GRTiQ Podcast: 88 Eric Chen

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Eric Chen (00:19):

So all in all, basically The Graph is probably the most important thing and the most unavoidable thing for a user to see for any type of application. Even just going on the Explorer, you’re interacting with a Graph pretty intimately.

Nick (01:02):

Welcome to the GRTiQ Podcast. Today, I’m speaking with Eric Chen, co-founder and CEO at Injective Labs, a research and development company focused on creating decentralized finance solutions. Prior to co-founding Injective Labs, Eric worked in traditional finance as an investment analyst and did research at NYU Blockchain labs. As you’re about to hear, Eric is a brilliant person with a clear vision for how DeFi can disrupt traditional finance and investments. And Injective Labs is yet another example of how new web3 platforms are emerging to create new and innovative solutions in the DeFi space. During our discussion, Eric talks about his background in traditional finance when he first became interested in crypto, and then we explore the early days of Injective Labs, talking about his own entrepreneurial experience and how Injective Labs works. Towards the end of our conversation, Eric also shares his perspective on The Graph and how Injective Labs relies upon the network to create value for its own users. As always, we started the conversation by talking about Eric’s educational background.

Eric Chen (02:16):

So I started off doing cryptoGraphy research and a little bit of trading, both out of my university lab, NYU Blockchain lab, and also at this family office/fund based in New York City, and over time kind of got a familiarity with the space and decided to jump in and work on my own thing, and that’s how I started Injective Labs.

Nick (02:37):

So talk to me a little bit about when you first became aware of crypto and why it piqued your interest.

Eric Chen (02:43):

I first heard about crypto probably way back in the day. I think first learn about it on Hacker News. After that, probably went around bad browsing, learned more about the Darknet and so forth, and realized that that is the dominant currency, which was extremely interesting because everything was really fascinating when you first learn about everything about the dark web. And slowly got more and more familiarized as friends talk about it more, and there are a lot more academic research around the subject area, especially on a cryptoGraphy side, and that’s when I kind of shifted my focus both in school and in my free time pretty much as a hobby to learn more about it and contribute to a few open source projects.

Nick (03:29):

Well, Eric, you’re the first guest that’s brought up the dark web before, and I don’t think it’s uncommon for people to have entered this space, especially early on, but for listeners that don’t know, how would you describe it?

Eric Chen (03:40):

So it’s certainly been a while, so I don’t know what’s new at that sector per se, but basically it’s kind of like this internet that’s not easily accessible. It only allows for accessing via Onion routing. The most dominant browser for that would be Tor browser, and basically it ensures that the server endpoint and also the user endpoint are both pseudonymous. And then for practical reasons, it basically means that you’re anonymous. And it basically creates this entire blossoming of both illegal and interesting cybersecurity and interesting cryptoGraphy discussions. And it has obviously a lot of activity when it comes to different types of illegal activity simply due to the anonymous nature of it, but it also becomes a very interesting case study and thought experimentation when it comes to a fully anonymous and actually, relatively speaking, decentralized concept of intranet. I don’t know where that part is just because web3 is such a dominant player now, but certainly back in the day it was such an interesting concept to be exploring when everyone is so used to TCP/IP internet, the standard Web1.0, web2.0 stack.

Nick (05:05):

Is the dark web kind of a precursor to web3 then? Is that the right way to think about it, for people that have no experience with it?

Eric Chen (05:12):

That’s very hard to say simply because most of the time web3 is, practically speaking, relatively unlike a broad stroke sense, more decentralized than the dark web because at the end of the day it’s just the accessing that’s more privacy focused rather than being decentralized. But probably in the most layman sense, yes, it is kind of a precursor.

Nick (05:35):

So you mentioned that you became a little bit aware of crypto because of the dark web, and that was maybe a currency that was used to transact on it. But when we were preparing for this call, you also mentioned that you were a minor at one point in your life early on, right? Maybe in around 2012. What’s the story there?

