Jupiter x Friktion AMA

Jupiter: the key liquidity aggregator and swap infrastructure for Solana

Jupiter AMA with 0xFriktion from Friktion(1/22/22)
Friktion brings high-quality portfolio construction and dynamic risk management to DeFi.

AMA Transcript

Ben: 0:02 Usually, when I’m do these AMAs, it’s like the first thing I do. It’s a super early morning. And I am not a morning person. So, it’s good to be doing… I am mostly awake, to be honest.
Friktion: 0:16 Yeah! Are you in New York?
Ben: 0:19 Yeah! It’s freaking cold man.
Friktion: 0:23 Texas got super cold too. I don’t know why!
Ben: 0:25 Oh really?
Friktion: 0:26 I feel like; Texas weather change at a faster rate than crypto prices last week.
Ben: 0:32 That’s good. I got to use that. I’m not in Texas. But that’s a good one!
Friktion: 0:37 It is crazy. It’s 35 degrees.
Ben: 0:40 I don’t even look at it. Because it’s depressing. But I keep debating 2 things. I either want to go somewhere warm, or I want to double down and go colder. And go skiing.
Friktion: 0:56 Are you going to go to a Moutain in February?
Ben: 1:02 Yeah. I don’t know. Actually, I didn’t make any plans for that, to be honest. I’m trying to figure out like, I know there’s so much going on. So I’m like, I feel like, I haven’t. I don’t know. I’m still trying to figure out all the things we’re trying to do for Jupiter.
Friktion: 1:25 Yeah! It’s hard to do multiple of these things while planning more than one month ahead. At least, try!
Ben: 1:32 Yeah. I don’t know. I feel like, I planned a half of a week ahead. I don’t know.
Friktion: 1:43 Goal…
Ben: 1:43 I think; this thing is going to keep changing a little bit.
Friktion: 1:47 Yeah.
Ben: 1:48 But it’s funny, because the speed of crypto though, that half week feels like, I don’t know, a month. It feels like, a lot is happening.
Friktion: 1:57 Especially, this week, it’s been pretty crazy. The market has just done such interesting things that we haven’t seen in… I mean, I catch every market and every asset class. Something we haven’t seen for a year. So, a lot of effort just to keep up and see what’s going on and not fall behind. I guess.
Ben: 2:15 Dude, we should definitely talk about this. This has got to be a topic. Let’s kick this off. Because we said that we’ll do a little casual. But I usually ask the standard intro question. Just for anyone who’s joined us, who isn’t familiar with you guys, probably, most people probably are. But I usually ask everyone if you mind giving me a background intro on you and maybe a brief overview of Friktion. And how did you get started?
Friktion: 2:51 For sure, yeah! I guess, I will keep it casual. But I also want to provide some good context. So, Friktion is building a portfolio manager and Risk Manager on Solana. A best way to think about that is when you own an asset, whether it’s a spot asset, future, perpetual, an option, or you’re yield farming. You have some risk that you take. Most of the times in DeFi when you think about that risk, it tends to not get too much mindshare. And you’re really focused on the APY at the time. So, in short, Friktion is built to provide ROI strategies, low level of risk, and then we have volts, which are our native investment products or structure products. Each volt fits a custom risk reward profile. And that profile can be combined together alongside multiple volts to create a pretty complete portfolio. So, we’ve shipped 2 volts so far, one volt… They’re pretty vanila. The first one is Covered Calls Program. Those are the money call options against spot assets that you already own. Second one is “Cash Secured Put” program. And it’s also doing very similar things, the way, the strikes and experts are calculated are largely determined by the recent market activity. So, that’s a little bit of summary of the first 2 volts. And then, the next 2 focused on volatility yield, and hedging impairment loss, which probably a lot of users of concept product games are familiar with. This like past year thing that happens when the price of the unstable asset in your stable-unstable LP token moves a bunch. And it causes you to wear some adverse selection opportunity cost from your initial position. And then, we want to do shipping volts. The next thing we’re focused on is circuits. And circuits are custom portfolio allocations for DAOs and DeFi treasures. It is focused on understanding what the risk profile of that protocol or DAO is, and building a set of volt customized for that protocol to optimize the parameters that they’re looking for. And I am happy to dive into these things.
Ben: 4:58 We definitely should. I think, it’d be awesome. Well, before we do that because I’m actually really raring to do that. Do you mind sharing a little bit about your background too, just for everyone who doesn’t know?
Friktion: 5:16 Oh shoot! Yeah, for sure. So, I guess our team… So, our team has 5 people right now. Most of us… Everyone has some experience in institutional asset management or quantitative trading and research. So personally, I come from a background in commodities. So, I spent 2 years in a prop shop in Chicago focused on bottom volatility and future across crude oil, gasoline, and foreign products. And I just spent a lot of time diving deep into how to build this trading desk, then Alex, my co-founder, spent a lot of time or a month in the discord. I spent a lot of time in treasuries and equity volatility. And then, we have a couple of folks who are more specialized in low latency systematic equity strategies. So, when you hear the HFT meme, one of the people that has joined recently joined us is a good friend from school that comes from there. Yeah, hopefully that’s useful.
