Pioneering DeFi on Bitcoin: The Velar Journey
Summary
TLDRIn this insightful presentation, the founder and CEO of Valar, Mill of Valer Mik, discusses the evolution of Bitcoin's ecosystem and the challenges of unlocking liquidity. He outlines Valar's journey from its inception, through building foundational DeFi products on Bitcoin's L2s, to their vision for a decentralized future where applications seamlessly cater to diverse user needs without infrastructure isolation, aiming for a scalable and user-friendly Bitcoin economy.
Takeaways
- 🚀 The Bitcoin ecosystem is currently in a nascent stage with significant growth potential but has not yet reached 'escape velocity'.
- 💡 The speaker, Mill of Valer, is an early Bitcoin ecosystem founder aiming to provide a framework for understanding the current state and future trajectory of Bitcoin.
- 🏦 The demand for yield on Bitcoin has traditionally been met by centralized exchanges, but trust issues have arisen, prompting a shift towards decentralized solutions.
- 🔄 The lack of programmability and limited block space on Bitcoin L1 has led to the exploration of L2 solutions and sidechains for building applications.
- 🛠 Valer's journey is divided into three chapters: the philosophy of why they started, what they have done so far, and the future direction of the Bitcoin ecosystem.
- 📈 The company began with a hedge fund offering Bitcoin-denominated returns and evolved to address the need for yield on Bitcoin in a decentralized manner.
- 🌐 Valer built on Stacks, one of the early Bitcoin L2s, due to its larger user base and TVL compared to other available options at the time.
- 💼 Valer Dharma focused on creating simple D5 protocols and products to test the viability of the Bitcoin ecosystem for scaling applications.
- 🌟 Val ARA aims to kickstart the economy by building goods and services, with the world's first perex on Bitcoin being a key initiative to drive yield and price discovery.
- 🔗 Valer has built a Launchpad, a bridge for liquidity, and a platform for creating meme tokens without coding, all to facilitate project launches and community building on Bitcoin.
- 🌐 The speaker envisions a future where the Bitcoin ecosystem offers a multitude of applications and yield opportunities without the need for users to be aware of underlying infrastructures.
Q & A
What is the current state of the Bitcoin ecosystem according to the speaker?
-The speaker describes the Bitcoin ecosystem as being in an interesting position, having taken off but not yet reaching escape velocity. There is a lot of interest from builders and investors, but the ecosystem is still in a middle stage of development.
What was the speaker's previous role before founding Val?
-The speaker used to run a hedge fund that provided Bitcoin-denominated returns, trading perpetual inverse contracts, allowing Bitcoin holders to earn more yield on their Bitcoin.
What fundamental change occurred in 2022 that affected the crypto space?
-In 2022, there were failures of centralized custodians, leading to a loss of trust in them. This event highlighted the need for decentralized solutions where people could earn yield on Bitcoin in a secure, native environment.
Why did the speaker choose to build on Stacks initially?
-The speaker chose to build on Stacks because it was the bigger L2 at the time with around 5,000 monthly active users and a few million dollars in TVL, and it aligned with their vision for building on Bitcoin's native infrastructure.
What is the philosophy behind building a perpetual exchange (perex) on Bitcoin?
-The philosophy is to have the price discovery of Bitcoin happen on the native Bitcoin ecosystem itself, rather than on centralized exchanges. A perex is seen as crucial for kickstarting the economy and providing yield that can be utilized across various DeFi products.
What is the significance of the Valar Dharma phase in Val's journey?
-Valar Dharma was about building simple products to test the viability of the Bitcoin ecosystem. It was the first phase where they focused on creating protocols and products that would allow them to understand if the ecosystem could scale and work effectively.
What is the purpose of the Val ARA phase mentioned in the script?
-Val ARA is aimed at kickstarting the economy by building goods and services on top of the tested foundation from Valar Dharma. It's about creating more advanced products that can attract a larger user base and make the Bitcoin ecosystem more appealing.
What is the speaker's vision for the future of the Bitcoin ecosystem?