Eric Chen (05:51):

Yeah, so definitely did a little bit of that in 2012, but probably never really spent too much time on it until, I would say, 2017 or ’18 or so, just because Bitcoin mining quickly evolved into first FPGA and then… Now it’s all extremely ASIC focused. But back in the day it was certainly… You can kind of try running it with your GPU and it was very, very fun overall. So I think my first series foray into mining was when I was in college and me and my friends were utilizing and taking advantage of the electricity in the dorm rooms and set up a mining rig with a couple dozen GPUs trying to mine. I think we tried to do a dual mine of Sia and also Ethereum and definitely probably tripped the floor breaker a few times. But overall, it was kind of like a very fun experience, definitely scary as well. And that friend that worked on mining with actually eventually got into crypto as well.

Nick (06:56):

So you mentioned when you were talking about your background that you actually ended up in traditional finance and investments for a period of time out of college. What took you into that space and what did you do while you were in there?

Eric Chen (07:07):

Yeah, so the mandate was pretty broad. I’ve certainly spent a lot of time working on trading just because there was so much low hanging fruit strategies, a lot of inefficiencies back then. I’m sure if you talk to enough people you’re going to very quickly realize a lot of them made their first pot of gold in trading, leveraging their [inaudible 00:07:27] premium and different types of exchange arbitrage. I think that was probably what I spent most of my time on, which is not necessarily the arbitrage aspect, but taking advantage of unchained token atomic mechanisms.

(07:41):

I think back then, staking wasn’t really a well-developed concept, but master node was, and there were a lot of strategy when it comes to market making, and also I would say leveraging the pricing opportunity when it comes to basically incoming flow or different types of staking releases or APY spikes and so forth. But yeah, it was really, really interesting back then because I get to touch different aspects. I get a stamp between a crossroad of having that fundamental understanding of decentralized infrastructure and also some know-how when it comes to trading and setting up the overall trading infrastructure and get to come across a few new and interesting and innovating ideas within crypto that eventually came into realization now.

Nick (08:33):

For listeners that aren’t familiar with this term arbitrage, how would you explain it? What does that actually mean?

Eric Chen (08:39):

So basically in most of the markets there’s a buy and a sell and obviously none of them… In any type of exchange order book or whenever you see any type of exchange interface, you won’t be seeing a buy or a sell at a better price. So that means that there could be buy at $99 and a sell at $100, but you would never see buy at 101 and sell at 99. That’s because it’s automatically matched on that platform. An arbitrage is essentially looking at all of those exchange platforms or decentralized exchange platforms and so forth and figure out what are the imbalances and what are the opportunities for theoretically speaking a higher buy and a lower sell within that very short time period. It could come in very much different forms or fashions, but arbitrage overall in the most umbrella term possible, it just means that a execution or a trading strategy or a deployment of capital that yields essentially zero risk, but some form of return.

Nick (09:46):

Is it normal for markets to have a lot of arbitrage opportunities? I mean, it seems to me with my layman brain here that it seems over time as there’s more visibility in a market and less asymmetry and information that arbitrage should not exist. What’s your thoughts there?

Eric Chen (10:02):

Yeah, theoretically and most of the financial academic papers out there, it always has a no arbitrage assumption, and that’s for a good reason is that you can’t build long-term models and rigorous understandings if there are arbitrage opportunities or fundamental inefficiencies with the market. And certainly within arbitrage, at least back in the day and probably even now, it’s about who moves faster before this opportunity gets oversaturized.

Nick (10:35):

There is a lot of arbitrage right now. We’re going to talk about centralized and decentralized exchanges. But in your opinion, does that decrease over time, these opportunities of arbitrage in crypto space?

Eric Chen (10:45):

Yeah, certainly. Free money is never… It’s never free in the long run.

Nick (10:53):

So let’s talk a little bit about then why you decided to move from traditional finance into DeFi. What was the idea behind making a move when you were already on a career track in traditional finance and you ventured off into DeFi?

Eric Chen (11:06):

I think overall, certainly by the time I started working on Injective Labs, DeFi was not really a term that was coined. But over time, you kind of see that trend going and evolving where a lot of fundamental decentralized finance application stack and protocol are coming in play. There’s I think a compound of a, back in the day, similarly resemblances of Uniswap. And so they’re all kind of coming to together, being iterated on and being developed on, and it’s really a matter of time before it just become an entire blossoming industry. Because fundamentally, if you’re working with a decentralized ecosystem and a decentralized currency, at the bare minimum, you would also assume that you want to interact with a decentralized financial infrastructure.

