In this episode, Bobby Ong, co-founder of CoinGecko is joined byJack O'Holleran, CEO of SKALE Labs. Bobby interviewed Jack on the background of SKALE Network, its SKALE chain, his thoughts on gas tokens and other Layer 1 chains, as well as the use cases of the SKALE token.
[00:01:10] Introduction of SKALE
[00:04:57] Categories of scalability solution
[00:14:40] Target market for SKALE chain
[00:20:54] Thoughts on Layer 1’s growth
[00:28:50] Thoughts on the interoperability system between Layer 1 and Layer 2 solutions
[00:36:36] Is SKALE only for Ethereum?
[00:38:22] Use cases of the SKALE token
Quotes from the episode:
“The SKALE chain is really fast and you're not paying for each transaction. So if all the users don't have to pay, the developer or a community can fund and pay for the chain, and it ends up being one of the most desirable things right now.” [00:15:41]
“There's four phases to the network launching and so the network went live on October 1st. There were 153 nodes launched, run by 46 different validator orgs. And 4,000 people staking from 90 different countries. [00:16:54]
“There's 135 dApps that have signed up in the SKALE innovator program.” [00:18:30]
SKALE Network - https://skale.network/
CoinGecko - https://www.coingecko.com/
SKALE (SKL) on CoinGecko - https://www.coingecko.com/en/coins/skale
Bobby Ong (00:00:00):
Welcome to the CoinGecko podcast. I'm your host, Bobby Ong. Each week we will be interviewing someone from the blockchain industry to learn more about this fast moving cryptocurrency economy. If this is your first time listening, then thanks for coming. The CoinGecko podcast is produced each week to help you stay ahead of the curve. Show notes can be found at podcast.coingecko.com. I highly encourage you to join our newsletter, where we send out top news in the crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at CoinGecko.
Hey, welcome to the CoinGecko podcast. For today's episode, we have Jack O'Holleran, CEO of SKALE Labs. Jack's passion for decentralized systems and blockchain let him to join efforts with Stan to solve the blockchain scalability problem. He is a veteran Silicon Valley technology entrepreneur with deep background in machine learning and AI technologies, and blockchain. His resume includes co-founder of Aktana, co-founder IncentAlign and executive positions at Good Technology and Motorola. Welcome to the CoinGecko podcast, Jack.
Jack O'Holleran (00:01:08):
Ey, pleasure to be here, Bobby. Thanks for having me.
Bobby Ong (00:01:10):
Yeah. Very happy to have you on the show as well. So I guess to start things off, right, Jack, maybe can you give us a simple explanation of what the SKALE network is and sort of the relationship with SKALE Labs?
Jack O'Holleran (00:01:22):
Yeah. Yeah. So the SKALE network is a decentralized blockchain network and it's open source, community-owned and run just like Bitcoin or Ethereum. And in particular what it does is it's a network of computers that can create many, many blockchains and actually limitless blockchains. The more and more computers or nodes that join this network, the more and more blockchains that can be created. And the rule of SKALE Labs was very similar to a lot of companies that help facilitate the growth of these community owned assets is this [work core team] that had an idea a long time ago around the network and got this started. But now it's a, there's open source contribution. There's a foundation that helped launch the network that's not associated with SKALE Labs. And it's a open source community on property run by a digital token or cryptocurrency, called the SKALE token. So perhaps we get into more of that later, but that's the quick, quick intro.
Bobby Ong (00:02:19):
Okay, cool. So, there's so many interesting opportunities to build in crypto these days, right? So what got you really interested to kind of work on SKALE and solve the problem that you're working at?
Jack O'Holleran (00:02:32)
Yeah, so we had the idea for SKALE back in 2017. All right. I had been doing tech startups since 2005. My co-founder, Stan Kladko who has a PhD in physics and he was doing research at Stanford a long time ago. He was one of the people who built the Java virtual machine. He actually started working in cryptography in 2000 and he was on the founding team of a cryptography company with Dan Bernay. My first company was called Good Technology that I was a part of and had a lot of deep crypto. Stan actually did our cryptography certification. As the US government like FBI, US Senate and all the, almost every fortune 500 company use its product. So at deep crypto certs, and that was my introduction to crypto and I had done machine learning startups after that in the SAS space or B2B enterprise space. And Stan had gone on to do a bunch of other startups and networking and other areas that really both our backgrounds kind of flowed nicely into where the market was in 2017. And I think both of us, our imagination was captured by Ethereum and we both wanted to go out and build a community-owned asset in terms of an application, like a decentralized exchange or a web3 company.
