Polygon’s Comeback & Katana’s Impact On The Agglayer Featuring Sandeep Nailwal And Marc Boiron

I always think of Polygon as kind of like being this nice thing where like, yes, we've got like this chain that can capture like a lot of value, but there's this like much bigger picture, higher potential thing that pretty much anything else in Web3 via the AggLayer that actually connects all of it together.

This episode is brought to you by SKALE, the next evolution in Layer 1 blockchains. Explore the gas-free ecosystem at scale.space/skale. /ecosystem and follow their journey on X @ScaleNetwork. Thanks to Scale for making today's episode possible. 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, welcome back to Empire. Very excited about this one. We've got Mark, the CEO of Polygon Labs. We have Sandeep, the CEO of Polygon Foundation. Very, very excited about this. So, Mark, Sandeep, welcome to the show.

Thanks for having us.

Yeah, I'm excited about this. Okay, so there's a lot that I want to cover. The, the reason I want to do this is you guys just launched Katana. Sandeep, you also just had a bunch of updates. You're moving back into this CEO role, or I'm not even sure I got that right, but I want to— like, there's all these updates around what I'd call the broader Polygon ecosystem. And Sandeep, you and I had a bunch of interesting conversations in Dubai at Token, not just about Polygon and Katana, but just about the industry, what it's like to have run a company or foundation protocol in the industry for many years. And so I just wanted to do this episode to talk about, like, Polygon, Katana, but more broadly, just like where the, where the industry is going. So Sandeep, I thought that would be an interesting place to start, is you've been, I mean, running this business. I don't know if that's even the right word to say, running this business, but you've been operating a protocol in the industry for a very long time. What is your general sense of like the industry today and how it's changed? We were just talking about what it was like in 2020, building, you know, building something compared to today. Like, what's your sense of what the last couple of years have looked like and your sense of what the industry is like today.

Yeah, I think in a lot of sense, I mean, we all know that this industry, basically we literally all joke that, you know, 3 months is like 1 year, right? In this industry. And I think like the, one of the things that you can say is that especially after 2022, the change of acceleration, I mean, the acceleration has, basically, what should I say, like, the acceleration of change is even more because we have seen so many things changing recently. The government changed, regime changed, complete new, like, I think like last, maybe 7, 8, 10 months back, none of us thought that people would be doing, like, you know, you would have the best performing coin of the market right now is something that is doing direct buybacks on daily basis. Like, you know, this is previously, I think, very, you know, kind of a scary circumstance. But I think now that, and this is the right way, like, I think most of these, you know, the tokens, like previously there was a very, very kind of like I would say very abstract separation between the utility versus your, you know, the utility versus the revenue and all that. And I think like now we are seeing more and more of those things getting tied together for, you know, in various different mechanisms. Like some are more pure, like the traditional protocols, whereas like, you know, app protocols, like what I call app protocols, they are like in a different way. But I think that is changing. But the point being that the industry changes a lot. And now the change in industry is even more, you know, kind of like suddenly we saw meme coins. Like last year it was like meme coins. And then people, you see, like if you see from a zoomed out level, we went from like saying that nothing in this industry works. So let's go only on meme coins. And it's like a casino game, meme coins, just do this because nobody is delivering anything. There is no revenue on anything. Why do you need all these roadmaps and teams and presentations and whatnot? Just have meme coins, no roadmap, nothing, pure speculation. To now people are saying that, you know, okay, people are now judging protocols on revenue, right? Which is, you know, actually the part of the fundamentals. And all this happened like maybe like that. When did the Trump coin happen? Like January. So like in last 5 months, right? Like 5 months before like meme coin was Like Trump was the peak of meme coin, right? And then after that, like now the meme coins are gone and all that. So the industry changes so fast. But I think the biggest, biggest kind of thing that I see the change for the good is that infrastructure wars are kind of, I mean, they are still there, like people, projects will fight. But I think the markets, you know, markets have stopped betting on purely infrastructure. Was, or maybe let me think of a better way of some, you know, saying that thing, articulating that thing, that is the infrastructure basically previously was we are building this, this, this crazy thing and this, that, like, you know, narrative was there on infrastructure that this infrastructure will achieve something in future. Now that infrastructure thing, people are asking what is happening right now? Tell me what is happening right now, right? What is the revenue right now? How many people are there and all that? So The parameters are actual parameters and it's all about users, how many users you have. And I think like more and more chains implicitly are becoming app chains, like app-specific chains. Even the mainstream chains that you see, the general purpose chains, some of them are already choosing. Like I would say Polygon POS, even though it's like by nature, by design, it's like a general purpose chain. But if you see in the last 6-8 months, we have focused very heavily on payments, RWAs. In a way, you can say that that's the core focus area. It's an app-specific chain for payments and RWAs, right? While, you know, Polymarkets, like, you know, of the world and Courtyards of the world still exist on that chain and they get benefited with that. But I think that is one of the biggest, you know, kind of change. I see that narratives are no longer the, you know, the main thing of the industry. So the best marketer wins. It's all about now the products and how can you have more users than distributed.

Do you think it's easier or harder to run a business today in crypto than last cycle or a chain compared to this cycle?

Chain is definitely harder to run. I would say any kind of token, you know, kind of venture, token-based venture instead of equity-based venture is much, much, much harder. Like even previously, I mean, previously they were like, you know, markets were good. There was liquidity for these assets in the market and all that. Now, if you see the token, literally, I tweeted about it also. The token literally adds two key values to your project. First is that it can give you early investment ability. I was just talking like a few hours back to a founder. They had raised like prominent project. They had raised like $80 to $100 million. And while on the white paper and this hype cycle and all that. And I said like, if you were in Web2, $100 million means like, I mean, no matter what kind of profile you have, you could raise like $20, $30 million. But beyond a certain time, then to raise the $100 million round, you have to have like revenue, users, this, that. It's very hard. So tokens were, you know, you could do that before. And the second value that token added is that, okay, if you are a founder, even if you are not like exit scammer and all that, but, you know, after first year of your listing, one year, you will get like maybe some percentage of your tokens. And you can be financially safe and all that, which is unheard of in Web2 world, right? Like you have to grind for 10 years and then after some sort of exit happens. And then also if you don't have too much of, you have not sold too much of preferential shares and all that, you probably make something which can save you or make you comfortable on the financial side. So these are the two main values. Apart from that, probably airdrops give you, brings you some early user metrics, with that too also, like I think only 10% of that is real. But apart from that, like token is, token adds net negative value to you, right? Like you are constantly being ridiculed if the token price is not doing.

It's funny you say that. I mean, I was at a thing a couple of weeks back and there were like, I think it was like 6 or 8 of us around a table. And we were just, I was like asking people like, who's having fun? Like it was a bunch of, it was only founders around the table. And the people with a token, it was like, let's call it 8 people, 4 people, they have tokens. They are, they're miserable. All 4 of them, just miserable. And the 4, the 4 folks without a token were having a bunch of fun. And that feels like actually the first time in the industry where that's happened. I remember in 2020 and 2021, like, you know, talk to you about this. Like, Mike and I had a lot of FOMO because all of our friends were building these. It was DeFi summer and then NFTs and our friends were building these businesses and literally making hundreds of millions of dollars. It was insane. And Mike and I are like, we're just out here hosting podcasts with no token.

What are we doing?

It does feel like that.