Nick (12:00):

So let’s talk a little bit about Injective. What is it and what is your role at Injective?

Eric Chen (12:06):

Yeah, so I’m the co-founder and CEO of Injective Lab, which basically just makes cool software and contributes to the ecosystem and a network of Injective. And Injective is this Layer 1 [inaudible 00:12:17] public blockchain that currently has the best possible environment for DeFi developers because it has the most capital efficient decentralized exchange infrastructure for digital assets and derivatives. From a user perspective, zero [inaudible 00:12:32] and [inaudible 00:12:32] and native interoperability with both Theorum and Cosmos.

Nick (12:35):

What did you identify in the marketplace to launch Injective and say, “Hey, there’s a problem out there and I’ve got a solution for it?”

Eric Chen (12:44):

Yeah, it certainly… Even from the beginning, it was very, very clear to everyone that you cannot possibly build a scalable or sustainable decentralized order book infrastructure that will be always stable, that will create a similar user experience as centralized counterparts. And that’s why within Ethereum, practically speaking, there are no dominant order book platforms out there that are purely contract based, and there are certainly a lot of trade-offs when it comes to working with an alternative L1 and deploying order book infrastructure on top of it. But even so, there are a lot of drawbacks or a lot of flaws at the fundamental design.

(13:27):

And then it became kind of clear is that if you want to build a fundamentally decentralized infrastructure that can support order book, you need for that to live on a application specific customized blockchain that are maximally composable and interoperable with other networks, so that this way you can be able to optimize it on a consensus level and making sure that, above all else, the order book infrastructure is going to have a few fundamental properties that are uncompromisable to say the least, and to be able to support this entire realm of possibility enabled by having a decentralized non-chain order book infrastructure.

(14:08):

So that would mean that there could be decentralized applications that can send orders, create on chain strategies, create extremely flexible and unique and bespoke applications that are tailored or only made possible by the order book infrastructure and create this entire ecosystem for a much more capital efficient, decentralized exchange that can basically remove the need of a centralized counterpart.

Nick (15:46):

Do I have it right then, Eric, that Injective is a platform upon which DeFi products and builders and dapp developers can build upon? It’s not so much a decentralized exchange as it is a platform for DeFi builders to come to and build. Is that correct?

Eric Chen (16:04):

It’s both. As a user, you can both interact with the core infrastructure, the core exchange module in the most native way by placing orders, establishing positions, exchanging assets, or you can be a application level user and interfacing with different types of on chain protocols or even different types of exchange applications that basically makes the user experience extremely optimized or enables you to automate a lot of the overall DeFi needs. And of course, along the line, really improve upon the user experience and the capabilities where it’ll offer something that are faster or capital efficient or even just features that you’ve never seen before within the DeFi space.

(16:52):

So basically it’s so flexible as a network that it can take into many shape or form user that can interact with the blockchain doesn’t even necessarily need to understand that they’re interacting with a decentralized infrastructure. And a great example of that is that FrontRunner recently launched a sports betting testnet where users get to interact with that platform without even realizing that they’re interacting with Injective. And you connect your metamask and you basically get to use and leverage all the amazing things about the Injective network without even having to establish a Injective address, without even having to go through a mental hoop of interacting with the new blockchain.

Nick (17:34):

If we were to put those two use cases in separate buckets, one are those that use it just as a decentralized exchange and then those that use it as a platform to build upon and to tailor their own experiences as builders, how do you see the current split between those two buckets? And as you forecast out into the future, how do you see that changing over time?

Eric Chen (17:54):

Yeah, I would certainly say that right now in terms of the overall application reach and also the core module chain reach. So for Helix case and for FrontRunner’s case and for all those exchange applications case, it’s certainly the latter bucket where some developer, and obviously for Helix is Injective Labs, create this interface, create this user experience or hyper optimized that tries to make sure that the user are getting the best both of worlds within decentralized infrastructure and also what they’re typically used to on a centralized infrastructure. And basically, it’ll allow for just in a raw user number account front much broader access and much more optimized and much more easier user onboarding experience than having them to go and interact with the chain running a full node or a light node. And basically that’s where we see 90%, if not 95% of the users are going to be interfacing with the network on.

