Inside Lighter’s Plan to Overtake Hyperliquid | Vladimir Novakovski

Hyperliquid was probably the first one that actually was competitive with centralized exchanges. I think Lighter is even more so, but in terms of the performance. And so now that that exists, I think it'll be more like all of these exchanges, centralized and decentralized, will compete for the same market share.

Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice, or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. All right everyone, very excited about this episode. We've got Vlad, uh, Novikovsky, founder of Lighter. Lighter, hopefully you guys know, very fast perp DEX, low latency, ZK proofs, L2 to Ethereum. We'll get into all that. Um, but before Lighter, Vlad was at Citadel, uh, director of HFT at Graham Capital, head of machine learning at, uh, Quora. I think it was, VP of Eng at Adapar, and also co-founded an app that I used to use actually all the time called Lunch Club. So Vlad, welcome to the show.

Thanks for having me. Thanks for that intro.

Yeah, I didn't know you founded Lunch Club until I was like about 10 minutes ago looking up your background before this episode.

Yeah, yeah, my co-founder Scott and I started working on that back in 2017 and it actually, you know, it still runs, you know, the AI runs in the cloud, so. You know, it was, um, it was really interesting to build, uh, and there's some kind of early applications of LLMs there as well.

Yeah. What were the lessons from that business, if there are any? Like, build it— it was basically like a social network that connected folks who wanted to— yeah, I don't know, more, more for business purposes, I feel like. But what were the lessons from that?

Yeah. Yeah, for sure. Uh, I mean, I think that, uh, there were some Like on the technical side, right? I mean, I think there are some really interesting things that we build and we learned a lot about kind of some of the newer approaches to machine learning. And I mean, also just like it was interesting to grow customer base because, you know, for a while it was growing quickly and then, you know, then things kind of plateaued. Understanding kind of what drives those cycles was interesting. I mean, I think ultimately You know, where we ended up though is like the size of the market for people who want to have, you know, kind of open-ended conversations that are not transactional, but, you know, kind of more like open-ended networking is just not that big of a TAM, right? Like, unfortunately, like most people either, you know, like I think if you look at like founders or entrepreneurs or other people like that, or like investors. So that happens a lot, right? But like when you zoom out, like there's just like kind of relatively small market. So I think that's kind of where it is, but for that market, it still provides a useful service.

Yeah. Yeah. I was kind of your perfect, I feel like addressable customer there with like, you know, founder does some angel investments, like interested in meeting other people, but Yeah, you go beyond that, kind of shrinks. Maybe we can start, I want to, I mean, I want to talk a lot about Lighter. You guys just launched your token. You've been growing market share month over month. Just had a big fundraise, obviously. Maybe we can zoom out from Lighter though. You were, you were kind of this prodigy child, you know, graduated Harvard, I think I read at 18, went to work at Citadel, you know, built out a whole bunch of cool HFT stuff at Graham Capital. Uh, led machine learning at Quora. Why is— if I looked at someone with your resume, you would probably be— I would think that you would be working at Anthropic, OpenAI, maybe at Renaissance, maybe, maybe back at Citadel. Why is crypto the thing that you chose to work on?

Right, well, you know, I think that, uh, for one thing, like, I like building things, right? So like, I think Citadel is actually the, I mean, actually when I was there, they weren't that big, right? But like, that's the biggest company I've been on, which is like a few hundred people at the time. So definitely like kind of being somewhere early stage, you know, building something new that's always been appealing, right? But In terms of crypto, right, like after having, like I was in TradFi for a while, right? So I saw everything from the 2008 crash to, you know, flash crash 2010. And, you know, I kind of saw a lot of what was good about TradFi, but also a lot of what was broken, could be more efficient, more transparent. And so, you know, I kind of started learning about crypto over time, starting with, you know, Bitcoin. Reading the white paper in 2012, started, you know, to learn more about Ethereum, like 2015, and got into ZK proofs around 2018. So it's like, then putting all these pieces together, it's like, actually, like a lot of this is the tech that can lead to a lot of innovation of finance, right? And kind of, if we think about, like, I mean, DeFi has been around for a while, but if we think about how does DeFi actually perform at the same level as TradFi without sacrificing kind of the verifiability. I mean, that's like a really big and important problem to work on. So yeah, so I think like from my perspective, it's not like, you know, it's not like, okay, let's like build in crypto for the sake of building crypto, but more like, okay, here's actually a really important problem that puts together a lot of the building blocks that exist now. And, you know, myself and the team kind of have, you know, we're pretty mixed, right? Because we have experience both on the kind of cryptography and research side, but also on the quant side, right? Like including my experience.

Right. What did you learn from Ken Griffin?

