E157: The First Bitcoin Perp DEX with Mithil Thakore - CEO & Co-Founder of Velar

Jacob Brown (00:02.079)
Mytho, how you doing, my man?

Mithil Thakore (00:04.613)
Jacob, thanks for having me and nice to see you again. It's always fun chatting with you.

Jacob Brown (00:09.216)
Likewise likewise man you guys have been crushing it since you guys came on the scene It seemed like it's a year and a half ago or so since you guys Really started building. Is that right?

Mithil Thakore (00:20.177)
Yes, a bit more than a year and a half, but yeah, you have been seeing us on the scene for a year and a half now. Yeah, time flies, isn't it?

Jacob Brown (00:25.774)
Yep. Yep. It's insane. It's insane. I feel like I've I'm like an 80 year old veteran in crypto and I'm also like a teenager at same time. It's back and forth of slow and fast. Yep. Cool, man. There's a lot to touch on. You guys have been building Velar. If people aren't aware, this is a DeFi app cross chain. You guys are touching all kinds of things. Building a perp Dex which we're going to definitely dive into.

But before we go into that, you actually have a pretty interesting background. So give us like a brief overview of kind of like some of your career history as you were going into the crypto space and then Bitcoin.

Mithil Thakore (01:06.747)
Sure, so I am a native crypto boy. I have been in crypto since my final year of university. Did nothing else in my life on the professional side apart from crypto. So been in crypto since late 2016, 2017 early. Started trading bitcoins, made a lot of money very quickly and lost it all in the 2017 bull market. that's how I got into understanding the technology behind crypto more because

once you lose money, you have to still do something. And crypto spoiled me so much already, I couldn't do anything else. I tasted the blood in a way. So yeah, I started learning more, started a services company in 2017 called QuillHash, which we turned into a smart contracts auditing platform called QuillAudits, number two, number three in the world in number of smart contracts audited at one point. We worked with over, I personally worked with over 600,

crypto startups, ICOs during the 2017-18 era, during that bull market, all the way up, all the way down in 2018. Then I exited and started a hedge fund. My hedge fund is one of the reasons we started, Velar, we'll come to

It was a crypto focused liquid hedge fund. We used to trade derivatives on centralized exchanges, mostly perps, Bitcoin and Ethereum perps. That's how I got to know about the perpetuals, derivative sides of crypto. We became really big at one point, over $200 million in AUM at one point in liquid actively managed hedge fund, which is big. You're not a VC, so that's different.

So when we were and then we did really well in 2020, 2021, 2022, even when the market was going down, but when FTX happened, a lot of our LPs in the fund.

Mithil Thakore (02:56.315)
people who would put money with us those were actually Bitcoin holders so we had a USP in the fund where people would put Bitcoin with us on the exchange and we would trade on coin margin pubs which are inverse perpetual contracts so you can use Bitcoin as collateral on FTX on BitMEX and different exchanges and you can earn your profit or you can loss you get loss in Bitcoin so we would have a lot of our LPs they would put their Bitcoin with us to make more Bitcoins so we always understood

I always understood that there is institutional demand for earning yield on Bitcoin holdings because otherwise the Bitcoin would be just sitting and they would see the price going up or price going down. if they can earn more Bitcoin on top of their Bitcoin holdings, it was huge. And when FTX went down, when BlockFi went down, people started losing trust on centralized custodians because now they realize that, you know, if somebody is holding 100 Bitcoin and if they want to make 5 Bitcoin yield on top of it in a year, they have to risk the entire 100 Bitcoin and they don't know if they'll get it back from the center.

because they don't know what they're doing with it. It's like a bank, right? So that's when we lost over 90 % of our AUM within a month after FTX went down. And I realized that, you know, I can't take this anymore. You know, like I was done with, I was genuinely done with so many scams happening in crypto. Crypto is my home, you know, I have...

And I saw always the industry going up and then big scams happening, people losing money and trust. And then the whole industry comes crashing back down all the time. realized that Bitcoin is not going anywhere and people want to earn yield on Bitcoin, but they don't want to trust centralized custodians. And they also don't want to bridge their Bitcoin to smaller chains like Ethereum, Solana. There was WBTC, but it didn't work. Like we had a mandate in our fund where you can't, you can do anything with the

coins except touching WBTC literally so because it was worse than a bank you know worse than a centralized custodian so we I realized that there is potential of in potential somewhere there if you give people yield on their Bitcoin holdings and Bitcoin was even then it was like half a trillion dollars you know or somewhere around that

Mithil Thakore (05:12.719)
down 60-70 % from its top. So there was potential to build a business around earning yield for Bitcoin holders, but in a decentralized way and a non-custodial way. Now the only way to do it was to build derivatives on top of Bitcoin because that would allow people to keep their Bitcoin holding secured by the Bitcoin native security, the native Bitcoin blockchain, the proof of work consensus mechanism, and on top of it,

still hold, they would still be able to hold custody of their bitcoins. So that was the vision behind starting Velar but happy to dive deep into it.

