Persistence brings restaking to Bitcoin through pSTAKE

0:01I'm ashon Addison from the cryptocoin show and today on blockchain interviews with mckel Pand co-founder and CSO of persistence Mel welcome to the show and thank you for taking the time hey Ashton thank you for having me on very excited to be here likewise uh we've actually had uh tar the the other co-founder of persistence on in the past but it's been a while um and I think we

0:25definitely need a refresher uh and it's great to have you on the show as well I'm excited to dive into persistence P stake uh what you and your team have been working on um and and your thoughts on the industry and where we're going um for those who haven't seen uh the previous interviews that I've done uh with persistence I would love to start from a high level on just sort of an

0:45overview of what is persistence persistence Labs uh and Pake and then we can dive into all the latest details yeah absolutely so I think uh refresher would be we started building in the space in 2019 officially so we first went out uh in 2019 trying to build a chain that that brings real brings real world assets on the Chain obviously not a very easy thing to do

1:10right like even today it's 2024 and we haven't seen many real world assets on the Chain yet now we're trying to solve this problem in 2019 and the bigger problem was how do you build a solution that can actually you know like allow you to do that and and for us uh we I'm personally a tech Enthusiast I spend most of my time looking at products and looking at how

1:31you know from an engineering perspective how can you solve problems so for for me and and for you know tar as well the idea was to pick a technology stack that would allow us to build that out so in 2019 we made a bed in Cosmos uh the idea was to build your own chain we call it the persistence score one chain and have you know different applications on top

1:54of the chain each of those applications serve a specific purpose that is to bring real world assets on chain and do different things with those real world assets so using real world assets as collateral to Bor against them those kinds of things but very specific to to real world assets so that was the purpose of building that chain in 2020 we realized that you know it's still

2:13very early to do something like this and and you know it wasn't an easy problem to solve so we started looking at different things and uh around end of 2020 we kind of stumbled upon liquid staking so uh we actually started off when we started off persistence tar and I I realized that one is is actually a very bad time to start up because we were in the depths of the bare Market in

2:362019 2020 we didn't raise any capital in fact early on it's pretty hard right like because the co crash happened so you could we could not raise Capital we had a team of 10 people barely you know making through month by month we had some very good people in the team who are happy to like say okay I'm not going to take my salary this month uh so we somehow survived but for surviving we

2:59kind of had this thing where we started running some validator nodes so we got into staking so we were early into staking because obviously we very late to do Bitcoin mining but POS was a new thing in 2019 we made a bet on Cosmos we made a bet on posos we made a bet on staking so we knew staking very well now in 20120 there were more conversations around liquid staking and it was still

3:19not a very big thing it was still lier wasn't live you know you you had heard of Rocket pool a little bit stafy was another player working in in liquid staking so we kind of saw that as an opport unity and and evolution from staking and we decided to build liquid staking so persistence becomes the chain where you issue liquid state tokens and these lsts are then used for different

3:41things but again the thought process the core thinking process was the same which is persistence will be an app chain that allows for people to stake their assets liquid stake their assets and do different things around liquid staking only and so to issue the lsts we built our own application called Pake so Pake was the first application built on top

4:00of the persistence chain and we raised capital from from some pretty you know uh influential Folks at the time so three Rs Capital Galaxy seoa Capital India binance Labs uh coinbase Kraken Ventures all these different investors for peace and uh Cosmos the thesis around Cosmos was that okay you know we have the Cosmos app chain there will be thousands of Cosmos chains and you want

4:27to issue liquid state tokens for all of them that was kind of the thought process and since then you know our thesis has evolved our Focus areas have evolved so on the persistent side the chain is still you know serves the same purpose which is you can have applications on top of the chain so today Pake exists as an application we have another application called Dexter

4:45that exists again built by persistence Labs so all three products have been built by or persistence Labs is the core contributor we have other contributors as well but primarily you know the the development happens from persistence Labs so uh yeah you know that is how we started that is what we were doing until recently and we have been thinking about

5:03the future of of you know persistence and PE and and I'm going to be very excited to talk about that today definitely I want to dive into uh staking more I feel like a lot of people that weren't staking or still aren't staking they've now seen hype around igen lay and other platforms with the reaking and and think benefits that you can have over just staking your ether

5:27you know vanilla um maybe you can talk about a little bit from a high level for those people who aren't familiar with staking you know maybe they're not too technical or they they're just like they think there's extra steps involved rather than just putting your ether they're probably holding their ether in a cold wallet and it's just not staking at all but they're sort of afraid to

5:47jump into it because of the complexities can you talk about the benefits of liquid staking um and why people should utilize this mechanisms that like for example on what peace stake has has absolutely I think the answer to that again if you're not familiar with staking staking is a simple mechanism that allows you to become a part of the network right like there's this