Well, Ken is very, like laser-focused. I mean, even back then, like he's, you know, was always kind of thinking about Citadel and pushing the team, like kind of very, just like very like intensity in his work. I mean, that's one thing, but the other thing is that he was always thinking outside the box of like, like back then he had the idea of building Citadel Securities, right? And it was like, okay, this is weird. Like, why would a hedge fund like that stuff should be done by a bank. Like why would a hedge fund build kind of an internal brokerage like that? You know, but he did it right. I mean, he like, there were other ideas like that as well. Like the way he approached building trading desks, like it was just like, there wasn't like, okay, this is the way it's always been done. So let's just keep doing it this way. But thinking outside the box. I mean, that's probably the other big thing.

You said you were excited to solve this, you know, important problem. What is the important problem as you see it today?

Right. Well, the important problem is that, you know, the, like, the, the fact that in, you know, we have all these technologies, right? But at least like when we started building in 2022, like 99% of the way digital assets were traded didn't actually use the rails of blockchain, right? Like they're actually trading in a way that's centralized, which arguably doesn't really get us any improvement over TradFi. In fact, in some ways, like we saw with FTX, is even worse than TradFi. And so that's, I think that's the kind of the big problem. But I mean, ultimately, like TradFi, like I said, itself has a lot of inefficiencies. I mean, I think part of why crypto is exciting in the first place is to kind of build a financial system that's more efficient, more transparent, right? Like, you know, you can still have a lot of different intermediaries in the system, but if what they do is verifiable and is on-chain, that just makes things more efficient as opposed to like having intermediaries whose actions are opaque.

Hmm. Why did you decide to start with a Perp DEX? Because you could, you could start with a mobile app, you could start with a chain, you could start with a spot, you know, spot DEX. Like what, why start with a Perp DEX?

Yeah, we actually looked at spot, like the very first iteration of what we built was more spot. And then we just, from talking to customers, it's like perps. I mean, it makes sense when you think about it, right? Traders, I mean, spot is important as, you know, you need that in the ecosystem, obviously, right? But most active trading happens with perps. There are not a lot of people who are like, okay, I trade and I only trade spot. I think it's more like perps is where a lot of leverage allows you to like be capital efficient, right? And then, you know, spot is important. Like if you want to do something that's a longer-term position, or if you want to hedge, do like basis trade like that, it's important too. But like, made a lot of sense. Like if the goal is quick customer adoption to start with what customers want to trade the most, and that's perps. I mean, I think the, like, we, we did build an L2 on Ethereum, right? And so that, and it's now one of the biggest, I mean, by like by TPS, it's, you know, that has the highest TPS. It's, you know, top 4 by TVL and so on. But we like, we wanted to build the core tech and the application. I think sometimes what happens is this, there's this like, if you build it, they will come mentality where it's like, hey, let's build this. Tech, and then hopefully builders will come in on top of it. And like, I think you kind of, you know, I think without having that iteration where loop where you actually have like real customers using the tech kind of from day one, it just you know, like, I think in principle, it could make sense to get, well, some, you know, one team is really good at building the core tech, another team is really good at building an application and like, but I think those things actually make more sense once there's a version that's already working and has a customer base. And then like kind of what we're doing now with, you know, saying, okay, well, like, lighter L2, like we're getting ready to announce the ZKVM sidecar where now other developers can, you know, kind of any Ethereum DeFi app can now work on top of Lighter, you know, once that's released. So I think that all of that is important, but if you just start with the infrastructure layer without any applications, I think that's just like not necessarily a great way to bootstrap.

Yeah. Tell me about, um, the, the evolution of Perp DEXs, of, uh, Perp DEXs are very, is very interesting, right? Or even just perps in crypto is very interesting. I feel like every, every cycle you have like one perps platform that kind of dominates. You had, you have like BitMEX and then you go to, do you obviously DYDX commanded a lot of market share. Then you get other people popping up, you've, you've got Drift and GMX. And then the platform that dominated this cycle obviously was Hyperliquid. Nobody's been able to keep their market share though. Do you have a theory for why that is?