Jacob Brown (05:51.936)
Now this is good, we've opened up a ton of a can of worms here. It's a, I mean first is yield seeking, which is a very hot topic nowadays. You people like Babylon trying to make it easier. People are just like put in BTC and get yield and not just kind of like sit in your bunker coin in safe self custody. Which people were using that back then with you guys. And then.

You've quickly learned there's a big centralization risk in the current services people are using, FTX for example. And that leads you into why you want to build on Bitcoin. Yeah, I think it's a pretty good lead into Velar. So like you see these pain points and there's a bunch of things you could do. so much of the volume is on ETH still and...

We now have better wrapped derivatives back then. think there was even a year and a half ago, it still mostly wrapped Bitcoin was like the dominant one. But talking a little bit about like why build closer to Bitcoin versus ETH and like that decision.

Mithil Thakore (07:02.449)
Sure, so I have two cases. It's a business case and an ethical case. The pure business case is that there is a trillion dollars plus worth of liquidity sitting on Bitcoin and like how I explained that Bitcoin holdings, it has to earn some form of yield. There is no asset class in the world which is worth over a trillion dollars and doesn't earn some form of yield including gold or oil or any other asset class, know, including commodities and stocks, everything. So to earn yield, have you need to have

you need to have a financial infrastructure on top for lending, borrowing, a few other things which can earn yield on top of it.

For Bitcoin, didn't exist for 15 years in its native Bitcoin secured environment. It existed in a centralized way. It existed through centralized custodians like FTX, Binance, Coinbase, but it didn't exist on the native Bitcoin environment, was the primary reason Bitcoin was created. Bitcoin was created with the non-custodial decentralized aspect of building an entire parallel financial infrastructure, which is totally decentralized, totally non-custodial.

But then why not, why not

build it on top of Bitcoin. Until two years ago Bitcoin was just seen as a digital store of value. But that was a very limited scope of what Bitcoin can be. Bitcoin can be this entire base of entire parallel financial infrastructure that can be created. And this liquidity of a trillion dollars can be utilized in this. And like how I said, people realized it when FTX went down and BlockFi went down.

Mithil Thakore (08:42.709)
of Binance going down that know centralized custodians don't make it sustainable for Bitcoin. That's why DeFi has to be created on Bitcoin. Now the second part that why not build it on Ethereum or Solana or other alt L1s.

The reason being that I think the primary reason, which is also ethical reason is the proof of work consensus mechanism, which is the most battle tested and most secure consensus mechanism and most decentralized as well until now. Ethereum moved from proof of work to proof of stake in end of 2023, I guess. Yeah, it was. And that was the last nail in coffin for us, for me, particularly, you that you have to build something on Bitcoin now because proof of stake as a mechanism

to run the entire financial infrastructure of future generations is not tested yet. It's not proven yet. EOS tried to do it in some way. In some way it used DPOS or something, which is like a form of proof of stake, which is like delegated proof of stake, but it failed with even three or $4 billion in funding. there was no proven case of any other consensus mechanism which has been successful at scale apart from proof of work. And apart from Bitcoin, nobody uses proof of work at scale.

So that is the ethical case which like so combined combination of these two cases where Bitcoin provides these two things where it provides us the most secure decentralized and metal tested consensus mechanism Which is which is the Bitcoin blockchain and on top of it the Bitcoin coin is also worth a trillion dollars So if you build something on top you get the most security and you get the most liquidity So it was kind of a no-brainer to build on Bitcoin

Jacob Brown (10:32.602)
No, no, that makes sense. Yeah, because if you want to robust financial infrastructure, it's going to last a long time. You want to go with the consensus that has the most potential Lindy effect. And we're seeing this with ETH. We like to joke and say ETH is a test net. You gave a talk in Nashville where that was one of the, like, blam, and everyone goes crazy. But we're seeing it right now, which is like,

Economic incentives are very tricky to get right and there's a lot of narrative and like social consensus involved on top of the financial side and ETH is kind of like withering away and unsure what it's doing. So all that infrastructure is like it works right now, but will it be here in a decade or 50 years? Unsure, but seems unlikely at this point. So, no, that logic makes a ton of sense. The next...

Like a logical question for a founder then though is like, I understand proof of work consensus is a good base to build on. And I want to unlock that lock liquidity at 1.2 trillion at this point or whatever. So it's like L1 versus L2. And then like L1 has a bunch of headaches trying to build on it. And L2 has like a siloing effect of like, none of them have really popped in a major fashion yet. So like when you're thinking about where to build and like lean into that complexity.

