Building a DeFi-Native Chain w/ Justin Havins (Katana)

Rex (00:03.343) Justin, welcome to the Signaling Theory Podcast. Justin Havins (Crypto_Texan) (00:06.55) Hey Rex, yeah, thanks for having me, really excited to be here. Rex (00:09.645) Of So before we get into it, can you just give a brief introduction about who you are and what is Katana? Justin Havins (Crypto_Texan) (00:17.41) Yeah, that's a good start. What is Katana is a really good question too, but I'll start with who I am, my background. Yeah, so I'm Justin Havens, AKA Crypto Texan on Twitter. I've been at Katana since we launched back in June, July. And prior to that, I was at Polygon for three and a half years on the DeFi team. And then prior to that, I was in traditional banking for about 13 years. So DeFi is what got me into the space. And now working for Katana, which is a DeFi focused chain. It's really just a dream come true for me. And it's, it's incredibly fulfilling. And that kind of leads me into what is Katana. And that is a DeFi focused chain. There are a lot of blockchains that have DeFi as probably the primary vertical or the most popular apps on that blockchain or DeFi related. But that's a lot of that's more just by circumstance, maybe. I mean, there are some like RWA focused chains, payments, gaming focused chains. and, but we wanted to be a DeFi focused chain, with intention and a lot of that goes into the architecture and the mechanisms we have in our DeFi flywheel that really make that possible and make it truly a DeFi chain, which we can talk about in a little bit. But I think when it really comes down to it, Katana is a DeFi focused chain. that shares chain revenue with defy users that helps encourage them to use the chain more and make the chain more valuable and to make a thriving and robust defy ecosystem that will eventually just be the one stop place that people are going to go to for all their on chain finance needs or wants. Rex (02:07.329) Awesome. So, like definitely want to dig into the secret sauce that you're bringing to the table and what's going on with Katana. But, I think where I want to start the conversation is more in kind of lineage. and like, feel free to push back at all. If, if you don't like this framing or if it doesn't really capture the right thing. But when I look at what, how Katana is positioned and kind of some of the mechanisms that you bring to the table to. push value back to DeFi users and apps. I see a couple chains, like in a couple ideas that were pioneered by these chains. And specifically I'm thinking of, I believe is Kanto, Kanto and a bearer chain. And like for what I saw in those were, you know, and we can talk about this too, right? But both projects that ultimately I would call failed projects that try to do something really cool, which is, Justin Havins (Crypto_Texan) (02:53.439) yeah, yeah. Rex (03:07.227) take the regular workings of the blockchain and really try to channel a lot of that economic activity into DeFi. specifically what I'm talking about is both the fees that users pay to generate transactions, as well as the inflationary rewards that are spit out as an inherent property of blockchains. So I'd love to hear your thoughts. Is that? Do you see yourself in that lineage at all? Do you distinguish yourself? mean, what's your reaction when I bring up that thought? Justin Havins (Crypto_Texan) (03:42.991) No, think that's, I think you're directionally accurate in my opinion. Kanto, I haven't heard of that, haven't heard of that name in a while. Bear Chain, I wouldn't say Bear Chain's a failed project necessarily. And I know a lot of people over on the Bear Chain team. think that maybe their tokenomics and their flywheel may have just been a little too complicated for long term. But I know that they're working on some, still some exciting things over there. So just wanted to share my love for that team as well. Rex (04:10.799) Sure, sure, sure. Justin Havins (Crypto_Texan) (04:11.79) Um, another, another chain that gets brought up, uh, when they're comparing, uh, mechanisms is blast, um, as well. So I'll try to touch on that a little bit too, but I think this is a really, this is a really fun question because. Yeah. We, uh, we at Katana believe that DeFi has matured to a point where it can be considered or, or it can be considered core architecture in the infrastructure and when you're building a blockchain and. We've seen throughout the history of DeFi and blockchains in general, a lot of unique mechanisms and experiments with flywheels, whether that's protocol owned liquidity, VE tokenomics, VE33 tokenomics. Blast had its own version of like a bridge that generated revenue, right? There's all these exciting things and experimentations and we like to think that we took the best of them and reiterated on them a little bit. And I'll start with blast as an example. we use this product called vault bridge, which takes bridged assets, deploys them into yield generating strategies on Ethereum. That yield gets routed to the Katana foundation. And then we use those revenues to boost the rate that users are going to get on Katana when they're in defy pools blasted something a little. Similar to that, we feel like we've better aligned the incentives, right? The whole thing, like if you show me the incentives, I'll show you the outcome. blast had it to where they had their own token, that would accrue value no matter if you did anything with it or not. Right. So users from a risk adjusted return perspective, they weren't really incentivized to actually use those assets. They bridged to blast in their defy ecosystem because they can just, it's just going to accrue value anyway, sitting in your wallet. We wanted to make sure that didn't happen. We feel like, and we've got this concept called productive TVL, which is different from just, know, TVL is just all the assets that are on a chain. productive TVL is all the assets on a chain in DeFi projects. We want to maximize for productive TVL because we feel like that's the best way to provide the best depth, make spreads tighter and provide just a long, an environment for a thriving, robust DeFi ecosystem in perpetuity. So. Justin Havins (Crypto_Texan) (06:38.251) That's what we did. You don't earn those for those that yield that's generated from vault bridge, just by keeping those assets in your wallet. You have to use them in Morpho or in sushi swap or in spectra and other projects, you know, and that's just, you know, and that's w when we talk about the Katana DeFi flywheel, it's actually like three or four different small flywheels that kind of get interconnected. So this is the vault bridge flywheel. You bridge assets over, you put them in defy to earn yield that high yield and deeper liquidity. It tracks more people to bridge, which provides more revenue to boost yield, which attracts more. And it's just this, you know, the self reinforcing bridge, which is really exciting. So that's, that's kind of compares us to the blast a little bit. think on the Canto side, I think you might be talking about how they kind of had their own decks that was ingrained. in the yeah they kind of had like a core app thesis in a sense we do we