Ben: 6:12 Nice. That’s very cool. And how did you guys decide to… What was the spark that made you guys build Friktion?
Friktion: 6:30 Oh yeah, I totally forget to talk about degen background. So, we got into crypto… I guess, I got into crypto in 2015 when… Actually, I’m sure everyone here knows Saber. So, Ian was one of my first person to intro me into crypto in 2015 when I met him in school. And then another friend of mine got me hooked. And then, we obviously interrogated the BTC white paper. And then we read about what’s happening. And then, he started developing. And he asked, I was like, this makes no sense. I can’t do it right now. I can focus on all these other dribble things. But yeah, it started in 2015 and in 2017. I started taking seriously. I convinced my parents to allocate obviously overweight portfolio into crypto. And then, I decided that I needed to be a trader to manage all these risks that were happening. And I didn’t really understand how the market works at that point. And then, Alex got a lot more into this last year, right before DeFi summer. And that’s also, when we both left our TradFi jobs. So, he was about to start this prop shop in New York. And he was really excited to dive deep into treasuries and stuff, then we both realize that… After being in DeFi past summer, there’s just no tooling to manage risk in crypto. And there’s no way DeFi can actually scale without people understanding what risk you’re taking on. And when I say scale, I mean, we have like 2 million active Phantom wallets. But how are we going to get to like 2 billion? Well, we probably need some tools that people can rely on. And they not have to chase token emission-based yields.
Ben: 8:08 I couldn’t agree more, man. And what a great number, 2 billion! Cool! I think we can get there. Yeah. Oh yeah. No, I am very bullish. I feel like, I’ve been doing a whole bunch of these AMAs. And I feel like the groundwork is being set for Solana to just explode with growth. So, one of the interesting things is… I’m going to probably ask you a similar question, actually. But one of the interesting thing is that Andre from Allbridge shares… Because, he’s got… I asked him. Since, he sees a lot of data around where assets are moving to what chains, can he share some of that? And he was saying that 70% of all tracking that he does is all going into Solana, which I think is a really good signal. And I think, for me, a lot of the other groundwork out of all the other chains Solana has done the best job attracting gaming and NFT projects. They have really good developers, really good projects, and really good community. And I think those communities will also be a great next market for DeFi because a lot of those people, especially gamers, they’re coming in for the plat to earn model. They’re going to accumulate assets, and they’re going to want to do things without. So I think, it’s just going to explode. I’m pretty bullish, actually.
Friktion: 10:14 Yeah, particularly, we also spent this amount of time on the defense side of Ethereum. I think, there’s a lot of stuff to learn from how things were done. And then from the non-defense side. It’s been really interesting, because some of the people that I see coming over now into Solana, NFT world, and gaming world have never touched any blockchain before. For them, this is an alien concept where it requires a lot of trust, but in reality, it’s quite different. It’s like, pretty trustless, for the most part. I tend to agree. I think, it’ll be really exciting to see this next couple of months. Besides, the core team has done so much work in bringing users across things. I think, the brave stuff is quite exciting to me, particularly. As a user of that before and as a lot of our community users with that… It’s like, those people tend to be more trust… Their decision making process is more trust based. They’re looking for security. They’re looking for reliability, and somewhat of autonomy. And I think that’s another reason why people get into Solana. DeFi versus Ethereum stuff.
Ben: 11:29 Actually, I think you bring up a really good point around trust. And I feel like, a lot of DeFi crowd, the whole trustless, permission less thing really resonates strongly. But I’ve noticed the same thing talking to gamers and other folks. And they definitely have the things that resonate with them as… I mean, actually someone was telling me that… For instance, the gaming crowd, a lot of people still use radium swap because that’s the thing that they learn to trust when they first got into Solana gaming. Those was one of their first exposure points. And from maybe a technology point of view, they’re risk averse. They want to use things that are tried, or feel more tried and true. And so I think, it’ll be a different way to reach them than the typical DeFi crowd. So, I think, it’s a good point that you brought up.
Friktion: 12:59 Yeah, I mean, at this point, anyone who is only using one DEX for swapping is just NGMI I mean, they’re not using a Jupiter. They don’t have Jupiter integrated. So, you’re naturally saying you don’t want to maximize your expected value for your trade. So, I would love… I mean, I think, when it comes to swapping, if someone doesn’t have Jupiter integrated into the dApp, then just NGMI.
Ben: 13:25 Dude, that’s actually why our tagline is for smart traders who love money. Because actually, there are to my surprise there are people who are like… I don’t know. I guess, whatever they feel comfortable with or convenient for them.
Friktion: 13:45 It’s a matter of time. There’s so much once people are in. Maybe right now, people aren’t making decisions. But the risk reward is in their mind. But as the average, maybe the marginal user on Solana gets more informed then… A lot of attention will focus towards having all these things packaged in one. But there is just huge motivation behind… What we wanted to roll out was, why doesn’t the user of any dApp on Solana have access to Jupiter or in SDK? It takes some time to get to understand integrated and stuff. But it’s a natural fit for any protocol, at least any DeFi that’s thinking about offering a product or a service.