-The speaker envisions a future where the Bitcoin ecosystem offers a multitude of applications and ways to earn yield, with a focus on not fragmenting liquidity or isolating infrastructures. The goal is to create a seamless user experience where applications can cater to various user needs across different L2s and infrastructures.
Why did the speaker mention the importance of not isolating infrastructures in the Bitcoin ecosystem?
-The speaker believes that isolation leads to fragmentation of liquidity and hinders the growth of the ecosystem. Instead, there should be collaboration and interaction between different L2s and infrastructures for the overall benefit of the Bitcoin ecosystem.
What are some of the products Val has built or plans to build to support the Bitcoin ecosystem?
-Val has built a simple AMM, a Launchpad for project creators, a platform called mem stack.com for launching meme tokens without coding, and a bridge to facilitate liquidity transfer between ecosystems. They are also working on a perb deex and are focusing on expanding their products across multiple L2s.
How does the speaker view the role of applications in the future Bitcoin ecosystem?
-The speaker sees applications playing a crucial role in catering to users by providing the best user experience and choosing the most suitable L2 or infrastructure for their needs in real-time, based on various factors such as security, latency, and transaction speed.
Outlines
🚀 Bitcoin Ecosystem Growth and Valar's Journey
The speaker introduces the topic of decentralized finance, particularly focusing on Bitcoin liquidity and the role of Valar in this space. The presentation is structured into three chapters, reflecting on the Bitcoin ecosystem's current state, Valar's contributions, and future prospects. The speaker shares his background in running a hedge fund that provided Bitcoin-denominated returns and the realization of the demand for yield on Bitcoin. The central issue discussed is the lack of trust in centralized custodians and the need for native Bitcoin applications that offer yield without compromising security or requiring the bridging of Bitcoin to other ecosystems. The speaker outlines the challenges of Bitcoin L1, such as limited programmability and block space, and the decision to build on L2 solutions like Stacks. The Valar Dharma phase is highlighted as a foundational step in creating simple protocols and products to test the viability of the Bitcoin ecosystem.
🛠 Building the Bitcoin Ecosystem with Valar Dharma
This paragraph delves into the specifics of Valar Dharma's development, which aimed to address the needs of the Bitcoin ecosystem by creating simple, user-friendly products. The speaker describes the creation of the world's first unisoft V2 inspired AMM on Bitcoin, which was a significant milestone achieved through self-funding and community engagement. The success of the incentivized testnet, attracting over 100,000 users, demonstrated both retail and institutional interest in yield-generating Bitcoin applications. Further developments included a Launchpad for new projects, a platform for launching meme tokens without coding knowledge, and a bridge to facilitate liquidity transfer between different ecosystems. The speaker emphasizes the importance of these foundational products in testing the ecosystem's viability and preparing for the next phase of growth.
🌐 The Vision for a Decentralized and Unified Bitcoin Ecosystem
The speaker presents a vision for the future of the Bitcoin ecosystem, drawing parallels with the evolution of the internet and the shift from web 1.0 to web 3.0. The discussion centers on the need for a decentralized infrastructure that does not isolate itself but rather works in harmony with other protocols to provide a seamless user experience. The speaker critiques the current state of web 3.0, where infrastructures are controlling narratives and isolating users, and contrasts this with the potential of a unified Bitcoin ecosystem. The goal is to create an environment where applications can cater to a wide range of users, from retail to institutional, offering diverse yield-generating opportunities with varying risk profiles. The speaker emphasizes the importance of not fragmenting liquidity and the need for infrastructures to support each other for the overall growth of the Bitcoin ecosystem.
🔮 Envisioning a Future of Interoperable and User-Centric Bitcoin Applications
In the concluding chapter, the speaker outlines a future where Bitcoin applications are interoperable and user-centric, providing a multitude of yield-generating options without the need for users to be concerned about the underlying infrastructure. The focus is on creating a seamless experience where applications can dynamically select the best infrastructure for users based on their needs and risk profiles. The speaker calls for collaboration among L2s and the broader Bitcoin community to avoid the pitfalls of fragmentation and to work towards a collective vision of a scalable and inclusive ecosystem. The presentation ends on a hopeful note, anticipating significant developments in the Bitcoin space in the coming years.