How are you guys thinking about L1 versus L2 once you're in Bitcoin?

Mithil Thakore (12:00.091)
Sure, we are all in on L2s, right? And I'll tell you why. With Velar, was a logical question when we started Velar, that where should we build? Should we build on Bitcoin L1? Because Audinals just started when we started Velar as well. there was some way, before Audinals, there was no way, but after Audinals, there was some way to build something on Bitcoin blockchain, right? But there was also the option of L2. That's why we decided to build on Stacks, which is like one of the Bitcoin L2s now.

leading Bitcoin L2. So the reason for that is that Bitcoin L1 will always have limitations and it's like I see it as building a city. know like in every city you have downtown but downtown doesn't define the entire city. You can have so many things

around downtown as well which I mean when I say downtown it means expensive real estate that you can always have an area with where a ton of business happens it has expensive real estate but it can't sustain a city of 10 million people like any downtown area can't sustain 10 million people so you have to build it build around it and also expensive real estate kind of

Kind of the economics of it works in a way that it will allow some things to operate there some things will Automatically go out like if you want to if you if you want to have a dumpster yard You would not have it in middle of downtown You would have you'd rather have a commercial space which can generate revenue for Revenue and more value for all the residents the government as well and everything so I see Bitcoin l1 as As this expensive real estate, but that doesn't mean L2s are not part of the same system

It's like Bitcoin L1 which is the downtown governs it's like

Mithil Thakore (13:47.889)
governs the rules of the city and all the people around it follow the same rules. That's how I look at it. Another way to look at it is like Bitcoin L1 can be the safe, can be the safe where you store all the valuables and whenever you want to use it, you take it out and you use it on Bitcoin L2. So Bitcoin L1 provides the security which in that city analogy, it decides and governs the rules that everybody in the entire city or state

will follow and Bitcoin L2s they provide the scale they allow multiple other things to happen they allow like in a city like you know you the more outskirts you go it allows like broader residences to happen it allows different other activities to happen it allows golf courses to happen or it allows like schools hospitals utilities you know like everything everything else to happen so but you can't have everything in downtown so Bitcoin L1 is the governing body which governs the rules

and maintains the security, sanctity, integrity of the whole infrastructure and Bitcoin L2s you can scale it the same way you can have different areas focused on different things different L2s will have different focuses they will cater to maybe different users they will cater to different set of people with different set of requirements or different L2s and we have seen that happening in the Ethereum space as well so when I call Ethereum a testnet it's actually not a joke it's actually a very deep

see that thought that we learn whatever we build in velar as well on bitcoin we learn a lot from ethereum because like I said when I was running audits I worked with 600 plus projects personally that were all building on ethereum and they were all building different kinds of products so all those learnings from that it helps us a lot in velar as well while we are building on bitcoin and and even if you see on ethereum all the L2s around ethereum that were built they had their own use cases like if you see the best perpdex is currently on ethereum are built

an arbitrary. If you see

Mithil Thakore (15:49.871)
If you see NFTs and gaming, happens on Polygon. If you see a lot of transactions in form of meme tokens, they happen on Binance Smart Chain. All of these are kind of the surrounding L2s on Ethereum. So I think we will see something similar in Bitcoin as well, possibly. Possibly not, where Bitcoin L1 is the governing body and it stores all the valuables. But whenever you want to use it, you use Bitcoin L2s to scale catering to different set of users.

Jacob Brown (16:21.248)
Yeah, that's how I see it too. I think you're going to see a lot of L2s be somewhat purpose-driven. There'll be L2s that very robust for DeFi. There'll be ones and more for DGen play. The communities will coalesce around those things. I think we're already seeing this at some level with the L2 landscape. So yeah, that's interesting.

Let's jump in then to more to Velar. Give me the current kind of product suite that you guys offer. And then I want to lead into the perp decks more specifically because that's the one that I think is the most novel and people don't understand, myself included. So, but yeah, give us the current suite of like, if people want to go to Velar right now, what can they do?

