Makoto Takemiya on SORAMITSU's economy of things ecosystem

0:01I'm Ashin Edison from BlockQuake Capital for Investment Pitch Media and the Crypto Coin Show. And today I'm blockchain interviews with Makoto Takemiya, CEO and co-founder of Soramitsu. Makoto, welcome to the show and thank you for taking the time to come on. Yeah, thanks for having me on. You're very welcome. I'm excited to dive into the Sora ecosystem, Polkaswap,

0:24Polkadot, Kusama. I'd love to start our conversation off by just hearing a little bit about your journey, how you got into, you know, blockchain, the Kusama ecosystem, and to start Polkaswap. Yeah, so I got into crypto back in 2013. So it's been quite a long journey and like most people I came in through Bitcoin and from Bitcoin I got into various altcoins

0:50and starting with actually NXT, which is back in like 2014 if those remember those of you remember. And then in 2014 I also helped work as a developer on them working on their consensus algorithm. And then kind of along this journey I decided to start a start my own company Soramitsu and that was in 2016. So almost 6 years ago now.

1:16And then we've just been doing lots of things in the space. I can couldn't even talk about all of them during the course of the show I think. So I'll just say that my the things I'm most proud of are work on Hyperledger Iroha, our work with the Central Bank of Cambodia on their CBDC project, and our contributions to the Polkadot and Kusama

1:36ecosystems through Sora, Fearless Wallet, Polkaswap. That's some of the most fun that I've had actually. Incredible. Yeah, NXT and NEM, both OG projects that I really like. So that's super cool, Makoto. And yeah, with I would let's dive into, you know, the Kusama ecosystem, Polkadot, why you see it as the best innovation and why you're

2:02working in that ecosystem specifically, and let's just learn about Sora, the network and the ecosystem that has been developed. Yeah, sure. So, scalability has always been a hot topic or a big problem in crypto space, and if you try to extrapolate, the users that we have now in crypto to the entire population of the whole world, you can just do

2:26simple arithmetic to see that a single network is not going to scale. And so, the problem really that, from my perspective, that Kusama and Polkadot are trying to solve is really the scalability problem by building a framework that many different networks can come together and they can each kind of specialize in their own little domains and, be able to kind of

2:44coordinate together and, move assets around and maybe even share like some virtual machine space, things like that. So that's to me the most compelling vision that exists currently, in the kind of scalability space for crypto. I think it's, it's a very easy thing to do, well, easy. It's it's the most straightforward way to, to

3:05create real scalability that could, theoretically scale to everyone on Earth, and that's that's a very important, thing to have. And for Sora, we're trying to build a decentralized economic system. So, the scalability is really important. Now, what does it mean economic system? So, there's lots of cryptocurrencies, there's, of course, you know, Bitcoin,

3:25there's kind of utility type currencies like Ethereum. Sora tries to be a decentralized, a decentralized token that can actually power real economic uses. So, productive economic use cases, so the creation of new goods and services. So, an economic system is not just a blockchain token and network, it's also a governance system to actually

3:47allocate, this to the right people. So, you need to allocate the tokens to producers to create new goods and services. And the macroeconomic theory behind this is the general quantity theory of credit or also known as the disaggregated quantity theory of credit put forth by Richard Werner. And in his idea, basically, there's three ways you can create money in an

4:09economy. You can create new money for consumption, consumption of new goods, you know, you or existing goods. You can create money for asset purchases or speculation. And you can create money for production, which is new goods and services. And if you do the first two, you lead to asset price inflation or consumer price inflation. And then only

4:29the third option, creating new money for production, actually expands the economic pie. And so can actually lead to new goods and services. And that's exactly the thing that we're trying to do with Sora is actually create a decentralized way to let people all over the world come together, have some democratic oversight in how to how do you create new tokens, how do you

4:49distribute them in the economy. So, that's what a decentralized economic system is. Very cool, Makoto, and thank you for that economics background like lesson there. I think that actually really helps in explaining, you know, a lot of these projects, how do they actually create value in a way that's actually going to create, you know, some kind of

5:11gross domestic value and not just creating coins for the sake of it. And especially in the Polkadot and Kusama ecosystem, where these parachain lease offering slots, you know, these parachain slots, there's only a limited amount. So, you need to have projects that are going to create value in there, otherwise it's going to run up run out of spots right away. And I

5:37was look following with Sora Mitzu and saw that you have won one of these slots. Maybe you can just talk about where the platform's at right now and in relation to the parachain slots as well. Yeah, so currently we have a network that's been running it uses parity substrate as the blockchain and it launched in April of 2021. So almost a year ago.