And what we realized was none of the ideas we had were going to work for until we had something that could help scale our ideas and both of our backgrounds actually lend themselves better to creating software infrastructure, then creating applications. And so what happened was we decided, "Hey, let's go", and Stan, to be honest, it's just and I think really important to say this is a technical visionary, and he had these ideas on how he could scale all these different applications when I met him. And that's really, that was the Genesis for SKALE Labs. And we said, "Hey, let's go build middle-ware. We were calling it middle-ware, not Layer 2 or scalability network. We were saying, "Let's build something that sits between Ethereum and an application to help Ethereum work better, without losing interoperability with Ethereum". And here's how it will work, here's what it will do, and then, you know, all this nomenclature and battle over what things called or should be called started later. But that was our kind of venture into doing this. And we really wanted to solve a problem for ourselves and realize we could solve it for a lot of other people and we realized our backgrounds were very well suited to do that.
Bobby Ong (00:04:47):
Alright. Yeah. I mean, it's always the case, right? I mean, you realize that your background sort of like helps you to decide what the best cause because that makes you a perfect expert to solve that problem at hand. So yeah, I guess my next question is you mentioned a little bit about Layer 2 and the middle-ware and all, so like, I mean, it's probably a bit of a tougher question, but if you may, right, like there's so many scalability solutions on Ethereum these days. Such as Optimism, Zk-Rollup, Avalanche, xDAI, Starkware and also Ethereum is working on its own like ETH 2.0 scaling solution with sharding and so on. Like how would you categorize all these different scalability solution and where does SKALE sit into one of these categories?
Jack O'Holleran (00:05:27):
Hey, I actually, I love this question because it's confusing for people because it's really easy to dive into the tech. And not really understand that distillation of these tech attributes and I'll try to give the distillation for people to understand who aren't developers or cryptography researchers. Okay. So that's my goal with this. And there's a few spectrums, I think that are important to understand. One is centralization. And along that spectrum is it a blockchain or not? And you have one side of the spectrum where you say, "Hey, we're going to abandon blockchain. We're going to use software to try to validate the things that are happening in this second layer or execution layer are accurate". And by the way, I'm not saying any of these techniques are wrong, I'm just helping people understand it. And for many use cases, that may be absolutely all right, where you don't need to KYC/AML anybody. Okay. And you don't care about like a central authority having control. So that's where you're finding the rollup solution set, where it's sophisticated technology, really brilliant people building this tech, but the tech at the end of the day runs on an operator, i.e., a node. And there's techniques being worked on to try to remove that centralization, where they kind of switch who the operator is.
Instead of having it be one person or company there, you know, saying, "Hey, could we come up with a mechanic and a token environment to kind of swap around who's in charge at any given time?" Because you get a 50 nodes and 49 of them could be malicious, but if the rollup operator's not malicious, then everything's accurate. Okay. Now, that's kind of against the belief set of the people that say "let's use blockchain". And so you look at all of these new Byzantine fault tolerance blockchain solutions that are being developed, and many of them are like very far away from being Ethereum, right? If you go look at the Solana and NEAR and Avalanche and all these new age networks that are being built, or even throw in Polkadot and Cosmos, and they're saying, "Hey, we'll build a bridge for you". And what we use is not mathematical proofs, but we're going to use blockchain. Blockchain from my perspective and my definition is a symmetrical database where every computer runs the same software. And if the majority of those computers agree, then that's the source of truth. Okay. And there's economic incentives driving that good behavior.
All right. And then you kind of find things in the middle here, where you look at like side chains, that are more fixed, where you've got one blockchain. And so you could throw in like the Matic and xDAI. And Matic by the way, is moving to another model, which I'd say, they're building towards a similar vision to SKALE with the switch to Polygon, but you look at this other category here, this is where, it's one side chain, and even the Moonbeam sidechain from Polkadot is one sidechain. It's one set of nodes that run one blockchain, that's a shared resource. Okay. And these are issues, in a lot of ways, potentially because people say, "Hey, well, if it's one fixed set of operators and there's not that many, it's easier for them to collude and steal money". And so you can also try to tack on things to like a Plasma operator or a roll-up, or a different feature with a computer to be kind of a middleman authority to make sure that if the people that run these nodes are bad, the money can't be stolen. Then you look at something like SKALE which is a, you know, it's a set of nodes.
It's kind of like the first category or the second category I talked about. It's a separate blockchain, but it's actually run by the Ethereum mainnet. So the Ethereum network says, "Hey", like, let's say you wanted to come and run a game or a DeFi application. The Ethereum mainnet says these 16 nodes out of this big pool of nodes, will go work for you this month. And then at the end of the month, these seven are going to switch and these seven are going to come and work for you. And it basically keeps a big pool of resources and it moves them in and out to ensure that these blockchains are collusion resistant, or side chains. But the Ethereum mainnet is actually running and orchestrating this network. And so, this vision, are guess like, picture I've spelled out, there's also a spectrum of how close is this to Ethereum. If you want to scale something on Ethereum, is it, you know, a roll-up operator that's like literally saying the consensus of the mainnet is the only thing that matters.