do something similar and i i'd have to go back and like research canto to remember exactly what they were doing because like three years ago almost like two three years ago last time i no no it was at a weird time too i think when they were they were launching but yeah we've got this core app philosophy where you know we we anyone can deploy any Rex (07:52.025) and it didn't last long. Justin Havins (Crypto_Texan) (08:06.231) type of project they want to on Katana. It's completely open source and permissionless. And we encourage anyone to do any of that. Right. However, we do have a few select core apps that are going to be the beneficiaries of that vault bridge yield that I was talking about. So we've got more fo on the lending and borrowing side, sushi on the decentralized exchange side. We've got Kensei for a meme coin launch pad. And we're working on getting a perp decks involved as a core application as well. And the reason we have this is that, you know, it provides a better user experience when users don't have to look at three different decentralized exchanges to determine where am I going to get the best rate for my swap? They know it's going to be sushi because that's what we're directing all the liquidity in. boosted rewards to go to, not just Vauper's rewards, but also like we're giving cat emissions right now too. same thing on Morpho. Where's the best rate for a loan on your WBTC. It's on Morpho, right? there's no guessing game for developers either. If they want to build on top of those projects from a composability standard, and it just kind of streamlines the process. And that's, that's where we want to see a lot of the innovation from a builder perspective is building on top of Morpho. and sushi and can say in the perp stacks to provide some sort of like optimizations or just even like more unique primitives that haven't quite been thought up yet. so there's, there's that. And then we also have our, so that's, you know, it's a corrupt philosophy. so we also have the chain owned liquidity and sequencer fee flywheel that falls underneath this as well, where all, all L twos generate sequencer fees. Most well not most of them, but if they have a lot of activity They're generating fees in excess of what they have to pay to settle those transactions down to a theory of main net If you look at bases, it's a lot I think grow the pie calm or dot IO or whatever whatever it is They've got some really good charts. They kind of show that we take net You know sequencer fees that are in excess of what we have to pay for settlement and we put that in something called chain-owned liquidity, which is Justin Havins (Crypto_Texan) (10:28.363) Liquidity that's deployed in DeFi that's managed by the Katana foundation and we see that as like a baseline layer of sticky liquidity That's not gonna go anywhere. We put it in very key markets that are important for the long-term growth and stability of the Katana ecosystem It's a little small right now. I'm gonna pull it up because I have a bookmark here it is Yeah, it's about 320,000 right now. So it's small, but it's growing over time as more activity picks up on chain. And you know, it's that's liquidity that doesn't leave in bear markets, which, um, can just help, you know, over time as it grows, it can help, uh, the defy ecosystem be a little bit more resilient against bear markets or extreme market volatility. Then I know I'm talking for a while here, but I'm at the last one. Rex (11:16.122) Mm-hmm. Justin Havins (Crypto_Texan) (11:22.347) Last but not least, we've got the VCAT flywheel, CAT, our token. If you're familiar with VE tokenomics models like Curve, Solidly, Aerodrome, Velodrome, yeah, Bear Jane has their version of it. You take your CAT, you stake it for VCAT, and that gives you the ability to vote. Rex (11:36.187) It's very Jane. Justin Havins (Crypto_Texan) (11:49.696) on where future cat emissions are going to go. And then you earn fees from the pools that you have voted for, right? The difference between that and curve or aerodrome is that this is chain wide. It's not just for a DEX. You can vote to direct emissions to Morpho or a perpstex or any other lending protocol that pops up or any other type of application. And you can, and then you can also earn bribes on top of that, right? Or what we call vote incentives. We feel like that's more accurate. where if, if a project or an asset issuer wants you to vote for their pools, they're willing to pay you for those votes to direct those emissions as well. And, over time, the cat that's funding those, the cat that's being used to fund those emissions, will be, will be funded by buybacks from those revenue. sources that we mentioned previously. So all that to say, yes, you're right. Did we borrow a bunch of different mechanisms from different apps and different chains that we've seen have varying degrees of success? Yes, we feel like we've improved upon them. And sometimes some of these mechanisms in a silo might not work, but when they have other flywheels next to them to help compliment them, we feel like that also provides a really big benefit. Rex (13:17.155) Yeah, no man, I like it and you know, I say for me too, it's been a long time with Canto. Like I didn't do a lot of research on Canto for this interview. So I might be remembering it wrong, but the one thing that I think that they did, and I'm sure we'll hear about it in the comments if I'm getting this wrong, right? But the one thing that I think that they did that I thought was really cool that... I haven't really seen in a lot of other places and I'm wondering if you guys have thought of this or maybe it's something that you find interesting, but you know, part of the philosophy there was that if you're, let's say DeFi application was generating, was what's the right way to put this generating a lot of fees to the blockchain or put another way, taking up a lot of block space or, know, whatever, right? Like if you're. app was popular on Kanto, then Kanto would funnel some of the fees that it was earning back to the app. not only are you, not only does this provide a mechanism for like users to benefit, whether that's through like juicier yields or kind of all the things that you're talking about, but it incentivizes developers to build more apps that are generating more usage because not only can they generate fees. Justin Havins (Crypto_Texan) (14:19.468) Hmm. Rex (14:40.303) directly from users like, know, Uniswap, well, Uniswap is a bad example, Curve, right? Like Curve generates fees directly from the user transactions, but because they are generating demand for block space, the blockchain itself will incentivize them, or not incentivize, reward them for the space that they're generating. And so, I don't know, I mean, do you think that's a cool mechanism? Is that something that maybe kind of fits the philosophy and the mindset or? Yeah, again. Justin Havins (Crypto_Texan) (15:10.188) Yeah, think, I think it, I think it could, I think, you know, going back to what I said earlier, you know, everything we do, we, want to make sure it's DeFi focused and B wants to make sure that we're helping to maximize productive TVL, right? Um, we want