6:12blockchain now for this blockchain to run it needs to produce blocks how it produces blocks is by certain stakeholders within the blockchain who do the technical work who run a specific software and and a hardware to produce those blocks by looking at all the transactions happening in the chain bundling them together and and putting it on the Chain so you have the first

6:33block second block third block so that's how the Block Chain is formed right so staking is is a method where you actually use your assets so if you hold e you stake it with a validator meaning you give that validator more power to create these blocks so more the power a validator has to create blocks the more blocks they can create but while you do that you're actually contributing to the

6:58network you are allowing the network to to be more secure uh because if more capital is at stake staking is like Capital at stake so if you do something malicious your Capital at stake is slashed you get punished for doing something malicious if you do something good which is contribute to the network in the right way which is what is expected then you get you know

7:17compensated for that so that's taking rewards so the biggest problem with staking is that when you stake your assets they get logged up you can't do anything with them it's just sitting there with the variator you know produc using some staking rewards but you can't withdraw them immediately if you want to withdraw them you have to wait for a unbonding period or a cool down period

7:37cool off period not ideal liquid staking allows you to earn staking rewards but also use the same asset as collateral for different things or just keep them liquid for for no reason right like for example if if Ashton you want to you know if you want to if you have like a th ether today and and you're like okay I'm just going to stake it uh but when

7:58the market turns around and you want exit your position you'll have to wait in the exit queue right because you say Okay I want unborn you won't get your assets immediately you have to wait for it but with liquid staking you deposit your ether into into a liquid staking protocol which then issues you a liquid stake token or a representative token it's like a receipt which you can then

8:19just give it to me I'm like okay as I can take your receipt I I'm bullish aath you may not be but I'll take it so that's kind of how liquid staking works it allows your Capital to be liquid but at the same time in the background the underlying assets are generating staking rewards so you're earning staking rewards plus your assets are liquid so that's liquid staking in short awesome

8:39no I that really uh helps understand how the liquid staking works and with Pak specifically can you talk about how that works and are there certain derivative coins and you know so you stake a certain coin and then you get certain ones back and what are the capabilities on on pakes app yeah absolutely so Pake you know again like I said is an application built on

9:04top of the persistence chain persistence is a cosmos based chain so it uses the cosmos Tech stack uh it has it is IBC enabled you can it has modular approach where you can build applications and modules and you can deploy smart contracts using Kum wasm so that's the persistence chain Pake uh was was developed to issue lsts within the cosmos IBC ecosystem so starting off

9:29with issurance of lsts within Cosmos so if you have atom you can come to the Pake application app. p. finance and and liquid stake your atom you get STK atom which is the liquid state token or the representative token or you want to call it the receipt or whatever that you call it right so P issues that lstd and you can use this LST to do different things

9:52similarly it P allows you to do liquid staking for osmo for dydx so we we go after major Cosmos assets and you can use these assets into the cosmos ecosystem so when I say Cosmos ecosystem unlike ethereum where every every L2 is is kind of like operating in Silo to bridge from one L2 to another you need to rely on third party Bridges uh in Cosmos you actually just need to follow

10:16a standard for bridging which is called IBC inter blockchain communication uh which is standardized across the entire Cosmos ecosystem so now when you have SDK atom you don't necessarily need to use it just on the persistence chain you can take it to osmosis you know LP it in a pool on osmosis you can take it to ux chain which is you know Umi the formerly

10:38called Umi where you can use it as collateral to borrow against it you can take it to Mars protocol uh you can take it to the secret Network on on shade you know so you can do a bunch of things you can Min stable coins you can basically everything that that defa allows you to do you can do that uh but recently we've been you know moving in a different

10:58direction lately uh and and that is going towards BTC so that that is something you know uh which which really excites us all and and there something I would love to talk about here no that's very interesting and yeah I want to dive into that uh on the cosmos ecosystem I feel like the technology is really good um but and it's very advanced in the way that uh

11:22the different chains can work together but I'm not sure if it's just a little technical or um it not as many people for sure uh know about it compared to those that are just staking ether because ether is it's easy to understand um and so many people are staking it um but Bitcoin I feel like is huge especially this year since uh the launch of of ordinals and you know brc2 tokens

11:50and sort of the Bitcoin ecosystem is expanding Beyond uh just Bitcoin itself as the network and you know there's there's opposite opinions on whether that's uh good for Bitcoin to expand into other things um or the people that just think Bitcoin is digital gold uh they don't want anything added but I feel like it's adding a lot of uh community and value into it what do you

12:14what do you think about what's happening with the expansion of utility on bitcoin I think it's definitely a very hot topic and uh I think it's exciting to see things happening within the Bitcoin ecosystem for the longest time happened things did not move right uh now what happens when you start moving is you either go into the right direction or you go into the wrong