I mean, I don't really think about that so much. I mean, I kind of zoom out and say, okay, like overall exchanges have kept market share. I mean, I think some of those earlier projects you mentioned, like, you know, didn't necessarily have good product-market fit. To begin with relative to centralized exchanges. Like, I think you need, like, this is one of the interesting things we learned after FTX collapsed, right? It was like, okay, well, after this happened, surely volume would move to DEXs, but that didn't happen. So it's like, so I think that it's like you'd rather trade on a centralized exchange where, you know, there's maybe a 1 in 6 chance it's gonna, you know, completely collapse. Like one of the 6 big ones did just collapse and yet you'd still rather trade in that space. And I think to us what that showed is like, there's just like the product market fit for most traders at the time of being on a DEX is just not there. Like, and so that's why our goals were kind of, you know, have something that's fast, you know, low latency, low cost, secure, verifiable, and composable. But those first two things, you need that, right? Because if you don't have that, then like most traders would rather forego the other advantages of DeFi and just trade on a centralized venue. So anyway, I guess all that to say, like, I think like Hyperliquid was probably the first one that actually was competitive with centralized exchanges. I think Lighter is even more so, but in terms of the performance. And so now that that exists, I think it'll be more like all of these exchanges, centralized and decentralized, will compete for the same market share, I guess, is kind of where I see it. And certainly overall, right, like there's Binance, there's Coinbase, Bybit, like those, you know, there's a lot of players there. It's not just like focused on a single one. And so I think that over time, that's what will happen with, you know, like I think the shift from CeFi to DeFi will continue. And also as more people from TradFi come in, I think they're gonna, especially after, you know, US markets are opened up, like a lot of those folks will come in to DeFi native platforms. So I think that's kind of how we see that. Like, again, I think to your point though, I guess why did we see this phenomenon? I think it's probably because none of those products really had true product market fit. At the time. And so they were, it was just kind of like people trying stuff out, but they weren't necessarily used by, like, they weren't really getting a meaningful market share from traders to begin with.

Yeah. I would say until Hyperliquid, Hyperliquid broke out of this like little niche, right?

Yeah. Yeah. And I, again, I think that's because just the product, it was like the first one that actually was competitive on the basic things the trader needs.

Yeah. What do you think Hyperliquid got right and what do you think Hyperliquid got wrong?

I think that, you know, they got a lot of stuff right on the product side, right? Like actually building something that, you know, has, I think, performance that's good enough for most traders and has, you know, a lot of the, um, the, the kind of the UI/UX features, um, that you need. And I think there's some other interesting things like the HLP, right? That was a good, um, innovation. I, in terms of getting wrong, I mean, I think it's more like You know, at the end of the day, I think building on top of Ethereum and being connected with kind of the broader ecosystem, both existing DeFi and then also like, like TradFi, as much as somebody might want to talk about like housing all finance, like TradFi just isn't going to move to like an L1 that's not Ethereum. Like when you talk to, when you look at like, what is you know, like tokenized stocks, right? Like Robinhood or, you know, like JP Morgan or, you know, others working on stuff like that. Like they're going to build and they are building on top of Ethereum. And so that like, you, if you want to capture that market down the road, like you need to build on top of Ethereum. And it's also just more, and that's also where most of existing DeFi is, right? So if you want to have that native unlock, so I think that's, and the only way you can do that and have the good performance is to, build it the way we did. So, but like, you know, but that also took longer to get to market because it's just a harder technical lift. So that's, that's the trade-off. And I guess now we're seeing that play out in real time. Now, again, we think like if you solve the hard technical problems first, then you get the bigger unlock later, but that has to, that's easier said than done, right? Like now, now we're seeing that play out in real time and we'll, you You know, like, I think this year will be, a lot of things will happen, right? As far as between unlocking the full connectivity to Ethereum, between kind of institutional use cases or use cases like tokenized stocks and between, you know, opening up to the US market. I mean, I think a lot of things will happen this year.

Yeah. Yeah. Can you double-click on why you guys are in ETH L2 instead of an L1?

Yeah. Well, that's kind of the thing here, right? It's like, anyone can build their own L1, right? I mean, like, it's like any Ethereum L2 can just remove the connectivity to Ethereum and call themselves an L1. Like, that's like the— it's so when people say like, why don't you guys become an L1? It's like, yeah, like we can, throughout all the hard-earned and interesting things we've built and call ourselves, like, what's the goal of that, right? Like, I think the whole point of being a part of building on top of Ethereum, I mean, besides the security aspect of it, right? Like, you're on top of the most secure L1 that's been around for over 10 years and It's kind of by far the most decentralized, most reliable. I mean, besides that, I mean, you just, if you just look at the data, right? Like that's just where most of the TVL is, most of the existing DeFi protocols are there. So being composable with those is huge unlock. And on a forward-looking basis, to the extent that DeFi and TradFi will merge, like, again, like, like TradFi, like Ethereum is kind of the only, kind of underlying architecture that TradFi trusts.

How important are the, all right, so you, so on one side you have the, the institutional trust. How important are the integrations with other, you know, players in DeFi? How important is it that, you know, because you guys are at this EthL2, it's much easier to maybe plug in with something like Aave?

Yeah, exactly. Exactly. And so kind of the vision here, right, is that any asset that's already on Ethereum, whether on the L1 or other L2s, can be used as collateral on Lido kind of natively. And that's kind of huge, right? So you can imagine like, if you have something, Yeah, like let's say on Aave, right? Or you have even just like, if you're holding a lot of ETH, I mean, you can then use that and trade other assets on Lighter, you know, and participate in perps or other markets we launch in the future, like options, prediction markets, and so on.