Ben: 14:36 Yeah. I mean, obviously, we agree. But I think, not just Jupiter… I’ve said this at a previous AMA or something that, I think, there’s opportunity for. I mean, we’re starting to see this with some all in one dashboards. But like… No, I think, maybe this is more relevant for the gaming crowd too. But I think it’s much easier if you take DeFi, or in our case, Jupiter or something to them. So, if you’re a gamer, rather than having to leave your game and go to different DeFi sites, and understand where to go and figure out things. I think the approach of trying to get closer to them and try to have some part of the thinking around the having the SDK too. It’s just like, go where the people are. And be there, and then make things, rather than, having to draw them to Jupiter. And build up the Jupiter brand. We should do both. But I think, there’s a lot of value in just being where people are.
Friktion: 16:02 Yeah! I think you guys have done a really good job like, monitoring where the people go, and then being everywhere. I think, a part of it’s just like, having SDK that’s really usable, and being able to integrate. But then also, I don’t think a lot of people appreciate the extent to which you’ve rolled out this true router that it can spit up orders for size amongst different exchanges. Because that’s a relatively new feature. I don’t know, if you guys call it your V2 or what. But I really agree with having this functionality available. A huge lego!
Ben: 16:36 It’s huge, it’s huge. Are you thinking about doing an SDK, by the way?
Friktion: 16:45 Yeah, we actually already have one. But it’s really tailored for our market makers and the RFQ Program, as well as other protocols that are trying. Because the issue with current… I guess, it’s like diving into the damage of how friktion rates. But we create these things called volts’ shares. Remember, our structure products called volts. So, each volt creates a shared token. And that shared token can only realize the value at the end of the epoch, when the options expire. We’re creating a system right now, which would allow that token to be collateralized against other assets that you own, across Solana. So yeah, once that happens, the SDK will be like, it’s already exposed to Solana and stuff. But as we refine that, it’ll be ready.
Ben: 17:29 Oh that’s going to be cool, man. I think that’s really cool. Yeah! So, I have some other questions. But I don’t know. There are some things that I’m curious about-what’s your general take on what’s going on right now, like, just recently? And then maybe, specifically, how has that affected your volt strategies, if at all?
Friktion: 17:58 Yeah. I think, this has been really interesting. Because the last couple days, we’ve seen implied balls, just like… It’s roof for a short period of time, and then suddenly fall back down. So, as we zoom out a little bit, cause and effect wise, a lot of people would make the argument that like, okay, the Fed decided that they’re going to plan for more rate hikes in interest rates than expected. So naturally, that’s like a risk off move. So, a lot of assets are selling off because of that. And then, the NASDAQ and PTC Correlations have been really high. So, no one really wants to participate. One interesting thing to note is all of our market makers have… Actually, I think that’s just speculation and no advice here. I think a lot of them have lost money in the last couple of weeks. Because they were all sitting like, yes, we can enter into positions. But yeah, I think, the essence of a lot of people lost their money last couple weeks, even if they were like, delta neutral or they were relatively thought they were like neutral risk books. Because some of these unexpected, like, macro events with the fed, potentially poor economic data. But for crypto specifically…
Ben: 19:11 You’re muted. We can’t hear you.
Friktion: 19:18 Can you guys hear me?
Ben: 19:20 We can now. Do you mind repeating what you said?
Friktion: 19:24 Yep. So, I think, we were talking about the last couple weeks.
Ben: 19:29 Yeah! A lot of market makers have lost money because of the macro events. No! You’re muted again. Oh man, dude! We can’t hear you.
Friktion: 19:50 Yeah, sorry. Yes, we were talking about market events.
Ben: 19:59 The anticipated. And you’re almost dropping this amazing alpha, and then you mute yourself. It’s so nerve-wracking.
Friktion: 20:06 Well, I mean, I don’t think, it’s that insightful. I can’t more than losing money. Well. Okay. There are couple of participants in our auctions. There’s market makers. There’s ball hard funds. And there’s discretionary punters. I think, the discretionary punters are still happy. But they’re not hatching. So, maybe they will make some money. Although, note, we’re the only structured product protocol that had a… None of our volts exercised in this period. So, we transitioned to Europeans this week, or last week epoch. Yeah.
Ben: 20:39 Was that in response with what was going on recently?
Friktion: 20:41 Yeah, in December, we were just waiting. We’re waiting on the devs to ship it. And they’re pretty fast. So, it happened. Basically, what that does is it gives less optionality to the buyer of the carpet. Because they can only exercise during like a 30-minute window. So they’re still physically settled, meaning user books, your LP and the underlying asset. Sol, if you’re selling a SOL-USDC called. It was useful. And then, a lot of this call that we’re talking… See, some people in here who are participants in the friction taskforces, or this covered call we share. Yes, you calling an Alpha, but… in our context.
Ben: 21:26 Yeah.
Friktion: 21:28 Yeah. It’s like weekly market notes that come out from a lot of research contributors. And yeah, it covers in more detail. So, we could talk a lot about the term structure and volatility. But it probably doesn’t make too much sense. Until you like digest… There’s actually a really good piece. So that was the GenesysGo guys about institutional offers trading. So, definitely check that one out. And then we’re chatting about this all the time in the discord. So, as things move, recently spot fell a lot, and the volts moved up a ton, especially for 7 days at the money options. Actually, they moved higher for 7 and 14 days versus 30, 60 and 90 days, which basically means like short term volatility. It got way more expensive than monetary volatility, which is rare feature in crypto markets. So then, a lot of market makers who are still capitalized and willing to participate are like sell short term and buy long term.