(18:58):

And this is definitely the same that goes for most of the blockchains out there. So you have to have a user interface to be able to interact with the network. But on top of that, I would say that in terms of value, there’s a kind of filtering or a funnel for going from a user into a power user. And that’s when we see in terms of value distribution, kind of like a flip where essentially maybe 10% of the value are coming from that 99% of the users.

(19:28):

And that 90% of the value is probably coming from the opposite, where these are probably people who are interacting with the chain from an algorithmic, probably a more developer perspective, and interacting with it because they have so much investment or they put so much value into it that it allows them to interact with it in a much faster, in a much more native, in a much more streamlined way. And so ideally over time, I want to see from a value perspective that being version closer and closer to 50/50 because over time, you’d have to make sure that there’s a mass adoption in terms of user, but also a mass adoption in terms of the value that users bring.

Nick (20:10):

So help listeners understand what’s going on behind the scenes here. You’ve mentioned time and time again, this is a decentralized solution in a DeFi environment, so a lot of the users are familiar with how important decentralization is. But you’re doing a lot of things, there’s a lot of work going on behind the scenes. So how did you build a protocol to deliver value in the ways that you’ve described, but in such a decentralized way?

Eric Chen (20:33):

Basically, once a network is launched, the only way for the network to undergo any change or any type of upgrade or into update is to go through governance. Basically, governance has this chain upgrade proposal which allows for all validators and any node that might be paying attention or are live to switch to the new binary to upgrade to the latest release and to reach consensus. And basically Injective Labs’ most important work, relatively speaking, is to create these binary releases, making sure that some of the features are included and to contribute to new features to essentially allow for more offerings. I think the most recent example would be a building a stop-loss feature for a launching and decentralized stop-loss mechanism for any type of order type or enabling virtual machine environments such as be [inaudible 00:21:32] so that application builders and developers can deploy smart contracts and interact with the core exchange modules and so forth.

(21:40):

So a lot of that work is being done by, I guess, open source developers and also labs. And after a certain point, once there is a version of the development core binary release that are ready, then a chain upgrade proposal will be made where the validators vote on what are to include or what are to upgrade the network after reviewing the binary and the codebase to make sure that everything makes sense or they all want this feature. And that’s when the actual chain upgrade and the actual network evolves.

Nick (22:15):

How big is the network presently in terms of node operators and people contributing?

Eric Chen (22:20):

Yeah, it’s hard to say off the top of my head. I think there are currently 30 active validators, and obviously the governance can vote to increase the validator account, as a matter of fact. And also in terms of open source contributors, don’t have to number off the top of my head, but on the lab side, I think there’s around 40-ish people at this point, close to 50, all working on making the network and trying to be a positive force in the ecosystem.

Nick (22:49):

Eric, it’s come up time and time again on this podcast that when I speak with people like you, there’s also this thread of entrepreneurialism in the guests, right? These are people going out and trying to have an impact in the world. And certainly in the case of Injective, you’re an entrepreneur and you’ve had that experience. What did that move from traditional finance into DeFi as an entrepreneur teach you about entrepreneurialism?

Eric Chen (23:13):

It’s number one, building something that’s extremely hard and I would not recommend a lot of people doing it. And on top of that, if you have an extreme urge to solve a certain problem or to address a certain problem that you know for a fact that you have the solution to or you’re capable of finding the solution to, that’s probably at a base level and that’s bare minimum requirement for starting your own thing.

Nick (23:39):

Knowing what you know now, being able to look back on that experience, what’s the one piece of advice you wish you would’ve known, just getting started?

Eric Chen (23:49):

Before you consider hiring someone or finding someone for help, it’s always required for you to try doing it yourself and have basic understanding or process of doing so.

Nick (24:02):

Let’s talk a little bit about DeFi and step back. And for people that aren’t as close to the front lines as you and some of your competitors and colleagues are, they group web3, crypto, and blockchain altogether. I mean those things are almost used interchangeably among people that are trying to learn and understand how all of this works. And then you get this rare flavor of DeFi. Where does that fit in? Is that a part of blockchain? Is that a part of web3? Is that a part of crypto? So as somebody who’s right there on the front lines, how would you advise or help listeners think through the relationship between crypto and Defi? And to kind of broaden that a little bit, you and I both know that crypto can be used in a lot of different ways. It can be used as a token for governance. In the case of DeFi and its relationship to crypto, how should we frame that?