I heard, I forget, I was texting a couple investors who participated in this last round saying, what should I talk to Vlad about? And they said, for I forget if it was in one of these texts or maybe I saw it on Twitter, but someone had mentioned you guys are the only product on the market that is strong across 5 different dimensions. Or maybe this is, you said it on another podcast, I forget where I got this from, but it was low cost, low latency, secure, verifiable, and composable. Can you talk through?

Exactly.

Yeah, can you talk through that competitive edge?

Yeah, well, I think the low latency part, is really important, right? Like if you compare LIDR on the latency side, it's like 200 milliseconds. And the reason that's possible is because the sequencer can be highly optimized. And, uh, you know, if you're trading from, I mean, there's other than, you know, speed of light, I mean, you can kind of be as efficient as possible. And the idea is that because everything that's done is proved, Like the sequencer can go very fast and then there's, you know, the kind of the, the prover, um, can go a little bit slower than that and kind of generates proofs and posts them back to Ethereum. But if you're trading in real time, like, um, the latency of that is very low. Like it's much lower than what you can get if you're trying to build your own consensus mechanism. Um, so, and that, that's like, Again, going back to like, why, why are we building this? I mean, that's one of the huge unlocks of ZK, right? Is that you can have very high performance applications yet still be verifiable. So that's the low latency part. I mean, low cost is kind of, there's two things to say there. One is just like the way we built the tech, it can be operated at very low cost. Like we're processing 500 million orders a day. Right now, and the costs of doing all that are like under $50K USD, right? So that's, I think, cheaper. You know, if you imagine how much that would cost if you were like doing that on one of the other Ethereum L2s, you know, it would be orders of magnitude more like even, I mean, I think even centralized exchanges probably have a higher cost structure, right? So that's, And, but one thing is to have low cost, other thing is to pass that on to customers, which we do in particular retail customers where it's free. And like, you know, there's kind of this apology of like, you know, monetizing from the market makers and the high frequency trading firms, but none of that would even be possible if the costs of operating the exchange were high. So that's the second part. The third part, the verifiability. I mean, I think like there's a question of who, you know, why do people care about verifiability? Well, so for one thing, like what would it mean to not be verifiable, right? That means there's some component that you just have to trust. Where there's no code for it, there's no, no, nothing to see on-chain to confirm that it's doing what it says it's doing. So then, like, for example, if you had something where trades are settled on-chain, but matching is done off-chain in a way that's not verifiable, well, that, especially with like big market moves, like an October 10th, or even other big moves, like, who's to say, you know, price could be moving, um, a few percent in a couple minutes, like, and, you know, let's say your order was not matched fairly, like, and you don't even know, you wouldn't even know that it was, right? Like, if the price is moving that fast, like, how, how would you, you know, um, you could have situations where, um, you have, instead of like making finance more efficient and fair, you can actually have outcomes that are worse than tradfi if you're not verifiable. So that's— but the other piece is like, because sometimes people say, well, traders don't really understand all that and don't care. I mean, some traders do understand it, but even if you say, okay, maybe most of retail doesn't, well, the people on the other side, the market makers, the HFTs, they certainly do understand it, right? And so they—

wait, they understand what? They understand the verifiability part?

Yeah. The verifiability part and why that's important and why that makes them comfortable trading in this environment and knowing that, you know, everything that they're doing is processed fairly. And so, so like they, they, and when you, those guys, you need those guys to have higher liquidity for the resale, right? So it's like, right, like every trade has two sides. So like arguably. Not everyone on the retail side understands the full nuances of how the tech works, but certainly the folks on the other side do, right?

Yeah. Yeah.

So that's, that's the verifiability part. Um, I mean, yeah, go ahead.

Before you get into that, can you explain the ZK stuff that the ZK innovations that you guys have been able to do? Uh, I guess two, two questions there. One, explain it to me like I'm, uh, not, not you. Um, you know, help, help me understand like why this is actually so important. And then the second part of that is like, why are you guys able to do it when no one else has been able to do it? Is this because of partners like the Sysinks of the world have made improvements, or this is some— you guys have a team of, you know, math Olympiads or what? Why have— so I guess two-part question there.