6:04And that's a standalone network. We have our own validators up to 69 validators can be chosen for some you know some epoch to do the validation. And then for a parachain we're actually setting up a new network. So this is called a little bit uncreatively it's called the Sora Kusama parachain network. But it's it's you know no one's going to get confused

6:26by the name. It's it's exactly as the name is. It's our Kusama parachain network. And the idea is that this network will also be its own independent network. It will have its own governance. It will be able to evolve over time and try new things you know deploy new code and apps independently of the existing network. And then we'll have a bridge between

6:47these two substrate based networks. So you'll be able to move tokens from well the goal really is to make it they can move tokens from any substrate chain into our network and be able to do swaps on what I think is the most awesome decks in the ecosystem called Polkaswap. And Polkaswap really is trying to be a like the go to place to trade all these

7:08different substrate coins. And the parachain is you know invaluable in achieving that goal. We have to have it in order to have the interoperability in the ecosystem in a secure way. And you know we're just getting started but Polkaswap launched last April along with our initial network and it already has fairly good TVL given that we don't yet have the

7:34the parachain operable yet. So it's about 30 million TVL which is it's not bad for new decks in a new ecosystem and I think it's just going to get better over time. Definitely. Yeah, I know it's very promising for pre-launch right now and there definitely needs to be a go-to place for Substrate tokens in the Polkadot ecosystem to be able to swap and collaborate and grow together.

8:02So, it's looking promising. And when I was looking into Polkaswap, I also saw in the Sora Mitsu ecosystem that there's this stablecoin XST USD. And I know, you know, based on your economics lesson that you gave earlier, I'm guessing you know a little bit about economics of stablecoins as well. And there are a lot of stablecoins that have different economic incentives and roles in them.

8:27I'm curious about the stablecoin in the ecosystem that you're working with and what makes that so special and maybe you can just elaborate on that a little bit to start. Yeah, so XST USD is the first Sora Synthetic stablecoin. So, that's what XST means, like Sora Synthetics. And it works kind of like like Luna's XST. So, in XST or sorry, USD. In Luna's similar name. In Luna's

8:56USD, you burn let's say $10 of Luna tokens and you get $10 of USD. One difference between that and our XST is that in our XST USD is that there's no like protocol fee that is put on top. So, you do get a better exchange rate because all you're paying is just the liquidity provider fee in the pool. You don't pay this extra like kind of seigniorage fee to the network.

9:22But it actually works quite similarly for those who are familiar with Luna. Actually, I proposed XST back in 2018, so quite a while before the white paper actually came out. But the idea is quite simple. You burn like let's say $1 of XOR to get $1 of XSTUSD and be able to get $1 of XSTUSD, you have a primary market maker function that will mint XOR, which is

9:50the native token of Sora, and it give you the, you know, your $1 worth. So, it's it's actually built into Polkaswap as a liquidity source, and so users are always guaranteed to get the best rate, and there's infinite liquidity because it actually can mint new XOR. And so it's it's really quite exciting. We only have XSTUSD, which is a kind of like a die It's a

10:14die-pegged stablecoin. But in the future, we want to integrate oracles into the network, and through governance, people will be able to create new stablecoins based on other types of indices. So, let's say, you know, euro or I don't know, South African rand, whatever people people want. It's kind of up to the community to have that discussion and to

10:34decide. Now, why is this useful? And why do we do it this way instead of doing like over over collateralized function like a die? So, with die, right, if you want to mint some new die, you typically have to put in like like 130% collateral or whatever. It depends on which reserve asset you're using. But you typically have to over collateralize. And in XST, you don't

10:59have to over collateralize when you're burning the XOR because the economic rationale is that by burning the XOR, reducing the supply, you're actually kind of you're helping you know, you're helping stabilize this market for XOR just because you're reducing the token supply that's circulating. And so the benefits to that are are going to be