Eric Chen (24:53):

That’s very difficult to say. I would say that if you look at DeFi around a year or two ago, it would be mainly framed in the context of a decentralized application within a context we’re building on tablet and blockchain. But at this point, we stand in such an interesting crossroad within the multi-chain world that oftentimes DeFi kind of transcend beyond just being a decentralized application or a smart contract protocol to router into something that’s a lot greater. And as a matter of fact, I think it makes sense for any type of, from a user perspective, at least any sort of application sector to be idiosyncratic and not necessarily a layer system or a tier system where under blockchain, their [inaudible 00:25:38]. Rather, “Hey, from a user perspective, this is web3.” web3 is an extremely broad term and it’s going to be pretty much all-encapsulating.

(25:48):

And if you have any type of user need or if you have any type of demand for certain services, and that’s when you start splitting up the sector. It could be DeFi, it could be GameFi, it could be I guess collectibles, NFTs, and so forth. And that’s when you start to separate them and do fine grain. And I think that will probably be the best setup because there’s so much change and so much evolution when it comes to every single sector where what you see today might be completely different in terms of the infrastructure or a categorization in a few months.

Nick (26:24):

Given all of that, and that’s a really great answer to that question, do you still think, or would you hold the position that DeFi was the catalyst that kind of launched the crypto revolution?

Eric Chen (26:36):

It kind of goes back to what you consider as the definition of decentralized finance because currency certainly is part of finance. So if you categorize I guess Bitcoin as kind of related to decentralized finance Ethereum and all the smart contracts, which is at the end of the value vetted, which is also kind of this definition of finance, then yes, basically the entire digital asset space is being converged around building a decentralized financial infrastructure and ecosystem. But it’s not necessarily what people generally would associate DeFi with. It would mainly be the DeFi protocols or applications or smart contracts that are deployed into multiple places and interact with and compose with all the other protocols. And I would say that it’s certainly a relatively new thing. It didn’t really kickstart the crypto revolution per se, but it certainly contributed and played a heavy role as an infrastructure layer or as an user application layer to kickstart and develop so much more new things with regards to metaverse concept, with regards to NFTs, with regards to GameFi and so forth.

Nick (27:47):

I’m going to ask you a difficult question here. I’m sure you’ve been asked it before, and if not, I know you’ve thought a lot about it, but you have experienced in traditional finance, you’re familiar with how investments in the United States work. A lot of listeners who are joining from the United States, they can go open a brokerage account direct or they can use a financial advisor if they want, and they can go invest in stocks and different things like that. So that’s traditional finance, no problem. Most people understand it. And here’s DeFi being launched and there’s solutions in this space like yours. Why is DeFi better than traditional finance as we understand it here in the United States?

Eric Chen (28:26):

One simplest way to put it is that there’s extreme disintermediation of processes, structures, and flows. And essentially beyond just a significant cost saving on satisfying or fulfilling into a financial need, regardless of your deployment scale, there’s also a fundamental efficiency boost when it comes to speed of transacting, a speed of deployment, and the overall barrier removal process of interacting with different financial products, interacting with different types of financial primitives. Because for example, if you go through Fidelity or any any traditional brokerage account, for example, just start with a KYC process, a bank clearing process, and your money is being kept by Fidelity or Interactive brokers, and if they have any issues or if they’re in bankruptcy clearing phase, then there’s a really good chance that you won’t see your money until a year or two later, if not ever. So that is certainly, first of all, one of the most fundamental issues when it comes to custodial platforms and centralized platforms, regardless whether it’s crypto or traditional finance, and that’s one of the fundamental things and the most palpable things that DeFis try and solve.

(29:43):

And after you deposit, every time you make a trade or every time you make an action, what are you noticing or not you’re getting charged or you’re getting fees? You’re probably getting offered a slightly worse price than what the institutions and the market makers are getting. You’re probably getting charged a dollar a trade or some fixed amount that probably doesn’t make sense for you. And on top of that, you are not allowed, most of the cases, to interact with some of the more advanced products or to even subscribe to managers and automate a certain process. And that’s just because of the innate inherent barriers and setup of, at this point, probably archaic financial infrastructure. And then on top of that, if you ever are dissatisfied with, let’s say, Fidelity and you want to move to Interactive broker, you have to go through this entire process again, and most likely they’ll probably stop you from withdrawing or money due to some form of regulation.