Mindmap
Keywords
💡Decentralized Finance (DeFi)
💡Bitcoin Liquidity
💡Bitcoin L1
💡Bitcoin Layer 2 (L2)
💡Automated Market Maker (AMM)
💡Yield on Bitcoin
💡Perpetual Contracts (Perps)
💡Bitcoin Ecosystem
💡Programmability
💡Launchpad
Highlights
Introduction to the current state of Bitcoin ecosystem and its potential for growth.
Emphasis on the interest from builders and investors in Bitcoin projects.
Explanation of the motivation behind starting Valar and building on Bitcoin.
Discussion on the limitations of Bitcoin L1, such as lack of programmability and limited block space.
Insight into the shift from centralized exchanges to decentralized finance (DeFi) for Bitcoin yield.
Mention of the rise of Bitcoin L2s and the choice to build on Stacks.
Introduction of Valar Dharma, the first version focused on building simple DeFi products on Bitcoin.
Launch of the first Uniswap V2-inspired AMM on Bitcoin and its success in attracting users.
Development of a Launchpad for new projects on the Bitcoin ecosystem.
Creation of Memstack.com to enable launching meme tokens without coding knowledge.
Building a bridge to facilitate liquidity transfer from Ethereum to Bitcoin L2s.
Transition to Val ARA, focused on building more complex goods and services on Bitcoin.
Introduction of the world's first perpetual exchange (Perp DEX) on Bitcoin.
Emphasis on the importance of Perp DEXs for price discovery and generating yield in the Bitcoin ecosystem.
Discussion on the future vision for Bitcoin, focusing on user experience and integration across multiple L2s.
Call for collaboration among L2s to avoid liquidity fragmentation and isolation of infrastructures.
Encouragement to focus on the application layer to enhance user experience in the Bitcoin ecosystem.
Transcripts
let's continue today's discussion and
continue the topic around decentralized
finance and talk about how we can look
at Pioneer in unlocking Bitcoin
liquidity ladies and Gentlemen please
welcome up the founder and CEO Mill of
valer mik check yeah
hey friends lots of familiar faces here
today uh welcome to the future of
Bitcoin uh when I was thinking what to
present for my 15-minute presentation I
was actually confused because uh as
Bitcoin ecosystem we have really taken
off uh the spaceship has taken off but
we haven't reached an escape velocity
yet and we also haven't escape the
atmosphere yet so we are kind of in a
very interesting position right now
where we are seeing a lot of interest
from a lot of Builders who want to build
in Bitcoin there are lots of investors
who have invested in Bitcoin projects
which are or might or might not be going
anywhere but there are still a lot of
investors who want to invest in Bitcoin
so we are kind of in middle and I
thought let me uh play my role as one of
the early Founders in Bitcoin space and
uh and give all investors Builders U and
users a framework of what's happening in
Bitcoin ecosystem what has happened
until now and where Bitcoin ecosystem is
going using the Val journey and I also
give you enough time to uh see the good
animation that our team has made here
until now so we are going to talk about
three chapters starting from why we
built well uh which would give you the
philosophy of why we started well y we
started building on bitcoin chapter 2 is
what we are doing and what we have done
until now and chapter three is going to
be where we are heading as Bitcoin
ecosystem so uh before well I was
running a hedge fund and and uh the USP
of the hedge fund was that we used to
give Bitcoin denominated returns so in
the in the liquid hedge fund that we
were running we used to do uh Perpetual
contracts trading but they were inverse
Perpetual contracts and basically
Bitcoin holders would put Bitcoin with
us and they would want to earn more
yield on their Bitcoin by using uh coin
margin PBS trading that we used to do or
inverse PBS as we call it so what I
realized very early in crypto was that
there is always more demand for yield on
bitcoin but it was it was all happening
on centralized exchanges something
fundamentally changed in 2022 when we
saw a lot of centralized custodians fail
and people lost Trust on centralized
custodians and there was only one other
option in defi where you would have to
bridge your Bitcoin to something else
some other ecosystem like ethereum or
Solana but that was also not very
trusted so the so the fundamental
solution to this and a lifetime solution
for this was to build applications using
infrastructure on bitcoin native where
people can put Bitcoin in Native secure
Bitcoin environment and earn yield on
top of it but when we looked at Bitcoin
L1 of course the problem statements on
bitcoin L1 are it doesn't have any
