59 - Uniswap | Hayden Adams

welcome to bankless where we explore the frontier of internet money and internet finance this is how to get started how to get better and how to front run the opportunity i'm ryan sean adams i'm here with david hoffman and we're here to help you become more bankless david we finally got him hayden adams on the podcast ladies and gentlemen we got him hayden adams the creator of unit swap we go through the entire history of unit swap starting when it was just a blog

post from vitalik on reddit i think going into hayden getting laid off and being convinced by his good friend carl florsch that he's going to all of a sudden become an expert on you know ethereum building and defy and turns out that's exactly what happened and so hayden takes us through the story of you swap from inception to where we are today with unit swap v3 to where we are going tomorrow which is uniswap being the world's largest largest asset exchange platform in the world uh it is it's been a fantastic story and there's

so many different uh detours and turns that we take because it's it's it's it's interesting every step of the way and there's so much value to be derived from this conversation because not only is it the story of uniswap but it's the story of ethereum at large as well because it's such an emblematic of what it means to build something on ethereum i had a fantastic time talking with hayden today yeah this is just i feel like this is going to be one of those legendary stories that the the world hasn't yet just discovered you know like like uh

steve jobs and steve wozniak in the in their garage right in in um menlo park uh that that area and or like bill gates the story bill gates or like you know mark zuckerberg facebook all of these things now that says bad connotations these days but it's it's that important and it still hasn't escaped in mainstream this is one individual very first software development project able to disrupt the entire financial economy by building code on top of ethereum um

no one believed that this thing would would work this was at a time when when ethereum was dead and lo and behold it just surpasses in the last six months surpassed the volume of coinbase and if you listen to hayden you come out of this episode incredibly bullish you come out of this episode uh believing that uniswap could one day surpass the the volume of traditional finance like s p 500 and nasdaq um such a compelling story such an ethereum-centric story so honored to be um one of the ones kind of talking about it early this is like an

anthology it goes through the entire timeline of uniswap that's sort of the first half of the episode in the second half of the episode we get more into uniswap v3 and the details and boy are there a lot of details uh around uniswap v3 it's very clear that hayden and team have thought about this exhaustively we talk about the sushi vampire attacks we talk about the unit swap stimulus package the union swap airdrop as it was 4.5 billion in value to 500 different ethereum accounts like crazy stuff um we

talked about his reasoning for licensing and core to this entire conversation was one through line david which was what are the values of a decentralized financial system what are bankless values and what does that mean what does it mean to instantiate that in code on ethereum what does it mean to instantiate that on the in the uniswap protocol um so really great episode definitely worth the wait uh and uh we're super excited to bring this to you guys to me the cool story about uniswap

is this dance between the relationship of the values of ethereum and also providing financial tools to the ethereum community and the the greater world at large while also inspiring bottom-up community ownership there's so there's so much value to be derived here so let's go ahead and get right into the interview with hayden but first we'll talk about some of these fantastic sponsors that make this show possible bankless is proud to be supported by unit swap uniswap is a new paradigm in asset exchange infrastructure instead of a cumbersome order book system where

trades are matched with other humans uniswap is an autonomous piece of software on ethereum which is what ryan and i call a money robot no human counterparties or centralized intermediaries just autonomous code on ethereum input the token you want to sell and receive the token you want to buy something brand new in the uni-swap ecosystem is the uniswap grants program is now accepting applications for grants we have been saying this for a while and we'll say it again dals have money and they are in need of labor if you think

that you have something to contribute to the uni-swapped out apply for a grant to uni-swap just look at the size of the uniswap treasury it's almost 3 billion this mountain of capital is looking for labor do you have something of value to contribute to the uniswap dow no matter how big or small your idea is you can apply for a uni grant at unigrants.org and help steer uniswap in the direction that you think it should go that's exactly what we did to get unisoft to be a sponsor for bankless and you can do the same for your project

thank you uniswap for sponsoring bankless metamask is your go-to wallet for the bankless journey if you're going bankless you need metamask period browser and mobile get them both this is your tool to unlock the world of d5 here's my favorite part now you can swap tokens directly in metamask with a single swipe this has got to be the easiest way to trade ethereum tokens choose a token you own a token to exchange it with and get your quotes if you like what you see you hit swap that's it what makes swap so useful is

what happens behind the scenes it compares dexes aggregators and market makers to find you the best price with the lowest network fees and the least slippage this means you can swap a wider range of tokens and swaps can even automatically split up your trade to give you access to better liquidity you don't even have to think about it try it out download metamask for desktop or mobile now at metamask.io and start swapping all right bankless nation we are super excited to have our next guest hayden