to make sure that any of the mechanisms that we put in place are not net extractive to the ecosystem. Um, You know, like if you look at vault bridge, you know, other bridges aren't necessarily net extractive, but they are capital inefficient in our opinion. If you just have those assets sitting on L one, not doing anything like there's risk that the user is taking there and they're not getting rewarded for it on a risk adjusted return. And in our opinion, and you know, if we, if we put something in place like that, think Sonic may have spun up a similar program to this. two, possibly, you know, there could be ways to game that system as well. and I think one of, like, if you're thinking about like just the amount of transaction fees that happen on a specific application, you know, with us kind of effectively choosing sushi as our core app, in funneling so much liquidity into key pairs, there's not a lot of arbitrage opportunities. Rex (16:07.578) Yeah. Justin Havins (Crypto_Texan) (16:35.54) And so you actually do see less transactions than you would if you had like a two to three decks ecosystem that are constantly trying to balance those prices. Cause on sushi, the liquidity is so deep. Those spreads are so tight that you don't, you know, you don't see a lot of those transactions. I don't know. I think it's something interesting to take into account, as long as it helps to maximize assets that are being used in defy. That's what we would want to focus on with any program that would be similar to that. Rex (17:06.651) Yeah, I hear you. And I definitely understanding can get behind that mentality, I guess. You know, in this, this is kind of like a bigger picture thing that I've noticed. But, you know, I joined crypto, I think sounds like around the same time you did during like the 2020, 2021. know, DeFi summer, I was still stuck in like figuring out if Cardano was like where I should be spending my time or. Justin Havins (Crypto_Texan) (17:24.129) Maybe. Justin Havins (Crypto_Texan) (17:33.446) fun, yeah, nice. Rex (17:34.972) But, you know, like 2021 was really when I realized, like, you know, knock on wood, right? Like, but hopefully where the real stuff was. you know, I, I remember kind of like being forged in the curve wars and like, to me, when I look back at that time, I look back and think, it felt like every month there were new things happening, right? Like new ideas were brought to the table. Sure. Maybe they failed. Like, like maybe they failed catastrophically like OME, for example, right? But there was still this energy around like DeFi is not ossified yet and we need to continue pushing innovation or really innovation's pushing us into new ideas. And when I look around now, I don't see that energy, right? And maybe there's some people working on new novel DeFi primitives or whatever, but it's definitely not the vanguard of what's pushing crypto forward right now, if frankly anything's pushing crypto forward right now. But I guess why I'm a little bit stuck on this Canto, maybe Sonic idea is I want to see more innovation in what we're bringing to the table and what we're offering to users. And sure, I think that if we... reduce spreads and if we increase yields and do these kinds of things that make the products that we already know our work that work in our core primitives better, we will draw more capital. We will have more people. But like to me, that seems like kind of a like five to 10 % year over year growth. And what I am looking for in this industry where we take so much risk for hopefully outsize returns is to get back to that. you know, 10x, 100x growth that it really felt was on the table back in 2020, 2021. And so, you know, I don't really think you can answer for that, right? But I guess I'd love to just hear your response. mean, do you think I'm a little too pessimistic? I'm looking at this wrong. Do you think that what do you think about this? Justin Havins (Crypto_Texan) (19:55.784) I think I share some similar sentiments, cause when I joined the DeFi space, yeah, everything was new. There were so many people getting into the space, building a lot of exciting projects, a lot of copycat projects with slight innovations on top of them. And, you know, I feel like, like back during DeFi summer, right? Like it was, it was so easy to like acquire. TVL and even get funding from VC like you could just fork Uniswap V2 put a new logo on it and you could like You know have a token and then you're gonna get TVL and you can you know, I mean and I think I think some of it Yeah, I would like to see more innovation in the space. I think we're kind of in a weird Mini bear market right now. That is a hampering innovation. We're just coming out of like this weird regulatory environment that really restricted a lot of, at least innovators in the U S. but I think we're starting to see innovation in some other places that maybe have been suppressed. Like I think there's a lot of very cool things happening with tokenomics. Now that people were maybe a little hesitant to experiment with historically, because there was. There was this point in time where it was like, if you have any utility for your token, the SEC might come knocking. Which is in my opinion what gave rise to the meme coin phase. Because it was like this weird loophole where it's like, you can launch a token as long as it doesn't have any utility, you're fine. And that's kind of what we saw there. But I think from providing support for builders, we do have a partnership with this program called hadron. They created a, a cohort for projects building on Katana. We saw some cool like cross-chain innovations, a prediction market, some AI, related projects as well. They came out of that, that are here on Katana and building. so we do encourage, even with. Justin Havins (Crypto_Texan) (22:10.507) grants and cat incentives, a lot of innovation outside of just like Morpho and Sushi and Kensei and the Perpstex. Um, but I think we're just, I think a lot of grants programs, uh, sometimes have a little bit more of a spray and pray approach where we want to be a little bit more deliberate in the direction, you know, like if we do provide grants or cat incentives to a project. is this helping us? Is this helping the ecosystem grow? Are they in it for the long term? Are they, are their values aligned with the values of Katana and the defy ecosystem and our flywheel and how we think about chain economics? so, you know, and of course, like we, want them to build on top of like Morpho and Sushi. like that's, if you're a developer and you're, building some sort of optimizer. Katana is going to be the best place to go because that's where the deepest liquidity is on those two apps. So I don't know. do share similar sentiments with you. I think it's just a matter of like the current market conditions that we're in. And I think. That's just being a little bit more deliberate with the projects that we're funding as well. Rex (23:12.474) Mm-hmm. Rex (23:32.154) I hear you. mean, I share some, some sentiment that the regulatory environment made things more challenging, but you know, 2021, like I was hearing all that stuff too. And, you know, I, I just, I