Ben: 22:28 Got it. Yeah. Interesting. We have a couple of questions from the community. Question one is from Metaverse explorer. I’m just going to read this question. He says, waiting on European, do you mean you’re about to use ship capitals product instead of PSI options? I’m not sure I know what he’s referring to.
Friktion: 23:07 Oh yeah. I think he’s asking about Inertia. So, Inertia is our underlying settlement layer. It is different to PSI options. And I think maybe like he’s referring to ship capital like the investment firm. We don’t use… Besides, I don’t think Jupiter’s use Ship capital. So, we don’t use…
Ben: 23:26 No!
Friktion: 23:27 We don’t use a ship capital product, per se. I mean, obviously, we use product that are at the best price and center, but inertia is not affiliated with ship capital. Our focus is creating the easiest settlement layer for Friktion. So, to describe what inertia is, it’s a European style physically settled options primitive, which is something that we’re working on making sure it’s pretty useful within Friktion. So, it’s a source of a lot of our settlements. And we recently transitioned away from PSI options. No, I think, I see the message. It is not Traction, traction is an American style. But it was inspired by a lot of these things like PSI options and Traction. That makes sense.
Ben: 24:16 Cool. I mean, I guess, we should ask this follow up question which is, what are your general thoughts on Friktion versus the other current competitors? Do you even know…
Friktion: 24:37 Yeah. I think, I don’t really see a lot of people trying to build portfolio management, to be honest. I think, a lot of people are just trying to build simple tooling on top of other existing primitives, but not really thinking about, how to make this a full stack Portfolio Manager? Our focus really is that. We don’t really spend too much time thinking about who could like do it faster? Because I think, especially, at this early stage of Solana, it’s just all about being fast. And today, if you have really good UX… Obviously, we learned a lot from you guys. I guess that’s the question.
Ben: 25:14 Yeah, I think so! I think that’s pretty good. Yep. He agrees. Metaverse is great. By the way. He’s… You guys should… He done videos and stuff for us. And he’s really good at explaining their projects. So, you guys should definitely connect.
Friktion: 25:38 Let’s do it.
Ben: 25:39 Yeah. So, it seems like your overall strategy is that you’re building the pieces. You want to build a vertical stack around portfolio and risk management. And is that a guiding principle of how you’re thinking about building out these different volts and things?
Friktion: 26:05 Yeah, I think, that’s a good way to look at it. Specifically, with respect to vertical versus horizontal. I mean, we don’t have a mandate. I think, we have a desire is to provide as much exposure across different asset classes that don’t exist. For example, volatilities one that hasn’t really got a lot of attention. But I think, it will once these DAO start to realize that, they’re like risk capital, that they have some responsibility to manage risk. And how we get in the right place, rather than watching their native token move up and down 25% every week.
Ben: 26:39 Right. Yeah. So, give me a second. I’m curious, actually! The question I had was that, or I was thinking about, you talked about building fast. You guys are actually… This is one of the impressive things. I mean, it’s really hard to build fast. I think, you guys are one of the fastest builders. And you do a lot of work. I like to always ask, what do think is your secret sauce for moving fast for your team or yourself?
Friktion: 27:32 Yeah. I think, in some sense, the team is just like a bunch of co-processors. I’m pretty tight about timing things. I think, we always should time things so that there’s no slack. And actually, SBF are really good about the shooting slack in the system. I think, one thing that we’ve learned a lot from how FTX and from all these larger and more recent popular institutions is in 2 years is they just don’t leave like downtime. I think a lot of what… Our thing is, everyone works quite hard at the end of the day. If you just continue to do that, and don’t get distracted. Our core focus is just shipping things. Maybe, we don’t do a lot of… Maybe, we’re slacking in community things, or we’re not spending as much time on marketing as we should. Our goal is to build this product that everyone can understand and provide all the resources we can. We don’t really try not to get distracted. That’s it.
Ben: 28:26 Oh that’s really interesting. I think, you do really well with your marketing. I’m a big fan of how you… At least, the content and the writing… It’s really good. And a lot of the stuff that you do.
Friktion: 28:44 Yeah, another really interesting, I guess secret sauce is like, I mentioned this earlier. But within Friktion, we have these things called sources, which are like learned from rotary capital, which is an Ethereum based protocol that is an isolated risk pool as money markets. They employ this model where basically, anyone from the community can contribute. And once the contributions, either move the protocol forward enough or have very independent unique value, they become part of a spots. And then, we actually announced when we announced our raise recently was like, the taskforce program is not supposed to be… A taskforce contributor only gives; they should also receive. So, we’re really excited to Contra grants program that’s specifically focused around this content and stuff. Because it’s hard for us to be writing a lot of this content while feeding into a lot of the questions that we get from community members. So, I think, that’s another cool one. And there’s three task forces right now if anyone’s interested in getting questions answered or whatnot. One is a quant research analytics. One is like education, and one is like user research. So, either of these things sound interesting, we’re happy to chat with people about it.