programmability there is limited block
space on bitcoin L1 and we talked about
the third problem which was uh it wasn't
a case where you would want to take
Bitcoin away from the Native secured
Bitcoin
environment so the only solution at that
time was to look for l2s look for side
chains and build on top of them when we
started well in early 2023 there were
two Bitcoin l2s there are over 120
Bitcoin l2s that I talk to right now so
we have come a very long way but when we
started well from those two Bitcoin elos
there was stacks and root stock we
decided to build on Stacks which was the
bigger one at that time Stacks had
around 5,000 monthly active users few
million dollars in tvl and four to five
applications live so uh when we thought
what we should build and what should be
our timeline we uh at that time I was
actually reading uh around the best
business book I've ever read in my life
that's called bhagwat Gita and around it
and I read this quote somewhere in in
The Vedas they say ARA is about
generating food by creating goods and
services by the way these are the uh
four versions of Val that we have
planned and in the chronological order
of Valar Dharma Val ARA Kama and mosa so
while Kama is satisfying this hunger in
Dharma we consider the hunger of others
and in Moka we outgrow hunger we decided
to do Valar Dharma first in which as
it's read here we consider the hunger of
others we had to build simple D5
protocols and simple D5 products without
which there wouldn't even be possible to
test if Bitcoin ecosystem would scale or
work so we literally just set out and
built a simple amm uh through uh the
road map that we created in 2023 we
wanted to build the foundation in 2024
we wanted to uh see where the ecosystem
is and try to build scaling applications
and 2025 is of course we'll see where it
goes but the first uh version that we
had valard dma we started building
simple products where we would at least
us users investors was able to test if
this is if Bitcoin ecosystem is really
viable if it's really viable to build
applications and for users to use
applications on top of it so we built a
simple amm and we then we started
building few more products so talking
about the amm we built early last year
we built world's first unisoft V2
inspired amm on bitcoin and uh we were
still self-funded at that time we didn't
know where we would be in a year or in 6
months from now but we did a
incentivized test net and we got over
100,000 users on our test net within a
few weeks which was a uh which was the
click for us especially because we saw
that we knew that there is a demand from
institutions that they want to earn
yield on bitcoin but for the first time
we saw that even retail wanted to earn
uh yield on their Bitcoin Holdings or
retail wanted to use Bitcoin specific
applications so the the amm is very
simple it's same as unisoft with good
user experience orange is the color we
chose of course because of
Bitcoin when we launched the amm we also
saw that many other people wanted to
launch uh their projects on bitcoin
ecosystem as well but they didn't know
how to create a community some of them
were first time Founders so we also
built a Launchpad in the Valar dma
version where people can come and launch
their uh projects on the Bitcoin
ecosystem when and then we realized one
more thing people wanted to launch
projects on bitcoin ecosystem but they
didn't know how to code or some of them
didn't know how to write smart contracts
there are of course security issues with
smart contracts which would uh which
would have issues in the future so we
built mem stack.com which is a platform
through which you can uh launch a meme
token without having to learn to
code we ALS and then we realize that
people who are launching their uh tokens
even through our Launchpad without
learning to code they also needed
liquidity some of their liquidity was
fragmented across different ecosystems
they wanted to bridge them from
different ecosystems so we built a
bridge where people can Bridge liquidity
from ethereum to bitcoin specific
l2s so our valara was basically about
building simple products and testing out
if Bitcoin ecosystem would work or not
that that took us more than a year it
was entire 2023 in middle of the bare
Market
uh self-funded completely ran it but we
reached a stage where uh where we saw a
lot of Bitcoin l2s coming up we saw a
lot of people started to build on
bitcoin so we decided it's time to move
on to our version two which is Val ARA
and according to uh the code that we saw
valara is really building goods and
services which means it's kickstarting
the economy so this this uh Valar Dharma
version products are good enough to test