Now you are much happier that you are actually building a business where it has actual users. Now you have actually like cash flows and all that. And there is a growth trajectory. Like in crypto, it's so hard to operate like infrastructure side also because every new startup that would come, right? They would get funded with $100-150 million. Like even the cost basis in the industry Like if you are an infrastructure project, like it's so hard to hire people. Like, you know, somebody was telling me that even in India, like, you know, I mean, Polygon, you know, originally came from India and they were trying to hire in India some smart contract engineers and all that. And he was telling me, dude, you have destroyed the market. And I said, what happened? He said like everybody, like even the college graduates ask me 100K, 120K. 120K in India is like a 10-year, 15-year experienced person's salary. And crypto people, like, and not even the smart contract, even crypto frontend builders would ask you.

No, it's funny you say this because we, like, in the last market, we would lose our people all the time, our analysts and reporters and stuff like that to protocols. Like, I remember, you know, it's like anyone from Uniswap or Arbitrum or Polygon or funds, right? VC firms would just hire our people and we just couldn't afford to pay. And we actually hired a head of people in the bear market. and I was like, get ready in the bull market, we're going to lose all these people because we just can't pay what the people with the tokens can pay. And we haven't lost anyone actually.

I actually literally remember thinking that I felt bad for like every company that had analysts because they would literally train them for like a year or two and then a protocol would just jump in and say— It sucked.

It sucked. Yeah, but now we don't lose them because the token performance has been— okay, so maybe this is another question and we'll get away from this topic in a second. But I'm just curious because you guys have been at this for so long. Can the people— can you recover? Just like to bluntly put it, like if you've been doing this for a long time and you've got a token that's been down for a while, like can you recover? I'm not talking about you specifically. I'm not talking about Polygon or you, Mark. But like—

you can talk about Polygon also. It's fine. You know, you can talk. It's a publicly traded thing. And then, you know, whatever, like views are public. And I think like recovery is, it's all dependent on macro, right? Like, so especially if you see Polygon and, you know, all the like layer 2 ecosystem, Arbitrum, Optimism, all of them, they have been badly hit because of they have a double whammy, right? Like first they got hit with the macro cycle. And the second problem with them is like, you know, because of the, you know, the Ethereum's L1 position, like little bit shaken, like, you know, people even thinking that, oh, this might not be true. Ethereum might not have won. Previously, like, I remember 2023, October, September, October, before the first meme coin mania cycle, we were in a very prominent event. I think Anti-Meridian from Dragonfly people. And there the topic was, and I was also on the panel, the topic was Ethereum has won. Stop fighting Ethereum. Something like that. That was the title. And then the meme coin mania came and the situation regulation change in 2024 and all that. And so that created a lot of pressure on everybody who's building an Ethereum ecosystem, of course, obviously. And then obviously the macro liquidity situation is very, very, very bad.

Yeah.

Yeah.

But I also think, you know, like the, I like refuse to believe this idea that if you build a great product that people want to use, that people are not going to attribute value to what you're building. Right. And I think like, That's the hardest part, right? Which is it's so easy to steal users with a new token sending money around and you take away users. But if you actually have a long enough time horizon on this that you can associate with it, I think the perspective changes a lot when you can start saying, hey, I've got one application that is sticky with a lot of users. I've got two, I've got five, I've got ten. And by the way, go look at the rate of change in the development of the protocols that we're building and go look at the kind of innovation that we have at the front end of what's coming next. I think what people start seeing very quickly is like, oh, this is something that actually is built to last. And that doesn't right away turn into something happens to your token price immediately does. But I think as the industry matures more and more, and Cindy just touched on this, right? The idea of actually going to fundamentals a little bit away from just pure pumpamentals. You are going to start having people attribute value to that and people want to see how sticky is it and how real is it. And I think when you prove that over a long enough period of time, it doesn't matter what your token price looks like at that time. It's going to be impacted in a positive way.

Yeah. There's a phenomenal episode of Invest Like the Best with Patrick O'Shaughnessy with this guy who— it's about Carvana's stock. And if you look at Carvana's stock, This is what Carvana stock looks like. During COVID it ran up from like $40, actually earlier, yeah, $30, $40 to $360. And then over the course of 2 years, proceeded to go from $360 to $4. And obviously everybody thinks that's okay. You know, it was only a COVID business. This business is cooked. It's over. And now it's actually back to, you know, a $70 billion market cap. At $330. And if you compare that to something like maybe Peloton, right, which went up and then has, has not recovered— this was more of a COVID stock— like, you can— I agree with you, Mark. Like, in the long run, the, the businesses that do build products and make good money actually, actually do end up doing well. It just sometimes takes longer than the market wants to— than you want to realize. So this episode is brought to you by SKALE, the next evolution in Layer 1 blockchains with a gas-free, invisible user experience Instant finality and robust security, SKALE allows for limitless scalability and has already saved its 50 million users over $11 billion in gas fees. SKALE's high throughput, zero transaction costs, and powerful Web3 infrastructure make it the ideal platform for gaming, AI, and other high-throughput apps. To explore the gas-free ecosystem, visit scale.space /ecosystem and follow their journey on X @skale_network. That's scale spelled with a K. Thanks to Skale for making today's episode possible. As always, investments in blockchain technology involve risk. Terms and conditions apply. Sandeep, tell me about the return to— so you had this tweet. I can try to pull it up, but while I'm pulling it up, you said big update is the largest holder of a poll and someone who has dedicated his life to the development and success of Polygon from the very beginning, I have decided to take full control of Polygon Foundation and will be its CEO going forward. And there's many sub-bullets of this, but tell us about this decision.

Yeah, I think the most important thing is that Polygon Foundation is basically the— you can say that Polygon Foundation holds the the treasury traditionally of the POL tokens and also funds a lot of entities in the ecosystem like Polygon Labs, which is like the most prominent kind of contributor into the protocol. But there are multiple small entities also like that. And Polygon Foundation, like when I was building the protocol, like obviously back in 2022, 2023, Polygon was in 10 to 100 phase, right? Before, like, you know, when Ethereum was this thing. And I mean, in all this thing, like, Polygon was the first breakout chain which had so many applications breaking out and all that. Even now, like, Polymarket and Courtyard and many, many other applications keep doing very, very well. Payments are doing extremely well, by the way. So basically, At that point in time, like, you know, I started to build Polygon Foundation as a more institutionalized, in the more institutionalized form, preparing it from 10 to 100 stage, right? Yeah, I mean, when I'm saying 10 to 100, I mean like 0 to 1, 1 to 10, and 10 to 100 stage of ventures. And that included like a lot of board formalities, this, that, everything set up in a way where like, you know, Now it's a very big ship, so you have to steer it very carefully, this, that, right? And what I was explaining, like, you know, because of like Ethereum getting into a lot of pressures from the, you know, the L1 ecosystem and all that, that, you know, I think that pulled all of us right back into, and I'm sure this is the same situation with all the other, you know, L2 protocols also, is that, you know, it pulled all of us into this, I would say, zero to, like Polygon could be like still in 1 to 10 phase. But I just like to think that we are in 0 to 1 phase altogether. And then that's where you need extremely fast decision-making, bold decision-making. Sometimes you will take kind of wrong steps and all that. For example, incubating Katana, right? Like, you know, it's one of the many, many, many steps that we have taken, right? Like, it's incubated with GSR and external, completely external project. But, you know, Katana is a very, very important part, we believe, for growing AggLayer.

Right.