don't know if I really believe in crypto cycles anymore. Justin Havins (Crypto_Texan) (23:58.273) I don't either. And when did you start at Lido? Rex (24:01.115) I started at the end of last year and so I made it basically a year and Justin Havins (Crypto_Texan) (24:07.975) Okay. Yeah. I just remember like the light, even, even in those like regulatory dark ages, I remember the Lido team, like pushing really hard and doing some pretty incredible work there. So I was just, just. Rex (24:22.041) Yeah, yeah. No, mean, I think, you know, think Lido is a good example of people that were, had a great idea and met the market before, before anyone else kind of realized what was happening. because they had a good product and, met a real demand, they grew to 33%. and. You know, I, I, this might get, give me some flock from like some of my colleagues, my ex colleagues, right? But I think that. Kind of like the rest of the industry, Lido kind of faced this problem where after SBF and then, you know, this is like very much one narrative, other things happen, right? But after SBF and it came out that he was like the devil and then because of that, and he was so in the pocket of politicians and then so that caused Gary Gensler to like turn around and just like rain hellfire upon us. You know, I think that had a major chilling effect on everyone and Um, we're all worse off for that innovation, frankly, like I haven't seen it since 2022. Um, I feel like we're kind of spinning on the same ideas that happened, you know, like the last big idea I saw, I feel like I saw was. Restaking. Um, and after that kind of became its own like points token, airdrop meta, then even that kind of. I don't know, man, I'm a little bit rambling here, but I just. Justin Havins (Crypto_Texan) (25:56.864) Yeah, no, I do. I do think that you do have like innovation cycles as well. Right. Like if there is a new narrative or meta that spins up like restaking, you know, you start to see a lot of capital and a lot of innovation go to that. And you start to see experimentation like minor or major innovations on like very similar products. And then that narrative kind of dies. The capital pulls out and then like only the strong and resilient of those, know, the ones that truly found some sort of product market fit or are really going to survive. And I mean, I, I kind of think about perp dexes too right now, right? Like how many perp dexes were spun up before hyper liquid, right? Like there were tons of, there, there were so many of them and then hyper liquid just like they, figured it out, you know, They, they continued to innovate on areas that people thought you couldn't innovate that much on anymore. And they've, yeah, they're doing incredible work now. So. Rex (27:00.057) Yeah, for sure. Yeah. And I don't really think there's like that much more value in opining on like the dearth of innovation we're in right now. I do think there's like innovation cycles and you know, there's part of me that even thinks that, that like maybe DeFi went through its innovation cycle. We came out of it with these core primitives like, Justin Havins (Crypto_Texan) (27:09.631) Mm-hmm. Rex (27:27.195) I don't want to say Morpho what are they actually? like decentralized money market and the DEX and some of these things that like we can pick branded products, but really there's just core primitives that are important to the blockchain ecosystem. And maybe we don't see that again. Like the next wave of innovation uses those as a given and builds on top of it. But instead of looking like more DeFi, it looks like. consumer experiences that are backed by DeFi. I am just, hungry for that kind of, I mean, we just need a wave that brings like the you and me's into the industry, right? Like we're believed every day I see people that join this industry with me or have been here even longer that kind of finally are thrown in the towel and going to get like real adult jobs. And like, that's fine. That's the nature of what we're doing. And at a certain point we need to start bringing in new blood. Justin Havins (Crypto_Texan) (28:28.106) Yeah, it's a, it's interesting because, you know, so I really got into crypto for the first time in like 2017. Um, and then, you know, the DeFi summer is really what brought me in to start working in the space full time. And I had a lot of other now that are now friends that came in during the NFT cycle. Right. So. I feel like, you know, on the defy side, you started to see people who were like a little bit financially literate who wanted to come into the space and like, you're like, you can get this type of yield. that's pretty crazy. And then you started seeing like the web, quote unquote web three crowd with like dows and NFTs. And it brought in like a different type of, of user. I think, I don't know, I feel like we are still starting to see that, you know, I think if you look at a project like polymarket. I think they're, they're bringing people into crypto on a much broader scale than any of us could have thought about, know? And I think one of the beautiful things about polymarket too, is that you don't have to necessarily connect your wallet to see benefit from polymarket, right? You can just like check what the markets are saying, and then that's a benefit to, to a user as well. So, and then I think there's also like really cool projects on the RWA side, like courtyard and. I'm saying RWA, this is a project that takes, professionally graded Pokemon cards, stores them in a Brinks fault because Brinks is an investor. and then they issue NFTs, for those Pokemon cards on chain. And it just, it creates a much more efficient market for those who want to trade, buy and sell those cards. And if you want the physical copy, you just send the NFT to courtyard and they mail it to you. It's so I think, I think the innovation is still there. think maybe on the DeFi side, we've maybe we're just, a lot of people are just comfortable with the projects and the amount of innovation that has happened on the DeFi side right now. Maybe we need to tap into more of like the consumer applications, like polymarket and courtyard first, before we start to see like a new wave of innovation in the DeFi space. We feel like we're pretty innovative. Justin Havins (Crypto_Texan) (30:46.29) Innovative on the Katana side of things with our flywheel and the way that we're, know, sharing revenue back to users. think, I think that's a meta that we're going to start seeing quite a bit more of is. I mean, look at, look at uni swaps, proposal, right? They're turning this fee switch on like that. That's exciting. That's, that's a signal to the rest of the industry that it's time to build projects that are generating revenue. And you need to be smart about what you're doing with that revenue, i.e. share that with the users who are making your product so great, which is, I think something we're starting to see quite a bit more. you don't see it too much on the chain level. If you look at other L twos, because they're tokenomics, we're not set up for that type of, you know, value share. but Katana is whether. We're sharing revenue with LPs through Volbridge revenue, whether we're using