Right. Well, maybe I'll start with the second part first and just, uh, um, because I think that'll inform the first part. Yeah. So, so far, everything we've built has been built in-house. So everything you see on Lighter today, like, you know, how it works. No, there's some, like I said, there's some new stuff we're working on now where we are working with partners and we'll announce who those partners are soon. But, but that's, that's for stuff that hasn't even been released yet. So everything that's been built so far has been built in-house. And, you know, our team has a pretty unique mix where it's, yeah, some people from, you know, we have like 20 of our team members have a medal in one or more of the Olympiads. I mean, I have medals as well, but I think that's part of it. But the other part is that, you know, we have experience both on the cryptography side and the quant side. And I mean, both of those have to do with things like math and computer science, but the point of it is like, there's certainly teams that are very good at one of those things besides us, but I think we might be the only team that has both. And so when we're building the, you know, the specific things, It's like, yeah, yeah. And now I'll get to your first question, right? But like, I guess in terms of like, why us? It's because we're able to kind of wear both hats and say, okay, like, this is how you design things from a cryptographic dimension. But then how's that, like, what are the trade-offs you need to make that are actually important to trading, right? Because I think some of the teams that are really strong in the cryptography side, like the stuff they focus on is not necessarily what actually matters in the markets. Like, to the early example, like how do you make sure that during like a big market crash, like on October 10th, that everything with liquidations is proved correct? Like that matters a lot more to the market than maybe something more academic, like what happens, you know, is it possible, theoretically possible to have MEV you know, at, you know, the microsecond level, right? Like that actually isn't what the market cares about. What they care about is like when the big moves happen to make sure everything is like liquidations and everything are handled correctly, right? But in terms of like how it all works, I guess like one analogy I think that's pretty interesting is like, so like, again, the goal is to process transactions, right? Do that efficiently, you know, low cost, low latency, but then to prove that everything you did is correct, right? And so it's like there's, you know, there's certain rules that have to be followed. And the rules are things like first in, first out, right? Or like, you know, like time, price priority, kind of all the obvious rules that when it comes to trading, right? But like when there's a lot of trades, let's say a million orders were just sent and like 100,000 of them were matched with other orders, the rest were canceled. Like you can generate a proof that all of that followed the rules of the trading system, which are public and kind of open source and what's so-called ZK circuits. Now the hard part is how do you do that efficiently? Because You know, you can use, there are systems you can use that, I mean, you can even try to just do that using smart contracts, but it would be very expensive. I mean, so one analogy is like, kind of like what NVIDIA did for, like they created a chip, right? That was like very specifically optimized to graphics, you know, like to video games. And that was the initial application. Now, obviously used for AI, but like they created that that chip that was highly customized for specific applications. Similarly, we created zero-knowledge circuits that are specifically for finance. So our circuits can very efficiently encode the rules you need for finance, like for risk management, for order management, for liquidity, all those rules and nothing else, right? So we don't prove like, we're not, and this is where the distinction between like full zkEVM and our custom circuits comes in, right? Because we prove only the stuff you need to prove for finance and nothing else. Now we're going to combine that with the full EVM as well.

Yeah. Cause I was going to say, isn't there, isn't there a downside of that? Like it's, you, you, you, you perfectly optimized for trading, but maybe you, it's tougher to add custom logic or, you know, if you need to do a big protocol change, it's, it's a little tougher.

Right. So exactly. So there, there is, there is a trade-off there. I think you need, I mean, for the trading, you need to have the efficiency, right? There's no other way to have that. And again, and still be on top of a secure L1, but you can actually have the, you can actually have both, right? And that's what we're going to announce in the coming weeks with the Sidecar EVM. So again, it's kind of like you can, in traditional hardware, you know, you can have this like really optimized, you know, coprocessor and then kind of the main, the main CPU, but here we're actually going to have something where you can write generic code too, like something like an Aave or Morpho can just come in and bring their existing smart contracts. So either those can run in a somewhat less efficient environment than the customized circuits, but able to share the sequencer, right? And so then, but, but for a lot of applications, that's good enough, right? Like applications that are good enough as is to run on top of Ethereum certainly will be, will, will work just fine with the lighter EVM and be able to kind of coexist with, with, with the, the high performance training. Yeah.

Yeah. Vlad, can we, um, maybe we can get out of the technicals. I want to hear about your, your relationship with the other Vlad, with, uh, Vlad Tenev at Robinhood.

Sure. Sure. Yeah. So it's interesting. We were at high school together. We were the two Vlads at a high school called Thomas Jefferson in Northern Virginia.

You and Vlad went to high school together?

That's right.

Same grade?