Mithil Thakore (17:09.691)
Sure, so the vision behind velar was to provide people different avenues to earn yield on bitcoin. That's it. So we are not limiting ourselves to anything as long as it unyields for bitcoin and full disclaimer like any yield comes with risks. So no yield on velar.

anywhere, any way will have zero risk. that's how we started building. started, so we have like four versions planned. The four versions are planned alongside the development of the whole ecosystem. So when we started, there were two Bitcoin, one and a half to two Bitcoin L2s and like five dApps across all Bitcoin L2s with like 5,000 active users in entire Bitcoin ecosystem. So the first version we started with a Dex, a simple Uniswap V2 inspired Dex where people can

come and trade meme tokens. We have most number of meme tokens now across entire Bitcoin ecosystem and most number of liquidity pools. So people can come and trade meme tokens, people can come and trade velar token, Bitcoin, Stacks because the first version is built on Stacks blockchain. People can provide liquidity in the liquidity pools and earn yield. On top of it, we have farming.

mechanisms where people can provide liquidity, stake their liquidity, LP tokens and they can earn more rewards on top of the liquidity pool fees that they are generating. We also have a launchpad in the first version where we help support startups coming to Bitcoin ecosystem. So that's version one, Velar Dharma. The Perpdex comes in the second version because it requires a more mature ecosystem, a more mature

infrastructure. So that is the interesting part. It's also our flagship product for this year. It is called Velar Artha and our flagship product is the Perp Dex. The Perp Dex is an extended version of the Dex itself. So it will also have liquidity pools and each liquidity pool separately will have a pair of two assets and people can use leverage.

Mithil Thakore (19:19.835)
trade on any of those assets in the pair of that particular liquidity pool. So people can still trade the same way they trade in a DEX, but they can have they can borrow more money from the liquidity pool and they can use leverage. So it's for example, if there's a BTC USD simple Bitcoin to USDT pool and they have a thousand dollars, but they can borrow for example, $10,000 from the liquidity pool and they can bet

on Bitcoin worth $10,000 either to go up or to go down with just that $1,000. So it kind of is more risky than a DEX and you are not holding the assets in spot, but it gives you more upside or more downside for that asset in that liquidity pool. So of course we will have multiple liquidity pools with multiple assets. will have initially we might have pairs with Bitcoin with Stacks with Velar as well. And as the ecosystem grows, we will have

different meme tokens as well where people can trade meme tokens on leverage. Of course, it's more fun, decent and more risky, but it allows a lot of institutions to participate as well. Like the hedge fund that we were running, we can definitely bring a lot of liquidity ourselves from the hedge fund that I was running because it's a dire need in the market to have...

use Bitcoin as collateral and or to trade on Bitcoin in a leveraged way because there are so many use cases around it which you can talk in as we move forward.

Jacob Brown (20:55.656)
This is good. So V1 is the DEX based on Uniswap V2. could do LP, Staking, Farming. And then you have a Launchpad for Stacks tokens currently. That's cool. On the Perp DEX, so is it helpful? a Perp DEX is a perpetuals exchange. And for people who aren't finance background, like we hear these words, perpetuals, derivatives, futures.

betting on the price going up and down and like I get lost pretty quickly on what's actually happening. like maybe before we deep dive into like the mechanics of the perp decks, it might be helpful to understand like what do these markets do in traditional marketplace? Like what is the role of derivatives and futures and perpetuals in like a functioning economy?

Mithil Thakore (21:47.505)
Sure, so I will explain step by step. So basically derivatives means that if you have money and you want to bet on an asset.

but you don't want to hold it in reality, but you still want to bet on that asset price to go up or down. It is allowed, I mean, it is possible with derivatives markets. For example, in commodities, people buy all sorts of commodities. People buy onions and tomatoes in tons. People buy oil in tons. If I want to bet on the price of oil, for example, the crude oil,

If I want to like bet that one, you know, like one barrel of crude oil will go up in price. don't, I can't buy, I can't go in the market and buy one barrel of oil, crude oil, right? So that's why derivatives markets existed to allow people to still trade on those assets, which they can't actually hold it in, in real life. Because if you want to, if you have money and you want to long or short, which means you want to bet up, bet.

going up if you want to bet one ton of gold that is going to go up you can't actually hold one ton of gold it's too much risk. So derivatives markets allow you to bet on asset prices to either go up or go down which means long or short respectively without holding that asset in real life. Now coming to futures futures is kind of a derivative futures is one form of derivatives markets where you bet on the price of that particular asset in future on a particular date for example if

there is a futures contract which is like 31st of December what will the gold price be so either you have to either you bet on that price to go up or to go down and you buy that contract accordingly if you want if you want the price to go up or you sell that contract if you want the price to go down and if you if you are

Mithil Thakore (23:42.093)
If you are correct, you will either make money on it or you will lose money on it. This is called a futures. This is basically betting on an asset price of on a particular date in future. That's what a futures market futures contract mean, which is a form of derivatives market. Now on top of it, what is a perps? What is a perpetual derivatives market or what is a perpetual futures contract? It means and it is very popular in crypto. is it is the most popular

most popular thing in crypto ever, perpetuals contract is basically betting on the future price of an asset but without a date.