(30:39):

And you don’t even get to probably call up customer support and say that you need your money now, that probably takes a week or two, if not on certain cases. And all in all, after everything, you probably are just starting to realize that you don’t even own a stock and a brokerage owns a stock for you. So all these kind of inefficiencies and all these transfer lags, asset velocity lags are contributing to a much more sub ideal, a much more inefficient process and platform. And one thing that people are slowly going to realize is that for every even one bips or 0.01% of speed up, or for every 0.01% of cost saving in a high velocity platform, it has a fundamentally compounding effect to the overall value within the ecosystem. And if you look at probably one of the most highly debate or one of the most watched financial related news, that’s probably how the Fed is looking at adjusting the interest rate of the overall US economy.

(31:43):

And it might seem very, very scary that oh, interest rates getting increased by 25 basis points or 75 basis points, or sometimes maybe even 100 basis points, but the reverberating effect across the entire economy just because of the leverage in the system and also just because overall, there’s just so much velocity going on that are impacted by it, it creates… Fundamentally, even a 75 basis point might create a 5% drop within the S&P 500, which is the US stock market, essentially. And this is a really great showcase of how even the smallest or the marginal improvement in process and the cost will create much bigger order mine too bigger in adjustable value and the total market value for any segment’s infrastructure.

(32:39):

Hi, this is Eric Chen with Objective Labs, and if my conversation with the GRTiQ Podcast has been helpful to you, then please consider supporting future episodes by becoming a subscriber. Visit grtiq.com/podcast for more information. That’s grtiq.com/podcast. Thanks for listening.

Nick (32:58):

In the past, I’ve asked guests about web3, and I’ve usually asked this question, does web3 eventually eat web2 and web2 goes away? And get their opinions on how these things, if that isn’t the case, might coexist. So I want to reframe that question for the context in which you and I are speaking. Does DeFi eat TradFi or is there a future in which these co-exist? How have you thought through that?

Eric Chen (33:27):

So the answer is absolutely yes, but that’s because first of all, the form of DeFi that we might see when it eventually eats CeFi might be completely different. It might have evolved to a point where we barely even recognize it. And the other question is the matter of what. And those two are… I mean, if you know that you’ll be very, very wealthy. So yeah, no one knows at the end day. But I would say that fundamentally speaking, DeFi is just a far superior infrastructure and most importantly as a concept compared to this entire archaic, inefficient, centralized financial infrastructure. But are we going to see in the next few years, are we going to see it in the next few hundred years? That we don’t know.

(34:14):

And as a matter of fact, technically speaking, there are some form of decentralized finance within the traditional finance world, but that’s generally taking in the form of a cross-border financial infrastructure, like for example, basically for the global wiring system, that has to be fundamentally decentralized because it’s going between countries and banks in different countries in different jurisdictions, but they came up with a standard that allows for them to coordinate upon and create this credit based system that can allow for cross-border payment flow and execution of transfers.

(34:49):

And so it might not necessarily be like [inaudible 00:34:53] is just going to take over the lending market in a few years, but I believe that fundamentally speaking, the financial infrastructure is going to be more and more decentralized, and it’s going to be taking in some shape or form of DeFi.

Nick (35:04):

So in that environment then, you’re envisioning people in DeFi being able to not only purchase and trade cryptocurrencies, but also get access to stocks and maybe bonds that we’re used to or accustomed to seeing in traditional finance?

Eric Chen (35:21):

Yeah, that’s possible.

Nick (35:23):

What do you think about decentralized exchanges versus centralized exchanges? And this is tricky, particularly in the United States because we have an incumbent player as large as Coinbase. And in some ways, a charitable interpretation of a centralized exchange like Coinbase is that they’re an on-ramp and an off-ramp into web3 and this decentralized world. And so for that reason, they play a nice little role, but maybe someone like yourself that holds kind of the hard line on decentralization, are they friend or foe? What are your thoughts about the interplay between centralized and decentralized exchanges?