I think we were like a year apart there. I mean, we didn't know each other well, but you know, we, you know, Certainly, um, you have each other like a little salute, like the same plaids, like walking past on the— yeah. So, um, and then we reconnected like 10 years after that, um, because we were at the time— well, so we were actually both doing high-frequency trading for a while. Like, I don't know if you know this, but before starting Robinhood, like him and Hiscoff and Orbeju were like building some HFT systems for trading companies. And so, yeah, we reconnected as they were kind of going from that to starting Robinhood. And, you know, I guess what they didn't know at the time is that I had left trading and was working on stuff in startups as well. And so it was like, we were all, and Paul also, as it turned out. And I started, I really liked what they were building with Robinhood and kind of started helping out a bit as an advisor with, you know, kind of bringing some of my HFT expertise there and kind of building, thinking about how to build some of those early systems there. And then obviously, like, you know, I think even though I was the advisor, you know, I learned a lot more from them than the other way around in terms of like, how do you actually build a consumer product that, you know, and I think to an important point here is like innovating business models. Like at the time, right? Like when they had this idea of zero fees, like no one thought that would work. I think they pitched like 75 VCs and only one wrote them a check in the beginning, right? Like no one thought this would work. I mean, I don't think I thought it would work, right? I thought, okay, these guys are smart. Like they'll figure out I want to be involved, but like, you know, but then, then it worked. Not only did it work, right? But it changed the industry. So I think that just shows you like experimenting with the business model and not just kind of keeping the status quo can be really powerful.

Yeah. Why did Robinhood participate in this round and Coinbase? Coinbase and Robinhood both participated. Why did they? Because I look at that, I'm like, oh, you guys are The world's moving on-chain. You guys are actually a competitor to the brokerages and the centralized exchanges.

So, right. Well, I think we're happy to have both of them as partners. I mean, I think they, they're, they're obviously very different from each other as well. You know, I think in the case of Coinbase, like they're in a variety of businesses. I mean, the main one like their main driver of revenue right now is the centralized business, right? But I think unlike some other centralized exchanges, they certainly understand the power of DeFi and kind of moving over time from centralized rails to decentralized rails. And they obviously have their wallet product and other products. So I think that there's, you know, there's a lot more, there's a lot of collaboration we can do there as, you know, as I think they certainly want to work closely with kind of folks innovating in DeFi. And that was kind of the basis of the investment there. I think in the case of Robinhood, it's, you know, a bit of a different perspective where it's like, okay, well, there's all this You know, if you think about moving stock trading on-chain, like there's a lot of, I mean, there's obviously they already have their crypto business, but also like their core business, there's their, you know, tokenizing stocks. I mean, those types of things they're very actively working on and we've been a partner on some of those projects. And so we'll also kind of announce that. The coming weeks, but I think there it's like, I think they see kind of eventually like a merge between DeFi and TradFi and see us as a potential partner in achieving that.

What will the, you know, you don't have to leak anything about the announcement, but what, give me a sense of like what the partnership could look like with Robinhood.

Right. So there's You know, there, there's some interesting things to do both on, you know, like there, there's like kind of two directions you can go, right? Like one is actually how do you bring assets like equities to crypto-native traders and investors, right? Through tokenizing stocks and having them exist on platforms like Lighter. I mean, that, that's one direction. I mean, the other direction is How do you bring like decentralized perps to, you know, the TradFi customer? So I think there's kind of some work being done across both of those. But yeah, we'll definitely have more to say about that in the weeks and months to come.

Cool. Exciting. I saw you guys have equity perps on the platform now. I think it was Hood. I mean, yeah, Hood, Coin, maybe Nvidia. A couple other ones. Why would a— you came from Citadel, um, you were at Graham. Why would a serious actor trade perps for equities on Litter? Why does that— why, why would they ever use— why would they ever trade equities on Litter? Why would— because they have all these other platforms that they have.

Um, well, I think the, this, you know, um, ultimately The institutions go where, you know, where the retail is too, right? Like, I mean, would they, like, if they're, if like, you know, like if Citadel is doing a trade with Goldman or something, like would they need to use Lightning for that? Like probably not, but that's not like most of what they're trying to do isn't that, right? Like they want to participate in as many markets as they can and provide liquidity and, you know, generate profit. So I think the biggest thing there, right, is like, it's like a cold start problem. Like, because I think a lot of people have tried real-world assets, you know, in the previous years. I think the problem you run into is that Yeah, like retail is like, to get retail you need liquidity and then to get liquidity you need the institutions and then, you know, so like the institutions don't, I think one of the biggest challenges for like the, the, yeah, the, there's, there's these like crypto native trading shops, but they don't have a lot of expertise in, in, in US equities to be a strong market maker for those. I mean, some of them are starting to develop that expertise, right? But like, The players that do have that expertise up to now haven't been, haven't actively wanted to trade on DEXs because, not because they don't think they can make money from it, but because of regulation and compliance questions. And that's what kind of, that's why it's so important for us to figure that out with policymakers in the US so that there's actually a pathway forward here where you can have, like imagine something where you know, an institutional player, maybe they only want to be matched with other KYC participants.

Right.