on in futures you have a date and that's when the contract ends but in perpetuals it keeps the contract keeps going on perpetually that's why it's called perpetual futures contract without an end date which is very popular in crypto that's why that's why when you also trade on the well our pub decks there is no end date for the futures contract basically you are buying a futures contract either it will go up or go down whichever asset you are trading on whichever liquidity pool but there is no end date to that future contract so you can keep

it open perpetually if you can basically if you are in profit or if you are in loss of course you your price your your value can go to zero but if it doesn't go to zero you can keep it open perpetually so it kind of it kind of makes more sense for crypto traders because of the volatility and it allows more flexibility for traders as well

Jacob Brown (25:16.962)
Now that's that is super helpful Just to ask one more probably obvious dumb question for the audience and myself People understand I mean if you use an exchange you don't feel this you just kind of like send an order and Coinbase does the magic for you? But if you go to the advanced tab, you'll see the order book and I'll have like order book depth and that the happy medium between buyers and sellers is the current price is That is that basically what's happening on the back end of derivatives as well. Is that like

people long and short, and in the middle there's this happy medium of buyers and sellers, and if it shifts off, it's changing of depths of both sides of that order book.

Mithil Thakore (25:55.799)
so...

There are two kinds of perpdexes in crypto. One is an order book based perpdex and one is the velar kind perpdex, which is an AMM style perpdex, which is an automated market maker, similar to how Uniswap operates. So in velar perpdex, we have a large liquidity pool and people can long and short assets from that liquidity pool, but the prices are fetched from oracles in real time. So the trade prices that people get for longing or shorting

They get the assets from the liquidity pool so they can borrow the assets from liquidity pool for trading to execute the trade but the prices are fetched in real time from oracles. That's how we maintain so we don't have to maintain an order book in the velar perpdex as of now because it's not an order book based perpdex. So the prices are fetched in real time from oracles.

Jacob Brown (26:49.142)
Interesting, okay. That's that's good. And then one one last question on this before you dive into specifics on product is perps versus futures When I'm hearing it futures sound better like why would I put an expiration date if I don't have to? so is there a premium to each of these or like what's the benefit to a Futures versus one that just has an expiration date like perps versus futures

Mithil Thakore (27:15.012)
Futures have an expiration date. Futures have an expiration date.

Jacob Brown (27:17.198)
Yeah. So why is there a benefit to either one in the market? why is there a downside to using futures versus perps? Does this make sense?

Mithil Thakore (27:30.277)
Well, there are so many, right? mean, I think it's just preference based because futures, perpetuals basically can, you bet on the asset in real time because perpetual contracts basically have same price as the market right now and you are literally betting if the market will go up and how much it will go up but you don't have to worry about an expiration date. So if you want to keep the position open for longer,

you can do that in futures there is premium so you may or may not get depending upon depending on how many people are betting in it or against it you may not get the same upside but also it helps you it also reduces your risk because in in perpetuals there is something called funding rate which is a fee that you that you pay to the people on the other side to keep the position

keep their position open and funding rate because of funding rate and because of because every time you are paying that fee in a perpetual straight eventually in eventually in in unlimited amount of time your position will go to zero because you are always paying fees so you will never have infinite profit which is but you can keep your position open for much longer period of time

not like a futures contract and the liquidity in perpetual market in crypto is much higher than any futures contracts in crypto. So it gets you more liquidity and it helps you keep the position much longer.

Jacob Brown (29:08.901)
Got it, okay. No, that's super helpful. Okay, then talk to me about the specific perp decks here. Where are you guys building it? What's the current status of the perp dex right now?

Mithil Thakore (29:21.915)
Sure, what we are, so Velar is a Bitcoin L2 agnostic platform. We are building it in a, we want to become the gateway to Bitcoin DeFi. So any user holding Bitcoin, including institution or retail, they can come to Velar. We will have multiple Bitcoin L2s integrated and that multiple Bitcoin L2s will have finality on Bitcoin. So that's the game plan.

Regarding the perpdex, we are building our perpdex parallelly across multiple bitcoin L2s. So recently like a month ago, we went live with our perpdex on beta mainnet on bob, which is build on bitcoin, a bitcoin L2. We are waiting for Nakamoto upgrade to go live on stacks, is evidently tomorrow as based on the date that we are recording this podcast. So once it goes live, we will test for a week or two and we will go live very soon.

probably within a weeks on with the first perpdex on stacks as well. The perpdex is basically ready. We got audited by three different auditors. One the one side of the auditing team that audited our perpdex have found majority bugs ever found on GMS, which is like the biggest perpdex of our kind of AMM based perpdex in the market right now on Arbitrum. So we have a very robust product ready. We were building it for over a year.

more than 15 months now, ready to go live. It's just that when you build a perpdex, it's a much complex product compared to a dex or a lending protocol. So you require basic set of infrastructure ready and low latency as well for the perpdex. So you are just waiting for the right time and now's the right time. So you will see us launching perpdex across multiple L2s within next few weeks and months.