Eric Chen (36:00):

Yeah, I would say that overall as a high growth ecosystem, everyone will be collaborative. And there’s extremely strong synergy between any type of sector, and I’m sure there are trauma here and there between different types of players or people sharing different beliefs. But at the end of the day, it’s highly synergetic. The benefit or the success of one is probably shared by the greater space. And I don’t have a particular opinion on Coinbase treating this as… At least Coinbase positioning themselves as pretty much a fiat gateway or an entry point for traditional users, or I guess in a sense CeFi users, but I think that the success of Coinbase will certainly translate into success for DeFi overall.

Nick (36:49):

Are you guys in DeFi thinking a lot about the web3 stack? I mean, in some ways, because of the way you’ve built your own protocol, maybe the web3 stack and some of the argument or framing of that isn’t as important to you. But be curious to know, how much do you think about the web3 stack? How important is it to DeFi?

Eric Chen (37:08):

I would say that overall, most of the layers within the web3 stack are still within its infancy, and there are no clear winners. For example, for decentralized hosting, there are at least three very, very strong players. Storage, [inaudible 00:37:24], a few very strong players. So we do think about it a lot as how to structure and what are the best possible toolkit to fill in the blank for each stack. But that being said, it’s very hard for us to come up with this map or basically this assembly line of web3 application layer. But yeah, it’s very hard for us to come up with this entire… Essentially a checklist for web3 application and, “Hey, these are the go-to. Those are the go-to,” just because the space is evolving so quickly. That being said, certainly we have our internal favorites and so forth, and I would say that Graph is probably one of the most important data layer, especially when it comes to analyzing and providing critical services for the overall… Any type of blockchain ecosystem and any type of decentralized application. And I’m sure the Injective ecosystem has also benefited heavily by it.

Nick (38:19):

Well, let’s talk a little bit more about The Graph. How important is The Graph to what you’re building an Injective and how do you use it?

Eric Chen (38:26):

Extremely important because if you think about how a blockchain works and say it only stores the most critical possible information on chain, and it gets rid of everything else that’s not required for the next state or state after that. And what you’re basically missing is a wealth of historical data that are actionable that are very, very useful in terms of informing the user and sometimes informing the user of what has happened and what are they expecting to happen. And generally speaking, the indexing process are pretty streamlined for Ethereum virtual machine and for a lot of other virtual machine solutions alternative to EBM. But it’s still extremely new for customized blockchains like Injective Network to really index those messages and making sure that it’s presented to any developer or maybe even user front in an actionable and a clear way.

(39:20):

So all in all, basically The Graph is probably the most important thing and the most unavoidable thing for a user to see for any type of application. Even just going on the Explorer, you’re interacting with a Graph pretty intimately. Interacting with any type of application and so forth, you probably have to interact with a Graph database or some form of Indexer to make sure that they information presented to you enables you to even use it. So yeah, I would say that it’s probably the most important thing from an application layer.

Nick (39:55):

So it’s probably not the best follow-up question, but I do like to ask it to different guests. Can a web3 stack exist without a querying and indexing layer that’s decentralized? Is that possible?

Eric Chen (40:09):

Technically, theoretically speaking, that’s possible. It would just be… But in a sense, it would just be centralized where there’s going to be a centralized Indexer or indexing service that might be supporting something that’s very pretty new or providing services for something that’s up and coming, but not necessarily well-exposed to a decentralized community yet. But that being said, it won’t last long, and I think that a decentralized layer or decentralized every single part of the web3 stack is always going to be the eventual convergence throughout the landscape.

Nick (40:45):

Well, Eric, I want to ask you just a couple of final questions here, and then I’m going to ask you the GRT1Q 10. The first question is, from your perspective, does the crypto market, all the trading and the market prices of digital assets, does it ever decouple from things like the S&P 500 and traditional markets? I think for a lot of people, and I was certainly like this for a long time, I always felt like traditional investment opportunities and those that exist in crypto should not be correlated. They should be fully decoupled. How do you think about that?