Chain on Liquidity to make spreads tighter and liquidity deeper for those using the chain. Or, you know, if you think about it, if you're using VCAT, you're getting access to the app level revenues of the chain, right? You vote for a specific DeFi pool, you earn the fees from that pool. That's exciting too. So there's, there's a lot of other things we're working on, on the Katana side that I can't quite get into related to that, but, the flywheels are spinning and, I think, I think we're in a really great position to take advantage of like the, these new metas that are taking off. Rex (32:28.731) For sure. Yeah. I think for me, you know, my, my thesis is that we need to start building things like DeFi, it kind of up until up through this last cycle of innovation was really, really good on speculating on itself and speculating on, on like things that are inherently crypto. And that worked when there was so much. like movement within crypto itself. but while we're in this lull, we need like it, it, you know, fly wheels work in both directions. Right. And so I really believe that in order for DeFi to have motion again, and to have that energy and that new blood, it needs to be used for something. and I really believe like we need to start building consumer apps. Like why I love Polymer, like I'm very concerned about our society just completely. Degenerating into gambling like I feel like we figure this out in like the 1500s, but whatever That aside right like why I love polymarket is Correct me if I'm wrong, but like I think that people can use polymarket without even knowing blockchain I think you can sign up with a credit card and deposit funds and like I I look forward to a world where these things that we're building they get more and more liquid and, and generate better incentives and all this stuff, but that is not so that people get on chain and like mess around with their ledgers and then put like an LP position in something, right? It's so that something that they want to do in their real life or like how in the case of gaming, right? Like that experience is enabled in a way that wasn't possible before. And so, You know, that's like really what I get bullish about. think the Pokemon cards is like half of a step there. Justin Havins (Crypto_Texan) (34:31.688) Yeah, I think it's, it's like a, it's like a sign of like what could be possible, right? Like putting, like a lot of like true decentralized finance is like no centralized intermediaries. Right. So I guess, you know, with the courtyard, it's more of like an on-chain finance thing as opposed to like truly decentralized. Cause you do have a custodian of your assets, but if you're going to pick a custodian of your assets, why not be the most trusted name in security? Rex (34:37.435) Mm-hmm. Mm-hmm. Justin Havins (Crypto_Texan) (35:01.296) In the entire world, which is Brinks, right? And they, and they do at courtyard, they have, you know, you don't really have to connect your crypto wallet either. You can sign in with your email and that, you know, through privy and that creates a crypto wallet for you. And it's just kind of all abstracted away. so that's, I will say that that is another thing that we really focus on, on the Katana side is like the abstraction away of. Rex (35:03.439) Yeah. Justin Havins (Crypto_Texan) (35:26.92) Like having to connect your wallet, go through different types of opportunities. we have, you know, we have our web app app.catana.network. We're about to launch a V one of our app because it's in beta right now and it looks slick and it is just like anything you want to do on Katana. You're going to be able to do just in that app specifically. And if you're a little bit more experienced in DeFi. we have like the ecosystem explore page where you can check out other types of projects and you can get a little bit more complex with your defy strategies. But we think for, for most users who are not involved in crypto yet, they might just want to use it as like a savings account. Maybe they just want to do a swap and like get exposure to a certain asset. And we're just going to go ahead and surface all of those opportunities in that app. in a very easy, intuitive way and eventually do that same type of account abstraction mechanism that you see on Courtyard. Whereas you just have to sign in with your email address and then that will give you access to those funds. Rex (36:39.867) And so let's say that I want to participate in Katana, but I'm not a crypto person. And I wanted to, you know, we're talking about this app where I can log in with my email and it'll create everything in the backend. mean, how would I, how would I experience this with the blockchain? how would I, guess a question that I think the answer to starts to unlock like the next wave of people is how do you expose people to DeFi? without, how do you abstract away DeFi, without building a kind of an experience on top of it. Like if I go to Katana and I'm like, this is interesting. I want to sign up with my email. What am I saying? Am I just saying that I can put in a hundred dollars and then get like a return on that and I don't really know or care why or like, talk to me about how like, how you envision this abstraction. Justin Havins (Crypto_Texan) (37:36.362) Yeah, I would see it as just like a, yeah, I would just say it just becomes a finance app at that point, right? I think if you, you know, it just happens to be on blockchain rails and the type of yields and efficiency and 24 hour execution is made possible by the blockchain. And so we've got a couple different, know, like there's a tab for vaults. We have year in vaults that are surfaced. Rex (37:42.063) Mm-hmm. Justin Havins (Crypto_Texan) (38:06.185) Those have yield that are boosted by Vulpridge and a cat incentives on top of that. So a lot of cat incentives. you're getting like 35 to 40 % interest on your stable coins. Like that's, that's better than a rate that you would get at a bank for sure. Uh, regardless on if it's cat emissions or not. Um, so we've got kind of like the savings account type of situation there. And then we've got swaps. That's built into it. So you want to trade your asset for another one. You go to the swap tab. You can trade assets. you want to use leverage and you know, put your money where your mouth is and double down on conviction. Well, we have a purpose tab as well, where you can do that. And we also have, you know, what talked about cat and V cat staking. There's a tab for that as well. If you want to get a little bit more involved. We'll be having a, an NFT project going live soon on Katana where stakers of the NFT earn yield. There's a tab for that. And we even see a future, even though this isn't like in the near midterm roadmap where we have a prediction market integrated in there too. And it's just all made possible by the Katana blockchain and blockchain technology, but the user just sees, this is a cool. Finance app that I'm having fun using will also include like leaderboards based on your activity and rewards based on your activity for the leaderboards. There's a questing tab. We're going to have our own in-app questing. you know, we, in all this is like, you