Jacob Brown (31:13.152)
Exciting and yeah, Nakamoto coming soon. I think one thing that's probably Maybe important here because I'm listening to you're waiting for Nakamoto which one of the big unlocks for Nakamoto is block timing Goes down to five seconds. I think Bob is already at like two or five seconds. They're super fast So is is that one of the reasons why like say you could build this on the L1 with ten minute block times to do

Exchanges like this need fast frequency to work properly.

Mithil Thakore (31:46.929)
Yes, we require low latency is a feature. Without that, you can't build a PerpDex because you need to understand the kind of users that use the PerpDex. Of course, there are degen users and retail users who might have like $10 and they want to...

have make a 200X or 20X trade and either make thousand dollars or make zero dollars, know, like or lose everything. So for those kinds of people, maybe not, but there are genuine institutions. are large stable coins who use perp dexes as a hedge. There are people, there are institutions who use the funding rate arbitrage, who use funding rate as a mechanism to hedge their Bitcoin holdings and earn yield on their Bitcoin holdings or on yield on their stable coins.

holdings in a low risk way. So this is a very institution

catering product as well and when institutions come in play, need to, they see everything. They see what price they are opening the trade at, they see what price they closing the trade at and even difference of one dollar in the price point from when they are making the trade to when the trade is being executed can make a huge difference because they are trading hundreds of millions of dollars. that's why low latency is important because without low latency, you can't give them the best price that they are expecting.

You can't give them the accuracy in executing the trades that they want to. If you see currently on Binance and FTX, the latencies are in milliseconds, which is good. latency and the liquidity both, liquidity is huge in the latencies and milliseconds, which allows people to execute the trades and allows bots to execute the trades at the right time, at the exact price point. If you have a 10 minute latency, in 10 minutes, imagine how much Bitcoin can move. It can move possibly

Mithil Thakore (33:42.641)
hundreds of dollars or tens of dollars but if you are trading a hundred million dollars even a ten dollar position can be a ten thousand dollar or more movement for your portfolio. So it doesn't cater to institutions who are making money off all the small small changes as well with high latency. So you require definitely require low latency that's why you're waiting for Nakamoto to come out.

Jacob Brown (34:09.428)
Okay, and then Talk to me about see you mentioned you guys have been audited a bunch. So it's it's it's gonna be secure lockdown There is a big question around Trust assumptions that all Bitcoiners have like going to an L2 has a trust assumption And you kind of mentioned it like any kind of yield already has some kind of risk. It's it's kind of inherent in the product. So If you're using a perp dex on stacks or Bob

What are the implicit trust assumptions when you're using that?

Mithil Thakore (34:42.811)
there are multiple layers to it and we are in control of some and we are completely not in control of some. So we are basically a user facing application. So we use the currently available infrastructure in the market and build applications on top of it. So when we build something, when we build a product on Stacks or Bob, the first trust assumption is that Stacks will be secure and Bob will be secure. So the assets that people are trading on Velar are to be secured by Stacks and Bob.

So that's the first trust assumption for user that are their assets secure and then their assets would be secure on that particular blockchain. But that's not in our control at all. So we rely on the L2, the Bitcoin L2 that we're building on.

to keep the assets of the users secure. That's the first trust assumption. The second trust assumption, which is not in our control, is the Bitcoin finality. So there are people who want Bitcoin finality. There are users, institutions, retail, both who want all their transactions to be secured by the Bitcoin blockchain. Now, getting that Bitcoin finality is also the job of the Bitcoin L2. It is not job of Velar.

So that is the second trust assumption, which currently I don't think this Bitcoin L2s have. Even Bob is waiting for BitVM, is, and Stacks after Nakamoto upgrade will have, we will see how it works out. I think it will have Bitcoin finality of some kind. But until then, are dependent on Stacks and Bob to provide a security to the user's assets. That is the second trust assumption. The third trust assumption, which is under our,

which is our responsibility, Velar's responsibility is the smart contract risk that the assets that people are putting, are using in Velar, they are putting it in Velar's smart contracts. So the liquidity pool.