Eric Chen (41:20):

It really depends on the duration and what type of timeframe you’re looking at, because for anyone in trading, the duration matters a lot. They could be interacting with the microsecond level where there’s a million microsecond in one second. They could be interacting on the hour, the day, the week, the month, a year to 10 year to 100 years. So we’ve certainly seen somewhat of a short term correlation between the overall digital asset space and the equity market. But that might not hold true in just a few months, or one of them might move in an idiosyncratic way compared to the rest of the, I guess, sector, money-related sector.

(42:05):

So yeah, there’s never a perfect correlation. There’s never a perpetual correlation on anything in life. And if we’re talking about for passing uncertainly, there has been a correlation just because they’re all sourced from the same impact, which is from the treasury markets, from the monetary policy. But that being said, historically, that has certainly not been the case between the digital asset space and also equity market. And most likely just from looking at past historical data, it won’t be correlating for much longer.

Nick (42:43):

And the last question I want to ask you is about how someone like yourself makes sense of the current market conditions. And people are talking about bear markets, they’re talking about cycles, when the cycle ends, when it begins. And I think to put some nuance on this question, as you forecast out, do crypto markets start to look and behave a little bit more like what we’re used to in traditional markets where there aren’t the daily swings or the monthly swings? How do you think through those things?

Eric Chen (43:11):

It’s all relative, for sure. Basically, back in the day, crypto as a growing sector or industry has been extremely volatile compared to equity markets or treasury markets and so forth. It might be an order magnitude more in volatility of non-multiple orders magnitude. Now, because of the craziness going on within the equity market, within the broader financial market, it’s honestly a sign of a maturity that the crypto has been comparatively enjoying a volatility that’s much less than what it was facing before. So all in all, I would say that a sign of maturity is when a volatility decreases, when over time basically the market gets more and more boring and personally looking forward to that as the sector grows more.

Nick (44:03):

So is crypto out of the box? Has Pandora’s Box been open? There’s no way putting this back in. This is what the future looks like, and people either need to learn it and get involved or just get out of the way, but this is where we’re headed?

Eric Chen (44:14):

Yeah, that’s certainly what I believe.

Nick (44:16):

Well, Eric, now we’ve reached a point in the podcast where I’m going to ask you the GRTiQ 10. These are 10 questions I ask each guest of the podcast every week to help listeners learn something new, try something different, or achieve more. So Eric, are you ready for the GRTiQ 10?

Eric Chen (44:31):

Let’s do it.

Nick (44:42):

What book or articles had the most impact on your life?

Eric Chen (44:46):

I would say Chaos Monkey.

Nick (44:49):

Is there a movie or a TV show that you recommend everybody should watch?

Eric Chen (44:53):

The Big Short.

Nick (44:54):

If you could only listen to one music album for the rest of your life, which one do you choose?

Eric Chen (44:58):

American Teen by Khaled or Khaled.

Nick (45:02):

What’s the best advice someone’s ever given to you?

Eric Chen (45:05):

Do your own research.

Nick (45:07):

What’s one thing you’ve learned in your life that you don’t think most other people know yet?

Eric Chen (45:12):

Coding is highly addicting.

Nick (45:14):

What’s the best life hack you’ve discovered for yourself?

Eric Chen (45:17):

You don’t need eight hours of sleep.

Nick (45:19):

Based on your own experiences and life observations, what do you think is the one characteristic or habit that best explains why people find success in life?

Eric Chen (45:30):

Managing work-life balance generally helps to be more productive, but those who are extremely productive generally have the worst work-life balance because work is life.

Nick (45:40):

And then the final three are complete the sentence type questions. The first one is, the thing that most excites me about web3 is…

Eric Chen (45:48):

Whatever I’m going to see tomorrow.

Nick (45:50):

And the second is, if you’re on Twitter, then you should be following…

Eric Chen (45:55):

@Injective Labs or @EricInjective.

Nick (45:58):

And then lastly, I’m happiest when…

Eric Chen (46:01):

We ship something,

Nick (46:10):

Eric Chen, thank you so much for joining the GRTiQ Podcast. You’ve been generous with your time and provided a lot of thoughtful perspective that I think listeners will find very valuable. If listeners want to learn more about you and the work you’re doing in Injective, what’s the best way to stay in touch?

Eric Chen (46:25):

Certainly. Follow @Injective Labs or follow me on @EricInjective.