know, we want to create a thriving, robust DeFi ecosystem, but we also want to make it really simple. So we can attract those users who have never used crypto before. Cause ideally. They just use the Katana app and they have no idea that they're even using the blockchain. They're just earning yield, making trades just like they would on like Coinbase or something. Rex (40:07.963) Yeah, I mean, I guess like, you know, I still think you're kind of running into the same problem, right? Like you can abstract away the fact that you need a wallet, but like who the hell who isn't already in crypto is going to be willing to do VECAT. Justin Havins (Crypto_Texan) (40:22.813) Yeah, that's fine. And I think that there's, I think there's opportunities there too. where, right. Where we can simplify, you know, like in the crypto space, we like to get very technical and in the weeds and in the nuance of like, what's actually happening. I think that there are ways to where we could abstract away like the complexity where it's just like, you know, if we have, you know, we will have relays. that you can select on your own that will vote on your behalf after you stake. it just kind of becomes more passive income. you're just, you're just changing your exposure and the source of the revenue that you're generating from the Katana app, right? you could put in the savings account or in the yield from those strategies, underlying, at in the year involves. You want to app level revenue from the Katana network, stake your VCAT, use a relayer that's maximizing for the best APR. Yeah, I think there's opportunities there as well. I think... Justin Havins (Crypto_Texan) (41:42.024) Yeah, even on the NFT side, right? You know, we've got this NFT project where if you stake your NFT, you earn yield. That's exciting. And also it creates like this, like a sort of social signaling, right? Where you'll be able to in the app, change your profile picture to the NFT that you hold in your wallet, right? It's a whole, a whole consumer experience is really what we're targeting here. Rex (42:04.503) Mm-hmm. So, you know, taking a step away from the, I guess the defy side of it and talking more about just, like nuts and bolts. Can you talk through just the, architecture decisions that you made? I mean, L1, L2, EVM, like just talk through like when you were designing Katana from the ground up, like what, what considerations did you make? I mean, if we're talking about launching and you know, like this year, I'm sure it was very tempting to like really focus the, put this point of gravity somewhere in the Solana ecosystem. You know, can you just talk to me about what is the core ethos behind this and why does Katana look like the way that it looks? Justin Havins (Crypto_Texan) (42:49.257) That's a question. So Katana was incubated by Polygon Labs and GSR. And like I said at the beginning, I spent three and a half years over at Polygon on the DeFi team. And as we started to see, you know, this more verticalization of L2s and L1s in the crypto space, you know, we on the Polygon DeFi team and other heavy DeFi users and DeFi builders that we interact with on a regular basis just really took a step back and said, you know, if we wanted to build a DeFi chain, like what would we really want as heavy DeFi users? the two main answers came back every time, which was high sustainable yield, right? Which makes sense. And, deep liquidity so you can execute trades with minimum amount of slippage and more consistency with rates on the borrowing side. And so through that we said, okay, let's build a chain with an architecture and some flywheel mechanisms that maximize for those two things, high yield and deep liquidity. And through that we came up with the ideas like what we're really maximizing for is productive DVL assets that are actually being used in DeFi. So that's kind of where that came into the full two. so, you know, vault bridge is one of the core components of Katana. Vault bridge is a product that was built by Polygon's Ag layer team. This is a product that any layer two can use if they want to, to generate yield on the assets in the bridge. And then they can do whatever they want to with them. Katana has decided, as I said previously, what we're going to do, which is to take that revenue and boost yield for users. So with that, you know, we, saw being an L2 as a way to, you know, maximize our revenues because you know, you can do it on like an L1 bridge. Sure. but also just, there's something that's, that's very unique here in the sense that Justin Havins (Crypto_Texan) (44:57.83) You know, I would say that when it comes to like Ethereum alignment, Solana alignment, like we don't really care. We just feel like you should build the best product possible that users actually want to use. But it just so happens that if you were to look at all the L2s out there, I would argue that Katana is the most Ethereum aligned L2 because the assets in our bridge are being used in Ethereum DeFi that's helping provide, you know, growth and sustainability in the same way that we're doing it on Katana. So, you know, we kind of looked at different stacks. What is like the type of execution environment in builder environment that we see DeFi builders being the most comfortable with? it just, OP stack was, was kind of the front runner there. And just so happened that the Ag layer team was creating their own like ZK OP geth stack essentially where it's like OP on the execution layer or on the on the smart contract layer and then you're using ZK proofs from like a settlement to Ethereum. So we adopted that chain development kit, implemented VaultBridge and haven't really looked back. I mean, it's been it's been a great success. VaultBridge earns on the bridged assets about three to $400,000 a month for Katana. And like I said, that goes to boost the yields. You know, it's, it's, it's, it's, it's amazing. It's a perpetually funded liquidity mining program, essentially. Right. Typically you see a bunch of chains that launch, they have these incentive programs where they're emitting a lot, a lot of tokens to, you know, attract liquidity. We're doing that too, with the cat token, to be fair. Rex (46:37.818) Mm-hmm. Justin Havins (Crypto_Texan) (46:55.442) But as long as people are on Katana, those emissions aren't going to dry up from like a vault bridge perspective. And then if we need to, you know, we can tap into like cat incentives, but the idea is to rely less and less on cat emissions and rely more and more on the revenue that's being generated by those flywheel mechanisms. Rex (47:18.395) And how do you, know, so like inherently where this yield is coming from is taking risk, right? And I guess my question is, know, there's, there's, there's, guess, two questions, right? One, how do you think about like where it's responsible on the Ethereum L1 side to be deploying these assets from a risk perspective? And then two, how do you allow users to make Like informed decisions about what they're doing, right? So I'm looking at the Katana page right now. I see that I can I can deposit in the USDT vault, which is powered by urine and earn 42 % right like What am I exposed to