12:36direction uh but you're at least moving and then you find out and then you you know change direction again you find the right direction but I think uh Bitcoin l2s so far obviously are kind of like side chains right to be honest those are not true l2s in any form those are still side chains but you could argue that's how ethereum began as well right like

12:57when it like Matic network not polygon at the time it is Matic Matic was a side chain right uh eventually evolved into a layer two and then they came up to arbitrum 20 other site l2s now so I I do see that Bitcoin is going through that phase of evolution where there are side chains which are then going to eventually become true l2s in every sense uh there's you know Babylon coming

13:22bringing yield to BTC so again I think for us what excites us is the possibility of yields because if you look at our history you know we come from a background of like just cash flows and and yield generation so we started with staking right uh that's how we survived in this industry in the early days like we barely made it because of some staking rewards that we

13:46would get on some assets that were staked on our varat node uh so that is a cash flow game we started working on liquid staking again cash flow y yield play right so for us what gets us really excited as yield what gets us excited is is betting on things at at a very early stage I would say not even like at an early stage I say very early because we've so far been very early we've been

14:08very ear we were in Cosmos building in Cosmos when there were like five or six other chains in Cosmos at the time most people did not care about Cosmos it was the second POS chain we were participating in the test net before it went live right so for us it's been about being early being in the right place and and we see Bitcoin evolving into that phase where it will have an e

14:29system it will have you know it'll become an asset that is been been more widely utilized in defi because so far that was not the case you had wbtc which is what I think 10 11 billion dollar worth of wbtc exists today how do you have more BTC generating more yield and that is what gets us excited so yeah that's I'm very excited about this that it's very cool to see Bitcoin expanding

14:54but I I'm I'm curious on on how that would work if Bitcoin is traditionally known as as a proof of work chain where people are mining Bitcoin uh not like ethereum or Cosmos where you're staking it does the staking mechanism work in the same way uh in that it's helping the network if it's proof of work chain actually no so Bitcoin staking is a very different concept that was I

15:19think introduced by Babylon I'm not sure if Babylon was the only one that introduced this but essentially Bitcoin Still Remains a proof of work chain it has nothing to do with staking but what we realized over the year last year or so is that there's a lot of chains now within Cosmos itself there's 100 plus chains right most chains how do they have Economic Security they have

15:40Economic Security by allowing their native token to be staged so if you have like 100 million tokens of of a chain a called you know asset a all these assets 60 70% of these assets are sted to then secure the chain but if the the value of the asset is very low if let's say the the value the market cap of the chain F DV of the chain is like $10 million then

16:04you have an econom if if 70% of the coins are sted you have 7 million dollars worth of Economic Security now that's not enough by any means to attract a large sum of capital right so that's how reaking came into effect the idea of oh let's bring let's build Ian layer cosos actually was the first reaking chain to be honest uh because it had interchain security and let's not go

16:25into that but I think you know we've seen reaking as a concept uh which which is using St ether to secure other services and chains now that's very exciting because you're using locked up e or or liquid st e or just liquid e to secure other services and chains but there's so much Bitcoin that is sitting out there doing nothing not generating any yield how can you put that to use

16:51and secure other chains that is what Babylon introduced with BTC staking so what they bring on is they allow people to who hold BDC to just take it uh when I say take it they just lock it up on on you know Babylon the deposited into Babylon and then they can choose there are 20 chains let's say which are consuming security or want Economic Security from this BTC they'll

17:15be like okay I I'll give up 10% of my tokens to BTC stakers if they secure my chain so 10% of all tokens of of chain a which is asset a goes to BTC stakers of this you know so that makes it very exciting now all of a sudden the the idle BTC is generating some yield and that's uh again but that would create a small you know inefficiency which is you have BTC

17:42which was idle so far not generating any yeld now you'll have BTC which is being logged up to generate some yeld but why lock it up you know because we talk about Capital efficiency why lock it up when you can have it in a liquid stake version and that's where Pake comes in and the LST for BTC which you can then use in in 20 other places right you can take

18:04it to any BTC L2 use it in different btc2 ecosystems you can just use it pretty much anywhere where there is demand for BTC as collateral or demand for BTC to Mint as a stable coin and I think that is then then an exciting play wow that's very interesting Mel so if I understand correctly uh you're you know because when I think of how can we earn gu on or BTC when I look at a a defi

18:32platform normally if you're supplying BTC the yield is coming from other people that are borrowing it and paying interest and you're getting an interest for that but in this case with staking your BTC it's actually helping secure other chains and that are POS chains and then that staking reward actually gets funneled through to the Bitcoin holders is that

18:57right absolutely spot on yeah wow that's very cool and is this something uh I actually haven't used Babylon I've seen it around on Twitter but I'm guessing most people aren't familiar with it is that they actually have that working live right now so so it's on their test net they had the third test net uh finished today they're launching the fourth test net and and I