And we're going to use a computer to try to fact check everything or something like SKALE that, "Hey, it's a separate blockchain, but it's actually run by the Ethereum mainnet or something entirely separate, like another Layer 1. And you're just building a bridge". So that's one model of looking at these things. The other model, I'd say that's a category is like, how are blockchains leveraged and there's app specific blockchains, where there are these structures and you see SKALE, and I think, Avalanche and Polkadot and Cosmos and Matic moving over with the Polygon vision. And this is all these app specific blockchains, where you have a big pool of resources and you're able to kind of splinter off and shard out these smaller blockchains and try to give pooled security, and speed, and efficiency, and effectiveness to each of the kind of subgroups or sub-blockchains in the bigger pool.
And that's another kind of broader category, but, and by the way, if you look at the architecture of SKALE and a lot of these others, like you know, hey, we could easily implement a roll-up or a ZK solution. We're just not doing it now because we feel, frankly, it's not needed. We believe in the way the validator community and businesses growing, and I can get into deeper into that. But I think you know, eventually use cases having like ZK in particular integrated could add value, but for right now, we feel pretty good about the way the industry is moving with the validator market that that's not required.
Bobby Ong (00:11:15):
So, let me try to summarize, what I try to understand about SKALE is kind of like it is a sidechain of Ethereum, where there's a bunch of nodes running on SKALE and this nodes are sort of, let's say like, 50 nodes running and there are multiple sidechains on SKALE. And out of these nodes, the operators will switch in and out every month or so. So that to keep them from being inconsistent or trying to cheat or something like that from the network. Right. And SKALE, to a large extent, is actually quite similar to the Polygon by network and that sort of like, where we should probably do a side-by-side comparison, if that's the right way to look at it.
Jack O'Holleran (00:11:52):
Yeah. Or, to like, you know, a Polkadot I'd say, but SKALE by the way, I think, you know, Matic, I think it's a great sign, I really liked their team, it's a good sign to see that they're shifting to this vision. This has been our vision since 2017. It's also, you know, you see other projects like Polkadot have a similar model. And I actually, I've been trying not to use the words sidechain too for scale. Cause I think sidechains carry a lot of negative baggage, historically. Cause people think, "Oh, a sidechain is not secure. It's just a small blockchain that connects to with big blockchain and collusion is pretty easy, easily takes place". So I think of the SKALE network more as elastic blockchains and these elastic blockchains can pair up to the Ethereum mainnet and their application specific. So every game gets its own blockchain, every DeFi application, every Web3 application. And there's this big pool of resources that are being pulled from to create these smaller chains that could be called a sidechain, but sidechains are, you know, need more modifiers to be accurate.
Bobby Ong (00:12:58):
So you're saying that like, there is one major SKALE elastic chain, one large SKALE chain and each SKALE chain will have its own small application specific sidechain connected to this main SKALE chain, which is then connected to Ethereum chain. Is that kind of a right way?
Jack O'Holleran (00:13:14):
You know what I would say is, I'd say there's one major pool of SKALE compute resource. So every single computer and SKALE is divided up, or node is divided up into a bunch of smaller computers. Okay. Each one could be on 128 different SKALE chains. And so there's the SKALE compute resource pool. It's not a blockchain, it's just a, basically, frankly, a bunch of compute power in these containers, these little buckets, right, that can be shifted together to create a SKALE chain and those SKALE chains, you could call them sidechains, but I, I've been more calling them elastic blockchains, but they perform a lot of the functionality of a side chain in that they can connect to Ethereum and run incredibly fast.
The other thing is the SKALE chains once connected, you don't pay gas. So the developer buys the resource from the pool, they buy, let's say there's like a hundred increments and I'm using kind of pretend numbers. And each SKALE chain is one increment. They can like buy one increment and they pay for that over a period of time in SKALE tokens. And then those tokens end up being paid to the people that run the computers. Later, and then, they don't need to pay the users, don't have to pay for per transaction. The developer or a community can fund a smart contract that pays for the resource from the bigger pool of compute resource.
Bobby Ong (00:14:40):
So I guess my next question is like, who are like the sort of like target market for the SKALE chain, right? Like, are you guys going after game developers or people building DEXs or NFTs, for example, like who do you see would be like the main target users for the SKALE scalability solution?
Jack O'Holleran (00:14:59):
Yeah. What I would say would be anyone who's building on Ethereum and has a need for very fast transactions and low fees. And so if you're building something on Ethereum, and there's like not many transactions and the cost is really high, then it's not as big of a need. DeFi, gaming, web3 applications, all of these can in just a few lines of code, port over to the SKALE network. Okay. And then run really, really fast. And the block times right now, I think they're getting about three blocks per second. And you know, you look at these other chains are more like five seconds per block. And so the SKALE chain is really fast and you're not paying for each transaction. So if all the users don't have to pay, the developer or a community can fund and pay for the chain, And it ends up being one of the most desirable things right now. And also the block sizes in SKALE are dramatically larger. I think it's about three times as much as what you can do on the Ethereum mainnet.