here am I exposed to urine on the L2 then the bridge Contract itself and then urine on the L1 or like what's the whole stack there? Justin Havins (Crypto_Texan) (48:16.156) Yeah, that's a really good question. And I'm going to talk about a few things here. first thing, yeah, if you look at, if you look at the year involves on the current version of the app, you don't get the most information on like where those assets are being deployed. You kind of have to go to yearn and we've, yeah, there's people in discord and stuff that talk about that. And on the, on the next version of the app, which should be coming live in a few weeks. That's that's fixed. It's, know, transparent clarity on strategies, what you're getting yourself into. Absolutely. We, we believe in that. and then, you know, from a vault bridge standpoint, we are not trying to maximize for the highest yield in vault bridge, right? These are conservative strategies, by intent. That's why if you look at the assets that are eligible to be in vault bridge, they are blue chip assets. is wrapped Bitcoin, ETH. USDC USDT incredibly liquid, Great reputations been around for a long time. A lot of confidence in these assets just on the asset level by itself. Right. And then we, know, the way Morpho is structured, is they have, know, you have to have a vault curator and set up a vault. So, on vault bridge, the Ag layer team partners with gauntlet and steakhouse. to that's where the vault bridge assets go into. And if you go on Morpho and you just type in vault bridge, you'll see the four vaults for vault bridge in there. And then you can also see the underlying strategies that are happening within them. it's a pretty conservative in my opinion. And that's what it is. We're just trying to get a little extra yield on those assets that All other bridges don't get any revenue from, then share that revenue with the users of the chain who are taking that risk. And if you think about it, like if you're, if you're bridging to Katana using vault bridge and then depositing into Morpho, how much additional smart contract risk are you actually taking on? Cause you're exposed to Morpho on both sides there, right? You know, and that's just. Rex (50:36.597) Sure, but if I'm burgeoning to Katana and then depositing into Yern, like... Justin Havins (Crypto_Texan) (50:42.182) Yeah, that's a good question. So yeah, let's talk about that. So if you think about the stack of risk, so first thing you have to think about a is in my opinion, you gotta think about the asset, right? So you've got risk on like the asset level, especially if it's something like usdt, where it's like off chain third party custodian, right? So there's, there's asset risk. Okay. Then you deposit it into yearn, smart contract risk on the yearn side. And then also. strategy execution risk on the year side as well, cause there are white listed strategies that are in those year involves that are helping to generate revenue. Okay. So that's one, two, three. On top of that, you've got L two risk, you know, the security of Katana, which is really just, I guess, bridge risk in a sense. Okay. And then on top of that, you've got a vault bridge risk, which is smart contract risk related to Morpho. And then. Rex (51:31.227) Mm-hmm. Mm-hmm. Justin Havins (Crypto_Texan) (51:41.062) If you're to go even further, Ethereum, blockchain risk in general. So, that's, that's the stack. it's not too dissimilar from all other layer twos or deploying into DeFi on other layer twos. There's just one additional layer of smart contract risk on the Ag layer side. And then you are compensated for that risk. by getting a portion of the revenues generated from Vault Bridge if you're using them in DeFi. Rex (52:18.457) Yeah. And of course, like, I don't think there's anything like that, that crazy or, or hard to understand going on here. You know, I just, you know, we're sent, we're having this conversation maybe a month or so in the wake of the balancer hack, which, you know, it's just like, what's particularly scary about that is that hack. that vulnerabilities can exist for two plus years in core DeFi infrastructure that are just ticking time bombs that there's really no way to know. so while everything you're saying about this risk stack is, again, I don't think it's hard to understand or really anything new. I think it's moments like this balancer hack that make us really kind of It makes the responsible ones of us kind of think again about like, okay, even if every brick in a wrist stack is like rock solid, you stack something up like 20 bricks high. that's just like, it's inherent, like tall things are inherently unstable. Justin Havins (Crypto_Texan) (53:33.148) Sure, yeah, that makes sense. I would say too, know, none of this is financial advice. DeFi is risky. mean, crypto is risky. Investing is risky. you know, think if you're, if you are experimenting, mean, yields are higher in DeFi than they are in the traditional finance world. And I think that is because there is an additional layer of risk. Rex (53:38.384) sure. Justin Havins (Crypto_Texan) (54:00.328) that people, know, if you're going to deploy in deep pot in defy users are going to want to be compensated for the risk that they're taking. And I think that they, and I think that they are, in my opinion, I think the market works appropriately there. And I think it's, it's no different, on the Katana side, right? There's, if you look at all other L twos, there's technically an extra layer of risk on the Ag, on the Ag layer side with the, with the. Vault bridge. and you, are you getting compensated for that? If you're if you're being deployed in DeFi, you are, but that doesn't mean that it's risk free or riskless and the strategies that are being deployed in urine faults or on Morpho on the Fall Bridge side. They're not riskless. They're just a little bit more conservative. Then maybe some other faults that you would see, and that's by design, right? The whole idea is not risk elimination, because that. is impossible. just risks mitigation and limitation as much as possible. Rex (55:03.643) Sure. Sure. So the last few minutes here, I'd love to kind of turn our conversation to looking forward and what's exciting. you know, earlier you talked about how with the Katana Grants program, you want to be, you don't want to fall in this spray and pray trap. You want to be much more targeted and, you know, get behind things that you really believe can, you know, be V value additive or V value multiplicative or, know, I'm putting words in your mouth at this point, but again, open up the space to more ideas, more users, like more oxygen than we kind of like have been like slowly letting out of the room since again, I peg it on the SPF drama. So. When you are thinking about your grants program, you're thinking about the types of things that you want to get behind just with the brand or with the energy that you bring to the table, what are the things that are really exciting to you? And you can name check any specific projects if you want, but I'm more thinking about what are the big ideas that you're looking for that really will be the core pillars of this next chapter of DeFi? Justin