So the AggLayer, as we know, that's the main product of Polygon. Like, that's the future. Like, we believe that this will be— this has a potential of becoming an important element of this trustless internet that we are building, you know, with the assumption that everybody, all big enterprises— and you can already see this, by the way, right? All the big ones, you see that Robinhood to Revolut to Stripe, like all of them are entering. Eventually all of them are going to launch their own chains. And so AggLayer is basically a service which provides this cross-chain settlement to these chains and whatnot. And if you want to create that service and you assume that there will be die separate business activity happening on multiple different chains, you would need like some liquidity hotbeds and which are extremely fast, you know, native to it, right? Like those hotbeds do exist outside, like, you know, just like Polygon POS, you have, you know, Solana, Base, other like, you know, high liquidity places, but they are not natively connected to Aggler. Like you need a native deep liquidity hotbed where people can easily trade those assets. So that's why like that was the reason why we kind of incubated or helped incubating Katana because it's a very important, we believe that it could play a very important role in the success of Aggler. So that's why, so basically this decision-making was becoming slower, like with the boards and all that, every time you will review what decision, even if you took some decision, you go back and many times I and Mark used to discuss and obviously Mark running the business team and all that would also time and again would say that sometimes when we revisit the decisions, change the decisions, it kind of affects the morale of the whole team. Like, okay, are we not clear and all that? And I said that mistakes happen in that scenario also. Like I said, instead of like, if mistakes are anyways going to happen, let's take them in a fast way. Like, let's take faster mistakes. If we fail, we fail, right? So that was the reason. So what I have done is like I've taken the CEO role of the foundation. The board and all that. Like, you know, now I'm the main person on the board and then we can, like, I can take with Mark, like, whatever decisions we need to take, we can take extremely fast, move extremely fast, break things. Some things will succeed, some things will fail. It's fine. But we work in the startup mode again. That's the main crux of it.

What do you think? So there's two business models that have emerged with chains. One is the, you guys, I'd say Optimism, Arbitrum, which is like providing infrastructure for other people to go build their own chains. Or maybe that's an overly simplified version, but, you know, Optimism has the OP stack. You guys have AggLayer. These are— these all kind of look directionally similar. Then there's like, hey, just come put everything on our one chain. Solana, maybe Base. Like, it seems like Hyperliquid's going in this model, maybe kind of. What do you think about the two models? And do you think one is— yeah, I mean, obviously you guys have chosen how to do AggLayer. I mean, we haven't even talked about Katana, so maybe that's a different strategy a little bit. But yeah, what do you think about these two models?

Yeah, I mean, Mark, I can start and then maybe you can add, like, you know, we, like, from the very beginning, like, you know, like, if you go and read the white paper of Matic Network, which Polygon used to be called before, from 2017 or '18, that time also I had talked about multiple chains because, you know, I could clearly see that one chain, no matter how much scaling you can bring in one chain, it still cannot take the transaction, especially you are not talking about the, it's not like Visa network. You can say like somebody might say that Visa has 50,000 transactions. Like literally half of the world is using Visa for the transaction. But Visa is only payment transactions. You're not doing complex smart contract logic on that, right? Like you're not putting code on that. Like it's a one like, you know, balance up, balance down, right? And even then you can't say that the world's like, you know, the whole world's payments are happening on Visa. It's still a small percentage of this. Of the larger system. So we don't, from the very beginning, my belief has been that there can never be a case, never be one single computer which will take entire world's computation in one single place. That's not possible. So there are going to be different, different this thing. However, I do agree with one thesis which I think which I give credit to Anatoly also, like he saw it initially, is that liquidity hotbed thesis that Of course, there will be computation many places, but there will be probably 1 or 2 liquidity hotbeds, 5 liquidity hotbeds where there will be a lot of liquidity situated and all that. And that might happen. But that also means eventually in our thesis, everything becomes an app chain. If that thing becomes liquidity hotbed, even then it's kind of like 1 or 2 kind of apps, like probably, you know, you can see this thesis, like for example, unfolding with Uniswap chain, right? Uniswap has like the DEX there and their thesis is like between the Superchain ecosystem, they will be the liquidity hotbed. Like wherever you are doing anywhere, the market is here. Right. So if let's say in Solana's design also, if that succeeds, I see the end version is not as an ecosystem where people are doing so many things. I see it as one or two large, let's say exchanges or few exchanges being there and people using those exchanges for liquidity and all that. But applications will largely move away. Like you can already see like some of the, like I don't want to name, but like some of the biggest applications in Solana ecosystem has already declared that they want to launch their own chains and all that. And Ethereum has been saying, talking about this thesis from day zero. And so has we.

So yeah, and tying this back to like Polygon where I think it's like really relevant is effectively like, okay, are like when we think about this like purely from like a very like traditional sense, you think we have this mission of building the trustless internet and we want people to do whatever they want with their assets whenever they want. When you think about what that means, it's not like this— I view building a single chain as a very small mission. I view it as you could create a lot of economic value on that chain for a period of time, And if you evolve with the market, you could continue to drive value in that chain. And that's great. And this is why we love having a chain like Polygon POS that could drive massive value through payments and RWAs. But by the way, it's not going to be the only payments and RWAs chain in the world, whether it becomes the most successful one or not. But when we think about it a lot bigger, what is the thing that really actually gobbles up a lot of Web3. It's the place where all of these big chains need to go to actually be able to interact. Polygon POS is not going to be able— it's not going to live on its own when it's great for payments and RBAs. Solana, if it wants to be like the on-chain exchange of Web3, it's going to need to allow users to do other things and it's not going to do it on that chain. It's not going to be able to handle it. And so you ultimately need this place. This thing that allows all of these to connect and actually interact. And that is the thing that to us is much, much bigger, much more valuable as well. And so I always think of Polygon as kind of like being this nice thing where, yes, we've got this chain that can capture a lot of value, but there's this much bigger picture, higher potential thing than pretty much anything else in Web3 via the AggLayer that actually connects all of it together.

And I also want to add, like, you know, Mark said this really good thing. And because many times we internally thought that, okay, should we go? Like, you must have seen the Polygon's GigaGas roadmap, right? So Polygon POS, like, you know, in next 10 days, we are going to go to above 1,000 TPS. And I think by September, October, by almost end of September, you would see Polygon POS at 5,000 TPS, right? As good as like any other chain that you can see, probably like, you know, approaching similar ranges as Solana also, you can say, in the performance. And we could have done that. Like, you know, we can also crank it up, like, you know, and, you know, based on this, all these giga gas research that is happening and all that, take it to 100,000. Over time, that's the plan. But like what Mark said is very important. Like, you know, if you told me that, you know, we are building just one chain and then we just want to bring, you know, a lot of like applications there and all that. And the token does well in the short run. Because the long run, we are saying it cannot be. Everything in the long run, our thesis, everything is an app chain, right? Like my thesis to this is, and which like Uniswap, you know, you can see in the Uniswap thesis is that if you had smooth enough cross-chain connectivity and compatibility, like I mean the composability also, why would any app exist on a shared chain? Like I would always, any app as a DeFi app, I would always create my own dedicated chain serve my customers with highest quality standards. And whenever I need any composability, like, you know, using this, any kind of interconnectivity layer, I can connect with anything else. Right. So that's the end of that mission is actually like, you know, it's been 8 years for me, like you and me were discussing, right? Like it's been a long time. 3 months is like 1 year. So it's almost like 30 years, right? Like here. So, you know, like one of our team members is elder than me. And he said like, how many years I have been for you. I said like, it's been 8 years, son. And he's older than me because the 8 years is like 20, 30 years, right? So what I was saying is that this mission actually is something that makes me feel like wake up every morning, even now after 8 years of all this crypto crap and still work 10 hours, 12 hours a day, right? And that's the most important thing. That's why we are chasing this dream to create not one chain, two chain, but create this trustless internet like AggLayer. If you see, like, and I would love to do like sometimes a deep dive and not a lot of people understand like AggLayer, but if AggLayer succeeds, it actually ends up becoming not like one network. It ends up becoming like a trustless internet. Like almost like, you know, people have abused this meme, the TCP/IP of this. But if you see this in terms of security, it actually is the could become the TCP/IP of the value internet. That's what is the bet.

