Rabbi).
Bridge widget: aggregates the flow between all smart contracts and with external chains, simplifying the user's operation experience. Users do not need to switch between different front ends, but can easily bridge through one interface.
Block Explorer: Zon mentioned that they recently acquired Seller Tone, which is the best block explorer in Cosmos and supports multiple block explorers (such as Say, Scan, and Osmosis, etc.). It provides powerful functions, allowing users to easily interact with smart contracts, verify smart contract codes, and view transactions and balances.
User Experience
Zon emphasized that Initia’s goal is to simplify the user experience as much as possible. For example, the bridge widget can not only perform bridge operations, but also token swaps, using liquidity to optimize the transaction process.
Kiet agreed, praising Initia for having a comprehensive product suite that is helpful for both developers and end users, noting that Initia's focus on both aspects is also reflected in its documentation.
VIP Program: Rewarding Engagement and Loyalty
Importance of community engagement
Stan introduced Initia's VIP program (Vested Interest Program), emphasizing that the program aims to enhance the community's participation and support for the ecosystem. He mentioned that in Web 3.0, many things are highly financialized, which actually helps build the community. Therefore, they hope to introduce this mechanism into the hands of users.
Structure of the VIP Program
The core of the VIP program is to provide rewards to users for using the Initia ecosystem. Specifically:
Token Distribution: On Layer 1, a portion of Initia’s token supply is specifically allocated to users who use different applications. For example, when a user is active on a specific platform (such as a lending protocol), they can be rewarded based on the key performance indicators (KPIs) set by the Initia operator.
Reward form: These rewards are issued in the form of "es in it" or "escrow in it", and these tokens are initially non-transferable or non-sellable. Users need to remain active within 26 weeks to unlock these tokens in a linear manner.
KPIs and Incentives: Users are rewarded based on their activity on a particular platform. For example, if a user remains active on a certain app, they can unlock more tokens. This way, users are incentivized to continue participating, driving growth in the ecosystem.
Eliminate the middleman
Stan emphasized that the program aims to eliminate the middlemen in traditional grant programs, ensuring that all rewards go directly to end users rather than being swallowed up by the team or treasury. Application developers can also benefit from it because they attract users and create economic value for the ecosystem.
Alignment of incentives
Zon added that the VIP program not only focuses on user participation, but also takes into account the contributions of application developers. Applications can act like validators and receive a certain percentage of rewards (such as 5% or 10%), thereby aligning with the incentives of users. This approach ensures the alignment of interests of all parties and promotes the healthy development of the ecosystem.
Token Allocation and Governance
In terms of token distribution, Initia sets 26 cycles, and each cycle distributes rewards based on the following two factors:
Init balance on Layer 2: This helps incentivize users to find new use cases.
Governance voting: Every two weeks, users holding Init can vote on the distribution of rewards to ensure the effectiveness of governance.
This mechanism not only incentivizes users to continue participating, but also encourages them to pay attention to the dynamics of the ecosystem.
The uniqueness of the economic system
Kiet summarized the two main reward pools of the VIP program: the **Balancing Pool** and the **Weight Pool**. The Balancing Pool distributes rewards based on the Init balance of each application, while the Weight Pool distributes rewards through governance voting. This design avoids the unfair phenomenon of only rewarding large stakers in the traditional POS system, ensuring wider user participation.
Innovation and User Experience
Dave mentioned that when users are looking for new applications, they often want to experience fresh and interesting features. Initia makes users more willing to participate by providing diverse applications and smooth user experience.
Zon further emphasized that Initia does not intend to rebuild the entire ecosystem, but rather leverage existing excellent technologies (such as Cosmos SDK and IBC) and integrate them together to simplify the application development process.
Memes and Communication Strategies
Dave mentioned that he was curious about Initia's strategy for using memes on social media, especially their collaboration with the legendary Hersh. Stan said that the use of memes is not just for fun, but also to keep the team and the community actively engaged. He believes that regularly posting interesting content can keep users fresh and not get tired.
The importance of community interaction
Stan emphasized that community and marketing are crucial in the cryptocurrency field. In addition to providing interesting products, attracting users to Initia is also an important part of their daily work. They hope to interact with the community, understand user feedback, and continuously improve the product in order to achieve common success.
Recommended Guests
Before the discussion ended, Dave asked a quick question about who they would like to have as a guest on the show. Stan mentioned that he would like to invite accounts that are active on social media but not well-known, such as "alignment bros", because their opinions are often interesting. Zon expressed his hope to see some of the teams that are building, and excellent builders like DCF God, because they have excellent performance in both Web 2 and Web 3.