So if you have a lot of computation that needs to happen in Solidity, you can just do a lot more with each transaction, which is really powerful for DeFi and gaming in particular right now, because the way they're leveraging smart contracts is pretty sophisticated. And right now, when you're coding in Solidity, you have to, it's almost like coding in, I don't know if anyone listening has ever used one of those old, old calculators where you could actually code on the calculator. Which has hardly any compute space. So you have to be really, really specific about what your code. And Solidity is kind of similar. And on SKALE there, you can just do more within each transaction and actually just do more on the blockchain.
Bobby Ong (00:16:48):
Yeah, actually interesting. Is SKALE already live or when is it expected to sort of go live?
Jack O'Holleran (00:16:54):
Yeah, so there's four phases to the network launching and so the network went live on October 1st. There were 153 nodes launched, run by 46 different validator orgs. And 4,000 people staking from 90 different countries. And that was the kind of real launch of the network because that's when it became fully decentralized. There were a couple, kind of pre-stages before then. And then the token actually went liquid on December 1st after the network had been running for two months to really prove the utility of the token that it's, "Hey, this is a real piece of software. It's a real network. It's decentralized". And so we went through that process. And now, there's another upgrade coming. And so you can use SKALE chains today, but the bridge between the Ethereum mainnet and SKALE just went through an upgrade and an audit. And so the community has been waiting for the audit to be completed and the upgrade to get pushed.
And when that next phase happens you're going to start seeing the, you know, DeFi applications and gaming applications really start leveraging SKALE because there'll be able to move back and forth with the mainnet. So it is a live network, but these networks are upgradable and the smart contracts are upgradable that essentially run the network. And so we're pretty excited. That's targeted for this month. And you know, it's coming out very soon and we'll have a demo that we'll be sharing of the latest upgrade in the next few days that I'm pretty excited about.
Bobby Ong (00:18:23):
Any dApps have announced that will be using scale so far or anyone that you can let us know so far?
Jack O'Holleran (00:18:29):
Yeah. Yeah. I think there's 135 dApps that have signed up in the SKALE innovator program. And that means they're signing up, they're testing, they're using SKALE. And what we've been doing over the last month is having a use case marathon. And so these dApps they're going live saying, "Hey, we're going on SKALE as soon as the smart contract upgrade is up and running, we're excited". And what we've wanted to do is show the different use cases. So there's some really exciting applications. I recommend going to the SKALE website and you can see all of these. There's a blog post written about each one and about each use case. And just, yeah, I think we're really excited about it and hey, it's a big honor to be able to support these projects and companies and organizations and we're just, I think, excited to help them start cutting their gas fees and growing their user base.
Bobby Ong (00:19:19):
Yeah. I mean the gas fees such a big problem. I've been talking about this for a long time on my Twitter like, for most people paying, I mean, when gas was over a hundred Gwei, like paying $30 just for simple ERC 20 transaction, that's not sustainable, right? Like making, paying like a hundred dollars for a swap on Uniswap, no one's gonna do that. Only old school Ethereum guys, I mean, like you and me, who'd been around since like whatever like, you know, if you're making like $5,000 swap for example, you don't mind paying a hundred dollars in transaction fee, but you're making like a $50 swap,there's no way you're going to pay a hundred dollars.
Jack O'Holleran (00:19:49):
You're just not going to do it. And I think, you know, we're seeing the community is, and users of crypto are speaking up and kind of saying, "Hey, like we're willing to use other solutions". Because, I mean, the other day I just had to swap out. I had to get some ETH for a transaction. And so I was trying to move out, I think like 300 of USDC into ETH and it cost me a hundred bucks in gas fee. So I just didn't do it. That just wasn't worth it. I'm like, "Okay, I'm going to have to go to a centralized exchange and do this.
Bobby Ong (00:20:19):
Right. Even then it costs you like $50 or like $30 to send it out.
Jack O'Holleran (00:20:25):
It's just not good. And you know, and yeah, I think we'll probably talk about, maybe talk about this later, but I think users are showing us that their pocket books speak louder than their religions when it comes to decentralization sometimes.
Bobby Ong (00:20:37):
Yeah, yea, it's true. I mean, I have some of these like dust tokens and dust used to mean like less than $5 worth of tokens, but dust these days mean like, anything less than a hundred dollars of tokens on your Ethereum wallet like, it's just no longer feasible to convert them out into ETH anymore because it just costs so much money. But yeah, you're right in the sense that I think we are seeing in the past few weeks that users don't really care which chain they're on. We've seen Binance Smart Chain, Huobi ECO Chain, saw significant growth on their own Layer 1 chain. Basically it's Ethereum fork but there's less people using it. So obviously gas fees are lower. What's kind of your take on the growth of this, like BSC, Huobi ECO Chain and so on.