Yeah, I do want to go there in a second. What is the role of Ethereum in all of this, Sandeep?

So Ethereum, in our mind, is Ethereum is the, like, after Bitcoin is the most decentralized chain and that is used for the final settlement guarantees. Right. So AggLayer actually collates the ZK proofs from everywhere. Creates the final settlement proof and posts on Ethereum. And because Ethereum is decentralized enough, people don't have to trust on the AggLayer, which is providing this fast interoperability between the chains and all that. They are actually trusting the final settlement on Ethereum. So that's the role of Ethereum.

Yeah. So a couple of months ago, before ETH really started to do their transition and like this new pivot and new guys in place and stuff like that, I think there were some folks that probably you and I both talked to who are really frustrated with the state of Ethereum. And people would say to me, and I'm sure if they're saying it to me, they're saying it to you too, which is, you know, if ETH keeps going this way, I'm going to leave the L1, right? I'm going to do things myself. Did you guys ever think about that?

I mean, you can imagine that there was a time that every other day this conversation would come up. All our investors will ping and then they'll say, just because, see, in terms of the money value it can deliver to you, it's just like, you know, we just need one announcement. That guys, we are an L1 now. And then suddenly like the valuation and the pricing is completely different, right? Considering we are one of the most adopted chains, like, you know, we would actually, you know, most of the L1s right now, they will pale if you actually compare the real user statistics and everything compared to Polygon POS, right? But their valuation would be like 2, 3, 5. I don't even want to name some of them are completely dead L1s. And they are like, you know, valued like 4 or 5 times higher than Polkadot. So obviously most of the investors, stakeholders, there is huge pressure. There was huge pressure. But I think like, you know, I mean, like people actually like, you know, this is like, I should say this. Like, so a lot of people actually, because MATIC as a token did its like 100x bull run and whatever and all that. They think of me as some sort of like crypto businessman. Like my branding is crypto businessman. But I am actually like an engineer. Originally wrote the code also there. And I have a thesis, I have a vision that I want to achieve, right? It's not like I'm just like, people are just thinking why Sandeep is just not declaring because they are assuming that I should be doing this anytime like now L1 pump pump like the token goes up and all that, right? But I don't do that. Like, you know, I am actually building for something real and I definitely like AggLayer in its current version is not an L1. It's basically something that use Ethereum as the settlement. Like as it decentralizes and all that, like everything like in future, you know, we don't know. But Ethereum, the AggLayer relies on the settlement powers of Ethereum. And we can't just call it like, you know, we can't go and say that no, this is an L1 and we'll see when it happens and all that. Right. So that we won't do. I won't do specifically also.

Yeah. And Jenna, this also ties into the discussion we were having earlier on, like at least that I started around like this idea of a product. Ethereum is a great product for settlement, period. And so we should keep using it for that purpose. It's actually that simple. And it shows that build a great product and people will use it. And people look at Ethereum also and they're like, hey, it's not a great product because of XYZ. I strongly disagree with it. We actually have a need for Ethereum that frankly others don't satisfy and that is very useful for us. And so as Suneep said, when it comes to the AggLayer, we post final proofs over there. And honestly, if there wasn't Ethereum, I don't know who we would be able to trust from a trustlessness perspective to actually be able to do that.

Yeah, it's only Bitcoin. It's only like someday, like Ethereum's real, real competitive competition is if someday Bitcoin says that we are adding these ZK proving capability into this, then there is like serious competition, serious problem to Ethereum. But right now, like for the settlement, which we think Ethereum is built for, And I think like, you know, this is what other L1s, especially Solana, has been able to do the best is that they were able to drag Ethereum ecosystem into a fight, which is an execution fight, which Ethereum is not made for at all. Even if let's say like they are 13 TPS, even if you scale 100x, you still go 1,300 TPS. You're still like one-fourth of where like, let's say one-third, one-fourth of where Solana, Aptos, Sui, many of these other protocols would be there, right? Why fight that fight? Like that was not supposed to be Ethereum's fight. Ethereum should have been a settlement layer and all that. But I think there are a lot of like in the community, like the just number go up kind of people because they want to see the fees and revenue and DeFi volume, everything on Ethereum so that like, you know, they can price it better or something. And they like, I think you compare that with, let's say, this is my disappointment. Like I was actually discussing with the, you know, some Ethereum Foundation people also recently that this is my biggest frustration, like price and all that. Like I know, like I have, I'm seeing the price. I have seen the bad price in 2020. For years, like, you know, when Polygon's price was at $0.02, right? Like, you know, I don't care about that. We keep building. We build a good product, good users will come, things will happen. But I was telling them my biggest frustration was that getting dragged into this execution war and leaving your strategy. Because see what happened on Bitcoin in 2017-18 when this, you know, BT, what was that Bitcoin What was the other name of the Bitcoin with bigger blocks? Bitcoin Cash. Bitcoin Cash. Yeah, Bitcoin Cash, because they said like Bitcoin is actually for payments, except for fees.

Payments, yeah, of course.

Yeah. And then, you know, the core people of Ethereum community, they put their foot down. They said, no, no, no. We are store of value. We are digital gold. And that's it. We are not doing anything else. This is what we will do for— let other people build other things. We will do this and ossify it, keep it simple. And I think that's what like, you know, Ethereum, this is my disappointment. Like I thought that this thought process and, you know, wisdom will come from Ethereum community that no, we will not do this. Like in fact, instead of like getting, you know, scared by the regular revenue, you know, this thing coming to this, coming back, no, no, no, we are built for settlement. We will only do this. We will make sure that there will be, you can run Ethereum nodes on Raspberry Pi and laptops and all that. And there are so many nodes with sovereign resistance. Permissionless because it is the best place for settlement, which also means it is the best place for creating the sturdy value. It is the best place to keep $10 billion, $100 billion. Like if I had like $100 billion or $10 billion, would I keep it on any other chain? I don't think except Bitcoin and Ethereum, anything suffices where you would want to safely keep and store your money. So that's where like, you know, the disappointment from our side, like from my side, because I still like, I am still a pretty big Ethereum maxi in that sense.

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Yeah, see, first of all, like Katana is one of many incubations and closely built products in the ecosystem that we built, right? Katana is not the only one.

This is your point number 4. You said the AggLayer breakout program is going to continue spinning off projects that will result in increased focus for Polygon POS and AggLayer, big airdrops to POL stakers, and et cetera, et cetera.

Absolutely.