19:22believe they're going to launch mainnet pretty soon uh but but that's me speculating on the launch uh yeah and so with with Pake are you guys uh building something in the works uh in in the near future here that involves staking your Bitcoin or what exactly are the plans for evolving into this space absolutely so I think uh for for us maybe taking a step back we've so far

19:51made you know bets in specific domains those those specific domains are the thesis of the app chain thesis we made a beted on that which is multiple chains will exist which seems to be you know very true right you see so many chains launching every day uh in Cosmos or using other text Stacks so the app chain thesis which is there'll be app specific chains is coming out to be true

20:20but it's very inefficient because now with so many chains you you have barely like a few thousand users in this industry to be very honest and and it sucks when I say that because I've been building in the space for 5 years now and and you know you don't find many users especially in Cosmos right so for us the idea is to build something which actually makes a difference to a lot of

20:41people right and and that is where Bitcoin comes in because it is that when it's actually a hedge against against the timing of the world we live in right the world is in a in a shitty place to be honest and and Bitcoin is a hitch against that and and you I mean most people believe that and I firmly believe that that we are in very dark times and and it'll only get worse from here so

21:04for us it's about working on an asset that gets us very excited first so this bake is shuing a BTC LST is going to be our Flagship product uh we will issue BTC lsds people can deposit their BTC into Pake which then goes on to Babylon and Pake issues a BTC lstd that people can then use while generating staking yield in the background uh through Babylon and that's the that's the core

21:32product and then we'll work with different projects different protocols to make the liquid state BTC uh integrated into those platform so using it as collateral to borrow against it using the liquid stake BTC as collateral to Mint a new stable coin for example so coming up with interesting use cases self- repaying loans 20 things that can be done that you've seen that have

21:57already happened with ether or or other lsds but doing it with the largest asset with the most robust asset within this industry mhm that's very exciting um and from what I recall there's a large percentage of ether that is actually locked up um what do you think are the prospects for Bitcoin as this uh staking gets more popular and also with the influx of uh

22:24institutions and funds that bought Bitcoin through the ETF do you think that that they'll find a way to get spat Bitcoin and and stake it or how popular do you think this will become how quickly as it gets more popular I think it'll become very popular because I I think if you look at you know what Warren Buffet talks about which is uh he doesn't have gold in his

22:48portfolio because it it doesn't have any inherent yield to it right uh BDC has the same problem but that's the store of value meme that BTC has going for it but imagine you could actually generate HEI on it which does not come from you know borrowed BTC you're not giving out your BTC to somebody else you're still staking it you're still locking it up

23:07it's still in in a decentralized platform on a decentralized platform it's not you know uh yeah it's not that you're lending it out to some other person who may not return it back so I I think a proposition like that gets a lot of people very excited obviously the Bitcoin ecosystem being pragmatic about it the Bitcoin e system has generally been uh you know very conservative and

23:32that is very fair given the you know the the assets at stake for example right uh it's the flag bearer for this industry and and the decisions that are made with BTC can trickle down to every other asset very easily so I think the most important thing is that obviously the opportunity is too big I'm not here to pitch you the size of the opportunity I

23:56think it's something that everybody will get excited about because it allows BTC to be generating and and you know imagine being able to use your BTC to generate some yelds you have cash flows you can borrow against it you can do 20 things man I think that's super exciting now it's very interesting I'm looking forward to seeing how it plays out and and how it works on P stake as well so

24:18for the viewers that want to learn more about this and they're interested in figuring out how to utilize Bitcoin uh where's the best place to follow along with uh the launch and figuring out how to get started uh as Pate continues to grow out this part of their Flagship product absolutely so I think uh just following us on Twitter Twitter is the best place uh to follow us it's Pate

24:42Finance Pate Finance is the handle and uh you can join our telegram Community uh we share a lot of updates you can go to forum. p. Finance where a lot of discussions happen uh you can follow a snapshot on for governance and particip in governance on the P side in terms of the product the product is expected to go live in June uh and yeah you know pretty excited to to get this going it

25:10has a lot of dependencies on Babylon going life because that's where the yield is going to come from uh but yeah I think this is going to be very obviously speculative and not Financial advice but I can see this playing out very much like you know how Ian layer ether fire Ando you know like all of that played out and that to me is super exciting no it's very interesting I'm

25:33looking forward to it I appreciate your insights into uh the P stake launch coming up Babylon um staking on bitcoin and how it works something that I uh wasn't aware of and I think probably most people still don't realize the potential of what this will become uh so I appreciate you enlightening me and the audience today absolutely I'm wishing you guys all the best on on the upcoming

25:56launch I will leave all those links in the show notes and let's definitely follow up as we get closer and after the launch um to see how things are going absolutely thank you so much Ashton