Jack O'Holleran (00:21:17):
Yeah. I mean, I think it's, I'm excited about it. I think it's a positive thing and you know, I think one of the sad things is, hey, I think there's this religion around how to SKALE Ethereum. And that's why it's like, no, we cannot use another blockchain. We can't use any other consensus. And, you know, it's kind of weird because if you say, Hey, I only want to use is a Roll-up or a Plasma, you know, and that has to run in a centralized fashion, like why is Binance any worse? Right. And Binance is a big company, they're not going to steal your money. Right. And so it, actually, I also think that there's going to be use cases for every single, for a lot of the categories of the things we're talking about, but where SKALE likes to sit is, it's a decentralized network that can scale Ethereum, but you know what consensus happens on that network. It's not using you know, a roll-up technique. It's using validators that have to, two thirds of them have to malicious to steal any money. And anything less than that, and there's also other protections built in. It's just really unlikely that we're going to see validators in this type of market, go malicious and steal money because these are the same validators that have so much money that they run on Polkadot and ETH 2 and all these others places. You know, if they steal from one place, they're going to lose their business everywhere.
Okay. It's just not very likely considering that the top 50 validators probably have 95% of the market share across all proof-of-stake platform. So one, I think, there will be a great need for decentralization, especially as DeFi grows. And I mean, you know what, if Bitcoin was run by a company, it would be shut down by now. Okay. And, but there are going to be many use cases where you're just like, "Listen, I just want to log in as address, interact with the smart contract and trade one currency for another". And I think Binance is, you know, people are saying, "That's good enough for me. The issue is as regulation grows when you're trading in an exchange as a person who lives in a country, you have requirements to do KYC/AML, and that's where, you know, these things will fail to scale.
It won't be from a technology perspective. And it'll be the same reason why, you know, people can't use certain exchanges in certain countries because there's regulations. And if you do have centralized exchanges running decentralized exchanges, that's great. As long as what they're doing is actually decentralized. And if it's not, you know, they're going to run into issues and headwind and their users will. But right now, let me tell you, it's adding a lot of value to the industry because people are getting priced out of swapping in and out of tokens. Like you said, a dust token is $500 right now. You know, I need to swap, unfortunately.
Bobby Ong (00:24:02):
Yeah. I mean, I hear your point about, interesting point that you brought out about AML/KYC on this decentralized chains. So I mean, it almost feels that, I mean, binance.com is not available for US users, but the Binance Smart Chain is available to US users. So to a large extent kind of like, I've been talking to some of my friends as well? It seems that BSC is sort of like a wrapper or an API around the binance.com ecosystem and is now available to US user, which sort of like skirts around the regulation that forces them to ban Binance to US users in the first place. But it's kind of weird because BSC is sort of like, they say decentralized, but really like, I don't know, 20 validators or so on BSC is really controlled by Binance and their friends. So would you say that the liability, kind of like falls on the BSC node operators right now?
Jack O'Holleran (00:24:52):
Yeah. What, what I'd say is they just launched. So I think, I'm not a lawyer. I don't want to predict law, but the reason why people are decentralized, the reason why Uniswap is effective and not illegal is because it's actually decentralized. It's a bunch of smart contracts and it's not run by, like you said, a company and some trusted friends. And I think those are the issues that come with being centralized is you're going to have the same requirements you do if you are running a centralized exchange. So we're going to perhaps see some regulatory scrutiny. But regulators work slowly. I think, you know, these things just came up. If there are issues with, we won't find out for probably six months, right.
Bobby Ong (00:25:29):
Six, six years maybe. I mean like, look at XRP, like they only got the securities letter after how many years? Like we've been doing these things like 2013 or so. And finally in 2020 they received a letter and calling them a security, but that's like so long, right?
Jack O'Holleran (00:25:42):
Yeah, but I think it's going to be faster. I think, there's been very clear communication flowing from regulatory authorities then through lawyers and then to, you know, people working on decentralized networks and, you know, you have to be decentralized or you need to be ready to, and that means you have to give up power and control and let software be in charge and let upgrades be managed in a decentralized manner. And, you know, let smart contracts be in charge and then make sure people running nodes or you know, people that are just people from the community, not people that work at your company or your company. Right. And if you do those things, then you get the benefits of being decentralized. Well, you know, giving up a lot of control of the community, which ends up actually being a good thing. That counterintuitively, it ends up actually giving you more growth, but if you want to control things, I think it's prudent to then be ready for the implications that come with that. Right. Just my thoughts.