but they wouldn't Kickstart the Bitcoin
ecosystem and make it reach a state
where it would be uh it would be really
intriguing and interesting for millions
of users or institutions to come in so
we decided to build well ARA as the
world's first perex on bitcoin and uh
the philosophy of us building a perex on
bitcoin was very uh specific and
personal to me as I said I was running a
hedge fund and we used to trade pubs
before and what I realized from that is
that uh as of today more than 80% of
entire world's crypto transactions
happens on perss which means that the
price discovery of Bitcoin happens on
perss as well but those perss are not
centralized exchanges and the ethos with
which Bitcoin was created in the first
place was to be decentralized was to
have everything on the Bitcoin ecosystem
itself so the philosophy of this was
that not just the price discovery of
Bitcoin should happen on um on Native
Bitcoin ecosystem itself but apart from
it also it's very important bbex itself
is very important because it has it it
it uh consists of most volume in the
entire space and also if you want to
Kickstart not just one product but the
whole ecosystem where there are products
like uh lending there are option markets
there are money markets there are dexes
and per dexes we you need to understand
uh lending works great when there is
good yield but where does the yield come
from the yield comes from when people
are ready to borrow the landed Bitcoins
in a huge quantity and the borrowing
also happens on perss where people trade
leverage uh people trade Bitcoin on
Leverage so literally perex is the
source of where all the yield from an
ecosystem comes from that's why we
decided to build the
pbex
uh if you see the current state of the
market like I said the binance future
daily volume is around $45 billion while
the biggest pbex in crypto right now uh
dydx is 100th of it so the growth
potential
in decentralized space especially on the
Bitcoin space because you the first was
insane and if you see the total wallet
holders of Bitcoin right now which is 53
million less than uh 10% of those hold
more than one Bitcoin which means over
90% of this Bitcoin holders hold less
than one Bitcoin it's one of the reasons
we decided to uh cater to the retail
Community before because because people
who are holding less quantity in Bitcoin
they would like to earn yield they are
not normal people They Regular People
Like Us if they're holding an asset they
like to earn yield on top of it which is
like very normal that's why we decided
to go with the perb deck so we are in
between Val Eartha right now where we
built uh we built an extended version of
our amm so it's a amm based perb deex uh
built across multiple l2s we started
with stack we are also live on testet on
bit layer and Bob uh which are great L2
shout out to them in such a short period
of time the tech they have built is
amazing
um and we are focused this year to
Kickstart not just our own our own
products but entire Bitcoin ecosystem
and I think it's really important for
entire Bitcoin ecosystem to reach a
certain stage where we have sustainable
yield regardless of bull market or bare
market and we have uh and we also have
uh a set of products that people can
sustainably use including retail and um
institutions
this brings us uh to chapter 3 chapter 3
is my most favorite chapter I think uh
that's what I think about half the day
of uh and I have thought about it for
last 2 years is where Bitcoin is heading
so uh we have to go two decades back uh
when web 1 I've by the way I've heard of
web 5 now which I have no idea about but
I'll take a step back let's talk about
web 1 when web 1 was forming there were
few infrastructure protocol OLS like uh
https ICP there was uh there was www and
this infrastructure protocols which even
we use on a daily basis right now but
most people aren't aware of these are
the infrastructure protocols on which
the entire internet today runs upon but
at that time there was no uh way for
these protocols to earn Revenue so uh
but there were there were application
providers like Google on top of it so us
so everywhere you go for any tech there
will be layers so the base layer is infr
layer on top of it there are application
layer and on top of it there are users
so in web 1 application layer uh
platforms like Google or Microsoft used
to fund these protocols because they
didn't have any Revenue generating
mechanism and they built the entire
internet we see today what difference
crypto made uh was that the base
infrastructure could launch a coin of
their own build a community around it
and for the first time they were able to