adams the legend the creator of uniswap guys this episode has been one year in the making we've been asking hayden on the podcast for 12 straight months now we have aggressively pestering aggressively festering on twitter we had mark cuban first you know and we were we're faced with a dilemma whether to have mark cuban or or hayden first we had mark cuban first but now we have the long awaited podcast with hayden adams hayden how are you doing i'm great really happy to be here uh really happy to be on the podcast and i'm definitely sorry that i've rugged

you a few times i'm saying that i was gonna come on and then not and canceling and pushing it back and you know it just made it it just makes this all that much better because we we just like wanted it so much you know you're building the suspense and um you know i think the community's really excited to have you on so david i think we're going to do this podcast as kind of like a timeline of events so do you want to kick us off with the first milestone in the timeline and we'll run through it yeah absolutely hayden i believe the genesis of uniswap started with you

getting laid off can you tell us about that part of the story and where things went after that yeah definitely um i mean to some extent it started a little bit before that uh i had a friend in college his name was carl um and he was super obsessed with ethereum uh incredibly passionate about it uh he would tell me to buy it back when it was you know a few cents um i i didn't really care that much about it at the time i wasn't that interested i don't think i was studying mechanical engineering and i sort of had a planned path for my life i think um

and so after i graduated college i spent a uh sorry my square my chair is squeaky um yeah after i graduated from college i spent a year working as a mechanical engineer specifically doing computational fluid dynamics which is basically just stuff with heat flow and we were working with car designs uh but i don't think i liked it at all um i might have hated it i it just wasn't very interesting you know mechanical engineering is one of those fields where it sounds like it's very futuristic and it's actually mostly

stuff uh from like newton and like you know hundreds of years ago um and so i don't think i was very passionate about it uh and you know fortunately i got laid off because i don't think that i would have left um and at the time you know this was in the summer of 2017 and so ethereum was finally starting to take off around then um and it basically ballooned from maybe one to two dollars to like 15 to 30. and so it was starting to get uh some excitement in the ethereum ecosystem and

i got on a call with my friend carl who had been working at consensus and then he had recently moved from consensus uh to working with the ethereum foundation uh he was writing the proof-of-stake smart contract uh for the original proof-of-stake casper um and we basically got a call and he said you know congratulations this is the best thing that's ever happened to you uh you're going to become an ethereum developer well i don't really have a you know software development background um you know i had done maybe one or two coding classes as part of mechanical

engineering but very very little um and so i felt like you know there's no way i could make this transition i'm too far behind too late in my career and you know what carl really impressed on me was that you know no one knew how to code smart contracts yet um and it was so early in the ethereum uh you know life cycle that you could become you know what he said to me specifically is you know in one year's time you're going to be a world expert on ethereum and i was like probably not but um you know i it was

kind of a little you know there was something really exciting about ethereum you know the more we talked about it there was sort of this you know the idea of programs that can hold money um the idea of you know finance where no one controls it the idea of you know you can send money and no one can stop you and no one can kind of take your money there's something really interesting about it to me and so you know i decided to make the leap um i you know so i spent a few months basically just learning solidity um

writing some initial smart contracts writing a token contract all that sort of thing and then carl pointed me to you know we i had another kind of call with carl where i was basically saying you know i i'm starting to get it but i don't feel like i'm making enough progress i don't really know what to do with it at this point and so i decided i wanted a project to learn on uh something that i could take a little bit further and carl pointed me to this blog post from vitalik on automated market making and that essentially outlined you know the

the initial idea of uniswap which is you can you can make a smart contract that has this x times y equals k formula and it will allow you to trade between two assets so that's where it started really the the interesting thing about the story to me is that the moral of this story we're about to we're about to go through the creation of unit swap v1 the creation of uniform v2 the token unit swap v3 optimism but to me the moral of this story happened at the very beginning where you had this buddy carl who for those that don't know carl his

energy and optimism is absolutely infectious uh and you were coming from you know the legacy world and you had skepticism as to your ability to build and perhaps didn't have that uh that optimism that carl had about you being able to create something on ethereum what can i really contribute i don't know how to code and carl's like no no no you're going to be an expert in one year's time and perhaps your your reaction was that how how is that even possible yet here we are today with the unit swap being the most