Mithil Thakore (36:37.137)
that people are using to trade or the liquidity that they are putting in the liquidity pool are smart contracts written by Vela. So that is a third trust assumption. But of course, we go through multiple audits from multiple best security teams in the world. So we reduce the risk from our side. We spend hundreds of thousands of dollars for each audit. Like we have spent over, I think, over 15 % of all the money we have ever raised just on audits until now. And we are not done yet.

keep auditing more and more as we move forward, will have bug bounty program. we, whatever is in our control, we do our best to make the most secure products in the market available. So that's the third trust assumption. The fourth trust assumption can be that, can be, is not under our control, is...

is the moment in, is kind of the price moment in the market. know, like they can make a trade, but they can still lose money. So every product, including the perp decks, people can, if there is an opportunity to make a profit, they can make a loss as well. And particularly for perp decks, the fourth trust assumption, fifth trust assumption is that the application like us will pay them, if they make a profit, will we pay the money back? But that is also not an

the RR control because the smart contract will pay them back. So that's good because that trust assumption, the fifth one, which is a trust assumption with the exchange. you are trading with Binance or FTX, people made profits while the market was going down with FTX, but then FTX shut down so they couldn't get their profits out. But that is a trust assumption in the normal market, but that trust assumption doesn't, it's irrelevant in decentralized products because

they get paid profits immediately from the smart contract itself. It's designed in the smart contract. So we don't control any money in any form. So that's another trust assumption, but it's irrelevant to decentralized products.

Jacob Brown (38:41.788)
Got it. Okay, cool. I don't have too many more questions. I do want to ask is there anything else on the perp decks I didn't ask that people should know?

Mithil Thakore (38:53.252)
So, Perbdex is a very interesting product. I think it is our flagship product for going next one year as well because Perbdex inherently

kickstarts the whole ecosystem. think whatever we have seen combined all the products, the amount of users, liquidity, any product has all the products combined have brought to Bitcoin ecosystem. A perpdex can bring alone the potential is huge. So that's what makes me very excited about the perpdex because even today like 80 % of all crypto volumes is on the perp, happens on the perps. They happen mostly on centralized exchanges because in perpetuals derivative

markets 99 % of volumes are on centralized exchanges and 1 % volume is on decentralized exchanges. So the potential for decentralized perpetual exchanges is huge but out of

the entire crypto market 80 % of it happens on perp so if you understand that the price discovery of bitcoin also happens on perpetuals because because how do you determine price of an asset based on demand and supply based on what people are willing to buy and sell it and people are willing to buy and sell because 80 % of volume is perpetuals that is where the price discovery of bitcoin happens and because 99 % of that 80 % is on centralized exchanges price discovery of all bitcoins happen right now on centralized

perps exchanges and because bitcoin was created with the vision of being creating a decentralized and creating a non-custodial financial infrastructure I envision and I hope that the price discovery of bitcoin should also happen

Mithil Thakore (40:34.563)
in decentralized way on the Bitcoin blockchain itself. It shouldn't be dependent on centralized platforms to determine the price of Bitcoin. And with Velar Perp Dex, this can be possible just within a few years because if we overtake, if products like Velar Perp Dex, decentralized Perp Dex overtakes centralized Perp Dex and they are majority volume in crypto, then which will mean that price discovery of Bitcoin happens on Bitcoin. This is the goal. This is the vision.

Jacob Brown (41:03.845)
Interesting I'm thinking in real time, but you you mentioned the two kinds of dexes you have order book dexes and LP dexes That use an oracle when you mentioned price discovery does does the oracle still play the same role or like how does that change over time?

Mithil Thakore (41:24.923)
Sure, basically an Oracle works in a more broader way. So Oracle's are basically, they fetch prices from everywhere. They fetch prices from centralized exchanges, they fetch prices from aggregators, they fetch prices from nexes, they fetch prices from other pub nexes. So Oracle is basically the average price of everything in the market, know, like all the products in the market. So yeah, mean, kind of it.

So so of course it will fetch prices from order book based perp nexus as well centralized actions as well Everywhere yeah, but eventually eventually the goal is to also have like the goal is to have Products like nexus take over like velar dex Hopefully it takes over centralized export exchanges as well

You understand my point if DEX is so the the end goal is that DEX is takeover centralized spot exchanges and perp DEX is takeover centralized perp exchanges. So when when a perp DEX like us fetches Oracle prices the Oracle prices are determined from the DEX is as well which will

which also means that the DEX volumes are also higher than centralized spot volumes. So the price discovery happens within the ecosystem.

Jacob Brown (42:50.697)
Yep, yep, okay, that would be dope. That would be dope. Last couple questions, you've kinda touched on this about roadmap. Your big focus this year is on the perp decks, but any other color you can give to kind of like your six to 12 month roadmap.

Mithil Thakore (43:06.907)
Sure, so we have been building products extensively heads down for last one and a half years and this is time, it's time now that they all go live one after the other very soon. So we are going to bombard the ecosystem with our suit of products. So we have the Perpdex going live across at least four Bitcoin L2s.