Absolutely. So you see that, you know, the core focus of Polygon Foundation and Polygon Labs is to focus on Polygon's core product, which is POS and AggLayer. Now for AggLayer, POS is very clear, payments and RWN, we are pushing ahead on this. Like already, you know, I don't know, like a lot of people are watching those stats. There are like some people have started talking on Twitter also by, you know, in terms of the number of transactions, we already surpassed Tron, like number of transactions, payment transactions. But, you know, in terms of the values, value settled, Tron settles around $680 billion per month. And we are at $140 billion or something. So of course, like still one-fourth of Tron, but like, you know, if you see like, you know, how market value is Tron at $25, $26B, that is also like, you know, completely something that is underpriced in the market and all that. So of course, like not financial advice and all that. I'm just saying as a founder, my side of like this thing, how I see the irrationality in the market. But Polygon POS, payments and RWA. AggLayer is a multi-chain ecosystem, right? It's, you know, in the past we used to call it Internet of Blockchains ecosystem, right? And providing the final settlement on Ethereum, cross-chain interoperability, whatever. And AggLayer does not succeed without some key initial partners or initial chains in the AggLayer ecosystem. You see that there is an OKX chain, there is Polygon POS is connecting into AggLayer. And then there will be like this chains like Katana, Miden, all of these chains will connect into the AggLayer and they will provide the initial network effects initial liquidity into the Aggler. And Katana, for example, is one of the incubations. Maiden is like a non-EVM incubation which we spun out and Maiden recently did a very stellar fundraise and all that. Similarly, there are multiple others. Some of them we have announced, some of them we have not talked. Like Billions, for example, is also on one other project. Like you might have heard PrivadoID. They are like now, you know, they are the ID, like proof of humanity plus ID protocol, right? And they are already getting a lot of traction because a lot of projects are using them as the airdrop. You might have heard about. So these all are like our incubated projects. Some of them built inside, spun out, some of them built outside and all that. And Katana is one of them. And I was explaining previously that since Aggler is this multi-chain ecosystem, imagine you were on a game chain and you earned 1,000 game tokens, which equals to $100 in USD. You want to swap it. You want a place where there is like larger liquidity and all that. With that USDT, probably you want to buy ETH, you want to put in an earn product and all that. So you need a liquidity deep, a deep liquidity place, hotbed in that. And we believe that Katana has the ability to do that because of the mechanics Katana has. And I think Mark is the best person to explain some of those mechanics because of his DeFi background also. But that's the background of Katana.

Sandeep, we'll let you get back to I don't see you walking, Sandeep. We got to get you—

Yeah, because I stopped, like, you know, while I was talking, I realized that I was not able to focus. So I just talked.

I can't walk and talk. I can't do that.

But I realized for the first time that, you know, especially in the podcast, like, calls I can take, but then this podcast, like, you know, it works.

Hard to stop. Mark, tell us the— so I'll get into more specific questions in a sec with Katana, but tell us the backstory of Katana. Like, how did this thing come to life? Like, was this like several people? Was this your idea, Sandeep's idea? You guys have a bunch of partners. Tell me the story of this thing coming to life.

Yeah, so this actually started for the exact reason that Sandeep said, which is we were looking at the AggLayer and we actually wanted a protocol, a chain that would actually have really deep liquidity on it. We went out to the market and we looked across the market at every chain. It doesn't matter what chain it was. Just name the biggest chains you can name in the space, POS, Arbitrum, Solana. We said, okay, which one could we just find a way to do a deal? And bring them to the Aggler. And what we actually realized was that none of them were actually good enough for the goals that we had for this purpose. And specifically the reason for this is because none of them actually have very deep liquidity. A lot of them have very high TVL. Not a lot of them actually have very deep liquidity. When you go look at the pools that get traded the most, you're talking about things that have like $20 or $30 million of liquidity. Which is just like— it's basically nothing.

Can you talk about that difference for a second? TVL versus liquidity, I'm sure this is familiar for some folks, but maybe not for others.

Yeah, sure. So like, general idea is you look at a chain and you're like, hey, you have— you look at this raw number, there's $6 billion of TVL. What people think of is they're like, oh, this is the place that I go and I can get lots of liquidity. I could trade really easily. But what happens is that most of the time, that TVL is just assets on a chain but they're not actually used in a DeFi protocol. You could almost look at this as like DeFi Llama provides the actual TBL that actually exists in the DeFi ecosystem. That is not at all the same as the amount of assets that are actually sitting in that ecosystem. The thing when you do this, you're a trader and you want to go trade, all that amount is irrelevant, which by the way is like over 50% in most chains. It doesn't do anything because it's not in the DeFi protocol. On top of that, when you actually look at liquidity within those chains, what you actually realize is that they're not actually all sitting in one protocol either. They're also sitting in like 10, 20, 30 different DEXs or lending protocols. And then what you realize is that when you want to go trade and you go look at the pool, within one of those protocols that has the most assets that you can trade against and start realizing that there's not actually that many assets to trade against. The value of those assets is not that much because it's spread out across everywhere or it's not even in a DeFi protocol. So that's what I'm referring to when I'm talking about this deeper liquidity is really a pool that can actually truly be traded against. So when we were looking at that in the ecosystem, just across the board, we're just like, nothing is built for this, this purpose. And so we started thinking about like, how can you actually get this done? We actually had the project called the Sync that was actually being worked on about a year ago by an external team. And it was intended to be a project that could be kind of built for this purpose. What we realized actually is that there was a lot of improvements that could be made to this project and that could really, really focus on solving this issue properly. In a way that only a new chain could solve and an existing chain could not solve it. And so we started kind of looking at that. And then what we realized is we're like, you know what, if we're building a chain for liquidity, you know what we should probably have is a partner who can help enhance that liquidity in the best way possible. And so that's why this is a chain that's actually not just made by Polygon, but also incubated by GSR. They're a liquidity provider, market making firm with, I don't know, 10 years in probably 15 years in the industry, almost 13 years in the industry and very experienced in this way. And so the thought was if we could build two teams, one that can bring an ecosystem and one bring the liquidity, then we'd be in a really, really good spot. And so really that's the source of Katana is really this idea of bringing this to the Ag layer with the comprehensive team that you need solving an actual need. Now, one of the things along the way that we realized is not only do we need deep liquidity on the AggLayer, but actually we need a chain that is actually just optimal for users, period. So great that we need deep liquidity. So we went and did a bunch of user surveys. We're like, what do you actually want to do in DeFi? What are the top 3 things that you actually care about? And uniformly, almost across the board, number 1 is I want high yields. Not surprising, it's DeFi. But also, by the way, that's just finance. Go ask retail, what do I want? Like using Robinhood, what do I want? I just want to earn a lot of money. So that's always number 1. Number 2 is I want deep liquidity. This also is not surprising. Go to anyone in finance and say, what do I want? And they're going to say, I want liquidity. And then number 3 is security. And so security to us is always baseline. It's like the first thing that we always think about is you're going to build stuff that's actually secure. But those first 2 things are things that chains do not solve. For at all across the board. And that is really the idea behind Katana, which ends up being what we need for the AggLayer. It also ends up building like a better chain for users than currently exists for DeFi purposes.

Mark, you guys made some interesting design decisions, I will say. For example, one is you guys are opinionated on the apps that you guys have chosen to— like, you have one lending protocol, one spot DEX, one perp DEX. I think I'm getting this right. Tell me about how you guys came up with some of these design decisions and how you came to those conclusions.