success perhaps the most successful uh ethereum application how how it's an elegant beginning to this story how do you see that beginning of the story and how it kind of played out yeah i definitely think that it you know speaks volumes to what ethereum is and what the ethereum ecosystem is i definitely didn't do it alone and there was definitely so much along the way um but all of it kind of points to you know the power of ethereum and the power of decentralized finance which is really you know for one it was because it was a small

community at the time it's still kind of a small community in some ways everyone was very welcoming and so everyone you spoke to was very passionate about it and was very welcoming and inviting and basically just wanted to bring more people in um right so carl wanted to bring more people in and so he kind of sucked me in to the you know into building on ethereum um but then there's kind of this other aspect of it which is sort of a more almost a technical aspect of it which is that you can build applications where you don't need to trust you know anyone and

that's just a very important part of the story which is that it didn't what i did wouldn't really be possible in traditional finance because i didn't have a reputation to you know that would allow people to trust me with their money and what was nice about uniswap right is it was an application and anyone could you know read the code for themselves it was fairly simple um it was or rely on other people who had read the code uh that this was safe to use and people were willing to put their money in it and they didn't have to trust me you know

they were trusting the code that i had written um and you know that is sort of what allowed it to grow so much and so fast uh and i think it's just such an amazing property of ethereum and then i think that you know beyond that just the the kind of permissionless nature uh where you know anyone can build on top of it where anyone can uh you know participate in it uh definitely was another aspect which is sort of fundamental to what ethereum is which which made it possible in the first place

so you have been given this project from uh pointed to out by by your friend carl say hey there's this blog post from vitalik about amms this uh x times y equals k curve uh and then you start you just start tinkering in solidity and start building this thing out where does the story go from here yeah i think that what i was you know as i started tinkering with it at first it was really just i want to learn how to you know write smart contracts and i want to learn how to create web interfaces and so the very first version was just me you know writing some simple code uh

learning kind of the basics of web web development um it was very much the way i viewed it was a learning experience for myself um definitely as it started to form once i had a initial proof of concept uh which was this i don't know if you've seen that version of the site there's a sort of pre-pre like early transit version of it the retro version um that once i sort of got to that point what i did is i started to compare it to other projects in the space at the time and the differences between them and you

know something that basically the primary decentralized exchange at the time was etherdelta um and ether delta felt very different from uniswap uh you know uniswap had this aspect there was it was sort of like a very confusing user experience it was very like complex to use i don't have a very i actually before you know i didn't this mechanical engineering background i didn't have any finance background whatsoever so to me it almost felt a lot more intuitive for my own use and and so i started to kind of get a feel of this like ux

implications and then the other thing that i started to get a feel of was and maybe this is maybe more important is the uh the underlying properties of decentralization and censorship resistance and permissionless um you know basically all existing decentralized exchange uh platforms that were kind of either in the works or um existed at that time didn't really have the same underlying properties of ethereum that i cared about right you know i cared you know the properties of ethereum that

excited me were the fact that you didn't have to trust anyone the fact that it could never go down um the fact that it was permissionless but when you looked at things at the time like you know ether delta it didn't actually have those same properties and so i started to view it not necessarily as you know okay this is a way for me to learn but it was also you know what does it look like uh to build an application on top of ethereum that has the same properties as ethereum itself that everyone cares about um and yeah at what point in your story did you realize that this uni-swap thing might

be as it could be as big as it is today like when did this go from a pet project for you just learning to to code to perhaps perhaps this is something that can change what ethereum is i think we need to yeah i think that we need to accelerate almost two years in this story um because you know everything i'm talking about was basically early like late 2017 um and i'd say that you know throughout 2018 basically you know my story was you know traveling around

every ethereum event i could meeting as many people in the space as i could starting to build out uh uniswap into a more complete version you know i got this ethereum foundation grant was definitely a pivotal moment for it um where you know i now had some financial support for it that was definitely important at the time um and i also had almost a responsibility to build it where you know i people gave me money to build it now i was like okay i actually you know have to take this a little bit further um and so you know i basically resolved on

getting a version to mainnet getting a version that felt production ready and i you know i set out to kind of accomplish all the tasks that were needed whether it was you know obtaining an audit hiring contractors to build an interface writing the white paper um and so but it's still all all along that time i didn't really know how it would be perceived it's definitely like a little bit just on that hayden for a minute like what can you tell us about that funding so like how much was it and where did it come from um i saw very little bit personally but you know there was definitely kind of a few ways that it got financed so the

ethereum foundation grant uh you know it was sort of written out as a hundred thousand dollars technically it was uh fifty thousand dollars plus um a hundred and something each basically it was the cost of an audit and the audit ended up was denominated in each and so i just asked for the ether amount um by the time i received the payout the the ether had gone down something like you know 75 80 percent um much closer like 55 to 60 000 um but it did you know and