Bobby Ong (00:26:40):
Yeah, yeah. Cool. So recently, like if you look at the past week or so, like the ETH gas was kind of hovering around more than 150. At one point, like, I don't know, a thousand Gweis. Kind of crazy, but now it's kind of like built around a hundred Gwei or less recently. Nick Chong of Parifi Capital recently suggested that this was probably because Vitalik propose the removal of gas refund tied to 'SELFDESTRUCT' on the Ethereum London upgrade. So this has sort of lowered demand for gas especially among the gas tokens because it kind of make those gas tokens useless. Do you think this explains the declining gas prices recently or that kind of no correlation with it at all? Not so sure you've kind of seen this yet.
Jack O'Holleran (00:27:21):
Yeah. You know what, so I can't give you a good enough answer on that, but what I'll say is I know that there's a lot of effort within the leadership of Ethereum to say, what can we do right now to optimize. And unfortunately that's balanced with the fact that the network itself only has a certain amount of resourcing, and load, and capabilities. And so if you make it really cheap to use, it's just going to make the [state logs] just massive, right? It's just cost money to run an Ethereum node. And so the costs kind of have to, you know, you have to kind of take the supply into consideration. As it relates to pricing for demand, which is one of the hard parts. From the conversations I've had with people at the Ethereum foundation and my understanding. So I do think, you know, it's interesting. I'm gonna, I think that's worth doing more research on, but I'm also, I'm curious to see what's happening.
I love to run some user numbers too, because we're seeing incredible growth, like Binance Smart Chain launch and, and all these other chains are launching, like you can swap tokens and you couldn't do it before. I'm sure someone's going to launch the second they can on SKALE. There'll be probably a multiple of these launch that are kind of, you know, Uniswap, SushiSwap clones. And you're just gonna, you know, when you can interact in an environment with the same tokens, the same wallets, but without gas fees, there's a lot of advantages. And but I do think, yeah, I think it's interesting, it's worth more research, but it has been an improvement.
Bobby Ong (00:28:50):
Yeah. I mean, over here at CoinGecko,, we're seeing huge growth in like, AMM is launching on multiple different chains, so like the past couple of weeks, we've just been super busy adding all those AMMs on Binance Smart Chain, so PancakeSwap, BakerySwap, JulSwap, a bunch of other swaps and all. And then we've seen the same on HECO, but there's only one major one day [index]. We recently integrated QuickSwap on the Matic network. So I'm pretty sure, like, I think we're kind of entering a world, where they will be multiple Layer 1 chains or Layer 2 sidechains, if you may. And then they all have their own AMMs. I guess, which kind of like makes things very fragmented for the users as well. I mean, if you're kind of on the Matic QuickSwap chain. You can't really interact with, like the BSC PancakeSwap coins and all. So like, I dunno, at some point they will probably be some soft interoperability system for you to kind of move between the various Layer 1, Layer 2 solutions and kind of swap your tokens on these different chains. Will you kind of agree with that or what's your thoughts on that?
Jack O'Holleran (00:29:51):
You know, I've been thinking about it lately. It's like similar. Similar in like the analogy that I've been using is almost like the physical world we all live in. Right? Like in your neighborhood, there's a grocery store. There might be a car dealership somewhere near. There's like a gas station and a grocery store. There's these pieces of infrastructure that support a certain amount of demand. And right now we're seeing each network pop up and then someone's there like, "Hey, here's my AMM for this network". Yeah. And there's a lot of money to be made in the short-term by going like servicing these communities where they are. But what I think is going to happen is there's a certain point where. If in the physical world, like the neighborhood you lived in had two huge grocery stores, instead of one. One might go out of business. Right. And we might see some consolidation. And so there'll be a growth period.
And this happens in these types of markets and every time it's like since the nineties tech boom, and you're going to see a consolidation phase again, but I don't think it's going to happen anytime soon. I think there's definitely a lot of growth. Because the market sizes that people use crypto is still so small, right. And people are creating these tribes to say like, "Oh, come over here, come over here". But one thing that's true is if you have something that's ETH compatible, the barrier to entry to set something up. So when someone next month, when like, the near future, all of a sudden SKALE in the next upgrade for interchain messaging goes for SKALE there'll be somebody there immediately to just with probably very little effort, get PancakeSwap, SushiSwap, QuickSwap equivalent going because they know that there's a massive community of token holders there. There's incredible performance, low fees. And what they're trying to do is win and beat all the other ones, but in the process, and it's just going to, you know, there's like already an established community there with little effort to get that business up and running. And they'll have great performance and great benefits compared to other areas.
Right. So, it will be something that will be really interesting to watch. And I think CoinGecko, you're in a really interesting viewpoint now and I love what, by the way, I love I'm so impressed with your business and how you've just like, you know, become a force and a center point of crypto. I think you're in an interesting position to see this grow and evolve.