11:25to the economic system are going to be better than any kind of costs associated with the you know effects rates changing or potentially having to mint more ZOR later because on the aggregate you're actually taking more ZOR out of circulation because XST USD and other XST assets in the future have some utility that can be used. So for example in D5 apps typically it's

11:50hard to reason about volatile currencies. So though usually you want to include some kind of stable coin and if you use a centralized stable coin like USDC or USDT you know they can get frozen at any time. DAI is pretty good too but because of the over collateralization the cost to mint is kind of high and so with XST USD we just kind of remove you

12:16know all these extra costs and make it really easy as it's also integrated right into Polkaswap so you don't even have to think about it if you're trading it. Yeah that's incredible and once again thank you for that lesson. I think a lot of people need to understand the difference between some of those major stable coins like USDT and between the Luna stable coin

12:37and between XST because it is quite a difference in the way that it's governed and the way that the supply works and the way that it stores value. So thank you for that and you talked a lot there about governance and there's so much to talk about because you're working on so many amazing things. But for Polkaswap I really am excited to see Polkaswap grow

13:00out into fruition and the whole Polkadot ecosystem to be able to swap easily and grow it out as these parachain slots keep getting filled. With the governance for that I see it's like very decentralized a community governed DEX which I think is a great which is great and I'm curious more about that governance and like how the community

13:22actually manages the govern the governance of it. Yeah so it's still young ecosystem. So there's the current state and then there's the future state. So the current state is we use decentralized governance that's actually comes with a substrate. So it's a built-in kind of substrate governance pallet. And this works the same as in for example Kusama or Polkadot where

13:46they have a council. They also have ability for token holders to vote on different proposals and to make proposals and there's a tech committee. There's all these different pieces. And it works pretty well. There's like a quadratic voting type of idea where you can lock up tokens for longer if you have more conviction and you can get more voting power associated with it. So

14:04it's it's quite it's quite good as a single stage governance. But in the future what we want to do is make a multi-stage governance pipeline. Meaning that there'll be many different stages in the governance process and each stage will be done by different people. So you don't have the potential to create something like a clique or you know political party or

14:25something like that. And we use a lot of the ideas from American political scientist named Terrill Bouricius and actually he spoke last year at the Sora Economic Forum which is a online event that we are kind of host annually. And in his in his political structure it's actually based on ancient Athenian democracy and in ancient Athens it wasn't a direct

14:50democracy per se. It was based on sortition. So sortition is random basically just randomly choosing people. And by having multiple stages so you have a proposal stage, you have a review stage, you have like a you know pros and cons drafting stage then you have a voting stage. And by splitting up the governance process into all these different stages

15:13and each stage randomly choosing the participants we hope to get a more fair and a more balanced democracy because in ancient Athens you know they never considered that we would have a democracy like like we have in our political structures in the in countries today, right? Where you it's really just a you know, popularity contest. You don't you just have these these factions that

15:37are controlling everything. That goes against everything that Athenian democracy had as the its core tenants. So that's kind of the idea of what we're trying to do into the future. And so actually Athenian democracy, just to quickly say, is based on three core tenants. So isegoria, isonomia, and sortition. So what that means is that everyone

16:02who's a citizen has equal opportunity to contribute their voice. And they all have equal equal voting power. And then sortition is what I just said, the randomly choosing people. And you mix these three components together and you can get a fair and reproducible governance system. So that's what we want to do in the future. Very cool, Makoto. I'm looking forward

16:23to seeing that and to participating in that ecosystem as well. We don't have a lot of time left, but for the viewers that are looking to learn more about Sora and more about the stable coin and Polkaswap and the substrate ecosystem, what's the best way for them to reach out and get into the community and to get involved? So they can go to sora.org. And also, we

16:47have a Telegram chat. You can go to sora.org/chat and that will take you to the Telegram chat. We're pretty active in Telegram. I'm there myself posting memes every day and answering questions. And it's it's a lot of fun, actually. So yeah, I hope people can get involved. And you know, Sora is a community-based project. So you can actually come and

17:11you can do things and make a difference in the world. So let's work together and help help improve the world economy. Amazing. I agree. I'll leave those links in the description box below for the viewers. Thank you so much, Makoto, for coming on to talk about the Storj ecosystem. It's very fascinating. I learned a lot today. I appreciate you taking the time to come on. I'm looking

17:31forward to catching up in the future. Yeah, thanks for having me on.