Then we will expand our DEX offering across multiple Bitcoin L2s, probably four or five Bitcoin L2s. It's easier to bridge the DEX across multiple L2s. bridge VELAR token will be a multi Bitcoin L2 token as well. it's a token. Currently, we have a token on Stacks and we have a native token on Ethereum because the Bitcoin L2s weren't mature enough and we launched VELAR token over six months ago. So we will bring VELAR token, bridge version of it across multiple Bitcoin L2s.

launchpad will become.

very extensively used because we have I think around 15 projects in our pipeline now who are all planning to go live in quarter four this year or quarter one 2025. So we will have the launchpad go out and in full fledged way where we will have a few project launches every month on the launchpad. The Dex, we will also build an upgraded version of the Dex which will be a Uniswap V3 or V4 inspired version.

Yeah, so like so many things coming in next 6 to 12 months.

Jacob Brown (44:34.335)
Very cool, very cool. Well then, last question I would like to end with on a high note of what are you most excited about? It could be in your project, it could be something in the Bitcoin eco, or just generally. What are you hyped about?

Mithil Thakore (44:50.278)
So many things right I mean I'm most hyped about so I am I'm literally in the trenches and I'm building it so I think that the I think it's time that Bitcoin ecosystem kickstarts like we have seen so many projects getting funded

six months ago, last few months, but the Bitcoin ecosystem hasn't kickstarted yet. So I'm most excited to see all these developments that me, my portfolio companies, know, like our friends that are building in the ecosystem. When all of this comes together, I want to see

I want to see Bitcoin DeFi flip Ethereum DeFi by end of next year. So I'm kind of excited about it, but also kind of this is my goal as well that we build such robust products, we bring so much better user experience than other ecosystems to our users, that users are compelled to use Bitcoin DeFi, at least try Bitcoin DeFi, then they will realize the difference, then they will realize the potential of it, and I want to see it flip all other ecosystems.

Jacob Brown (45:55.807)
I like that. Put that on a bumper sticker. Bitcoin flips. DeFi flips Bitcoin. DeFi, Exactly, by next year. I like that. I like that. Yeah, I have a similar bet of like, think Bitcoin dominance is going to continue to go up and to the right slowly. And I think, you know, 80 % dominance is like on my target, you know, in like a year or two, which I think it's at like 59 or 60. So it's...

Mithil Thakore (46:03.099)
Bitcoin DeFi flips ETH DeFi. end of 2025.

Mithil Thakore (46:24.689)
It's 59. Yeah, if you see my pin tweet, I have tweeted about it like I think six months ago, my predictions for end of 2025 and I just look at it every day. I wake up in the morning, I go on my Twitter and first thing I see because it's pin and I work towards it.

Jacob Brown (46:25.223)
Still a ways to go, but...

Jacob Brown (46:42.814)
There you go, there you go, you got a mini vision board just every time you open up Twitter I like it Cool man. This has been an interesting one. Thank you for breaking down perpetuals for us any any closing thoughts or things I didn't touch on that you want to close with

Mithil Thakore (46:59.941)
No, I think it does run basically everything. I mean, we are heads down building the entire future financial infrastructure for future generations. And it's not like we are at a war. Like, I don't see this, I don't see what we are building like Bitcoin, DeFi. We are not at war with Ethereum. We are not at war with banks. The reason why Bitcoin was created in the first place, and I keep going back to 2008 for that, that, you know, it was just a backup.

In case the centralized systems fail, you need a backup for the world and for future generations to operate their day-to-day finances in a decentralized non-custodial way. That's why Bitcoin was created. And that's why we are creating Bitcoin DeFi. Because after Ethereum moved to Proof of Stake, there is not a single project that has ever succeeded with Proof of Stake. There are no other...

Blockchains that have that have been served that have survived over a single cycle Solana is an exception with the second second cycle now, but apart from it No other blockchain has the durability scalability. It has the decentralization and the security as Bitcoin So the reason we are creating Bitcoin DeFi is a backup in case Systems like Ethereum or systems like Solana or systems like banks fail. So we are building it We are building it as fast as we can

because I don't know when that happens. So it's just we are building as fast as we can as much as we can in the most scalable, best user experience way.

Jacob Brown (48:31.091)
Well said, well said. Cool man, this has been great. Mythel, thanks for coming on. People listening, links will be in the description for all the cool stuff that they're building and I'll have his direct Twitter on there. But yeah man, thanks for coming on the show.

Mithil Thakore (48:46.843)
Thanks Jacob, it's always fun chatting with you. Cheers.

Jacob Brown (48:50.459)
Alright, cheers!