Bobby Ong (00:32:07):
Yeah. Yeah. I think kind of like a town planner point of view. And I really, like your analogy. I guess you can think of it, like each of these chain, like BSC, it's kind of like, some settlers go to a new town and they like clear out, okay. And then they get people to come to their town and live there. And they're like, okay, now that we have all these guys living here, we need like amenities. We need a grocery store. We need a car repair workshop and all these different things. So, you have the PancaeSwap will show up first, the AMMs and then you have the Maker equivalent. And then you have the lending and borrowing protocols. You have a yield aggregators and then kind of, everyone's kind of geared up and then they compete against each other. And then, some guys going to be the biggest player and then some guys like Huobi is creating his own town like Huobi City. And then as you say, like kind of like a mayor looking at all these things coming around this various towns and sort of like, see how this works out. It's a very interesting analogy, I would say.
Jack O'Holleran (00:32:52):
Yeah. You know, crypto is a, it's in a really interesting growth stage now. And, I think all the people working in the space and interested and who are enthusiasts, like it's really, I think, a great time to be here because there's still so much knowledge asymmetry. If you don't understand and follow these projects and know about AMMS, know about lending protocols, know about the dynamics of DeFi or how to interact with games or NFTs, right. Even we're seeing NFTs boom, like, it's not easy stuff, but when you get it, you kind of have a headstart on the rest of the world because they're going to get it at some point.
Bobby Ong (00:33:25):
Yeah, I agree. I mean, I keep telling all my, the new guys that joined us at CoinGecko, I mean, you're in the right industry, right place, right time, there's so many opportunities to make like 10X return or whatever amount of insane returns that you want. And the reason why all these crazy returns are available in this industry at this point in time is because of information assymetry. You know something, or at least you spend a lot of time researching about something that the world hasn't found out yet. And if you make the right bets and hold on long enough with the right conviction, you will see these returns because eventually the world is gonna catch on and everyone's going to kind of buy those tokens or whatever it is and that price gonna move up.
So I definitely agree that there's so much information assymmetry and this is getting harder and harder because this pace of development is just growing at a such an exponential rate at all directions like there's so much development going around in like the scalability section, like SKALE, MATIC, Polygon, all these different things. There's all these things going around with the BSC ecosystem. with the Huobi ecosystem, with the Ethereum ecosystem and all these various sectors as well. Right. You have the fixed interest rate protocols, the option protocol, DeFi protocol, all kind of protocol, is that kind of hard for one person to really kind of get a grasp of a deep understanding of every development going around all these different parts of crypto. So yeah.
Jack O'Holleran (00:34:38):
You know, the other piece of this that's cool is, you know, typically information asymmetry and using it for business purposes, there's like regulatory issues with that, but there's nothing, there's no access asymmetry. This is all open source. You can read about every single project. Everything's open. DeFi is launching a fair launch, anybody can kind of get in there and participate. There's no closed doors. And so the harder you work and the more you learn, the greater your information assymetry grows on people who don't do that, which is nice because in the centralized world, there's access asymmetry. Where you need to know the right people. You need to you know, have gone to the right schools or get access to the right professional wealth advisor. And in crypto it's like everybody can support themselves and the harder you work and the more you get in there, regardless of who you are, where you live, there's upside for you.
Bobby Ong (00:35:34):
Yeah. I completely agree with that point of view. Like I mean, a lot of the innovation that took place in wall street is only available to accredited investors and to the right financial advisors who can put you the right guys in New York, for example. And like someone living in Malaysia, you may not even be accredited for example, so there's no way you get access to all these things. I mean, if you look 20 years ago with the dot-com boom, there's so many startups that had great growth potential in Silicon Valley, but you got to be, one of the insiders in San Francisco to be able to be offered access to do deal flows right. Like there's no way, and then it takes like five years before it hits IPO. So like, that's going to be tough. Right. But now in crypto, like, the time to public market is just super short and then there's incredible growth once it hit the public market as well. So yeah, there's no access asymmetry as well in crypto. So that's one of the better parts of crypto.
Jack O'Holleran (00:36:19):
Yeah, it's cool how global it is too, because of that, right?
Bobby Ong (00:36:22):
Yeah. Yeah. I think a lot of things sort of like, everyone outside the US don't really get a lot of these opportunities and crypto offers this opportunity, which many people outside the US really appreciate it, I suppose. Yeah.
Jack O'Holleran (00:36:35):
Bobby Ong (00:36:36):
All right. So let's just jump back a bit back to SKALE right. And kind of like ask a few more questions before we wrap things up. So I guess my last couple of questions is, is SKALE only for Ethereum or it can be sort of be adapted for other blockchains once they sort of like clogged up as well.