And that's okay, right? Because they can be like, as long as it's one order book and then you could have the, like, this is what also you can do with the logic in our ZK circuits. You can put that in there and say, hey, like if you have this like on-chain KYC, you can have certain rules around that. And those are all made public. So like, you can have price discovery happen. Let's say somebody who's an institution that has these requirements, but they can still trade with others, like the price discovery can happen and then that can be passed on to retail that doesn't need to go through KYC because they can be like, like trading firm A can trade with trading firm B and then trading firm B can trade with, with, you know, retail, right? So, so I guess the point is like, I think all of these markets are interesting if there's liquidity and there's retail and you can, you know, to get both you need, you know, good consumer experience, kind of like we're saying low latency, low cost, but you also need, in cases like these, you need the kind of compliance and regulation side as well. And that's finally like there's both interest from policymakers to figure this out, and there's a lot of tech that can be used for it.

Yeah. How big of a— going back to Hyperliquid, how big of a competitive advantage is it for you that you have so many US institutions on the cap table? You're spending time in DC, you're in the New York finance scene. Like, how big of a competitive advantage do you think that really is?

I, I think certainly spending time with folks is, um, is helpful. But I think fundamentally, I mean, that adds value, but fundamentally it's around like the technical stack and how we're approaching things, right? So like building on top of Ethereum, like TradFi, just, you know, they're not, you know, that's, you know, it's hard enough for them to trust crypto at all, right? But they really, if they're going to do it, they're going to want to build on top of the most secure L1, which is Ethereum, right? So that's the starting point. And then I think also kind of being, for us, like we're very open to partnerships and kind of building stuff together with folks and spending time kind of educating them on how a lot of this works. Like I think, again, that helps with the margins, but I think fundamentally, like the alignment of the technical stack needs to be there. Without that, like, it's not, like, I don't know, there's some other projects that, you know, actually have, like, there's a project called Canton, right, that like has a lot of the institutional relationships, but the tech there just doesn't work. Like there's no actual customer using it. So like, so I mean, you kind of need, like, it's like if there's technical alignment and the tech actually works and it's being used, then the relationships with TradFi or, you know, spending time with folks, you know, institutional folks in the US figuring out how it works helps for sure. But you need that, the tech actually needs to be the right solution and needs to work.

Yeah. What did you, you guys just launched your token? Token's been live for like, I don't know, a couple weeks. What have you learned since, uh, in, in the few, few weeks that it has been live?

Let's see. Um, I think that, uh, it's, it's, um, yeah, the kind of— people pay a lot more attention to the price action than we would've thought, right? Because like, Vlad, I could've told you that, my man.

I could've told you that. Yeah.

'Cause I mean, from our perspective, it's just one more metric, right? Like we were always looking at, you know, things like TVL and open interest and volume and revenue, right? Like all these metrics are changing every day. But like that's been true all year, but it's like people, like you would, if you just think about like, it is interesting, right? Like, is like, I don't know, like before the token launch, let's say we had one day with like lower revenue, like no one would freak out about that. But like now they do, even though it's the same platform, same, you know, we've had, it's not like we've had no low revenue days before, you know, sometimes the market shifts back and forth. So that part is kind of interesting, but you know, Like, I guess at the end of the day, we're building, we're creating, you know, building new products, creating value for the customer and value for the token holders, right? With staking, with buybacks, other things. So, I mean, I don't think we should pay attention too much to the kind of back and forth. Like, I think if we build the right things and, you know, create value for folks, like the price will take care of itself and, you know, kind of in the months and years to come.

Yeah. Why is LIDR trading at $2 billion, but Hyperliquid's trading at $24 billion?

Well, I think there's some models that where that would make sense and some models where it wouldn't, right? Like if you just look at it, okay, like what are the revenues right now? I mean, I think like, I think that ratio is something like 10 to 1. So from that perspective, I think now maybe both should be higher, right? Like maybe both should be lower, you know, that like you can ask that question too, right? But on a relative basis, I think if you just look at it that way, makes sense. But I think like I mean, I think it's like, it's good that crypto now looks at revenue, but I think like, you should also look at growth. Like, I think, you know, like, I think in the past, there were cases where like valuations that were like not based on business metrics at all. That doesn't make sense, right? Like if you have no revenue, no customers, like being valued at like $8 billion or whatever, like that doesn't really make sense. But at the same time, I don't know if you should go all the way to like, like, you know, kind of stratify like discounted cash flow. Well, you know, you should also take a look at growth, right? And like, we grew like 1,000x in a year and there's a lot of opportunities for growth ahead of us, including with, you know, unlocking the full Ethereum ecosystem, including like institutional growth, like opening up to US. Like I think if you price all that in, then you would have a different story than just like, okay, what's the revenue relative to your competitor right now? I mean, so yeah, you have to look at the growth rate, of course. Right. So, and I don't think people necessarily do that. I mean, some do like the, um, some of the, you know, the investors we worked with and, but it's like, again, I think you have to think of it more as a startup. It's not like, it's not vaporware, but it's not like a public company that's existed for 20 years either. You have to look at it more like as a startup with growth. Yeah.