Yeah. So it comes down to this point that I was saying earlier. Let's take any general purpose chain that exists today. What do you have? You have an implementation of Morpho on it, you have an implementation of Aave on it, You might have Euler on it as well. And then by the way, name like 5 more, like longer tail lending protocols. Do the same thing on the DEX side, right? You're like, I've got Uniswap, Sushi, QuickSwap, Paradigm, like, and most chains literally have like 30 DEXs, if not more. What happens is that you get $100 million of liquidity that sits in, let's say, Morpho. You got $100 million of liquidity that sits in AAVE, and you got $100 million of liquidity that sits in Euler. That's $300 million of liquidity. But the thing is, you can only tap into $100 million for any sizable trade without— and having the issues related to slippage and just pricing in general, or specifically on this side, borrowing lending rates. If you were to take all of that liquidity, all $300 million, and just put it into one protocol, You now have much deeper liquidity. You can do much more sizable lending, borrowing without actually affecting rates. On the debt side, you're not going to affect slippage in the same way. Now, you have to assume that if you don't bring those 3 protocols and you only bring one of them, you're not going to get $300 million of liquidity. You're going to lose some. So what are you going to get? You're probably going to get $150, $200 million of liquidity. So then you ask yourself, are you better off with concentrated liquidity of $150 to $200 million or $300 million where the deepest liquidity that you have is $100 million? And the answer is pretty easy. Just like if people want deep liquidity, because that's what users tell us that they want, let's build the thing that actually brings that deep liquidity. And then the same thing is true with respect to assets. Very interesting. This is the one that's a little less obvious. I think the protocols, honestly, when I walk people through it, they're always like, oh yeah, duh. On the asset side, it's a little less obvious. But if you think about it, you've got so many versions of wrapped BTC, WBTC, CBBTC, TBTC. I could keep going down the line of lists of wrapped Bitcoin. Those are virtually the same assets. At times, there's some differences in how they're secured, but frankly, not actually meaningful once you dig into it. Most people are willing to hold any of those assets. It's not uniformly true, but it's very often true. And if you have $100 million of WBTC, $100 million of CBTC, $100 million of TBTC, that is significantly worse than just having $300 million of WBTC or even $200 million of WBTC. Now, what happens though is there are different people who want different things. Some BTC holders are like, I want something really, really secure. So I want something that's like secured on Bitcoin. Versus somebody who says, hey, I'm more of like an Ethereum person, I'm okay with like multisigs holding my assets. And so maybe what you end up needing is actually two versions of these BTC assets that meet different needs. The point is, there's a subcategory of people that want like have different needs. All you need to do is meet their needs, not have every version of these assets. And once you do that, you can deepen the liquidity in what is virtually the same asset. Rather than fragmenting liquidity across all of them. That results in less TVL. It results in significantly more actual value for users on the chain.

More value is better user experience or more yield?

Yes, better, better user experience. We can also get to the yield part if you want, but definitely better user experience for anyone who's looking to do anything that could create any kind of slippage or like move borrower lending rates in a meaningful way.

Yeah. How did you come up with the partners? Like, I think, I think I'll get this. Some of them, right? Like Morpho, Sushi, I think Lombard. I think you guys partnered with Agora on the stablecoin. Like, how did you actually make these decisions? Is it whoever gave you the best rates on things? Is it what founders you like the most? I'd actually love to hear just like a behind the scenes of these.

Yeah, yeah. So there's multiple approaches. On some of them, there's a pure RFP. We sent it out to the top teams and we said, hey, what are you willing to bring to the chain? And very importantly, the decision-making on who we initially approached had a lot to do with the security that they could bring in the asset or in the protocol. And the simple reason is this is a core aspect of the chain. If this fails, it's actually problematic. If you think about where's the risk on Katana, it's on the failure of a protocol. So what you want to do is you want to build— choose protocols that are very, very secure, solid audit history, solid actually history in production. And those are really the teams that you want to work with. That's number 1. Number 2 is I really— people like to say chains are everyone's chain or whatever it is. I think of Katana as the user's chain. Basically, users get everything thrown at them at Katana. Every bit of value that can be taken from a chain from its partners gets thrown at the users through yields. So when we look at this, a lot of this had to do with like, okay, what are assets that users want to hold? What are protocols that users want to use? I don't want to choose an asset that protocols like don't want to— that users don't want to hold. I don't want to choose a protocol that don't want to be used. And then second is, What are you willing to bring to the users on Katana from an incentives perspective or other value? I'll give as an example, Sushi has a percentage of its revenue that actually goes to chain-owned liquidity. Effectively, what this means is a percentage of the Sushi revenue actually goes to creating liquidity in, on Sushi themselves in various tokens. So that when there is a bear market of some sort and many people have decided to pull out their liquidity, in Sushi, what you have is liquidity that literally stays in there and that never gets withdrawn.

Oh, so you've got like the sequencer fees and protocol fees and application fees basically all funneling into one fund, essentially, which is like your own. That's what you guys call this chain-owned liquidity. And then this becomes— now you guys own the capital. You don't become reliant on other people's capital. You own the capital that supports DeFi on the chain. So in, yeah, in up markets, you don't have to worry about that. In down markets, now instead of having capital leave the chain, you have this embedded liquidity, which can be maybe the difference between a chain doing well in volatile times versus not doing well. Is that like— is that a decent—

Yeah, I often think of Katana as being like, I think it's easy for any chain to do well in a market, frankly. It's not that hard, especially the DeFi-oriented chain. The hard part is what happens when times get tough. And that's ultimately the key thing you're trying to be solved is there's two things that make this really interesting on Katana. The first is the chain-owned liquidity, right? Again, people pull up liquidity, but you've got a baseline layer of liquidity that you could still trade against. The second one is when we look at these different sources of yield, some of them are actually off-chain yield. So something like aUSD, aUSD is a stablecoin where Katana Foundation actually receives the revenue and redistributes that out to users. That is off-chain yield. So when you are in a bear market and DeFi yields drop significantly, what will actually happen is that that yield on the aUSD is actually going to be much more desirable than the on-chain yield. And that is something that allows like disproportionate earnings for users in a bear market that you don't actually get in a, a, like, frankly, just anywhere else because they're not built for it.

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Yeah. So yield's really important on this chain for two reasons. We talked about all of these assets and all of these protocols, right? The question becomes, how do you actually get Sushi and Morpho and the Lombards and the EtherFi? How do you get them to actually be the assets here that people adopt? How do you not fragment that liquidity? It all comes down to incentives. Just incentivize those assets, incentivize those protocols, do not incentivize anything else. This comes down to this point of being opinionated that you made at the beginning. If you do that, if you imagine another DEX, coming to Katana, the disadvantage that they're going to be at is absolutely massive such that they will get no adoption compared to Sushi. And the reason is because of the yield that's funneled there. I think of it as like there's like 5 sources of yield that exist on Katana. And you've got kind of 3 sources that we'll call like real yield. And then we'll call it like 2 sources that you call like token yield, which is like the typical yield that you get, right? The typical yield that you get is like a token called CAP, right, where there's going to be a significant airdrop to POL holders. So, well, really POL stakers specifically. So it's interesting in that sense for kind of like that incubation. But then on top of that, so that's all going to flow through. And by the way, when that flows through the users, it flows through those core protocols and those core assets. So you're only incentivizing those. On top of that, the core protocols they all bring incentives. So Morpho incentives, Sushi incentives, those all flow through those core protocols. So again, you're incentivizing just those protocols and then certain assets that you pick. But then on the real yield side is where it really gets interesting because every chain has that, right? Every new DeFi chain comes in, they pump you with a ton of incentives. The incentives eventually disappear or they do really well and those incentives last like a little bit longer than they would. But eventually, those incentives, A, are volatile and people can't really price them well, but B, end up actually not existing forever. So Katana has 3 other yield mechanisms. The first one is a protocol actually built by Polygon that is used called VaultBridge. So this is a protocol that's actually available to actually multiple chains. There's actually a lot of chains that will be adopting VaultBridge in general. You will see this soon. It's become one of the more popular products of Polygon where you just haven't seen the launches come out yet. And Katana uses it. And effectively what it is, is that all USDC, all USDT, all ETH, and all BTC that is deposited into the chain is actually deposited into Morpho vaults on Ethereum. Those assets get lent out, they earn a certain amount of yield. So users are taking more risk here. Now, why is this appropriate? Simple. It's a DeFi-centric chain. If you want to earn more yield in DeFi, you do it on this chain.

And you're just automatically making these decisions, right? Like, a user doesn't opt in to put it on Morpho. It just automatically goes into Morpho, right?