Jack O'Holleran (00:36:55):
Yeah. What I'd say is there's a real commitment to scaling the Ethereum ecosystem. It doesn't mean you can only scale tokens that are on the Ethereum mainnet, like, so you could run Bitcoin on a SKALE chain. But when you're running smart contracts on SKALE, you're running Ethereum Virtual Machine and you're running anything that is interoperable with the Ethereum ecosystem. And that's one of the cool things is like, hey, if you use a SKALE chain, you can use Chainlink and The Graph and all these other really cool tools and Metamask and My Ether Wallet and all of these great products. And that's why, you know, the reason why we're so passionate about Ethereum is that all of the building that's happening there, all the developers and the tools and the ecosystem. Now over time, if there's a real need to, you know, run smart contracts from another network on the SKALE chains and, you know, it's open source and community run. The community could, you know, say like let's build support for that.
And somebody could submit a poll request or the core team could and that could happen. But, the short term, you could think about it as all like the inner workings are Ethereum, but outside things somebody could say, "Hey, I want to clone Bitcoin into this or some other token that's not part of the Ethereum ecosystem". And as long as you can build a bridge into the SKALE network, then you can access the Ethereum ecosystem from a developer view, but leverage tokens in an integrated manner that aren't from that world.
Bobby Ong (00:38:21):
Okay. Cool. And what do we say would be like the use case of the SKALE token that went live on the first of December?
Jack O'Holleran (00:38:28):
Yeah. So there's three main use cases. So one is you pay for a SKALE chain. So if you want a SKALE chain, you have to pay a certain amount of SKALE tokens. That price is dependent on the load of the network. There's just. elasticity curve based off of a network load and if the network's really overloaded with dApps and it costs a lot more, it incentivizes more people to set up nodes. If the price of the tokens really expensive, more people set up nodes to get the fees from the chains and also this inflation that happens. And so that's one, I guess mechanic of the token, the other one is staking. So anybody can stake the token. And what you're doing you're putting the token at risk and the validator operator, if they go malicious, then you know, they can lose your token. If they try to steal from a dApp, right. That's one, is staking it. The other one is governance. And so very soon there'll be on-chain voting and you could vote to change, you know, like make the fees lower, to run a SKALE chain, or someone might have a proposal to make the quantity of tokens needed, lower, to run a node in the SKALE network. And that's the other way, or I guess, tool and utility of the SKALE token. Those are the three main things.
Bobby Ong (00:39:43):
Cool. Very interesting. Yeah. And I guess, I kind of run out of all my questions that I wanted to ask. Is there anything, any questions that I should ask that I haven't really already asked yet? Anything that you want to say?
Jack O'Holleran (00:39:52):
I think what I would say is, you know, I think we're early in this battle of pioneering towns. Like we talked [inaudible] you know, the analogy. And I think we're going to see a lot of successful ones, but I think, and there's a lot of really smart people building in the space but at the end of the day, I think users will pick the winners. And I think we're going to see web3 and user on economy applications just boom in the next year. We're going to see so much growth happen on the application side. And right now DeFi is really flourishing, and we're seeing NFTs flourish, and we're seeing gaming like, you know, get a strong start, but I think we're going to see more come onto the blockchain and at the SKALE team, you know, hey, we all from an incentive perspective, I worked on this for three years as with a lot of people, and we didn't even start vesting. The first day of vesting was October 1st when the network launch for a four year vesting schedule. So we're like locked and ready for a long battle or a long journey trying to win market share. And yeah, I'm just excited about it and I think a lot of other teams too have similar dynamics. But the ones that get users will win. And it's kind of a cool time right now because there's a lot of promising teams and it'll just be really interesting, I think to see the way it plays out. And you know, we'll be working hard to try to win as much market share as possible, but also you know, I just appreciate the competition too. Cause I think the more and more smart people building, it just raises the whole industry.
Bobby Ong (00:41:17):
Yeah. I mean, I always tell people that this industry is probably the industry that has like some of the smartest brains around and like so many smart brains, like IQ 200 guys working in this thing that you just feel inadequate talking to all these guys. But it's great. I mean, you know, you're in the right industry when you're surrounded with like super smart guys. And yeah, I mean, this scaling solution thing is so many scalability solution. At the end of the day, you're right. The users will decide It feels very fragmented the space right now. So many different solutions. We don't know who will emerge as the winner yet. So yeah, I really wish you the best of luck. Hopefully you guys can capture sufficient market share and people will start using SKALE.
Jack O'Holleran (00:41:55):
Thank you. Yeah. Hey, there's a ton of great momentum and it's just exciting to see so many people, you know, see some decentralized effort come together. There's thousands of people that work on the SKALE network. And I think a lot of people now are starting to find out about it. Even though we've been working at it for a really long time, so. Hey, thanks really appreciate you, you know, digging deep and asking these questions. It's always fun for me to be able to talk about SKALE and the industry as a whole.
Bobby Ong (00:42:17):
Yeah. Thanks a lot for taking the time to explain to us. Really appreciate it.
All right. That wraps up the show. Thank you for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out podcast.coingecko.com, or please leave us a review on iTunes. If you have any feedback, do drop us an email at email@example.com. Join us for more next week. See ya.
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