Ben: 29:53 Awesome. Yeah, I definitely encourage anyone to sound really awesome roles. And I feel like that’s a general strategy, that people try to do. And if you can do it really well, it’s amazing. Like, I’ve been really impressed. I think, Grape is one of those communities that is at the top that did really well. I’ve been super impressed with Mean, MeanDAO community. Like, it not only the community, but they really harnessed a lot of the great people there. I was surprised when we first partnered up with them. I saw some of the blog post and the releases, talking about our partnership. And Michel was like, oh yeah, this is written by the community. I was like, what! It was so well read. It was so… I was just like, blown away.
Friktion: 31:00 That’s exactly the goal of what we’re doing. Like people from the community can own a lot of the protocol because of these things. They are zaps, which we’ve announced are… 95% community, and just put together by some of the core team to make sure things are in line. That’s it.
Ben: 31:15 That’s amazing. Okay, I want to dive a little bit into this because I’m always curious to know how you how you get started with that. How did you get the community? Because I imagine not everyone can do it. And not everyone can be good at it. Like how do you find the people that can work on it and happen so be good? No. Oh you’re muted man.
Friktion: 31:50 Guys I was rambling and not realizing…
Ben: 31:56 No, you’re muted again.
Friktion: 31:58 I’m trying to get away from the noise. Yeah, I think, in the early stage there are a lot of finding people that we’ve worked with, that are really interested in writing and have experience in the traditional across crypto exchanges. They’re a bit like bit.com, And our large participants in the markets are interested in providing feedback. So, we have a couple of really sharp people in our discord who come from backgrounds in Tradfi, across asset classes. So, we have some finishing macro folks, commodity guys and girls. And then, we just tried to find a bunch of people who’ve worked in multiple asset classes, and tried to curate a group of people who are interested in talking about it and have some time. And they are crypto curious, and just tried to make an environment where they can talk about stuff. And we can share what’s going on behind the scenes with the volts.
Ben: 32:52 I love that. Thank you for sharing that. I think that’s amazing. The distillation of what Michel shared, which might be useful. I thought, it was interesting. How they did it was they just launched their white papers and very early versions of stuff. And they got a lot of hate. They got called out by a lot of people. And then, they took the people who are the angriest or the loudest about what giving them the most shit about what they put out and CO opted them to help make it better. I thought that was really cool, way to build that up. Cool. Wow, this is awesome.
Friktion: 33:44 Yeah. I agree. I think that’s an interesting strategy. Because we got a lot of fun in the beginning as well as, how can you just let any arbitrary person into this task force and expect them to provide meaningful feedback without leaking all this alpha. But at the end of the day, if the protocol is built to give institutional type alphas to normal people. So it was like, Okay, well, we’re doing a good job at giving a lot of situation away. And there’s a lot of concerns around like, Okay, well, these wallets exist, how do you manage exposure with the market selling ball is right before you actually execute? And we got some good feedback from people who are actually doing this strategy and participate in this. And there’s only like, if you’re truly transparent about this stuff, it becomes a lot easier. And I think we’re trying to be better at this because team is constantly trying to ship new things and share a lot of information with the community. So, I am very interesting to hear how different people do it.
Ben: 34:39 Yeah. I would say, the same thing too. Because MeanDao was on the extreme end of super transparency, literally share everything. And even if it’s not… I think, the learning for me was even if it’s not perfect or great then it’s so early and raw. It’s bad and a lot of places. They just share it anyway, And we’re more of the… We’re more of the type to refine it and make it better before we share. Because we want to do a good job on things and ship a good product. But that means that we don’t loop in people as early as other communities or other projects. I just always wonder like, oh maybe there’s value in doing that or clearly MeanDao gotten value out of that. So, I think it’s interesting.
Friktion: 35:38 It depends on your product. Your product almost gets real network effect meme when other protocols have integrated Jupiter versus individuals just going to jup.ag. And trying to do the swap. You access this cluster of users that are already on some other dApp. And obviously, feel this protocol, it’s very appealing for people to want to integrate this thing. And yeah, it’s using SaaS terms, but B2B versus B2C. But it feels like, that’s how you guys have built it really strongly.
Ben: 36:12 Yeah, I mean, the thing is once… We want to make it so easy. The thing is… By the way, it’s such a different growth model, too, because you are getting other projects to do things with them, and they have their own timelines and their own priorities, is always a tougher thing than just like launching with your own thing where you fully control everything. For us, it was like, look, no one should have to replicate all this hard work, doing split trades, aggregating everything, and making it performant. If we make it really easy, and we align or make sure that all the incentives and everything are aligned, so we’re all going towards the same place, then there’s no… You shouldn’t have to. Why should you build it the same thing? You can focus on whatever it is that your value added. And just use us?
Friktion: 37:17 I agree. I think, if we aren’t doing that, there’s no point of building the DeFi stuff. We’re not using your Lego to build our whatever, then it doesn’t make sense. We have 5 people on our team. And if we had 3 people dedicate 3 weeks, just to build this on their own, it wouldn’t make sense versus when we integrated, we were thinking about exactly how to add Jupiter into Friktion. And that itself takes a lot of time because you already have a set of users that are comfortable using our deposit and withdraw model, then we added swap to deposit and withdraw model. And then users were like… Because we got this complaint a lot that said, Oh why don’t you support this certain type of asset like solid versus formal? Why can’t we just do this natively? And they’re kept asking, where do we go? So, I think, naturally, the end state of any protocol requires assets. Most users aren’t familiar with, off the top of their head, means they just moved to integrating things like this.