i think that the other you know there was a few people who kind of helped me out with small personal grants along the way such as you know uh that guy pascal who was mentioned in the blog post and um i got a grant from balance at one point and i got a uh i think none of that money i didn't see a single penny from the grants uh personally um i basically was i had bought a little bit of eath in early 2017 and i basically just was selling all my youth and living off of it um and so i kind of basically sold all of my eth to to live while

building uniswap um which was you know i guess it was the right i guess you know it ended up being the right the right uh gamble but uh you know yeah uh were you aware of the gamble you were making at the time did you think that oh this could perhaps come back and and really helped fund my life or what did you think you were doing i think it was more like i needed to you know pay rent and eat food and i wanted to keep building unit swap i'll say that the other you know there's financial support uh but there's kind of maybe the more important thing which was

a community support and and and uh you know support from kind of other contributors um i definitely had you know an example would be khalil who's you know the the designer at uniswap and kind of has become much more known in the crypto industry for his design work um he was helping out on the project actually as early as i believe december 2017 um so he you know he i basically paid him a little bit but not very much as a contractor for early design work and early front-end work um

i also had you know paid some other developers but in part they were contributing with their their time uh as well and you know people like carl and people like vitalik who gave me feedback and introductions in the space um definitely you know the sort of ethereum community who supported me and and you know inspired me to keep on building it uh was super instrumental to it and you know maybe even more valuable than any of the the financial support that i got was you know going to my first ethereum conference it was edcon and toronto and

i met so many people there you know i met well i actually i met a few of them the day before but i met you know dan robinson i met andy millenius who was the cto at maker dao i met phil dyan i met all these people who kind of uh helped bring me into the space and you know were very uh generous with their time and their their advice um and all of that was was so incredibly important so i want to get kind of a preset on this this timeline of events we we've we've um moved through so far so 2017 summer of

2017 was when you got laid off right and and carl was sort of making the pitch um all this time are you getting plugged into the community and you're writing sort of the first prototypes of uniswap that happens somewhere in the 2018 or so yeah time yeah range yeah yeah and then the uniswap launch right so november 2nd 2018 was when uniswap v1 launched and i want folks to understand sort of the backdrop of this the backdrop hayden you were kind of alluding to is um we had these things called decentralized

exchanges but to your point hayden they weren't totally decentralized they certainly weren't permissionless an operator had to sort of add the assets uh they weren't fully on chain so the order books off chain uh and here you are in 2018 the market's kind of dead right like the ethereum project has failed uh this is what i did not exist definitely was not a thing maker was just like sort of a little bit there but not fully there i don't even think they had um their single collateral die out

at maybe they did it it was one month old okay so all very br brand new and what you're doing in that backdrop is you're bringing something called an automated market maker to the fold which is a totally new take on decentralized exchanges it's it's or on exchanges period it's not an order book type of of exchange and you're deploying this thing can you talk about sort of the the context of when you deployed it on november 2nd and sort of what you expected yeah i think that i didn't i didn't

fully know what to expect uh i think what i knew at the time one was that vitalik was very smart and liked the idea um and that on its own was like a huge like okay you know if italia thinks it's a good idea i'm gonna i'm gonna assume it's a good idea or at least worth like trying out um and then i think that the other thing that i knew is i knew that i knew the benefits of it and i didn't i knew that there were downsides um in fact everyone i spoke to from the traditional financial world to extend that i spoke to people from the traditional financial

world uh did not think it would work um even you know someone that they shocked yeah what did they say to you um well they basically said that you know hilariously some of the same things people are saying about you know v3 today which is active market makers are gonna you know beat up passive market makers people who just deposit liquidity are gonna you know slowly have their value drained over time um basically that it was too slow to update prices um by that i mean you know it updates prices in real time but it but if someone you know actively wants to change their price then they're

competing against arbitragers and uh it maybe takes too long to do that um so yeah there was all sorts of uh reasons that it was never going to work um you know it was too capital and efficient um what about hidden even in the defy community what were people saying because as i remember at the time the sort of the um the like idea was that um decentralized exchanges were of the flavor of um 0x and of ether delta and this idea of an automated market maker

was even foreign within d5 it was formed within d5 i will say that i i did you know and if i didn't exist yet as we uh as i said but you know within ethereum um i think that it did get a lot of support from certain people i think that there was like a strong signal from vitalik uh when he he sort of supported it very early on that a lot of people picked up on there was also plenty of people who said it wouldn't work um every step of the way for sure um but you know i also got a huge amount of support from people who were excited by it um