Automatically. Users are told that's where your deposits are going. They I know that's for coin. They earn that, that yield gets earned. That yield does not go straight to users. Passive users are terrible for DeFi. They cost you security on the chain. They add no value. That actually goes to Katana Foundation. Katana Foundation then chooses how to use this. So all of that yield goes straight back into those core applications and into those core assets, incentivizing them. We now have, I think, $150 million of deposits on Katana that is generating probably $7.5 million or so a year already. You push that up to $300, $400, $500 million, you're talking about tens of millions of dollars going straight into these core applications and all flowing through to the applications built on top of Sushi, Morpho, and the, the other core applications, and then the users ultimately getting that benefit. Second one is aUSD. Some people are not going to like this bridge mechanism. They're going to say, this is a risk that I'm not willing to take. Who's going to do that? Mostly institutions. The thing is, this chain is actually one that should be desirable both for retail and for institutions. Retail is going to get more yields. Institutions are going to get deeper liquidity. We want to offer them an option. We've been working with Agora, which has aUSD. It's a stablecoin that shares yields, shares yields with Katana Foundation, so institutions can receive a native stablecoin on Katana, take no bridge risk, use it in Katana, and then that yield goes right back into these core applications and core assets, including Agora as an asset. So again, that's more yield just flowing straight through. And then lastly, this is a sequenced chain with a single sequencer. And so ETH is earned. And so when that ETH is earned, initially, that's all going to go to creating chain-owned liquidity, deepen that liquidity, take a very long-term view. Once that liquidity is deep enough, in the core assets that you want, you start taking that and passing that right through the core applications to the users as well. Now, what's happening is users are actually not only just earning token yield, they're now earning USDC yield, USDT yield, ETH yield, BTC yield, and aUSD yield. That is actually real stable yield in a very sizable way. Huh.

It's funny. There are these themes. Time and time again, you see these things in crypto that didn't work, and then you slightly tweak the model and it comes back and it works. It's like You know, everyone knows like Olympus DAO, obviously, and like the protocol liquidity and blew up and stuff like that. But like, I don't know, it's kind of like Olympus DAO meets like what Fei was trying to do. And then there's some element of like the Curve wars and like what Balancer had tried to do with like combining voting and emission. And but you got— I don't know, it's— maybe I turn that into a question like, what have you guys learned from like studying the failures of the past?

Okay, so this is interesting. So first of all, it's funny, people compare this to a lot of things. It's parachain, it's Blast. Blast. And the thing is, it has a lot of elements from things, right? There's elements of parachain, there's elements of Blast, there's elements of Olympus DAO. Ultimately, I think people focus on the mechanics behind Katana too much and they don't actually focus on the bigger strategic difference. The core assets and the core protocols. That is actually the differentiator. The mechanisms are just how you actually make that come to reality. That is really it. That being said, OlympusDAO is in so many Telegram channels and Slack messages. Look at them. Actually, funny thing is OlympusDAO has failed. OlympusDAO has one of the biggest treasuries. In all of crypto. And that is the whole idea with the chain-owned liquidity. It's like, that's technically like a treasury, but not really, right? It's going to be owned by the protocol, but the amount of value that can actually accrue there is very significant the way that you've seen in OrbisDAO. We've learned from Blast. One of the big mistakes from Blast is you deposit into Blast and you receive an asset on the other side, you hold that asset and you earn yield. Well, what that does is it means that now the chain has a security cost associated with it. Somebody's got an asset there that is being secured and no value is being added to the chain whatsoever. That adds a lot to TVL. It's very easy to attract TVL in that way. Katana very much rejects that idea. You do not earn any of the value until you actually use protocols. This is the concept of productive TVL. We want TVL that is actually used. Rather than TVL that just sits there.

You don't want users just getting 5% a year and just sitting there.

I mean, there's lots of ways that they can do that. That's okay. But why don't you earn 8% a year while depositing into Morpho instead? Go earn your L1 yield and then earn the full L2 yield, and that's the yield you can earn. If you want to earn 5% somewhere else, that's okay. Katana is not the place for you, and that's fine. Again, opinionated chain. Then there's other things that you look. You look at I think the mechanisms that you see in parachain around their proof of liquidity, you see some of that replicated in the mechanisms that exist in Katana. I think one of the really interesting ones is the Curve Wars. This is something that we don't talk about as much because CAT is not tradable right now. But one of the cool things about CAT is that when it is actually tradable, you'll be able to deposit it into a— you'll be able to lock it and receive what we call VCAT, just a voting cat. You will then be able to direct emissions into different Sushi pools and receive fees from that, similar to how you see that on Aerodrome. That's another mechanism where we've looked at a lot of protocols and see how it's done. Mechanisms, bring together like all of these different protocols. But ultimately the key thing is to me is like this strategic difference on like concentrating that liquidity and like driving it all to drive like higher yields and deeper liquidity that gives like users what they actually like want in DeFi.

Mm-hmm. Mark, if you ask a bunch of founders of different chains like, who's your customer? They would say actually founders and builders. And, you know, we have chains who come to us all the time because, like, you know, we make money from like advertising and sponsorships and stuff like that. And we're like, who do you want to reach? They're like, I want to reach new developers to build new apps on the chain.

Do you—

you don't have to worry about that problem at all or because you've already picked the apps or you still— or you still care about the founders and the app builders as a potential customer down the road?

Yeah, we very much care about them, right? Because ultimately you've got this, you've got this base layer, but then I want thousands of applications built. On top of them, right? They're all tapping into the same liquidity. They're all tapping into that yield. So ultimately, and this has been like, we'll— when Katana launches, it will launch with quite a few apps right off the bat. And the reason it's been like relatively easy to attract both like high-quality apps as well as like long-tail apps is because they actually know that they're going to be able to offer their users higher yields by building on top of the core protocols than they would if they go build anywhere else. And on top of that, as they bring more size, they'll be able to do it with more kind of like in bigger size than they could do anywhere else simply because of that deeper liquidity. And the same is true for institutions. When we have conversations with fintechs and they're like, hey, I want my users to be able to earn on their deposits. The problem for a lot of them is the volatility of what is actually earned. If you've got a pool with like $10 million of deposits, then your APR is just going up and down like that. And that's not like an experience people want. You want some consistencies. If you actually build really deep liquidity, then you can come tap into that with consistency for your users. And that's something that fintechs are actually willing to offer. So ultimately, we hope to have thousands of builders come build on top of them. And a lot of that also has to do with how we approach this. So GSR has been really important in this part, which is, again, this whole liquidity aspect of it. If you want apps to come build, you need apps to make more money. Apps are going to make more money because people are incentivized to use the chain, but you ultimately need the users to be able to come and come very easily. And the way this is done on Katana is a few things. First of all, the default experience is a subsidized solver experience. So onboarding to Katana literally takes a few seconds and is free. This is actually very, very important because if you're an app builder, usually what you're used to is somebody needs to go to a site, bridge over there, come over there, and then blah, blah, blah. Or people try to claim that that's different for L1s, but it's no different than an L1 because you need to go to a centralized exchange, deposit your assets, move them from the centralized exchange to the L1, and then you can start using it. By subsidizing solver fees, you can have anyone who's in Web3 in general depositing from probably 60+ chains in seconds for free, and users can start using the apps in the ecosystem immediately. And that is kind of, I think, a very big value add to builders that is not directly to builders, but makes it so much more desirable for their users to actually come to the chain.

Yeah. I guess when you think about tying all of this together and wrapping up this conversation, Sandeep, I don't know if you're done with your walk and you've got your enough steps in here, but Sandeep, maybe I'd go back to you and just think, get your take on like, if this is wildly successful, right? If Katana works, if Polygon POS works, if the AggLayer works, like what is the vision of the future? If all of this, if you're wildly successful with all of this?