Ben: 38:15 Yeah! No, really. Actually, it’s funny, in the other AMA I did with Zeta. Because they also are doing an SDK. I actually threw out this idea. And I’m just going to share it because I want to keep testing out this idea. We all end up having SDK because we all want to be composable. We want to be integrated. Maybe we should have an Uber SDK like a SDK partnership. So, you integrate our SDK, and you get everyone else or you get other people.
Friktion: 38:49 Interesting. Yeah, that’s really cool. You only have to do one thing, and you get access to all these, but also to the same point, like… On the dev side, an SDK only goes in… For example, with you guys, it’s easier, because the swap is happening through the client side versus when Saida. We need to make sure we’re checking liquidation requirements and margin requirements. So, we need to do CPI examples, which are like at the program level for some context. But I think that’d be really cool. Everyone just puts like a giga SDK together and can just share it.
Ben: 39:24 Well for me, by the way, we are working at a program level thing so… It’ll work very differently because of the routing stuff. That stuff has to happen off chain but I think we are thinking about ways to move some of that chain or so that could be called a program level. For me, I think, my personal experience, doing this work of like getting the SDK out there, and getting more project integrated, there’s actually just human leg work, getting projects to integrate, not the technical side. I mean, there’s definitely a lot of technical documentation side, but there’s actually just a ton of other work. You could call it BD work. And, I was just thinking like, wow, if you could bundle an SDK, then we’re sharing that BD work together. If I’m making progress, building a partnership, we connected SDK, we shared an Uber SDK. I’m doing all this work to get an integration somewhere, and then they could get you for free, as part of that. And then, you don’t have to do that work, too. We’re both, I think, it made a lot of sense was data. Because data is like… We were asking for integrations for a lot of the same people. For some things. There’s some overlap there. And we’re very complementary to each other too. But why should we both do it in parallel? or why we’re both trying to get our SDK separately integrated? Maybe, there could be like, one that just makes it easier. I don’t know.
Friktion: 41:15 I mean, I think, yeah, this is Solana problem. I feel like, it’s people. It doesn’t happen in another chance.
Ben: 41:24 Yeah! This is definitely a Solana problem. I brought this up before because there’s just a lot of… Also, as an aggregator, on the other end, where we have to integrate other people’s on chain programs, or SDKs. There’s… It’s not… Everyone is a little bit different. So, it’s not a…
Friktion: 41:53 It’s harder than level 10 Tetris Yeah, it’s like, level 25 Tetris. Like, you can’t win without practicing. Level 10, you can win if you don’t practice. You can’t get really far in the marathon without having done it a couple times, but it also gets…
Ben: 42:08 Do you know the story that I share about it? I mean, it’s very early days were like, really, to work together with people, you got to call them up. You have to call them and talk to them. An example that I give is that way back in the day, we couldn’t… One of the challenges we were always doing is optimizing the fit under the transaction limitations. And there was a time that we couldn’t actually fit radium routes, because the payload on the radium thing was pretty high. We just couldn’t fit it. And actualIy, I just happen to be talking to radium, and we were like, oh let’s try to work together. By the way, could you help us out with this problem, we seem to not be able to do this. And he’s just turned out that actually one of their arguments was optional. So we could not pass that in and save enough space. And then, literally, that this was one little interchange between them. Because there’s no documentation. No one says, anything. No one knows anything. They’re the only ones that know this information. Argument was optional. I was like, what? And then, all of a sudden, we were able to, rating routes. And, and it was such a simple thing. We’re at that phase. You got to call and talk to them.
Friktion: 43:40 Otherwise, you become living in this Metaverse full time. And we’re just weird. It’s fine.
Ben: 43:46 It’s totally fine. But imagine, I mean, how does it scale? I feel for the people who are… There’s all these new projects and new people building. We’re fortunate to have been early. And we’re in communication with a lot of groups. And so we can chat with them and say, Hey, what about this. But as salon grows, there are more projects. And people who don’t know as many people, how do they do it? So, that’s hard. Yeah!
Friktion: 44:18 Yeah, it won’t be easy for sure. I mean, I’m hoping open sourcing of contract level stuff becomes the real standard. We’re behind. We need to get there. We’re just about to start 2 audit so hopefully that’s useful.
Ben: 44:33 Yeah! That’s awesome. I’m glad to hear that you’re open sourcing. Oh gosh! I’m going to… I can’t even believe how much time… We should do a trivia. Let’s do a trivia. Jesus! Oh yeah!
Friktion: 44:53 Let’s do it. Yeah, we have a pretty exciting NFTs
Ben: 44:57 Yeah, we have a pretty excited… We should give it out. Alright, let me do one thing.
Friktion: 45:06 Okay, maybe, I guess, I can ask a relatively…
Ben: 45:10 No, I got one. You can come up with another one. But I’ve got one already.
Friktion: 45:18 Yeah, I guess, how many assets just Friktion support right now?