What, um, oh, there's been this conversation around value accrual recently. Um, and I saw a tweet from you guys on like, uh, maybe New Year's Eve. It was, uh, something along the lines of the value created by all Litter products is, will fully accrue to LIT holders. The LIT, LIT is the, LIT is the token of Litter for people who don't know. Um, and you guys said we're building in the USA, the token is issued directly from our C-Corp. Um, which is cool. I, I hadn't, seen many posts like that, just directly calling it out. Let me give you a hypothetical scenario here. You do a partnership with Robinhood, you and Vlad, buddy-buddy, same high school, everyone's loving everyone. He tells you, Vlad, I want to, I want to acquire Lighter. Who makes money there? The equity holders or the token holders?

So, I mean, we're certainly not, you know, looking to be acquired. I think in a hypothetical like that, if something like that were to make sense, I mean, the acquiring entity would have to buy up all the tokens. So, you know, would there be a kind of a deal around that, not around the equity? So, you know, I think there haven't been a lot of cases like that in crypto. I mean, I think there have been Some, right? But that's the way, I mean, again, we're not certainly not looking for, you know, we want to like, we, we've grown a lot in the, in the last year. I think we want to continue growing, but again, just to answer your hypothetical, I think something like that would have to happen through, through the token.

Yeah. And the reason I ask is because there's been a few acquisitions recently and they, they haven't bought the token, right? They just buy the equity or they buy out the Labs Co or they buy out the team.

Well, people can, you know, like people can do like just to go back to like my former co-founder from Lunch Club, you know, Scott started a company called Cognition, right? And they—

Your co-founder at Lunch Club was Scott?

Yeah.

What's it? Oh, I didn't know that.

Yeah. Yeah. So he and I, I'm the first— Yeah.

Speaking of crazy acquisition stories.

Yeah. Right. And so I'm the founding advisor to Cognition. So I'm, you know, I mean, I didn't work on the acquisition stuff with them, but I know a little bit about what happened, right? But like they acquired Windsurf, but I guess the reason I'm bringing that up is like, like I think in that case, like some of the team kind of left to go to Google and whatnot and the rest, but then now can, can people, like, I don't think many people were happy with those decisions, right? Like, can individual people make decisions that are not good for an ecosystem, like, I guess that's a, you know, I guess they can, but I mean, we certainly, again, like, I think at the end of the day, it's like, at the level of the project, we, what we're doing is building something that's gonna accrue all the value to the token holders, right? Now, I mean, if, again, hypothetically, if some individual person from the team is like poached by and OpenAI or whatever, like, can that theoretically happen? Sure. But that can happen with any company, right? Like, I don't think there's not like a guarantee any company can make that that can never happen. But, you know, our intent is very much aligned with like the team now with our investors, like everyone who invests in the round came in with that in mind, right? Like they, that what the reason they're investing is because of the value in the token and So the same is true for the customers, for the team, and the investors.

Yeah. Well, as we think about wrapping this up, is there anything— when you look out the future of crypto and capital markets, is there anything that looks really obvious to you that you think others are missing?

Um, well, I, I, I think this is more of a big picture thing. I mean, I, I think— I guess we, we, we spend some time on the technical details So I won't spend so much more time on that, but just on the big picture thing, right? Like I think one thing that people are missing is that like TradFi institutions, like they're, I think a lot of like the crypto native people don't understand how much TradFi and institutional players have come in understanding the value here and wanting to incorporate these technologies in a real way. Like, I think, like, you know, like, because from my perspective, it's all kind of part of one larger ecosystem and there's going to be this kind of merge that'll happen. And I think, like, I don't know, like when I write about stuff like Citadel or Robinhood or, you know, Renaissance, you know, a lot of the crypto native people are like, whoa, that's totally different. Like, how dare you use that analogy? And it's like, no, like, that's the whole point. We're not, Like, that's not to say that, like, you know, it's exactly the same in every way, but the point is, like, it's all, like, things like on-chain hedge funds, right, or, like, tokenized stocks, like, all these things are gonna happen, and they're not just happening because, like, people from crypto wanna rebuild finance, it's because people in finance actually understand these technologies now and wanna use them, and so it's like, that, and I think a lot of the early folks don't actually know that that's the case already. Hmm.

Yeah, I love that. That's a good place to end. It seems very likely that all capital markets are coming on-chain and we won't think about it as traditional capital markets and crypto capital markets. We'll just, they'll just be capital markets.

That's right. Exactly.

Yeah. Yeah. Agreed. Vlad, congrats on everything, man. Cool seeing you grow. I didn't realize you started Lunch Club, so that's always, that's always fun. I used, I was a very early user of that and, um, yeah, man, I know it's early days for Lighter, so yeah, just rooting for you.

Cool. Thanks so much.

Appreciate it.