Yeah, I mean, if all of this is wildly successful, that means that, you know, AggLayer combined with all of these chains, OKX's xLayer and many other chains, they succeed. That means that AggLayer will become that liquidity hotbed where if you are launching anything, you would want to launch connected to the AggLayer. And AggLayer provides you that interoperability and all that. And that's the future vision. Like I see, like people laugh at me when I say that I predict a million chains, right? People are like, you know, we have like 500,000 and and that. I think that, you know, in 10 years, give it long enough time. If the trustless compute has value, which I think like, you know, enterprises are realizing, like crypto was never bullish, not that bullish for crypto itself. Like, you know, I'm saying now what is most bullish is that now enterprise is realizing that this is better financial infrastructure because your counterparties can simply launch or like, you know, kind of connect to your trust machine and they don't need to have like those deep integrations. And as a whole, the financial system is much more auditable, much more transparent and all that. So if everybody is coming and those 1 million chains are coming into the space, then Aggler will become that avenue where all of these chains would want to connect because Aggler is very different. Like you earlier said that, you know, directionally it's similar to Superchain and this and that. Like Superchain and some of them, they are like very, you know, Superchain wants to create like an environment of 10, 20, 30, 100 chains probably, which work very closely together. And you think like, this is basically again, the thought process is like a limited, you know, kind of compute requirement of the world versus unlimited compute requirement of the world. That's the only difference actually. So the AggLayer is built in a way that there is unlimited computing requirement in the world. So more and more chains can connect and you can have like 1 million TPS aggregated on AggLayer, right? Like, you know, where all the chains are working. So yes, to answer your question, if it's like wildly successful, we want to see AggLayer as becoming that important element of this trustless internet that is being created, which is a sub- set of the overall internet, of the data internet, which is the value internet. And the AggLayer is an important element of that.

Yeah. And like, just building on top of that, I think the— like, I always think of it as the AggLayer should make all of Web3 feel like one chain. It's just that simple. Like, that's the experience that we ultimately want. So like, everything else that you build around the AggLayer is important to like kickstart network effects. We want to make sure it's like trustless. Like, we know there's going to be hundreds of thousands of chains and then hopefully more than a million chains tend to agree with Sandeep on this. But ultimately, the thing that matters is that when people are using these chains, they have an experience that lets them feel like the internet does today, which is just one internet and it should feel like one chain. They are going to want to go between chains. If you narrow and niche chains down enough, They're going to want to go from one place to the other. It's unavoidable. And we need to do that in like a very, very seamless way, which is the goal of the AggLayer.

Yeah, it's a good way to put it, Mark. There's— it feels like there's one internet. Obviously it needs to feel like crypto. Crypto very soon needs to get to feel like there's one, one chain. I like that framing. Sandeep, as you go back into to like use the very overused saying at this point, which is like, you know, it seems like you're going back into founder mode at Polygon right now. Like, are there any misconceptions that you think the industry has or people have about Polygon that you are looking to kind of reshape?

Yeah, I think like, you know, not misconceptions. I think right conceptions. Like, you know, these are not misconceptions. Like we, in 2021, when we acquired all of these ZK teams and all that we wanted, we were a very heavy BD-heavy project, right? And we went into a very research-heavy mode, right? So imagine like the project pivoting from one extreme to other extreme. And then also, you know, we evaluated multiple different protocols in between, like, okay, do this, like Plonky3, zkEVM, this, that. And, you know, like the market unfolded, markets unfolded only now. Like now you see that zkEVM is largely commoditized, right? Like, you know, it's what you need is the zkEVM networks and all that. I think it's not a misconception. You also have heard, and I think you also told, and multiple people have told that Polygon is doing too much. There's so much going on like Miden, ID, this, that. We were thinking in that direction. But I think now what we have done, and that's the part of the founder model, is the laser focus on building few things. Rest all have been spun out. Miden, ID, this ZK proving, Zisk recently with Jordy. Which is a zkEVM and all that, all is spun out. Polygon is going to focus core on core product, which actually serves the end users in a better way. That's the whole thing.

Sandeep, is there anything that feels very obvious to you right now that you think other people in the industry are missing?

Oh, yes, yes, yes, yes, yes. That's like the AggLayer, for example. Yeah, especially like, you know, again, like I can go on about it all. You know, I internally keep saying that, you know, I always draw inspiration from like what Jeff Bezos says about AWS, that, you know, the AWS for first 7 years, people didn't even realize that there is something meaningful, right? Like they're like, you know, why do you need this and all that? And many, many, many people also feel the same way about like Aggler. They think that, you know, there are some bridges, third-party bridges or intent providers and all that. Like, you know, what they are not realizing is that Aggler is providing one single security zone, like all of these bridges and all that. Kind of separate the security zones when the assets are traveling. And at scale, you will have absolutely no idea what thing is going where and what is securing that and all that. You actually need one single coherent security environment that we have in the form of, let's say, TCP/IP or www, HTTPS on the data internet, which I call like data or information internet. The same will be needed in the value internet. And I think that is one thing like I deeply, like many people have spoken to and like all of them see it's a great idea and all that, but I don't see that, you know, okay, this could be the thing. I think that's what, like, you know, people don't see it, obviously. I see it so clearly.

I think the corollary of this, by the way, is that it kind of goes hand in hand, is that every chain, and Sadiq said this multiple times, but I think it's is so not appreciated yet in the industry. Every chain will become specific to a purpose. And I often say specific to a purpose by choice or by force. And by force, I mean by market force, right? What's going to happen is I often say, if you want your general purpose chain to be great at DeFi, I guarantee you I'll build you a better DeFi chain. If you want your general purpose chain to be good at payments and NFTs, I guarantee you I'll build a better chain that does just that. And I think that is going to play out very obviously. It's just obvious, right? So often people say, well, what's different from a technical perspective? I mean, we just walked through Katana. I could give you 10 things that I could not do on a general purpose chain on Katana. I could do the same thing on the payments and RWA side. But there's a part that's even more important than that. I was in Hong Kong the other day. I was meeting with— I was at dinner with somebody, somebody very Yeah, like running a very big enterprise in China, not interested frankly in the conversation. And then I say, Polygon POS has actually turned its focus almost entirely to RWAs and payments. Literally turns, starts asking questions 5 minutes later. He's like, can we have a meeting tomorrow? And that had nothing to do with anything technical or engineering or anything of that sort. It had to do with, I know you're focused on this. I expect you to be able to give me more support. I expect your ecosystem to be more comprehensive for this purpose. That is just how every market has ever operated. Things niche down with time and those niches win. And there's no way that is not true on a blockchain as well, especially if you've got the AggLayer that allows you to still benefit from users and liquidity on other chains.

100%. Yeah, could not agree with that more. That feels like a good place to wrap. Mark, Sandeep, thank you guys. For people who have not checked it out, we hadn't actually— we didn't even talk about Katana. You guys have these cool boxes. People should check out the boxes. You can win a prize. Actually, Mark, you want to give 30 seconds on this so I don't completely botch what is happening with Katana right now?

Yeah. Yeah. So Katana's got one really cool experience, which is that you can actually deposit funds and receive effectively these these crates.

Very cool. Like gamified.

Like it's a very gamified experience. You have the chance of winning 10 million TAD, a CryptoPom, things like that. You also have like another avenue for deposit. That's kind of like the let's get the gambling addicts of Web3 to use that. And then we have like the more I need 50% yields people because that's very normal, of course, who can go to Turtle Club and deposit and earn yield on BTC, ETH, and yeah, some stablecoins. So check it out. It's a fun experience. And then you'll be right on Katana using it when it launches at the end of June.

Epic. Congrats, Mark, Sandeep. Rooting for you guys. Thank you for the time. Cool.

Thanks, guys.