Ben: 45:24 You want me to ask that one? Oh you already asked it. So, I’m switching to yours?
Friktion: 45:29 No, I’m just thinking of random questions. We don’t have to…
Ben: 45:33 We’re not using that. Let me ask, how many unique spot token addresses Sol, dude is count. The Metaverse is awesome. Alright. I’m sending out trivia question number one. This is this might be a familiar one. Alright, trivia question. Number one, what is the most wrong answer for why Friktion is called Friktion? I’ve asked this before, but it’s a fun question. Oh that’s good.
Friktion: 46:21 Because they are freaky a ton? I don’t get that one.
Ben: 46:39 Maybe we’ll wait for some someone to come around. Yeah, is there is there? the question that I I’m starting to ask everyone. Is that Is there something you see in your data? Or, that you find surprising, and maybe it’s about what’s been going on the recent couple of weeks, but, but um, it hasn’t been something interesting.
Friktion: 47:06 Particularly, we do our RFQ options to channel RFQ, on Fridays, right after 8 am UTC. This week was particularly interesting because we expected higher upside volt bids. But then, right as the auction started, Mark starts a SKU. So a lot of the SKUs, which is just like the difference between the implied volume of production at some time and call option itself, then it really started to favor pricing for these Puts, which was contrary because like the whole market move, right as this auction was starting. So we ended up realizing better on like these downside volatility products than the upset ones, Because I was trying to get rid of their upset ball and buy more affection. But it’s just like anecdote. Interesting. Other probably, like more relatable one is just like the number of different addresses that are interacting. I think we have like, between 12 and 1500 unique addresses across the entire protocol right now, which we didn’t expect for 3 weeks into the product. And I think a lot of it’s a function of the UX, and seeing information as you said.
Ben: 48:12 Wait! What do you mean by that is a function of the UX and information?
Friktion: 48:19 Yeah, it’s like just having answers to simple questions that anyone participating in the strategy would want.
Ben: 48:26 What am I actually doing by depositing? Sure, it says API at the top but what does it realize every week? What does it realize for the last 10 weeks?
Friktion: 48:34 And pretty transparent performance of the volts over our epochs? Which was volts. So, we were just showing as much information as we can
Ben: 48:49 Yeah! Actually, this goes back to… I’m also watching the answers by the way. Because they are freaky a ton. Freaky a ton. Sounds like friction. Wow, that is a stretch man. Because he’s always eating briskets This one’s tough. Usually, most wrong answer naming is a pretty good one. I liked the slippage one though. That was pretty good. Because he’s always eating Chris kits.
Ben: 49:37 Guys, look, there’s an awesome NFT in this. Work harder.
Friktion: 49:43 This answer is like non-trivial that. It is out of a meme. So, in the sense like, one inch is the weirdest name ever for a protocol. Same is with Macho. But friction with a “K:” is building to minimize yourself. So…
Ben: 50:02 Wait! Was that the legit answer? Is that why you called it Friktion?
Friktion: 50:07 Yeah! What are we trying to avoid? And then we just call it that. And then, we put a “K” in there because it seems even cooler. And it was spontaneous. And the branding looks really cool as we were playing around with it. So…
Ben: 50:22 Yeah! You guys are so good at the branding and the naming man, I love it. I am just always impressed. Correction is the correct answer. Because they are smooth. By the way, you get to choose any of these answers as the winner since most wrong answer. So whichever is most wrong to you, or most cool, whatever your vibe was. Up to you! I mean, there’s some good ones. COVID ones pretty good. I like the guy. I like the frequent ones.
Friktion: 50:54 Because they’re like a count to a number of unique responses that we probably take. Until these are pretty fun.
Ben: 51:03 Yeah! No, this is usually a really fun one. I’ve done this one before.
Friktion: 51:16 I mean, the real answer was like, we just like physics and stuff. And it made sense to have something that would fit in. So, we could build a theme of physics related things. We’re going to drop something called circuit. I think, I was alluding to this earlier, but if it’s a volt. Because, and then we’re going to announce these roles called inductors. And then, friction which is like… It manages, like current between positive and negative terminals in the normal circuit. But…
Ben: 51:45 Yeah!
Friktion: 51:46 You have to pick it.
Ben: 51:48 This is actually… You can pick any answer. Wait for some more… But by the way, this seems all more electrical engineering related than physics.
Friktion: 52:04 Yeah, I know. It’s weird because they got they actually studied petroleum engineering and math in school. And then, everyone else was more CS and math. So, we’re just thinking of what was some fun stuff we’d like to do.
Ben: 52:18 So, you have no electrical engineers or anyone with that background? You just haven’t a tune to this.
Friktion: 52:28 We just like electricity a lot. And we love volts and play on vaults. Like most DeFi products over a vaults for this site. And volt sound way cooler than vaults. You have lightning volts and stuff.
Ben: 52:41 My God! Dude. It’s so good. You guys are awesome, man. The naming is so good. Rubbing equals friction!
Friktion: 52:54 I think that one might win.
Ben: 53:00 Dude, you call it man.
Friktion: 53:03 A repeat like a ladder. And I guess, I should pick one. It’s a lot of work. But…
Ben: 53:07 Do you want to pick a couple?