generate Revenue they were able to earn
uh rewards for the work that they have
done for building the infrastructure so
that was the difference between web 1
and web 3 but we went a bit over the
line when these infrastructures they
started controlling the narratives they
started isolating each other as
protocols and they started uh and they
started also not just catering to the
applications but also trying to cater to
the users the end user which are like
two layers above them and also try to
control them and isolate them from other
uh infrastructures if you see if you use
this example for web one it's uh it's
very similar to some something like
there are three main infrastructures in
web one which is Google App Store Play
Store and windows and it's like we have
different social media applications for
each of these infrastructures it's like
we have a Instagram for app App Store
but we have something else for Play
Store it means if I want to change my
phone I'll have to change the
application completely this is what's
happening in web 3 right now and this is
one of the reasons I think uh ethereum
failed in scaling D5 so when I say eth
was the test net it's not because it's
bad uh I don't think I'm audible I said
eth was the test
net am am I audible enough eth was the
test
net so when I say eth was the test net
it's not because I hate eth it's because
we have to learn uh from the mistakes we
made while building Def onne and we
don't have to repeat it in Bitcoin
because we have a chance because we have
a chance right now before we are too
late so how I feel by the way I hope you
like the animation again
um so this is the vision I personally
have for it's not for V I wrote it the
Val Vision uh but it's it's for entire
Bitcoin ecosystem it can take 5 years 10
years 20 years I don't know uh but how I
look at Bitcoin ecosystem to evolve is
that when any user
be it an institution or be it retail
when they come to uh when they come with
their Bitcoin Holdings to earn yield
there are hundreds of applications and
hundreds of ways to earn yield of course
any yield generating product will come
with a certain amount of risk so there
is no such thing as no risk only yield
product but there will be so many yield
generating products like the amm we
discussed about like the bridge we
discussed about like the per deck that
we are building there are so many other
products which some of our friends are
building
uh but this products should be the one
that are catering to users and for the
users the user experience should be so
simple and so easy they shouldn't even
care about which infrastructure they are
going on so I don't know how this will
happen the technology is still too far
but probably in future there will be
users uh with user profiles there will
be institutions transferring 5,000
Bitcoin at in one go there will be
retail uh trying to Leverage with 0.005
Bitcoin and these all users will have
this different risk profiles they will
have different needs and probably
applications like Val in real time will
choose which L2 or which infrastructure
works best for them including because
there will be different l2s with
different use cases there will be
different l2s on bitcoin who are
focusing on different things some will
be focusing on security more some will
be focusing on latency more some will be
uh focused on faster transactions it can
be anything but it is the application's
job not the infrastructure's job uh to
cater to these users and to and to give
the best user experience and the best
user experience doesn't come from
isolation of infrastructures it doesn't
come of doesn't come by uh by
fragmenting liquidity just because an
infrastructure doesn't want to interact
with other infrastructure so we need to
focus on the third layer which is the
application layer that's why we started
Valar and I think I think we should all
work together even as l2s that's one of
the reasons we work with a lot of l2s
and we try to convince them not to
isolate themselves uh from other
ecosystem just to just for a short-term
win but to think for the overall win of
Bitcoin ecosystem if we want to scale to
trillions of dollars if we want to scale
to millions of users we have to not
fragment the liquidity we have to not
isolate the infrastructure like how
etherum and other ecosystems were doing
I hope uh I hope we see this future uh
that we want to see but this is what I
think uh thanks a lot I'm way over time
but thanks a lot for coming uh it's it's
a great few years ahead for Bitcoin
regardless of whatever happens and
you'll see us much more uh in coming
weeks and months thanks a lot Mel tagur
[Music]
[Applause]
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