you know examples would be even like a mean uh on day one so you know day one it had about thirty thousand dollars of liquidity uh which was put in by people we kind of knew and so i was terrified it would be lost through a potential hack you know i did everything i could to avoid that but i was still kind of terrified that there would be real money at stake um and then the second day uh i was somebody introduced me to me and he messaged me he's like i'm thinking about putting a million dollars in today and i was like i'm trying to sleep at night and i would prefer you don't um

but what i what i did know is that you know it had these sort of decentralization properties that other things did not and i basically wanted to figure out what is the value of those decentralization properties relative to maybe the potential weaknesses of the system right maybe it isn't as capital efficient as an order book uh but it definitely is more decentralized in an order book it's definitely you know easier to create a new market it's definitely easy to create liquidity definitely lowers the barrier of entry and i think that for me that was enough um

just as a starting place um and then definitely you know i was overwhelmed with the response uh the the positive response that i received where you know despite it being like an insane bear market where everything was going down i think that the one thing that wasn't going down was unislav uh unispot traction uh during during 2018. um and seeing it kind of just you know exponentially grow in usage and traction was when i started to you know

think that maybe there was something more there this part in the story to me is a through line of the core deep ethereum community members who really understood what was going on here versus perhaps the you know the legacy financial people that you that you talked about that only saw problems i can definitely attest to the fact that i started paying attention to unit swap because amin kept on talking so highly of it and i personally really as a respected mean and he he was the person

that really did a good job you know through twitter explaining the merits of this whole thing uh and i i do would think that amin ultimately did end up seeding the uh the spank uh eth uh lp and then also becoming uh very handsomely rewarded uh for that behavior ultimately when the the the uni token came down the line uh and so there was that there was that liquidity but that was just for um spank and eth and i think the the biggest uh most legitimizing event i think in the

early days of uniswap was uh maker dao or the the people behind the maker team decided to move their mkr liquidity away from oasis decks into uniswap were you a part of that story at all so what's so awesome about the story from my perspective is how little involvement i had in actually growing the liquidity or or bringing it to the platform it was really just like a natural occurrence um where you know i think it resonated with people at the maker you know i had friends at maker

but i actually had no idea who the major mk or liquidity providers were in the early days of unit swap um i didn't know any of the the early big liquidity providers really um and it just kind of happened uh you know early user early kind of members of maker dow saw meredith and and put some of their mkr and some of their in the pools and you know it it was a validating experience especially you know early on when when it started being you know becoming the number one market for mkr and it was you know maybe it was worlds behind you know things like

coinbase or even ether delta um but it was you know the number one market for mkr for for mkr is the number one market for dye it will not die yet but um yeah that was definitely a very validating thing and by the way just to speak to your previous point on the community and the bear market there was something really special you know people who were around and building in the bear market were people who like truly believed um and i think it was like a really exciting time because of that um you know everyone who was there was there because they like shared the

values of ethereum not they weren't there to make money because everyone who was there had lost a huge amount of money um and so yeah it was definitely like a you know an awesome time and people like amin were were like really instrumental i i totally agree like the sudden the the tourists moved out and the settlers were there the builders remained and i you know before we get too much further in the story hey i want to ask this question because you keep going back to sort of almost core values of uniswap trustlessness permissionlessness censorship resistant and i'm curious to

hear i mean these are these are um values that i think are inherent in the ethereum platform it sounds like you you understood these very well at a at a fundamental level um and you talked about the uni-swap experiment being worth trying just because they exemplified those values i i'm wondering if that's something from like your personal life like you just highly identify with these values or if this is more an engineering mindset of well all of these other exchanges decentralized exchanges are trying this spot on the trade-off spectrum but what about this

spot i wonder if this has product market fit yeah i think that it's a little bit of both you know i think that i'm personally very interested i think i'm interested from an engineering perspective um i think it's really what drew me into ethereum and you know helped me kind of you know carl sort of advised me to do it but the thing that kind of helped me make the leap was that there was something so interesting and novel about you know i think that i definitely you know recognized problems within the existing financial world or maybe just power

structures in general that existed um where you know obviously like there was a huge amount you know a huge amount of wealth concentration um you know there was kind of a huge amount of gatekeeping you know uh very few parties could participate in fina finance and you know the idea of sort of a financial system that removed you know unnecessary middlemen financial system that uh you know helped