Friktion: 53:12 I personally like they’re a freaky a ton. It’s just like, so Degen or off the cliff. That’s one. I think rubbing is also a good one. And then, I think, Metaverse explorer has gotten a little bit creepier every message that they’ve sent. But I like their second one. It’s such a drag to use. Okay. It’s not really truly… It’s supposed to be not a drag to use, but I can see what’s coming from.
Ben: 53:41 All right. Cool. All right. So wait, let me get that one. Let me announce the winners here. Who was the other one? Who was the… Lemare, freaky a ton. Nice. All right! We have three winners
Friktion: 54:09 Awesome. Yeah. I mean, anyone who’s Lightning Thief in the Friktion discord also keep an eye out for winning some cool things. And we’re working on a really interesting drop. So, if that’s some Alkalete for y’all as well.
Ben: 54:23 Awesome. Yeah. Actually, I didn’t know about some of the stuff that you were doing. Now I want to be a Lightning Thief.
Friktion: 54:30 So, let’s go. Lightning thieves are the users that first wanted to test out our Dev. They had actually in later November. I think in early November. Yeah. So there was no economic incentive for lightning thieves to participate and get that. They just took a minute out of their day to apply for being lightning them. And then, try out the DAP. And then, provide some feedback. So, I think, I really value that community within Friktion. So, I appreciate that.
Ben: 54:59 That sounds Awesome. They sound great man. We’ve had similar groups to help us test. And they’re the best known. Literally the best people! Let me ask one question that it came up earlier. And I feel like a lot of people ask this. So, this could be maybe… I think, it’s relevant but I can’t even find who asked. So apologies. But I think someone else… Here we go. So, Humphrey Jupiter asked, how safe our investments in volts, but I’m going to reinterpret a little bit. Because I think, for me, the question is how does someone who is maybe not as familiar with covered calls and some of the vault strategies. How did they figure out for themselves? Where the risk is? how to choose where to deposit their assets, actually?
Friktion: 56:16 Yeah! So we’re going to add a page to the dApp soon. It’s called analytics. And then another page that’s called portfolio in which we will basically allow anyone to connect their wallets to the platform. And then, we’ll look to see what is your risk profile? What are you participating in? And then, where could Friktion fit into that, to build full stack portfolio? Because a lot of people ask this question. And then, the first level of answers come from asking people in the discord, the second level come from going to the Friktion docs and reading about how do these strategies work? And then, what does it mean to like sell upside volatility versus downside volatility. And in terms of a direction of view right? Because volatility is, for the most part, it’s directionally neutral. But the way you measure it can change that a little bit. So I think the first place is definitely hit up the discord 24/7 people. And they’re answering and talking about stuff. We’re working on pushing a lot of new changes to the UI, since it’s trying to ship it to get faster with what’s going on the backend. So that’s the first one, the documentation is also quite good. If you just want to watch a video or like an educational piece on how does the strategies work, I would say those are the first 2 places to go. And then, stay tuned for a portfolio page, which will help you allocate better.
Ben: 57:29 That sounds awesome. I mean, are you saying that there’s going to be someone that will look at your wallet, and then make those recommendations? Or is this more going to be an AI or some algorithm or something?
Friktion: 57:43 Yeah! For DAOs, it’ll be an inductor, which is human who’s helping like a strategist, who’s helping that DAOs allocate across different volts and create new volts specifically for that DAOs. And then, as DAOs get into this, they can get into circuits, which is the program for this portfolio manager. Individuals can also participate; to see how they would fit across this. For individuals, it’ll be a little bit more automated, since data is more reliable. And we can see that they’re looking to get this specific file that we can test that we can back test for. So yeah, that’s, that’s how it is right now.
Ben: 58:19 That’s really cool. That’s it. That’s really awesome. Actually, I am really excited for the circuits thing. So, we should definitely work together.
Friktion: 58:31 So, yeah! It would be awesome to have you guys as part of the Genesis circuit once. We’re going to open up all this stuff this week. It’s just been flushed with stuff to do this week. But hopefully this weekend, we’ll open it up to you guys. Again, yeah, sorry. It’s been a really long conversation. But I really appreciate this is awesome. Glad to share some of this stuff with you guys.
Ben: 58:49 Yeah! Thank you. We actually… I didn’t even check the time. We are out of time. Thanks for coming and sharing. Any last things you want to share with the community?
Friktion: 59:05 I think, just hop in the discord. Like, let’s chat more about what you guys would like to see. And I think, what we’re going to try to do a better job of making these strategies, more understandable, as well as packaged as a portfolio. I think that’s a really big thing that has yet to unlock, which is meaningful risk management, rather than just yield. So, again, our focus is on genuine returns across market cycles, not just when everything is booming, and your yield farming this checkpoint. And so…
Ben: 59:34 Perfect. Awesome. Thank you! Now’s a good time for these strategies. So, I think it’s great. I heartily recommend. I will probably be joining you because I want to learn more too. So awesome, man. So, thanks for coming. Thanks, everyone for joining and listening at this time. I really appreciate it. And we’ll see you at the next one.
Friktion: 1:00:00 Thank you guys, its been a lot of fun. See you guys in this…
Ben: 1:00:03 Yeah! Cool, Awesome, Cheers!