Havins (Crypto_Texan) (56:29.243) Yeah, I think we've got a really cool prediction market on Katana called foresight, which I think is also a great name in general. they're starting to pick up a lot more volume in TVL and their pools, which is allowing them to provide more, more predictions. I think their team is, is really sharp and I'm excited to see them grow quite a bit. I think more innovation on the prediction market space would be really exciting if there's some sort of, you know, like. If you're locking in a prediction that doesn't settle for two months, like that you're locking up your capital for two months, it'd be nice to earn some sort of yield on that. In my opinion, you know, that just a thought out there. I know that there's a project that just went live on polygon that's doing some sort of, you can use your prediction bet as collateral and take out a loan against it, which allows you to leverage up, which I think is also very, interesting and unique. we will have an NFT project on Katana from the Katana foundation coming soon. where users can stake their NFTs and they'll have equipables. It's a new NFT standard, six, two, two zero. I think it'd be cool to see some sort of innovation or have some builders build on top of that. Cause the, know, when an NFT can earn yield that. kind of opens the door to other types of things that you can do from a builder composability perspective that I think would be interesting to dive into. And then what do we have on our roadmap? You know, we've got version one of the app coming soon. We've got in-app questing coming soon with a leaderboard. We've got the NFT launch, which I mentioned. We've got a perp decks coming soon. We've got TGE, which will allow for cat vcat staking, in here pretty soon. That's probably going to happen in February. So over the next three months, we are slammed. And I think there would, you know, for other things I want to see, and I know we're running up on time. I'd like to see more projects that are at the intersection of DeFi and AI. Justin Havins (Crypto_Texan) (58:44.55) We have a few projects on Katana that are doing that, like ChimpX is one and there's a few other ones. I think that is going to be something like the, I think we're just, we're a little spring loaded here. And I think there's going to come a time where a lot of capital and innovation is really going to hit that intersection of AI and DeFi. you know, I would love to just see what people are working on. It's fascinating to me. Rex (59:13.155) Yeah. Yeah. mean, if people are listening to this podcast, I apologize for saying this again, but just to kind of close us off here, you know, I, I really believe that there is a, the defy, the crypto and AI are part of the same story. and you know, like to me, it's just too much of a coincidence that AI is about abundance and just like, a deluge of content in which you can't tell what's real and you can't tell what's not. And crypto is literally the exact opposite. It's about slowing things down and scarcity and identity and attributability. And so, you know, I don't think it's a coincidence that these two things are kind of happening at the same time. And what that looks like, I don't know. Like, frankly, while all like the virtual thing, like the chat bots and virtual is like, I thought that was interesting and I like the energy around it. I don't really think that's like the future of like where crypto and AI intersect. But I do think that there is a very clear intersection that when somebody kind of like unlocks it, not only are they going to make a billion dollars, but it's just going to change how we understand, you know, what these technologies are for and how You know, we start to ingest them as society. Justin Havins (Crypto_Texan) (01:00:44.218) Yeah, I think so too. mean, I think there's a lot of things to, mean, you could from the intersection of Define AI, there's things that are just very simple. could do where, you know, it's like, can identify what type of assets you have in your wallet and it could like, based on its own logic, find the best risk adjusted return for that asset on a, on a given blockchain. think that could be really cool or just having vaults that are managed by AI. strategists, which also sounds kind of scary, but if you whitelist opportunities, maybe put some guardrails on it, it could be a success. And I think that's just the beginning of what we could see there. Also, financial intelligence is another project that we work with that they're very great also. Rex (01:01:24.483) Yeah. Yeah. Rex (01:01:29.819) Yeah, no, awesome man. I think, again, like you said, I think that's the beginning, right? I think these are almost table stakes, which is just how do we use the AI, essentially chatbots that we have to do things that are pretty automatable right now. Or if they're not automatable, it's just hard for humans to ingest the amount of information that is really kind of trivial for an LLM to ingest. But then I like look forward. And think like, how do we even think beyond just using this as like, how do we use chat bots to do more sophisticated transactions on our behalf? like, how do we create a truly autonomous chat bot that is identity is corely built on a private key. And like, that's how they like not only make trades or whatever, but like sign their own work or, know, like can they truly exist in the internet or. Justin Havins (Crypto_Texan) (01:02:19.184) Yeah. Rex (01:02:28.973) in the chain or, you know, in like our, our nodes that are supporting this blockchain. and that's not really a financial thing. That's like a whole, you know, it's like, don't want to be too woo about it, but that's like almost a spiritual thing about like what are chatbots, what are these intelligence and like, how does crypto provide the substrate for them to, to, to exist in a purely digital space. Justin Havins (Crypto_Texan) (01:02:54.854) Sure, absolutely. Rex (01:02:56.281) Yeah, cool. All right, man, we are getting way off of DeFi here. So for the sake of everyone's schedule and attention span, I will cut us off. man, Justin, thank you so much for the time and the thoughts and the vision of what DeFi is and what it can be. If anyone is enthusiastic and excited about this conversation, can you tell them just where they can find you, where they can learn more about Katana, and if maybe they have some of these ideas that... are really applicable to not just being the next, not just being a sushi fork, but really taking DeFi and bringing it to the next level. Like what's the best way to kind of be involved in the Katana ecosystem? Justin Havins (Crypto_Texan) (01:03:38.81) Yeah, great. Great question. you know, follow us on Twitter at Katana. Follow me on Twitter at crypto underscore Texan. go to our app app dot Katana dot network, check out our telegram, is Katana at Katana underscore network. And, if you, if you go to our app, you can, you can find our discord and things as well. So reach out to us, get involved builders, users, everybody. Rex (01:04:06.477) Awesome, Well, thank you so much, Justin, and have a good rest of your day. Justin Havins (Crypto_Texan) (01:04:10.223) Alright, thanks, Rex.